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

cookie1977

The_Conductor wrote: »

Another thing- Germany is, uniquely among EU memberstates, the only country who classifies its nationals working in the ECB as national civil servants, subject to German civil service rules. They do not act independently- they obey the rule of Berlin (the job of any civil servant being to implement the policies of its government).

Aka- the German government, by extension, views the ECB as an arm of the German state (perhaps its rude of me to state it so bluntly, but I challenge anyone to prove differently).

To be fair they are the largest economy in the EU and have been bankrolling most of the rest of the EU. If I was German I'd be looking for significant control over it too.

The_Conductor

cookie1977 wrote: »

To be fair they are the largest economy in the EU and have been bankrolling most of the rest of the EU. If I was German I'd be looking for significant control over it too.

In absolute terms they are bigger- however comparatively they are dropping down the charts, with even the UK and France vastly ahead of them on a per-capita basis (and several interesting countries such as Poland in the East, who are going to feature in future years).

Lets say the German economy is worth about 2.8 trillion, with a population of a little north of 80 million. The UK and France are over 2 trillion a piece- with a population of about 65 million a piece- and despite the odds, growing more strongly than Germany.

Even Ireland was part of the Greek bailout- so while Germany have contributed more in absolute terms, because of its larger population- its still just a voice around the table- and has not, proportionally, paid a bigger price for the mess, than have many minor minnions- such as ourselves.

Villa05

murphaph wrote: »

Agree with most of your post but just a point of order: Americans have historically preferred long term fixed rate mortgages.

I agree, it was a move away from this by the banks which caused the problems

makeorbrake

@The Conductor: It's been interesting reading your posts. I guess I'm not as clear on the subject as I thought I was. I would imagine as I have a tracker - and that has always (of course) shifted with ecb rates, I assumed that whilst not as rigid, it was necessary for variable rate mortgages to shift rates up or down dependent on the ecb rate.

In some ways we are going a tiny bit off the core topic. As misguided as I seem to be as regards what the chain reaction is which will lead to a change in rates, I would imagine we have consensus in the first instance insofar as if rates go north, this affects affordability -and therefore must have some effect on property prices?

Switching back to whether or not they will increase - is it still logical that we are likely to see - over the next few years - higher rates (even if this isn't hooked up with ecb rates in the way I thought it was)?

The_Conductor

makeorbrake wrote: »

Switching back to whether or not they will increase - is it still logical that we are likely to see - over the next few years - higher rates (even if this isn't hooked up with ecb rates in the way I thought it was)?

From recent comments from the ECB, it is entirely possible that rates may lower, or even enter negative territory, before they increase.

The main factor behind ECB rate moves (political pressure to try to act as a conduit for employment and economic expansion notwithstanding)- is to try an maintain inflation rates as near to 2% as possible. This is a mantle they inherited from the Bundesbank- where even 80 years later, the long shadow of the Weimar Republik continues to cast its influence.

At present inflation rates are probably a tad around 1%- which would indicate that even with interest rates as they are, there is still no inherent inflationary pressures building in the economy.

Particular sectors will be looked at- and no doubt instructions issued to constituent governments with the aim of avoiding asset price bubbles- but as it stands, rates could very easily fall further.

After this- depends on when economic fundamentals return to normal (and what this means is debateable- in the context of a Europe which does not have a homogenous economy). Wim Duisberg was rather fond of saying that normalisation of ECB interest rates would indicate a rate of 4-4.5% (and add your tracking margin onto this- and even those on tracker mortgages wouldn't be too far off 6%).

This need not necessarily mean that the cost of financing for lending institutions would rise- it would depend entirely on the fundamentals as viewed by investors, in individual lenders.

AIB are a defacto arm of state. If/when they are divested- they will have to stand on their own two feet. What will their margins on bonds be? I don't know- but given fundamentals, I'd be very surprised if they weren't forced to pay significantly more for money than BOI.

It doesn't mean loans from BOI will be cheaper- or indeed more readily available- as despite the fact that their management was so much less risky that their competitors- their balance sheet still contains many many grenades, that keep getting kicked into the long grass.

Oversight of the main banks- will be taken over by the ECB- probably before the end of the year (it was supposed to be June- but this appears to have been wishful thinking). Presumably- the banks will be forced to recognise the true state of affairs at some stage. Perhaps some may be allowed to fall- now that we have a model for failing banks. Who knows.

Yes- interest rates will (eventually) go up- when, I don't know- but it doesn't appear to be imminent- if you see headline EU inflation rates skirting 2%, you can be sure a rate rise is on the imminent horizon. We're no-where near there year.

Snakeblood

Actually I have a question about this. Given the variable rates are high now, compared to the ECB rate, is there any reason to hope or expect than when the ECB rate raises (eventually) will the variable rate lower, or will it stack on the raised ECB rate?

Like, I was thinking that if the ECB rate being higher might mean tracker mortgages are not as loss producing for the banks, and consequently, the variable rate would no longer have to compensate so heavily for the trackers for the banks, but my brains simply leak out my ears when I try to follow the thought through. Anyone who can shed light on this (including saying 'nope things will be even worse for variables and here's why' would be appreciated.

The_Conductor

No particular reason to imagine the variable rate customers would see a favourable reduction, just because the tracker mortgages didn't cost the bank as much........ What always happens in situations like that- is the bank make hay while the sun shines. In all probability- they'd increase the variable rate mortgages by a commensurate amount- despite the simple fact that they may be sourcing their finance somewhere else altogether.

So- I'd imagine- increase in ECB overnight rate = increase for both trackers and variable rate mortgages........ Lets be realistic........

cookie1977

Come on. Do you think the banks would miss an opportunity to make some money?

ChRoMe

The_Conductor wrote: »

So- I'd imagine- increase in ECB overnight rate = increase for both trackers and variable rate mortgages........ Lets be realistic........

I wouldn't consider any other outcome a possibility to be honest.

gaius c

makeorbrake wrote: »

I'm referring to the series of interest rates increases that the irish banks have imposed on standard variable rate mortgages over the last couple of years - at a time when the ecb rate is at an all time low.

The expectation cannot be that the ecb rate will remain at such a level continuously. In the short term - it certainly looks like it will - but the same cannot be said of the medium term. When those increases come - irish mortgage holders will not be a consideration. The main european economies will.

On that basis, I believe that to be relevant. Particularly so - when you had people complaining about the bank imposed increases. How are those same people going to cope when the ecb rate increases come? And following on from that, what effect will that have on property prices?

Ah I see what you're getting at now and I agree. We could end up with another crisis caused by people loading up on debt when rates are low.
I wince when I hear about people on median household wages (€45-50k) loading up on €300k worth of debt.

For people wondering where ECB rates could go, the historical Bundesbank average was 5%. Now imagine what STV's in this country would be if that happened...

cookie1977 wrote: »

A previous post said...



Rates have already risen. They are high. I stand by that despite what others think or say. And the higher rates have not deterred those buying and taking out mortgages to purchase in Dublin. It has not brought down prices. That was the basis for my point that rates are high.

Give it up please. You've had it pointed out to you quite plainly that 4.5-5% is actually quite low by Irish standards. If rates go back to double digits, we could end up with another arrears crisis on our hands as all the folk who have bought in the last few years join the arrears from the bubble years.

cookie1977 wrote: »

I agree with a lot of what you say but the thing I have a problem with is that while yes the ECB rate and the rate the banks get is different they do have some connections. They should allow for trends to be predicted. The problem is that because the banks went on a crazy tracker binge they are not behaving in some sort of predictable fashion.

Banks have pummeled std variable rate mortgage holders due to the ECB cuts to their tracker customers. And once we see trackers rise due to ECB rate rises (when ever they come) we'll also see continued rises in std variable rate mortgages too. There has been no let up for variable rate customers. They are doubly hit as far as I'm concerned. Hit because they're tax payers and hit because they didn't get them selves a tracker. So while tracker holders have benefited substantially from ECB cuts, std variable rate holders have been hit for the gaps.

Again a complete overhaul of the mortgage system and the bankruptcy system in Ireland is still needed but it seems to me we have missed that opportunity.

You must also remember that STV's are both covering the loss on trackers (which you correctly point out) but also the arrears. Until banks start to make moves on enforcing security on their defaulting loans, they need people who are still paying to subsidise those who are not.

Snakeblood wrote: »

Actually I have a question about this. Given the variable rates are high now, compared to the ECB rate, is there any reason to hope or expect than when the ECB rate raises (eventually) will the variable rate lower, or will it stack on the raised ECB rate?

Like, I was thinking that if the ECB rate being higher might mean tracker mortgages are not as loss producing for the banks, and consequently, the variable rate would no longer have to compensate so heavily for the trackers for the banks, but my brains simply leak out my ears when I try to follow the thought through. Anyone who can shed light on this (including saying 'nope things will be even worse for variables and here's why' would be appreciated.

There is a school of thought that STV's come under pressure to increase when ECB rates go down because the banks' margins get squeezed even more and that STV's might actually decrease or at least hold steady if ECB rates increase. I'm not quite sure I agree with it.

However, in a normal market, banks would compete with each other and that would stop the rates getting out of whack.

Now do we look like we have a normal market? Of course not, we have a zombie bank cartel where even the slightly healthier banks can charge as much as the zombies because there's no competition.

As for foreign banks coming in and cutting Irish banks off at the knees?
Firstly, their rates would also be high to reflect the fact that Irish mortgages are effectively unsecured loans.
Secondly, the zombie banks would be unable to compete with them and continue to require state assistance.

MouseTail

gaius c wrote: »

If rates go back to double digits, we could end up with another arrears crisis on our hands as all the folk who have bought in the last few years join the arrears from the bubble years.

.

Rates are not going to go to double digits.

El_Dangeroso

MouseTail wrote: »

Rates are not going to go to double digits.

Quoting this post so I can laugh at the hubris in a couple of years.

The_Conductor

El_Dangeroso wrote: »

Quoting this post so I can laugh at the hubris in a couple of years.

Unless we jetisson the Euro- rates are not going to go up into the double digits- its not going to happen. The Euro crisis isn't over by any means- but its simmering rather than boiling, and there is no impending danger of the Euro disintegrating.

Prepare to laugh all you want- you'll be waiting a long long time, before you eventually give up..........

El_Dangeroso

The_Conductor wrote: »

Unless we jetisson the Euro- rates are not going to go up into the double digits- its not going to happen. The Euro crisis isn't over by any means- but its simmering rather than boiling, and there is no impending danger of the Euro disintegrating.

Prepare to laugh all you want- you'll be waiting a long long time, before you eventually give up..........

ECB rates do not have to go to double digits for mortagae interest rates to go into double digits.

Confidently stating they will never rise to double digits is as stupid as saying they definitely will.

gaius c

The_Conductor wrote: »

Unless we jetisson the Euro- rates are not going to go up into the double digits- its not going to happen. The Euro crisis isn't over by any means- but its simmering rather than boiling, and there is no impending danger of the Euro disintegrating.

Prepare to laugh all you want- you'll be waiting a long long time, before you eventually give up..........

Irish bank rates, not ECB rates. If Europe ever recovers and sticks up the ECB rate, we're goosed. We already have more than 4% difference between the ECB rate and Irish STV's. What's that going to become if and when the ECB settles at the Bundesbank long-term average of 5%?

cookie1977

gaius c wrote: »

Irish bank rates, not ECB rates. If Europe ever recovers and sticks up the ECB rate, we're goosed. We already have more than 4% difference between the ECB rate and Irish STV's. What's that going to become if and when the ECB settles at the Bundesbank long-term average of 5%?

Irish bank rates wont reach double figures either, certainly not while the Irish government is the major shareholder. Could you imagine the backlash on the politicians. You're still living in cloud cuckoo land if you think they will.

handlemaster

BBC world had a piece today on property price rises in key cities throughout the world. London prices have risen more than 100% since 2005.

Villa05

handlemaster wrote: »

BBC world had a piece today on property price rises in key cities throughout the world. London prices have risen more than 100% since 2005.

Did dublin get a mention,
So there is no bubble danger with rises of 100% in 8/9 years.
I hope those high tides washed up plenty of sand so that the great and the good can put there heads in it again

jay0109

Report to Cabinet urges easier repossessions for banks
http://www.irishtimes.com/news/politics/report-to-cabinet-urges-easier-repossessions-for-banks-1.1655436

Banks have stockpile of 1,500 repossessed properties
http://www.independent.ie/irish-news/banks-have-stockpile-of-1500-repossessed-properties-29917294.html

lima

I recently viewed a Repossession in one of the boom postcodes in Dublin. Price was on the high side of reasonable so I was going to put in an offer at 20k below asking. The latest offer is now 20k over asking and there are more viewings this weekend. Cash buyers.

So looks like repossessions are coming to the market, albeit in drips and drabs as expected.

The government has made it even more appealing for investors and cash buyers to purchase homes to the detriment of young professionals, so they are throwing money and overbidding on any fair offers. I also saw another place and there was a Kerryman farmer type in his 60's who wanted to put in a cash bid straight away at the first viewing. That is currently bidding at 30k over asking.

Conveniently rent is going up also.

As expected, the plan is working by the vested interests.

As a young professional working in a high-value tech job, I feel I should be given some sort of help in purchasing my first home. It will make me stay here and not emigrate (again). I am only saying this since there is so much help for investors (no CGT if keeping for 7 years, etc.)

The_Conductor

lima wrote: »

As a young professional working in a high-value tech job, I feel I should be given some sort of help in purchasing my first home. It will make me stay here and not emigrate (again). I am only saying this since there is so much help for investors (no CGT if keeping for 7 years, etc.)

The government meddling in the market in the first instance- in particular with First-Time-Buyer grants, and of course Tax relief on mortgage interest- was at least partially what got us into this mess in the first place.

Personally- I do not believe there should be tax incentives (or other incentives) of any type for those who purchase property- irrespective of whether they are FTBs, Investors, Landlords- or whatever. Treat everyone in exactly the same manner- and discriminate against no category of purchaser.

Of course- our politicians see it as their prerogative to meddle- so hell may freeze over..........

handlemaster

lima wrote: »

I recently viewed a Repossession in one of the boom postcodes in Dublin. Price was on the high side of reasonable so I was going to put in an offer at 20k below asking. The latest offer is now 20k over asking and there are more viewings this weekend. Cash buyers.

So looks like repossessions are coming to the market, albeit in drips and drabs as expected.

The government has made it even more appealing for investors and cash buyers to purchase homes to the detriment of young professionals, so they are throwing money and overbidding on any fair offers. I also saw another place and there was a Kerryman farmer type in his 60's who wanted to put in a cash bid straight away at the first viewing. That is currently bidding at 30k over asking.

Conveniently rent is going up also.

As expected, the plan is working by the vested interests.

As a young professional working in a high-value tech job, I feel I should be given some sort of help in purchasing my first home. It will make me stay here and not emigrate (again). I am only saying this since there is so much help for investors (no CGT if keeping for 7 years, etc.)

Correction. No capital gains for first seven years of ownership. So if you sell after 10 years you pay capital gains on three years . Therefore 70% of the gain is tax free. You must not forget investors are the reason you have a job. If it weren't for investors no risks would be taken to create employment. Money doesn't grow on trees.

gaius c

jay0109 wrote: »

Report to Cabinet urges easier repossessions for banks
http://www.irishtimes.com/news/politics/report-to-cabinet-urges-easier-repossessions-for-banks-1.1655436

Banks have stockpile of 1,500 repossessed properties
http://www.independent.ie/irish-news/banks-have-stockpile-of-1500-repossessed-properties-29917294.html

It is believed that the financial institutions are in the process of selling some Dublin homes but country properties will be difficult to offload.

They'd find it a lot easier if they priced them to the market.

handlemaster

Villa05 wrote: »

Did dublin get a mention,
So there is no bubble danger with rises of 100% in 8/9 years.
I hope those high tides washed up plenty of sand so that the great and the good can put there heads in it again

No mention of dublin. But we are an open economy so aren't immune. With regard to head on sand comments.... markets go up and down that's how a free market works.

cookie1977

lima wrote: »

I recently viewed a Repossession in one of the boom postcodes in Dublin. Price was on the high side of reasonable so I was going to put in an offer at 20k below asking. The latest offer is now 20k over asking and there are more viewings this weekend. Cash buyers.

So looks like repossessions are coming to the market, albeit in drips and drabs as expected.

The government has made it even more appealing for investors and cash buyers to purchase homes to the detriment of young professionals, so they are throwing money and overbidding on any fair offers. I also saw another place and there was a Kerryman farmer type in his 60's who wanted to put in a cash bid straight away at the first viewing. That is currently bidding at 30k over asking.

Conveniently rent is going up also.

As expected, the plan is working by the vested interests.

As a young professional working in a high-value tech job, I feel I should be given some sort of help in purchasing my first home. It will make me stay here and not emigrate (again). I am only saying this since there is so much help for investors (no CGT if keeping for 7 years, etc.)

On a point it's not that there is no CGT once you keep for 7 years. It's that if you keep it for 7 years then sell there's no CGT. But if you keep it for 10 years then you pay CGT on the 3 years post the 7 years. The idea being that investors will sell the property back into the market in a relatively short period before they risk having to pay CGT.

lima

handlemaster wrote: »

Correction. No capital gains for first seven years of ownership. So if you sell after 10 years you pay capital gains on three years . Therefore 70% of the gain is tax free. You must not forget investors are the reason you have a job. If it weren't for investors no risks would be taken to create employment. Money doesn't grow on trees.

Correction noted.

Investors in Irish property are the reason I have a job? Really? What a troll comment that does not even deserve an answer :rolleyes:

cookie1977

lima wrote: »

Correction noted.

Really? What a troll comment that does not even deserve an answer :rolleyes:

people in glass houses
kettle calling the pot black
takes one to know one
etc etc ad infinitum

gaius c

handlemaster wrote: »

No mention of dublin. But we are an open economy so aren't immune. With regard to head on sand comments.... markets go up and down that's how a free market works.

What exactly is free about a market where 1,500 units are being withheld from the market and not for sale at a market price?

cookie1977

jay0109 wrote: »

Report to Cabinet urges easier repossessions for banks
http://www.irishtimes.com/news/politics/report-to-cabinet-urges-easier-repossessions-for-banks-1.1655436

Banks have stockpile of 1,500 repossessed properties
http://www.independent.ie/irish-news/banks-have-stockpile-of-1500-repossessed-properties-29917294.html

I just had a look at that report and while it makes some good points I do think that reporting about it by the media is very poor. It's title is even wrong. If you have a look at the full report below you can see that it had a very limited terms of references.

http://www.justice.ie/en/JELR/ExpGroupReportFinal.pdf/Files/ExpGroupReportFinal.pdf

Terms of reference
1. Outline the current repossession framework in Ireland.
2. Review the length, predictability and cost of repossession proceedings in
Ireland.
3. Assess the expected case load and the adequacy of the currently available
capacity.
4. Evaluate the effectiveness and efficiency of Ireland’s statutory repossession arrangements and propose, where necessary, appropriate measures.
5. Prepare final report.

Hardly worth calling the group an "Expert Group on Repossessions" now. And disappointing to see no reference in the media to the groups very limited terms of reference. I would have thought on the points they made they would have all been obvious to anyone and would not have needed any "expert group" to look into the matter. How and ever who am I to think for myself.

cookie1977

gaius c wrote: »

What exactly is free about a market where 1,500 units are being withheld from the market and not for sale at a market price?

To be fair if they are for sale at higher asking prices why aren't the banks accepting lower offers which I presume they are receiving?