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

cookie1977

jay0109 wrote: »

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

You dont think calling in the troika and nationalising most our banks due to the world financial crisis was a sufficient shock? I didn't even see a dramatic increase in BTL repossessions while they were in charge.

jay0109

cookie1977 wrote: »

You dont think calling in the troika and nationalising most our banks due to the world financial crisis was a sufficient shock? I didn't even see a dramatic increase in BTL repossessions while they were in charge.

And did'nt prices drop by over 50%!!!! I'm not sure what your trying to say here

cookie1977

jay0109 wrote: »

And did'nt prices drop by over 50%!!!! I'm not sure what your trying to say here

I meant that despite the disaster that was 2007-2011 we still didn't see an increase in repossessions.

SeanSouth

@Jay - With respect, I think it may be you who has an overly simplistic view of it.

Of course there will be people repossessed in Shrewsbury Road who move to rent in Foxrock
People repossessed in Foxrock who move to rent in Rathmines
People repossessed in Rathmines who move to rent in Lucan

At the same time people who have been biding their time in rental properties may react to this situation.

The guy renting in Foxrock now decides to buy in Shrewsbury Road
The guy renting in Rathmines decides to buy in Foxrock
The guy renting in Lucan decides to buy in Rathmines

My point is that as long as the supply and demand for housing in the market remains largely unchanged following repossessions, then the affect on price will be minimal.This is basic economics from Economics 101.

jay0109

SeanSouth wrote: »

@Jay - With respect, I think it may be you who has an overly simplistic view of it.

Of course there will be people repossessed in Shrewsbury Road who move to rent in Foxrock
People repossessed in Foxrock who move to rent in Rathmines
People repossessed in Rathmines who move to rent in Lucan

At the same time people who have been biding their time in rental properties may react to this situation.

The guy renting in Foxrock now decides to buy in Shrewsbury Road
The guy renting in Rathmines decides to buy in Foxrock
The guy renting in Lucan decides to buy in Rathmines

My point is that as long as the supply and demand for housing in the market remains largely unchanged following repossessions, then the affect on price will be minimal.This is basic economics from Economics 101.

it's 'basic' alright, I'll give you that
Your making so many assumptions and have a perfect 'flow' of activity built into your theory.

By your theory, all those repossessions that happen in places like America would have meant zero price impact, and I don't think thats what actually happened...in fact what your saying is that repossessions on a small or large scale will have no impact what so ever.

jay0109

cookie1977 wrote: »

I meant that despite the disaster that was 2007-2011 we still didn't see an increase in repossessions.

Spider said that a drop in prices wold be avoided at all costs.
I pointed out that is not what happened from 2007-2011.

So we're talking about price rises/falls here

You seem to be getting confused and are talking about repossessions.

The Spider

jay0109 wrote: »

Spider said that a drop in prices wold be avoided at all costs.
I pointed out that is not what happened from 2007-2011.

So we're talking about price rises/falls here

You seem to be getting confused and are talking about repossessions.

I did say that indeed, but the repo point is valid. You mention 2007-2011, that was the country's first property crash, lessons have been learned, the economy in fact all economies are closely tied to the fortunes of the property market.

The bottom was last year, prices are not going to drop they may increase in line with inflation or they may rocket, but the fact of the matter is they look affordable to a lot of people right now.

Compared to the height they're 50% cheaper, and that's what the average guy sees.

SeanSouth

Jay, my friend

Repossessions do not cause property markets to deflate in America or anywhere else

Property markets deflate when a bubble bursts or where there is too much building activity resulting in over supply or too much emigration or migration resulting in lack of demand.

In the Dublin market, we are seeing signs of healthy demand, low levels of supply and a widely accepted view that the bubble has well and truly burst to the tune of 50% +. There is very little building activity and there hasn't been for six years.

Quite simply, the conditions for property price deflation do not exist in the Dublin property market, either with or without higher levels of repossession.

If it was a case that all repossessed families were to emigrate AND there was nobody interested in buying the repossessed houses, then I agree that prices would fall. As I see it there is lots of interested buyers, a fair share of pent-up demand and little evidence that masses of would-be repossesseds are planning to emigrate.

You are waiting for a bus that will never come.If the bus does finally arrive, the chances are that the fares will have gone up NOT down.
Did you ever here of "missing the bus" or was it "the boat"

techdiver

SeanSouth wrote: »

Jay, my friend

Repossessions do not cause property markets to deflate in America or anywhere else

Property markets deflate when a bubble bursts or where there is too much building activity resulting in over supply or too much emigration or migration resulting in lack of demand.

In the Dublin market, we are seeing signs of healthy demand, low levels of supply and a widely accepted view that the bubble has well and truly burst to
the tune of 50% +.

Quite simply, the conditions for property deflation do not exist in the Dublin property now either with or without higher levels of repossession.

A functioning proper market has roughly 3% of the entire stock for sale at any particular time. Dublin, at the moment, has only 0.5% of stock for sale. That is the sole reason there is a perceived demand in the market. This perception is driven by the usual vested interests and unfortunately some Irish people are just too damn dumb to spot this.

Added to this that the number of transactions are so low that nothing concrete can be garnered from the figures and also the fact that over 50% of transaction are cash only. These cash buyers are finite and regardless of what you say credit is severely restricted, so the kind of people who had access to mortgages during the bubble will no longer be granted mortgages (rightly so BTW).

As longer as this status quo is allowed to continue the worse the end result will be. The more you kick the can down the road, the worse the eventual correction will be.

Villa05

cookie1977 wrote: »

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

Same root cause - High House prices. That why attempting to pump the property bubble and ignoring a huge overhang of property not being paid for is doomed to failure

jay0109

The Spider wrote: »

I did say that indeed, but the repo point is valid. You mention 2007-2011, that was the country's first property crash, lessons have been learned, the economy in fact all economies are closely tied to the fortunes of the property market.

The bottom was last year, prices are not going to drop they may increase in line with inflation or they may rocket, but the fact of the matter is they look affordable to a lot of people right now.

Compared to the height they're 50% cheaper, and that's what the average guy sees.

I don't understand how you and the other bulls here just make big points, are pulled up on them and then carry on the same theme at a slightly different angle, blustering over the earlier errors!
You can have more than 1 bow to you string....it all does'nt have to be 100% 'price rises are good and we'll never see a bust again' type stuff.

You start above by agreeing with what I pointed out and then immediately grab out at something else to divert attention away from your earlier statement!
You then talk about lessons having being learned.....this is Ireland!!!! Lessons will never be learned. And again, I think you give our govt too much credit for being able to influence things.
You then make more big statements despite your earlier utterances. I can assure you that the 'average guy' does'nt think prices in Dublin are right at the moment...unless the average guy earns 120k+!

Have we reached the bottom as you so confidently say? Perhaps we have, 2 years of price rises in SCD say we have in that area at least.
Will there never be a fall in prices again as you seem to believe- I don't buy that one!

Good luck!

jay0109

SeanSouth wrote: »

Jay, my friend

Repossessions do not cause property markets to deflate in America or anywhere else

Property markets deflate when a bubble bursts or where there is too much building activity resulting in over supply or too much emigration or migration resulting in lack of demand.

In the Dublin market, we are seeing signs of healthy demand, low levels of supply and a widely accepted view that the bubble has well and truly burst to the tune of 50% +. There is very little building activity and there hasn't been for six years.

Quite simply, the conditions for property price deflation do not exist in the Dublin property market, either with or without higher levels of repossession.

If it was a case that all repossessed families were to emigrate AND there was nobody interested in buying the repossessed houses, then I agree that prices would fall. As I see it there is lots of interested buyers, a fair share of pent-up demand and little evidence that masses of would-be repossesseds are planning to emigrate.

You are waiting for a bus that will never come.If the bus does finally arrive, the chances are that the fares will have gone up NOT down.
Did you ever here of "missing the bus" or was it "the boat"

Really, they have no impact on house prices going down! Perhaps they drive prices up This is mad stuff

I'm not waiting for any bus! I've said repeatedly that I don't see there being mass repossessions (I believe there should be, but politics has interfered in the market), but don't let that ruin your little ramble.
I actually agree with most of the other points you make about pent up demand and shortage of supply...but the supply is historically low at the moment and any person rationally studying the recent price rises, would say they are the main factor behind them.

Just trying to have a rational discussion on here which some people seem set against because they just want to scream out all sorts of madness to support their own side.

Anyways, whatever, I'm off to the pub

Villa05

Does anyone know the general view of the ECB and EU to what is going on here. The banks are still in receipt of cheap money from the ECB. How long will this last. Considering latest comments from Barroso Irish Banks are hated and despised by the EU authorities

The head of the European Commission Jose Manuel Barroso told a press conference that Ireland’s problems had not been caused by the EU.
Indeed, he said that Ireland’s banks had caused major problems for the Eurozone.

“It was the Irish banks that created a big problem for Ireland but also the other countries in the euro area. This should be taken into consideration.

“It would be wrong to give the impression that Europe has created a problem for Ireland.

“It was the banking sector in Ireland that was one of the biggest problems in the world in terms of banking stability, let’s be honest.”
He went on to say that the Euro was not to blame for Ireland’s problems, saying that the currency had been a “victim” of the Irish banking sector.

http://www.thejournal.ie/barroso-says-that-irelands-banks-caused-eurozone-crisis-1233008-Dec2013/

SeanSouth

I dont really take your point that cash buyers are finite.

There is a lot of interest in Dublin property now coming from China and Russia in particular. There is nothing imaginary about this demand. It's there and its very real. In much the same way that the Irish went over to buy up Budapest in 2005, due to the perceived value in that market at that time, the Chinese are here in force to buy up opportunities that are not available to them at home.

If you believe that the demand in the market is only "perceived", I would recommend a visit to Allsops auctions at any stage and then you will witness the demand "for real". Also it shouldnt be too difficult to observe how quickly houses are selling in your area. I'm not asking you to take my word for it. If you have any evidence of vested interests telling mistruths, you should come back on here and talk about it

By the way I have no vested interest. I am just someone looking for a property
at the moment and finding it very difficult to act quickly enough to secure the right property. I'm posting here because of the obvious disparity between what Im finding on the ground and the notion on here that properties will shortly be cheap as chips. What I'm seeing is hyper demand driven by people who believe that the market has recently turned and rushing to get in at the bottom. I suspect seven years of pent up demand is now being unleashed.
I know this annoys a lot of people who are still hoping for prices to go lower but its a genuine account of what Im seeing.

cookie1977

Villa05 wrote: »

Does anyone know the general view of the ECB and EU to what is going on here. The banks are still in receipt of cheap money from the ECB. How long will this last. Considering latest comments from Barroso Irish Banks are hated and despised by the EU authorities


http://www.thejournal.ie/barroso-says-that-irelands-banks-caused-eurozone-crisis-1233008-Dec2013/

I think everyone is playing a wait and hope game. That goes for the public, the banks the Troika, everyone. Didn't Rehn or some German minister talk this week about getting back-up funds for Ireland too (if we needed it) since we'd done so well to date exiting the bailout? If I find the link I'll post it.

Calina

SeanSouth wrote: »

There is a lot of interest in Dublin property now coming from China and Russia in particular.

In my view, this is not a good thing and should be, how should I put it, disencouraged with a fairly huge tax. Particularly as far as residential property is concerned. There are swathes of London basically unoccupied for this reason.

And before you ask: I was completely against it when the IRish were doing it in Budapest and Cape Verde as well.

Glenbhoy

The Spider wrote: »

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

50% of purchases this year financed by cash.

Mortgage levels at 5% of 2006 levels.

Glenbhoy

cookie1977 wrote: »

I meant that despite the disaster that was 2007-2011 we still didn't see an increase in repossessions.

True, because it was practically impossible to repossess due to a ruling by Justice Dunne in 2011 which found that most properties could not be repossessed because of a loophole in the Land and Conveyancing Law Reform Act 2009 (whether that loophole was deliberate or erroneous, who knows!!).

I agree that repossessions will not have a huge impact on property prices, as banks will manage them in a such a way as to minimise the impact. That said, I don't think current price levels in SDC are sustainable or will spread - we've a helluva lot of pain to negotiate in this country yet, unemployment figures may be manipulated downwards, but that doesn't mean decent employment is rising. There's a 9Bn gap in the public finances which hasn't yet been bridged and the govts strategy there is that this will be sorted by wholly unrealistic growth figures (how many years in a row have estimates been utterly wrong??). It's not hard to see the troika back and in all honesty, have they actually gone away (truth to tell, do we really want them gone?).

kaymin

SeanSouth wrote: »

I dont really take your point that cash buyers are finite.

There is a lot of interest in Dublin property now coming from China and Russia in particular. There is nothing imaginary about this demand. It's there and its very real. In much the same way that the Irish went over to buy up Budapest in 2005, due to the perceived value in that market at that time, the Chinese are here in force to buy up opportunities that are not available to them at home.

If you believe that the demand in the market is only "perceived", I would recommend a visit to Allsops auctions at any stage and then you will witness the demand "for real". Also it shouldnt be too difficult to observe how quickly houses are selling in your area. I'm not asking you to take my word for it. If you have any evidence of vested interests telling mistruths, you should come back on here and talk about it

By the way I have no vested interest. I am just someone looking for a property
at the moment and finding it very difficult to act quickly enough to secure the right property. I'm posting here because of the obvious disparity between what Im finding on the ground and the notion on here that properties will shortly be cheap as chips. What I'm seeing is hyper demand driven by people who believe that the market has recently turned and rushing to get in at the bottom. I suspect seven years of pent up demand is now being unleashed.
I know this annoys a lot of people who are still hoping for prices to go lower but its a genuine account of what Im seeing.

I don't think there's anyone disputing that houses are being snapped up quickly. The main reason for this is the artificial lack of supply caused my government interference in the housing market through NAMA and through laws that prevented banks from repossessing up until recently.

I don't think properties in SCD are good value at the moment because the gross rental yield they generate is very low.

And I don't think the mini bubble we're witnessing is sustainable because if the average person earns €43k then the average house price should be no more than €150k. How many cash buyers can there be when the average person earns €43k? Currently the average price of a 3 bed semi is 250k.

For the people that did well from the property boom, presumably they will be smart enough to see that we're now at the bottom of an interest rate cycle, there are massive government and private sector debt levels, property taxes are increasing, rental income is increasingly treated unfavourably under tax rules, banks aren't lending and, basically, the risk / return ratio doesn't encourage investment in residential property.

Even if Chinese / overseas buyers buy up properties, I expect they will do so on the basis of future price increases rather than yields (certainly in SCD) which aren't sustainable for reasons stated above. So I expect overseas interest will be a short-term phenomena.

Yes, for every seller there will be a buyer, be it a homeowner or an investor - so it's a zero sum game in terms of properties available, for the moment at least. That doesn't mean prices won't fall though. Eventually sellers will just have to reduce their prices to match buyers pockets.

Ultimately repossessions are inevitable in line with all property busts around the world.

moxin

The ending of the CGT incentive at the end of next year(2014) is helping investors invest in property, yet another govt driven property incentive like the LPT exemption and the hike in DIRT on savings.. http://www.citizensinformation.ie/en/money_and_tax/tax/capital_taxes/capital_gains_tax.html

on_my_oe

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?

The apartment we rented for 2.5yrs had been rented solidly for over five years at almost double the mortgage payments - but the landlord hadn't paid the mortgage since he brought it (literally brought in the October, paid November and December, and nothing for five years afterwards).

There have been five BTL repos in our building, all long term rented (we knew most of our fellow tenants).

Sure there are genuine investors in trouble but others who are playing a tricky long game waiting for a taxpayer gift in form of a write off

makeorbrake

on_my_oe wrote: »

The apartment we rented for 2.5yrs had been rented solidly for over five years at almost double the mortgage payments - but the landlord hadn't paid the mortgage since he brought it (literally brought in the October, paid November and December, and nothing for five years afterwards).

There have been five BTL repos in our building, all long term rented (we knew most of our fellow tenants).

What has your guy done differently to the BTL landlords that had their properties repo'ed?....or were those voluntary repo's?

on_my_oe wrote: »

Sure there are genuine investors in trouble but others who are playing a tricky long game waiting for a taxpayer gift in form of a write off

What taxpayer gift? Trousering the rent for all those years means they walk away with something - I'd imagine that's the extent of their 'tricky long game'...

SeanSouth

Even if all of the 80000 homes that are in arrears > 90 days came on the market at the same time, they only represent 4% of the total housing stock of PPRs (of approximately 1.9 million housing units).

This idea of government policy and NAMA artificially influencing market prices by curtailing supply is utter nonsense. Releasing all these houses on the market at the same time will cause nothing but a very short lived ripple. People still need to live somewhere. Repossession doesn't make the demand for housing to go away and it doesnt increase the supply. At most. It will shift the supply and demand balance between property owners and property renters.The chances of 80,000 homes being repossessed in this country is extremely low. I think there were c 1500 repossessions in 2013. If it increases to say 5000 next year or 10000 the year after, it's hard to see how it will adversely affect the main property markets in Dublin Cork or Galway.
Even if the banks need to sell 80000 repossessed houses, it will be done in a controlled way and all of this at a time when the population is growing.

Back in the celtic tiger days we were building up to 90,000 new housing units each year.At the moment we are building very little. This is the real cause of our supply problem. We're not building enough new houses to satisfy demand in certain locations at a time when the population is growing.The right conditions for building new houses are not there yet. The credit facilities are not there and housing prices will need to increase further to make it profitable for developers. At present it would be difficult for a developer to buy a site and build houses for less than it would cost to purchase 2nd hand equivalents. This can only be solved by price increases.

Finally the poster who talks about average salaries of 45K as a guide to setting average house prices at 150,000. Buying property in major cities is never cheap and was never cheap . The average buyer cant expect to buy a property in a central location in London, Paris, Brussels,Amsterdam,New York or any other capital city at average prices. I would say an average buyer can expect to pay average prices 45 minutes out of such cities but not centrally. A property in Ballsbridge was never accessible to the person on 45K but one in Leixlip might be.

gaius c

SeanSouth wrote: »

If you believe that the demand in the market is only "perceived", I would recommend a visit to Allsops auctions at any stage and then you will witness the demand "for real".

Where you at it? Selection was mostly muck. The tidal wave of demand was such that 15% of lots failed to sell.

Glenbhoy wrote: »

50% of purchases this year financed by cash.

Mortgage levels at 5% of 2006 levels.

2013 lending likely to be below 2012 levels too but don't worry the people with money will buy all the property and everybody else will rent. It worked great in the 19th century.

Oh and would folk ever stop trying to compare Dublin with London, Paris & New York for the purposes of their argument? Dublin is about the 40 something-th largest city in Europe by population. I know we have google, facebook, ebay and trillions of other MNC's and that we're really special and all but really, Dublin is quite small.

cookie1977

gaius c wrote: »

Where you at it? Selection was mostly muck. The tidal wave of demand was such that 15% of lots failed to sell.


2013 lending likely to be below 2012 levels too but don't worry the people with money will buy all the property and everybody else will rent. It worked great in the 19th century.

Oh and would folk ever stop trying to compare Dublin with London, Paris & New York for the purposes of their argument? Dublin is about the 40 something-th largest city in Europe by population. I know we have google, facebook, ebay and trillions of other MNC's and that we're really special and all but really, Dublin is quite small.

While we'll wait and see what the 2013 lending actually is lets be honest here and at least say that 2012 lending was in part driven by the last quarter due to the expiry of TRS. Another artificial high.

SeanSouth

OK guys, I'm willing to nail my colours to the mast here.

My prediction for property prices in Dublin Cork & Galway for 2014 is an increase of 8% to 10% and repossessions to rise to about 5000 houses.

My prediction for property prices in Dublin Galway and Cork for 2015 is an increase of 5%.

In the meantime I raise my glass to the guy that believes that properties in Ballsbridge will eventually find their natural level at around 150,000 because we are a SMALL country :-) Might make a good topic for a doctoral thesis.

I don't personally hold any monopoly in predictions of the Irish property market. My conclusions say that prices must rise. Anyone with different predictions, please add.

lima

SeanSouth wrote: »

This idea of government policy and NAMA artificially influencing market prices by curtailing supply is utter nonsense.

I'm not sure if you saw this:

http://www.youtube.com/watch?v=pWlz1IKWfw4

http://www.independent.ie/business/irish/michael-noonan-not-concerned-about-hike-in-dublin-property-prices-29822367.html

SeanSouth

@Gaius

I was at the auction and any decent lots were well bid. I was well out-bid on what I wanted to buy.

I didnt know that only 15% didnt sell. The 15% is very low in my view. The
ones that didnt sell were either with too high reserve, in bad locations, in bad repair or with problematic title. Good quality lots in Dublin Cork & Galway bid very well.

lima

SeanSouth wrote: »

OK guys, I'm willing to nail my colours to the mast here.

My prediction for property prices in Dublin Cork & Galway for 2014 is an increase of 8% to 10% and repossessions to rise to about 5000 houses.

My prediction for property prices in Dublin Galway and Cork for 2015 is an increase of 5%.

In the meantime I raise my glass to the guy that believes that properties in Ballsbridge will eventually find their natural level at around 150,000 because we are a SMALL country :-) Might make a good topic for a doctoral thesis.

I don't personally hold any monopoly in predictions of the Irish property market. My conclusions say that prices must rise. Anyone with different predictions, please add.

It's probably right. I don't think anyone believes the whole of D4 is going to get repossessed, and a lot of the repo stock will be in towns outside Dublin (the countryside). But there are likely apartments and houses within Dublin that will be repossessed also. Obviously, the vested interests have it sewn up so there will not be a glut.

Personally I think property prices are far too high right now. Dublin might be a capital city, but it is a peripheral EU city with little tiny expensive houses that people seem to just accept. I am looking, but have a decent place to rent now in a lovely area so am willing to wait until either a) Those tiny little houses get cheaper or b)a decent house comes on the market c) Keep on renting and use my deposit to buy bitcoins (joke)

DebDynamite

on_my_oe wrote: »

The apartment we rented for 2.5yrs had been rented solidly for over five years at almost double the mortgage payments - but the landlord hadn't paid the mortgage since he brought it (literally brought in the October, paid November and December, and nothing for five years afterwards).

There have been five BTL repos in our building, all long term rented (we knew most of our fellow tenants).

Sure there are genuine investors in trouble but others who are playing a tricky long game waiting for a taxpayer gift in form of a write off

Exactly - the BTLs are making money. Where is that money going if it's not to pay off the mortgage? Into a secret bank account somewhere?

If enough noise is made and the threat of repossession becomes real, perhaps the strategic defaulters will put up a big chunk of money from said bank accounts and promise to keep on top of repayments from there on in.