Glut of repossessed houses could depress prices ‘by up to 25%’

gaius c

cookie1977 wrote: »

That would be fine as long as there is an independent process to do the valuation and that the bank hasn't delayed repossession proceedings unduly. I still think though that the outstanding debt should be written off after repossession and sale. It does make economic sense to me despite what others say on here. We need to close off this whole thing not have it dragging on with unproductive members of society lumbered for years with debt following repossession/bankruptcy.

And a wee quick look at their other assets perhaps?
Unless they are a Limited Liability company, they don't really have grounds for segregating their personal finances. At the very least, those assets should be looked at as well as garnishing of his income for the period of his bankruptcy/insolvency.

See my earlier post for an example of a colleague at work who plans to do exactly that: dump all the trash on the banks and keep his other considerable assets unemcumbered. I explained to him that such a plan would be laughed out of a UK court (his original plan).

gaius c

Zamboni wrote: »

I know it was addressed to Lima but what about interest rates?!?!

I can buy a house next to a person who bought a house in 2007 for two thirds of the price but they are on a fecking tracker!
Over the course of a new term we would both end up paying similar outlays for the property + interest.
And the kicker is I would have to pay HIGHER interest rates because servicing the trackers is costing the bank.

I would rather be in NE now on a tracker than being an FTB with today's interest rates.

Somebody ran the sums here recently demonstrating that despite the big drop since 2007, you are actually paying the same mortgage as the guy who bought the house in 2007. Anyone got a link to that btw?

I think we're all agreed that houses were overpriced in 2007 so if they cost you the same per month now, surely it is obvious that they are still overpriced now?

The Spider

gaius c wrote: »

Somebody ran the sums here recently demonstrating that despite the big drop since 2007, you are actually paying the same mortgage as the guy who bought the house in 2007. Anyone got a link to that btw?

I think we're all agreed that houses were overpriced in 2007 so if they cost you the same per month now, surely it is obvious that they are still overpriced now?

Not really, it just means the banks messed up with trackers, what would the repayments be if those houses bought in 2004-2008 were on variable rates?

cookie1977

gaius c wrote: »

And a wee quick look at their other assets perhaps?
Unless they are a Limited Liability company, they don't really have grounds for segregating their personal finances. At the very least, those assets should be looked at as well as garnishing of his income for the period of his bankruptcy/insolvency.

See my earlier post for an example of a colleague at work who plans to do exactly that: dump all the trash on the banks and keep his other considerable assets unemcumbered. I explained to him that such a plan would be laughed out of a UK court (his original plan).

Yes all perfectly reasonable.

Villa05

The Spider wrote: »

I'm not asking if you're a speculator or investor, I'm asking if you bought a house, to live in are you happy for the price you could sell it for to be less than what you paid, so that others can get cheaper houses, it's a simple question yes or no?

Happy days, property tax liability less, my children hopefully will have a better standard of living. The country will have moved and learned from the bubble disaster.

gaius c

The Spider wrote: »

Not really, it just means the banks messed up with trackers, what would the repayments be if those houses bought in 2004-2008 were on variable rates?

And in the same vein, would the Germans have won WW2 if all their soldiers were equipped with iPhones?

Bob24

gaius c wrote: »

Anyone got a link to that btw?

Well it can really change a lot depending on which assumptions you make.

But here's one example.

Let's say you buy a property which was worth 500000 before is now worth 300000; and you want to buy it with a 50000 euros deposit and repay over 30 years.

Let's assume the old tracker deals would give you a 2% average interest rate (big assumption but you have to make one).

Then with you deposit you would have borrowed 450000, over 30 years.

If you run calculations your repayments would be 1663.29 per month and the total cost if your mortgage including interest would have been 598783; so with deposit the cost of your house was 649k.

Now let's say you're buying the same house now. After deposit you are borrowing 250000. Also over 30 years but this time lets assume a 4.5% average interest rate on the variable deal.

Your monthly repayment will be 1266.71 euros and the total cost of your mortgage including interests will be 455018. This means the house is costing you 505k in total.

With these assumptions the house is indeed cheaper but definitely not as cheaper as the price drop. Also note that changing any parameter slightly can change the numbers quite a lot.

Lastly I am completely ignoring the fact that there was not property tax before, and that tax relief on interests paid is not available anymore for new buyers. If you factor these into the calculations with my previous assumptions, the total cost for buying the house would probably be getting quite close now compared to what it was before.

ps: sorry for the typos - had to type this on my phone :-)

lima

The Spider wrote: »

If the debt is written down, the house should be surrendered of course, clean slate without the house obviously, this is especially true for the highly desirable areas in the country.

Now I have a question for you Lima, as you're thinking about buying, if and when you do buy a house/apartment that you're happy with, would you becontent to see property prices suddenly start to fall to a point that would allow others to purchase houses, possibly for two thirds of the price you paid in the same area?

Honest answer.

I wouldn't like to see prices fall 2/3rds, no.. if there was a govt-sponsored agenda to drive prices down then yes I would not be happy.

I would not be in it for speculative gain though, I'd accept +/- 20% variation in cost.


If I bought a 3br family house, short-term NE wouldn't matter to be. I would have planned for the long-term and would have obtained a suitable mortgage that I would comfortably afford

stevedublin

lima wrote: »

I would have planned for the long-term and would have obtained a suitable mortgage that I would comfortably afford

What would your plan be if you lost your job and you couldn't get another one?

lima

stevedublin wrote: »

What would your plan be if you lost your job and you couldn't get another one?

I would plan to ensure that any temporary social welfare benefits of both my partner and I would cover repayments. Worst case I would rent out a room.

MysticalRain

The Spider wrote: »

I'm not asking if you're a speculator or investor, I'm asking if you bought a house, to live in are you happy for the price you could sell it for to be less than what you paid, so that others can get cheaper houses, it's a simple question yes or no?

Seriously, why would I care? If falling house prices mean that I sell my house for less, then conversely, I pay a lot less for the house I buy.

The added benefit to the wider economy is that both me and the person buying my house now have more money to spend in the real economy. As opposed to the Celtic Tiger bubble where money was siphoned out of the economy and into German and French banks.

jmayo

riclad wrote: »

Everyone seems to hate landlords,
i know its stupid, there,s alot of people bought houses,
for say 150k,,
house is now worth 80k,
as an example.
The rent is maybe 80- 90 per cent of the mortgage per month.
BECAUSE of negative equity ,they cant sell up,
so they are working for nothing,
profit = zero cent ,and they might still be liable for tax in the future.
IF some one does,nt pay loan for 4 years,
the bank can go to court ,repossess the property.
MAYBE they do,nt have the staff to handle 1000,s of empty propertys ,or are afraid of causing more price drops in the market by mass repossessions.

If we had no landlords ,
WE, d have no rental market ,
a rental market is part of a strong economy.

A lot of single people prefer to rent for various reasons.
even if they are on a good wage.

I presume new insolvency act, will see more people giving houses
back to the bank ,
especially btl investors.

Ohh FFS the country does not need thousands of little landlrods with their one or two rental properties.
If anything looking at the threads here about awful landlords, it points to the need for proper professional landlords like in other countries.

Oh and a lot of these people made an investment so tough sh** if the sums now don't work out.
Were they going to share the profits when their capital appreciation kicked in with the imagined increasing prices ?
Were they fook.


Ps at this stage I am so fed up trying to read your stuff I am nearly contemplating buying you a proper keypad with a working ' key for christmas

cookie1977 wrote: »

So banks should take no responsibility for any thing no? We should just have zero laws and regulation and put all the onus on personal responsibility yes? Wonder how we'd do as a society then...

I wish to christ people would stop thinking of banks as some entity that can be chastised, screwed or taken for a ride.
At this stage most of the banks are owned by us, that means if you screw them over you screw us over.
It is another version of the long running mindset in Ireland that screwing the system is ok becuase it is just a bunch of civil servants in Dublin or somewhere. :mad:

As for people mentioning how things work in the US that is not applicable here.
People can't seem to get through their heads that we cannot afford to just forget about a huge chunk of mortgage debt.
Where the fook are we going to get 20 odd billion to fill that hole.
Oh yeah the magic money tree. :rolleyes:

What happened 20 years ago to someone who refused or were unable to repay their mortgage for a long period.
Let me guess that they got turfed out.

What happens in other countries when you don't bother repaying your mortgage ?

cookie1977

jmayo wrote: »

I wish to christ people would stop thinking of banks as some entity that can be chastised, screwed or taken for a ride.
At this stage most of the banks are owned by us, that means if you screw them over you screw us over.
It is another version of the long running mindset in Ireland that screwing the system is ok becuase it is just a bunch of civil servants in Dublin or somewhere. :mad:

As for people mentioning how things work in the US that is not applicable here.
People can't seem to get through their heads that we cannot afford to just forget about a huge chunk of mortgage debt.
Where the fook are we going to get 20 odd billion to fill that hole.
Oh yeah the magic money tree. :rolleyes:

What happened 20 years ago to someone who refused or were unable to repay their mortgage for a long period.
Let me guess that they got turfed out.

What happens in other countries when you don't bother repaying your mortgage ?

The banks will be taken private eventually again and as I already posted AIB are saying they're in line to return to profit next year. Why cant we penalise them through fines (like the US has done and they bailed out their entire sector). The UK is contemplating this too.

And yes we should look at other models around the world because clearly ours is not working or do you think it is?

Inflation will eat into the debt (what ever that debt is) not to mention that growth in the economy should also improve our national prospects if we get delas sorted. Ever major financial organisation is calling for this to be sorted and none of them are saying lets saddle people with their debts until they're paid in full no matter what.

I've answered your last question before and you didn't like the answer so why ask it again?

Balmed Out

cookie1977 wrote: »

The banks will be taken private eventually again and as I already posted AIB are saying they're in line to return to profit next year. Why cant we penalise them through fines (like the US has done and they bailed out their entire sector). The UK is contemplating this too.

And yes we should look at other models around the world because clearly ours is not working or do you think it is?

Inflation will eat into the debt (what ever that debt is) not to mention that growth in the economy should also improve our national prospects if we get delas sorted. Ever major financial organisation is calling for this to be sorted and none of them are saying lets saddle people with their debts until they're paid in full no matter what.

I've answered your last question before and you didn't like the answer so why ask it again?

AIB are hoping to make a pre provision pfofit in 2014. A pre provision profit means a profit before taking provions for bad debts - of which there will be plenty.

The Irish state owns close to 99% of AIB with the former shareholders having lost more then tax payers, home owners etc already.
Who exactly do you want to punish?
Why would we punish the Irish state as the new owner for what happened under previous ownership?

cookie1977

Balmed Out wrote: »

AIB are hoping to make a pre provision pfofit in 2014. A pre provision profit means a profit before taking provions for bad debts - of which there will be plenty.

The Irish state owns close to 99% of AIB with the former shareholders having lost more then tax payers, home owners etc already.
Who exactly do you want to punish?
Why would we punish the Irish state as the new owner for what happened under previous ownership?

Yes I know what their profit means it doesn't take away from the fact that they are beginning to make money again despite the bad debts and money pumped in to keep it going. It still does not mean we cannot look in the future at levies/fines.

Balmed Out

cookie1977 wrote: »

Yes I know what their profit means it doesn't take away from the fact that they are beginning to make money again despite the bad debts and money pumped in to keep it going. It still does not mean we cannot look in the future at levies/fines.

But it means there isnt really a profit.
Put it another way AIB are on track to make a profit so long as one ignores the billions loaned to it and the fact that there will be many debts, much of it mortgage debt which wont be repaid.

The state owns the bank. You cannot punish those within the banking system who had a role to play in the property bubble by punishing the entity that AIB is now.

If you add costs to AIB you simply impair the banks ability to repay the Irish state so youre robbing your left pocket to have money in your right.

How could that possibly be a solution??

cookie1977

You're hung up on aib here. They're not the only bank in the country. Aside from that you can levy a fine on aib to be collected at a later stage.

The Spider

MysticalRain wrote: »

Seriously, why would I care? If falling house prices mean that I sell my house for less, then conversely, I pay a lot less for the house I buy.

The added benefit to the wider economy is that both me and the person buying my house now have more money to spend in the real economy. As opposed to the Celtic Tiger bubble where money
was siphoned out of the economy and into German and French banks.

And there we have it, the I pay less fallacy, you seem to be forgetting that if you sell your house at below the amount you owe the bank, you'll be left with a big il' debt that you owe the bank, so you can't move and buy the cheaper house, the bank won't give you a loan, any deposit you have saved to buy the cheaper house will have to go towards the debt you owe the bank when you sold your house for below the price you paid.

Now you see why there's no supply in Dublin people can't sell their houses without incurring massive debts, they're not all waiting for the repo man, they can afford their mortgage it would just be idiotic to sell now and create a 100 grand debt for yourself.

Frank Lee Midere

The Spider wrote: »

And there we have it, the I pay less fallacy, you seem to be forgetting that if you sell your house at below the amount you owe the bank, you'll be left with a big il' debt that you owe the bank, so you can't move and buy the cheaper house, the bank won't give you a loan, any deposit you have saved to buy the cheaper house will have to go towards the debt you owe the bank when you sold your house for below the price you paid.

Now you see why there's no supply in Dublin people can't sell their houses without incurring massive debts, they're not all waiting for the repo man, they can afford their mortgage it would just be idiotic to sell now and create a 100 grand debt for yourself.

Until it is repossed. However you are correct. People can't sell in negative equity. Best to turf them out and sell to people who can manage their finances.

The Spider

Frank Lee Midere wrote: »

Until it is repossed. However you are correct. People can't sell in negative equity. Best to turf them out and sell to people who can manage their finances.

Read what I said, just because you're in negative equity doesn't mean you can't pay your mortgage, plenty if people in negative equity paying their mortgages.

What makes me laugh is, I'd say 99.9% of people in SCD can afford their mortgages or have paid them off, the same with most other desirable areas, you tend to get very employable people living in these areas.

Anyone who's waiting for a repo, should look towards Lucan, Blanchardstown, or Talkaght, because if any happen ( I doubt it) this is where they'll be.

Frank Lee Midere

The Spider wrote: »

Read what I said, just because you're in negative equity doesn't mean you can't pay your mortgage, plenty if people in negative equity paying their mortgages.

What makes me laugh is, I'd say 99.9% of people in SCD can afford their mortgages or have paid them off, the same with most other desirable areas, you tend to get very employable people living in these areas.

Anyone who's waiting for a repo, should look towards Lucan, Blanchardstown, or Talkaght, because if any happen ( I doubt it) this is where they'll be.

There was a huge amount of "leveraging" to get on the property ladder in SCD. Of course it has it's old wealth too.

MysticalRain

The Spider wrote: »

And there we have it, the I pay less fallacy, you seem to be forgetting that if you sell your house at below the amount you owe the bank, you'll be left with a big il' debt that you owe the bank, so you can't move and buy the cheaper house, the bank won't give you a loan, any deposit you have saved to buy the cheaper house will have to go towards the debt you owe the bank when you sold your house for below the price you paid.

Now you see why there's no supply in Dublin people can't sell their houses without incurring massive debts, they're not all waiting for the repo man, they can afford their mortgage it would just be idiotic to sell now and create a 100 grand debt for yourself.

I don’t doubt the NE issue will have some effect on the housing market. But it is not as great as you seem to think it is.

As I pointed out earlier, a house is a place to live in for the vast majority of people. If they can continue to make the mortgage payments as you said, then NE is largely irrelevant to them. (Why you seem to think a young family with 2-3 kids would want to sell their house after less than a decade living in it and move to another area is beyond me)

Secondly, FTB’s tend to purchase newly built houses and apartments, and are not interested in waiting for some granny living in SCD to kick the bucket so they can move into her mansion in order to live apart from the hoi polloi in a “desirable area”. The natural laws of economics dictate that supply will fill a demand, hence why we see the building trade beginning to kick off again.

You are missing the bigger picture here by ignoring hidden costs. High property prices fuels inflation elsewhere in the economy – which is partly why Ireland has been such and expensive country to live in during the last decade or so.

Additionally, you seem to be under the impression that two contradictory events can happen:

a) A mass write off of mortgage debt, with the banks taking a huge hit to their balance sheets.
b) Said banks starting to lend en masse again to fuel the property market despite their balance sheets being decimated in the above scenario.

You can’t have it both ways.

The Spider

MysticalRain wrote: »

I don’t doubt the NE issue will have some effect on the housing market. But it is not as great as you seem to think it is.

As I pointed out earlier, a house is a place to live in for the vast majority of people. If they can continue to make the mortgage payments as you said, then NE is largely irrelevant to them. (Why you seem to think a young family with 2-3 kids would want to sell their house after less than a decade living in it and move to another area is beyond me)

Secondly, FTB’s tend to purchase newly built houses and apartments, and are not interested in waiting for some granny living in SCD to kick the bucket so they can move into her mansion in order to live apart from the hoi polloi in a “desirable area”. The natural laws of economics dictate that supply will fill a demand, hence why we see the building trade beginning to kick off again.

You are missing the bigger picture here by ignoring hidden costs. High property prices fuels inflation elsewhere in the economy – which is partly why Ireland has been such and expensive country to live in during the last decade or so.

Additionally, you seem to be under the impression that two contradictory events can happen:

a) A mass write off of mortgage debt, with the banks taking a huge hit to their balance sheets.
b) Said banks starting to lend en masse again to fuel the property market despite their balance sheets being decimated in the above scenario.

You can’t have it both ways.

Nope what I have said is that there'll he no repossessions but if they were the banks would have to wipe out the debt, and that's one reason there won't bd repossessions, yet anyway.

The other reason is that if the banks repossess and sell they crystallise losses, it's better to wait while prices continue to rise, send out the odd letter about repaying debt, but make no move, leave the family in the house, this is a long game after all mortgages at 25-35 years. Prices start to look like the banks loss will be minimal or far fetched as it sounds exceed the purchase price, then they can gradually start repossessing, family doesn't end up in debt.

Then resell on to a better prospect, who can pay back the mortgage, better job etc. the banks have swapped bad debt for good debt, and that is the name of the game, if the banks aren't lending, they're not in business basically, they sell money, that's their job.

Oh and just on the point about high house prices fueling inflation in the economy, while true to an extent, low prices have a far more detrimental effect on the economy, when prices are dropping no one spends. High prices fuel confidence people feel richer, they don't think they have to save every penny, and spend in the economy.

When house prices are dropping, people don't spend, they certainly don't buy houses, how many people who are all rushing to buy now weren't buying in 2011? how many were sitting in the sidelines waiting for the bottom?

Is it coincidence nis that you see this surge in Dublin that other parts of the economy are picking up?

All about confidence.

Villa05

This surge you speak about is close to record low volumes. If there is so much pent up demand, how come sales are so low.

During the week the media were baffled that employment was up 3% while the economy was only growing at less than 1%. The answer is simple. Business cut to the bone in the recession so a small pick up in demand would require extra staff, while at the other end we are a nation of debt monkeys so any extra income is swallowed up by the property bubble parasite. The irony is that the powers feel the answer is to infect more people with that parasite. A cunning plan indeed.

cookie1977

Villa05 wrote: »

This surge you speak about is close to record low volumes. If there is so much pent up demand, how come sales are so low.
During the week the media were baffled that employment was up 3% while the economy was only growing at less than 1%. The answer is simple. Business cut to the bone in the recession so a small, pick up in demand would require extra staff, while at the other end we are a national of debt monkeys so, any extra income is swallowed up by the property bubble parasite.. The irony is that thepowers feel the answer is to infect more people with that parasite. A cunning plan indeed.

Do you not see the irony of what you say in that saddling people with debt after repossession will fuel exactly what you speak of too?

MysticalRain

The Spider wrote: »

Nope what I have said is that there'll he no repossessions but if they were the banks would have to wipe out the debt, and that's one reason there won't bd repossessions, yet anyway.

The other reason is that if the banks repossess and sell they crystallise losses, it's better to wait while prices continue to rise, send out the odd letter about repaying debt, but make no move, leave the family in the house, this is a long game after all mortgages at 25-35 years. Prices start to look like the banks loss will be minimal or far fetched as it sounds exceed the purchase price, then they can gradually start repossessing, family doesn't end up in debt.

Then resell on to a better prospect, who can pay back the mortgage, better job etc. the banks have swapped bad debt for good debt, and that is the name of the game, if the banks aren't lending, they're not in business basically, they sell money, that's their job.

Oh and just on the point about high house prices fueling inflation in the economy, while true to an extent, low prices have a far more detrimental effect on the economy, when prices are dropping no one spends. High prices fuel confidence people feel richer, they don't think they have to save every penny, and spend in the economy.

When house prices are dropping, people don't spend, they certainly don't buy houses, hos many people who are all rushing to buy now weren't buying in 2011? how many we're sitting in the sidelines waiting for the bottom?

Is it coincidence nis that you see this surge in Dublin that other parts of the economy are picking up?

All about confidence.

Correct me if I’m wrong, but didn’t you say debt should be wiped out (minus the house of course).

There has been an uptick in repossessions recently, and the troika are still leaning on the government to at least tackle the low hanging fruit in the BTL arrears. So we’ll see.

The other reason is that if the banks repossess and sell they crystallise losses,

Under your ideal scenario that is. The other scenario is people actually paying off their debts (I do actually have sympathy for the argument you’re making about surrendering the debt along with the house, even with the wider cost to society).

Realistically speaking of course, property prices are never going rise to a quickly enough for that scenario to play out (the banks will be waiting a very long time indeed if that is their plan)

Oh and just on the point about high house prices furlong inflation in the economy, while true to an extent, low prices have a far more detrimental effect on the economy, when prices are dropping no one spends. High prices fuel confidence people feel richer, they don't think they have to save every penny, and spend in the economy.

Where is your proof that no one spends when prices are dropping (I think you’re confusing causation with correlation when it comes to economic downturns)? This is exactly the kind of financial imprudence that led us into this mess in the first place. Someone who is being crucified by a huge mortgage can’t really spend unless they are borrowing heavily to fund their life style. Not that it matters anyway is the money is locked away in an asset which will likely only be liquidated after they die.

Is it coincidence nis that you see this surge in Dublin that other parts of the economy are picking up?

All about confidence.

Yes, it is a coincidence, and the reasons why have been explained in depth over and over in this thread.

This “confidence” malarkey is the kind of classic Bertie-ism which should have died a death with the Celtic Tiger. It’s the kind of self confidence that a drunk has which makes him believe he can take on a lot more than he can actually handle, and goes some way towards explaining why people in this country have such high levels of personal debt.

The Spider

MysticalRain wrote: »

Correct me if I’m wrong, but didn’t you say debt should be wiped out (minus the house of course).

There has been an uptick in repossessions recently, and the troika are still leaning on the government to at least tackle the low hanging fruit in the BTL arrears. So we’ll see.


Under your ideal scenario that is. The other scenario is people actually paying off their debts (I do actually have sympathy for the argument you’re making about surrendering the debt along with the house, even with the wider cost to society).

Realistically speaking of course, property prices are never going rise to a quickly enough for that scenario to play out (the banks will be waiting a very long time indeed if that is their plan)



Where is your proof that no one spends when prices are dropping (I think you’re confusing causation with correlation when it comes to economic downturns)? This is exactly the kind of financial imprudence that led us into this mess in the first place. Someone who is being crucified by a huge mortgage can’t really spend unless they are borrowing heavily to fund their life style. Not that it matters anyway is the money is locked away in an asset which will likely only be liquidated after they die.


Yes, it is a coincidence, and the reasons why have been explained in depth over and over in this thread.

This “confidence” malarkey is the kind of classic Bertie-ism which should have died a death with the Celtic Tiger. It’s the kind of self confidence that a drunk has which makes him believe he can take on a lot more than he can actually handle, and goes some way towards explaining why people in this country have such high levels of personal debt.

I did say debt should be wiped out with a repossession, I even said it in the text you quote.

It's common economic knowledge that people spend less when prices are dropping, see link below, Uk based but the principle apllies regardless.

http://www.economicshelp.org/blog/1032/housing/why-falling-house-prices-cause-a-recession/

MysticalRain

Sure, but it's that kind of irrational economics which leads to unsustainable debt and huge recessions. You can't really have a properly functioning economy based around people borrowing money to buy and sell houses to each other, and treating their house as their own personal ATM machine to fund their consumer spending.

The Spider

MysticalRain wrote: »

Sure, but it's that kind of irrational economics which leads to unsustainable debt and huge recessions. You can't really have a properly functioning economy based around people borrowing money to buy and sell houses to each other, and treating their house as their own personal ATM machine to fund their consumer spending.

That's the way most economies work and always have, at least back to the 19 the century.

Glenbhoy

gaius c wrote: »

And in the same vein, would the Germans have won WW2 if all their soldiers were equipped with iPhones?

No chance, too many distractions on the net.