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

Villa05

http://www.rte.ie/news/business/2013/1216/493110-euro-zone-banks/

Speaking to a committee of the European Parliament, Mr Draghi warned that the recent balance sheet review, carried out by the Central Bank, "falls short" of the more stringent test that would be carried out ahead of the ECB assuming the role of overall banking supervisor next year.
He said the exercise carried out by the Central Bank was "not forward looking".

"The Irish banking sector remains a source of some concern, with outstanding issues still requiring swift and decisive action.

"The recently submitted results for the Irish specific balance sheet assessment exercise indicated that while no capital shortfalls were identified there is a need for adjustments to provisioning as well as risk weighted assets."

This means that banks will have to set aside capital to pay off any future loans which go bad.

Mr Draghi said these issues should be addressed before the new Single Supervisory Mechanism's comprehensive stress tests are carried out next year.

Troika may be gone for now, but I'm sure they don't want to come back again and will be influencing policy here for some time.

cookie1977

There's nothing new in that from Draghi. We always knew that. We still have an epic failing banking system who still refuse to deal with their arrears:
Three quarters of mortgages in arrears still not restructured

Fitch sees the total number of repossessions in the country being

As many as 26,000 Irish houses will be repossessed after falling into deep mortgage arrears, with the pace of seizures predicted to step up rapidly from next year.

And that:

52,000 homes could see a share of their debt written off. Fitch said one in five houses where mortgages had been in arrears for three months or more was likely to be repossessed.
Despite saying repossession would be a last resort for lenders, it means as many as 26,000 properties, including buy-to-let properties and actual family homes, could be seized by the banks.

These figures taking the country as a whole will not result in new price decreases as far as I can see. And remember this will take a long time to happen so it wont be 26,000 homes (apts and houses) suddenly released on to the market.

I still dont see how we're going to see huge price decreases again soon and into the near future if these figs stack up. According to the CIF (and yes they're a vested interest) the country needs between 15-20K houses being built a year to meet demand so even if the entire stock of proposed repossessions happened in one go (which we know it wont) it would only represent an entire year of stock needed.

So again I cannot see house repossessions going into the future making a significant impact on house prices.

el pasco

Galego wrote: »

But in the cases of repossessions and having to write debts off..........who is going to pick up that bill? Taxpayers again?

Bingo! :-)

el pasco

cookie1977 wrote: »

There's nothing new in that from Draghi. We always knew that. We still have an epic failing banking system who still refuse to deal with their arrears:
Three quarters of mortgages in arrears still not restructured

Fitch sees the total number of repossessions in the country being


And that:



These figures taking the country as a whole will not result in new price decreases as far as I can see. And remember this will take a long time to happen so it wont be 26,000 homes (apts and houses) suddenly released on to the market.

I still dont see how we're going to see huge price decreases again soon and into the near future if these figs stack up. According to the CIF (and yes they're a vested interest) the country needs between 15-20K houses being built a year to meet demand so even if the entire stock of proposed repossessions happened in one go (which we know it wont) it would only represent an entire year of stock needed.

So again I cannot see house repossessions going into the future making a significant impact on house prices.

But where will the banks get the money to write off this debt?

el pasco

Villa05 wrote: »

@cookie

I think its irrelevant at this point,
Option 1
If repossessions happen it will increase supply and prices will drop, however the banks will be cleansed and allowed to start afresh allowing sustainable low growth with tighter regulation from EU to prevent future credit bubbles.

Option 2
If repossessions are not allowed to happen, losses will increase, mortgage rates on paying customers will increase pulling more into the arrears crisis, Strategic defaulters get away with it, Mortgage lending becomes high risk -> deterring new entrants -> reducing mortgage lending -> increased pressure on interest rates

Option 1 is negative for house prices in the short term, however as the issue is repaired. House prices will stabilise and probably rise with inflation/economic recovery.

Option 2 is negative for house prices full stop, in addition banks remain in their zombie state. Lending to viable business drys up. Genuine distressed borrowers are in limbo unable to adequately plan for the future. Strategic defaulters win.
Construction of new houses will not happen as banks will not lend for this purpose, purchasers will not buy off plan. Construction workers remain on the dole.

To me it feels like Ireland is in a live experiment in reverse evolution so house prices will become less relevant and the burning issue will be the abundance of trees because the road we are travelling, thats where we will be eventually living.

The problem here is if you have mass debt write downs who bails out the banks??

The debt should probably be "parked" for a few years maybe even cut to 50% now and the other 50% in 20 years time that could solve the problem

gaius c

cookie1977 wrote: »

There's nothing new in that from Draghi. We always knew that. We still have an epic failing banking system who still refuse to deal with their arrears:
Three quarters of mortgages in arrears still not restructured

Fitch sees the total number of repossessions in the country being


And that:



These figures taking the country as a whole will not result in new price decreases as far as I can see. And remember this will take a long time to happen so it wont be 26,000 homes (apts and houses) suddenly released on to the market.

I still dont see how we're going to see huge price decreases again soon and into the near future if these figs stack up. According to the CIF (and yes they're a vested interest) the country needs between 15-20K houses being built a year to meet demand so even if the entire stock of proposed repossessions happened in one go (which we know it wont) it would only represent an entire year of stock needed.

So again I cannot see house repossessions going into the future making a significant impact on house prices.

Don't think you need that many tbf. So few houses are really for sale that it will only take a small amount to upset the precarious supply/demand equilibrium we have right now.

cookie1977

gaius c wrote: »

Don't think you need that many tbf. So few houses are really for sale that it will only take a small amount to upset the precarious supply/demand equilibrium we have right now.

Doesn't it depend on where these possible repossessions are located though?

gaius c

cookie1977 wrote: »

Doesn't it depend on where these possible repossessions are located though?

Are we about to have that "all the arrears are in Outer Leitrim" discussion?

cookie1977

Are we about to say all arrears are located in dublin?

gaius c

We won't really know until we get better data or actually start the repos but I've never had much time for the Bulls' blithe "they are all in Leitrim" argument.

There was a thread here before where a poster was buying in the Ashbourne/North Dublin region and he expressed his frustration with the number of houses for sale that were only "on sale" to get the banks off their backs so there is definitely some level of arrears in the Dublin region. Think he said 7 of 9 houses that he looked at were not really for sale.

cookie1977

Well I don't think leitrim's the centre of everything nor do I think all/majority arrears are in dublin but as you say without proper analysis we cannot tell.

The_Conductor

gaius c wrote: »

We won't really know until we get better data or actually start the repos but I've never had much time for the Bulls' blithe "they are all in Leitrim" argument.

There was a thread here before where a poster was buying in the Ashbourne/North Dublin region and he expressed his frustration with the number of houses for sale that were only "on sale" to get the banks off their backs so there is definitely some level of arrears in the Dublin region. Think he said 7 of 9 houses that he looked at were not really for sale.

Its not complete bull- Carrick-on-Shannon is used as a teaching aid by the EU Commission- they bring tours from Eastern Europe over to show them what happens when development is allowed occur unfethered. Unfortunately the Polish equivalent of the NRA went 180 degrees in the opposite direction, with similarly ridiculous results.

Lets keep our powder dry and see what transpires.

leinsterdude

Carrick on Shannon is lovely, but terrible planning

DebDynamite

With all the talk of rents being at an all time high in Dublin, is it likely that's there's that many Dublin BTLs in arrears? Would the rent they make not be enough to cover the mortgage repayments?

cookie1977

DebDynamite wrote: »

With all the talk of rents being at an all time high in Dublin, is it likely that's there's that many Dublin BTLs in arrears? Would the rent they make not be enough to cover the mortgage repayments?

Rents did fall quite a bit even though they are rising now they are not where they used to be. It just depends also on how extended the owners of BTL's are. So even with rising rents they could be still in serious trouble with repayments.

lima

DebDynamite wrote: »

With all the talk of rents being at an all time high in Dublin, is it likely that's there's that many Dublin BTLs in arrears? Would the rent they make not be enough to cover the mortgage repayments?

Yeah there are, I've been looking around and there seem to be some that currently have tenants but are for sale. Some of them seem strange for a landlord to sell but thinking about it they are probably repossessions or voluntary surrenders as the landlord can't afford to keep them

Villa05

Newstalk speak to David Hall and an official assignee from the high court about the bankruptcy process

http://www.newstalk.ie/player/shows/Breakfast/5/6354/19th_December_2013_-_Breakfast_Part_4

lima

IMF telling the Govt to get started on Repossessing properties that people aren't paying for as it is hampering growth

http://www.irishtimes.com/business/economy/ireland/imf-calls-for-greater-efforts-on-mortgage-arrears-joblessness-1.1633117

lima

Villa05 wrote: »

Newstalk speak to David Hall and an official assignee from the high court about the bankruptcy process

http://www.newstalk.ie/player/shows/Breakfast/5/6354/19th_December_2013_-_Breakfast_Part_4

Listening to this and reading askabout money there is certainly more realization that Repossessions are imminent. Time to hold off looking again!

The Spider

lima wrote: »

IMF telling the Govt to get started on Repossessing properties that people aren't paying for as it is hampering growth

http://www.irishtimes.com/business/economy/ireland/imf-calls-for-greater-efforts-on-mortgage-arrears-joblessness-1.1633117

Doesn't mention anything about repossessions, it says the government has to address unemployment and mortgage arrears.

That could be anything, write down the debt to a reasonable amount etc.

Don't know where you got repossessions from.

This thread has been going since March and still no 'imminent repossessions' what's the betting there'll still be none in March 2015?

SeanSouth

This thread is completely wide of the mark. A glut of repossessed houses will not impact on prices as lots of posters seem to think. There will be no increase of supply arising from houses being repossessed and the demand will remain unchanged so there is absolutely no reason for house prices to decrease.

Lets take an example of 1000 houses being repossessed. Those 1000 families will then be looking to rent so the same amount of houses is needed to house the population in overall terms. So a number of things can happen

1. The 1000 families that lose their homes will end up renting the 1000 homes that have been repossessed. In this scenario, even though there is 1000 homes extra on the market (supply) , 1000 extra homes are also needed for rent (demand)
There is no significant change in the demand / supply balance.

2. Lets take an extreme example. The 1000 houses repossessed do not go on the rental market, they are instead put up for sale. In the meantime the 1000
families that have been repossessed are screaming for rental properties.This sudden rise in demand for rental properties will drive up rents rapidlyl which will entice investors to come in and buy up the repossessed houses to make them available for rent due to the increasingly attractive rents available.

As long as the overall demand for housing (rental or purchase) and supply of housing (rental or sale) remain unchanged, there is little chance of house prices changing due to repossessions

Aka Ishur

SeanSouth wrote: »

This thread is completely wide of the mark. A glut of repossessed houses will not impact on prices as lots of posters seem to think. There will be no increase of supply arising from houses being repossessed and the demand will remain unchanged so there is absolutely no reason for house prices to decrease.

Lets take an example of 1000 houses being repossessed. Those 1000 families will then be looking to rent so the same amount of houses is needed to house the population in overall terms. So a number of things can happen

1. The 1000 families that lose their homes will end up renting the 1000 homes that have been repossessed. In this scenario, even though there is 1000 homes extra on the market (supply) , 1000 extra homes are also needed for rent (demand)
There is no significant change in the demand / supply balance.

2. Lets take an extreme example. The 1000 houses repossessed do not go on the rental market, they are instead put up for sale. In the meantime the 1000
families that have been repossessed are screaming for rental properties.This sudden rise in demand for rental properties will drive up rents rapidlyl which will entice investors to come in and buy up the repossessed houses to make them available for rent due to the attractive rates available.

As long as the overall demand for housing (rental or purchase) and supply of housing (rental or sale) remain unchanged, there is little chance of house prices changing due to repossessions

Your situation assumes a free supply of credit which does not exist. The lack of mortgages being given out restricts the number of buyers, changing the balance in favour of supply.

The Spider

Aka Ishur wrote: »

Your situation assumes a free supply of credit which does not exist. The lack of mortgages being given out restricts the number of buyers, changing the balance in favour of supply.

Tell that to the people looking to buy in Dublin, oh and mortgages are being given out to people who can pay them back.

Ardent

SeanSouth wrote: »

This thread is completely wide of the mark. A glut of repossessed houses will not impact on prices as lots of posters seem to think. There will be no increase of supply arising from houses being repossessed and the demand will remain unchanged so there is absolutely no reason for house prices to decrease.

Lets take an example of 1000 houses being repossessed. Those 1000 families will then be looking to rent so the same amount of houses is needed to house the population in overall terms. So a number of things can happen

1. The 1000 families that lose their homes will end up renting the 1000 homes that have been repossessed. In this scenario, even though there is 1000 homes extra on the market (supply) , 1000 extra homes are also needed for rent (demand)
There is no significant change in the demand / supply balance.

2. Lets take an extreme example. The 1000 houses repossessed do not go on the rental market, they are instead put up for sale. In the meantime the 1000
families that have been repossessed are screaming for rental properties.This sudden rise in demand for rental properties will drive up rents rapidlyl which will entice investors to come in and buy up the repossessed houses to make them available for rent due to the increasingly attractive rents available.

As long as the overall demand for housing (rental or purchase) and supply of housing (rental or sale) remain unchanged, there is little chance of house prices changing due to repossessions

I don't see this hypothectical problem at all.

Right now, there is a shortage of 3/4 bed family homes in Dublin. Sure, those who lose these homes will have to rent somewhere. But most likely they will have to downgrade or move further afield, i.e., rent a smaller house/apartment or move out of Dublin?

The Spider

Ardent wrote: »

I don't see this hypothectical problem at all.

Right now, there is a shortage of 3/4 bed family homes in Dublin. Sure, those who lose these homes will have to rent somewhere. But most likely they will have to downgrade or move further afield, i.e., rent a smaller house/apartment or move out of Dublin?

Ha you wish, the fact is there won't be massive repossessions, and any that happen will be carefully released, the point that you seem to be missing is that rising house prices are good for the majority of people, the economy and the government.

You'd better believe that a drop will be avoided at all costs.

Villa05

The Spider wrote: »

You'd better believe that a drop will be avoided at all costs.

Unfortunately that cost is our childrens future, another generation consumed with debt, future generations burdened by the countries national debt, bankruptcy of the country, a health service not fit for purpose, multiple suicides, stopping short of killing the domestic economy.

Of course high house price will always exist in this environment

SeanSouth

First of all there is no problem getting a mortgage for people with good income and a half decent deposit saved.

Secondly there is no shortage of money in the country (or belonging to Irish people in off shore accounts) Did you ever ask yourself where all the celtic tiger money actually went. Yes some of it was squandered on Mercedes and BMWs but not all, by a long shot. We borrowed billions in the celtic tiger era and when the musical chairs finally stopped in 2007 / 2008 a lot of that money was still being held by canny irish individuals who had either sold their land, their businesses or their houses to the populus. There are lots of people who benefited from the celtic tiger. Very wealthy individuals at this stage. A lot of these people are back in the housing market buying up property for cash.

So how do I know all this. Because I'm out there at the moment trying to buy an investment property myself. Anything like a block of apartments or a rent producing commercial property is getting snapped up pretty quickly and for cash. This is what is happening in the housing market in Dublin. The people holding the cash from the celtic tiger days are back in town buying up quality property for cash.

The other thing that is now happening in the market is foreign investors buying up quality property that is perceived as good value. I also have had first hand experience of that.

Anyone who believes that the market is about to spiral downwards due to repossessions is deluding themselves big time. The banks have a good grasp of the situation now. They are still in bad shape individually but they are in survival mode
With a comprehensive arsenal of split mortgages, mortgage to rent, interest only options, the banks will do everything possible to weather this storm. If the banks were to repossess in mass, it would also mean the end of the banks so that is very unlikely to happen.

The final reason why the market will not fall further IMHO is because property prices are now such that the cost of building is greater than the cost of purchasing a property already built on an equivalent site. That situation cannot last for too long. By the way the population in the major cities is still growing significantly and the pent up demand is massive. The future estimates all point to increased need for housing in the future and steady population growth for the next twenty years.

These are my personal views. feel free to disagree.

cookie1977

Villa05 wrote: »

Unfortunately that cost is our childrens future, another generation consumed with debt, future generations burdened by the countries national debt, bankruptcy of the country, a health service not fit for purpose, multiple suicides, stopping short of killing the domestic economy.

Of course high house price will always exist in this environment

Half (In fact all) the things you've mentioned there could also be caused by a glut of repossessions.

jay0109

The Spider wrote: »

You'd better believe that a drop will be avoided at all costs.

Just like a 'drop' was avoided at all costs from 2007-2011 :rolleyes:

I think you give the Govt/VI's too much credit for being able to influence things. Some major external shock for example and all bets are off. Not saying that's due to happen but just don't believe you should be as definitive as you always try to be

jay0109

SeanSouth wrote: »

This thread is completely wide of the mark. A glut of repossessed houses will not impact on prices as lots of posters seem to think. There will be no increase of supply arising from houses being repossessed and the demand will remain unchanged so there is absolutely no reason for house prices to decrease.

Lets take an example of 1000 houses being repossessed. Those 1000 families will then be looking to rent so the same amount of houses is needed to house the population in overall terms. So a number of things can happen

1. The 1000 families that lose their homes will end up renting the 1000 homes that have been repossessed. In this scenario, even though there is 1000 homes extra on the market (supply) , 1000 extra homes are also needed for rent (demand)
There is no significant change in the demand / supply balance.

2. Lets take an extreme example. The 1000 houses repossessed do not go on the rental market, they are instead put up for sale. In the meantime the 1000
families that have been repossessed are screaming for rental properties.This sudden rise in demand for rental properties will drive up rents rapidlyl which will entice investors to come in and buy up the repossessed houses to make them available for rent due to the increasingly attractive rents available.

As long as the overall demand for housing (rental or purchase) and supply of housing (rental or sale) remain unchanged, there is little chance of house prices changing due to repossessions

way way too simplistic. Likelihood are that those repossessed in high demand areas won't be able to continue to afford to live in those areas and would move on.

I'm not saying there will be a glut of repossession's as it's being kicked down the road so far and will probably continue to do so...but perhaps developments such as this might speed things up
http://www.askaboutmoney.com/showthread.php?t=184302
BoSI have sold their mortgage book on to a 'vulture' fund