[ejmaztec]

Originally Posted by shamblertine

My mate Dave will take one, and the bank will give him a loan. So in effect all thats happening is the debt and ownership is being transferred from someone who can't keep up repayments (the developer) to someone who can (my mate Dave).

Your mate Dave is a very lucky man, but unfortunately, there aren't enough Daves around to to get all of the developers out of hock. In the present circumstances, even God would have trouble getting a loan using the Universe as collateral.

[shamblertine]

Originally Posted by snyper

But the "assets" arent there, and even if they were, the tradesman still gets fcuked - because eveb if there were assets there the tradesman is last to get paid

What assets does a developer have? Nothing in many cases.. privately yes, but within the company no. Loans were secured on reputation in many cases im certain

Well the assets are there for debts with anglo anyway, according to Eamon Ryan who said in the case of bad debts, assets secured against loans would come under state control.

And the tradesmen will already have been paid using the initial loan anyway, they don't wait until property has been sold until they get paid.

[shamblertine]

Originally Posted by ejmaztec

Your mate Dave is a very lucky man, but unfortunately, there aren't enough Daves around to to get all of the developers out of hock. In the present circumstances, even God would have trouble getting a loan using the Universe as collateral.

but if prices were lowered the market would get moving again

[ejmaztec]

Originally Posted by shamblertine

but if prices were lowered the market would get moving again

It would if there was not the likelihood of mass unemployment.

The banks are being told to lend to people, but they're very reluctant to do this as job security has gone down with everything else. I know several cases where mortgages have been offered to prospective buyers, only for the lenders to go back on the deals at the last minutes. They've either pulled out altogether, or reduced substantially the amount of their original loan offer.

I wonder how much would be involved were the amounts of negative equity relating to relevant borrowers to be written off in some way - across the board. If we assume that property prices are never going back to the high level that they were, those borrowers will never be able to move if they have to find the difference between the selling price and the loan.

[mickdw]

The banks ARE putting the hammer on the smaller developers with a small 8 -10 house development sold v cheap in mayo. I guess in cases where the loans are secured on something other than the sale properties, the banks will be getting onto the developer telling him to free up some cash quick. Many small guys would have their home tied into the borrowings.

[K-9]

Originally Posted by shamblertine

I'm sorry but I think that is complete crap. For example, just looking at the <snip> development, prices have been reduced by over 100k (which means the developers where aiming to get way above 15-20% markup. However the prices are still at crazy levels and still represent markups of way over 20%. These are very small 1 bedroom flats we are talking about here, they do not cost much to build especially considering the poor quality of them and the type of areas many of them are in.

Do you know how much they paid for the site?

Is this the same site?
<snip>

One bed, €165k, 2 beds €230k?

If they'd bought the site in the last 4/5 years, I can't see much profit in it.

Originally Posted by shamblertine

Thats the developers problem and not the taxpayers problem, or at least it shouldn't be the taxpayers problem. Time for the banks to start calling in these debts and taking over the assets of developers that were put up against their loans.

From the Tribune last week, that time has come:
http://www.tribune.ie/business/artic...th-developers/

Originally Posted by javaboy

I'm not disputing any of your figure Snyper but wouldn't economies of scale enter into it when you're talking about housing developments rather than single builds?

They would to an extent, but never mind the building costs Snyper mentioned, Loan Interest and Development charges are huge. People tend to focus on building cost.

Originally Posted by snyper

You may think that all developers are filthy rich, you'd be very wrong, some made very poor decisions and took on projects beyond their means and managed these projects badly.

I know many many people who worked for said developers and now are out of pocket to sums most people wouldnt make in 10 years. So if the property is sold at a loss the bank gets paid, the developers makes no money and has no money to pay the debts to the people that built the property.. again.. the little man gets fcuked..

Many people don't realise how subcontractors and many small builder merchants, hire shops etc. are being screwed. As you point out, if developers sell at below or near cost, there will not be much left over for them.

Originally Posted by snyper

But the "assets" arent there, and even if they were, the tradesman still gets fcuked - because eveb if there were assets there the tradesman is last to get paid

What assets does a developer have? Nothing in many cases.. privately yes, but within the company no. Loans were secured on reputation in many cases im certain

Most of it is on paper. Even if you bought a site for €10 million and you think it's worth €6 million now, nobody will offer that.

Originally Posted by mickdw

The banks ARE putting the hammer on the smaller developers with a small 8 -10 house development sold v cheap in mayo. I guess in cases where the loans are secured on something other than the sale properties, the banks will be getting onto the developer telling him to free up some cash quick. Many small guys would have their home tied into the borrowings.

Would be interesting to see what these other assets are? Shares?

[Slutmonkey57b]

All of these arguments are meaningless in the face of the collateralised debt markets.

[peasant]

Originally Posted by snyper

.. the little man gets fcuked..

sums it up nicely there

[gurramok]

So to sum up. buyers like shamblertine of shamblertine's friend Dave cannot afford the asking price hence the gaffs stay vacant unsold and decrease in value over time which leads to bad debts for the developer and/or the bank.

They're all screwed including the little man, bar the buyer of course whose potential debt is decreasing over time.(falling prices leading to smaller mortgages)

[K-9]

Originally Posted by gurramok

So to sum up. buyers like shamblertine of shamblertine's friend Dave cannot afford the asking price hence the gaffs stay vacant unsold and decrease in value over time which leads to bad debts for the developer and/or the bank.

They're all screwed including the little man, bar the buyer of course whose potential debt is decreasing over time.(falling prices leading to smaller mortgages)

YEP.

If the potential buyer stays employed and his/her wages aren't decimated by wage/hours cut, Pension/tax levies, tax rises, etc. etc. etc.

As long as banks don't cut lending levels to the old 2/3 times income levels when incomes are dropping.

In summary, property prices crashes isn't great, even for buyers.

[Sam Vimes]

Originally Posted by snyper

The developer i paying a much higher interest %

Well he's supposed to be. Many of them aren't paying it which is why we have to bail out the banks

Originally Posted by ejmaztec

It would if there was not the likelihood of mass unemployment.

The banks are being told to lend to people, but they're very reluctant to do this as job security has gone down with everything else. I know several cases where mortgages have been offered to prospective buyers, only for the lenders to go back on the deals at the last minutes.

That's the most frustrating thing. The banks won't lend because job security is low but in many cases job security is low because businesses can't get loans to tide them over. Both problems are causing each other

[asdasd]

All of these arguments are meaningless in the face of the collateralised debt markets.

Yes. its a new paradigm. People who think that falling housing prices will hurt the economy just don't understand collateralised debt markets. Good job the bankers were on top of it.

Anyway. Synpers points about builders/developers not having that much room for profit may well be accurate but are beside the point. They can take either the losses or declare bankruptcy.

It does seem that we are bailing banks out so this does not happen. BOI and AIB are priced by markets for nationalisation. However I think that, nevertheless, the vast majority of developers will still go bankrupt, because Ireland cannot afford their debt. As for whether banks want to sell property, or not, I don't really see the point of guaranteeing the land against the development unless they are prepared to own the collateral and sell it.

When we own the banks fully we can use them for social housing.

[K-9]

Originally Posted by K-9

Do you know how much they paid for the site?

Is this the same site?
<snip>

One bed, €165k, 2 beds €230k?

If they'd bought the site in the last 4/5 years, I can't see much profit in it.

Apologies Terry. Should have been more selective in shamblertines quote. The reason I referenced that development wasn't to do with alleged poor quality in anyway, just prices from €165k. Depending on site costs, the builder could be selling at cost or even less.

Originally Posted by asdasd

Yes. its a new paradigm. People who think that falling housing prices will hurt the economy just don't understand collateralised debt markets. Good job the bankers were on top of it.

Anyway. Synpers points about builders/developers not having that much room for profit may well be accurate but are beside the point. They can take either the losses or declare bankruptcy.

It does seem that we are bailing banks out so this does not happen.

Not necessarily. Some will suffer losses and some will go bankrupt, nationalisation or not.

Bear in mind development debt is usually short term, 2/3 year debt. All good when you are selling of plans, not great when maybe more than half of a development is unsold or not even developed because they can't sell. The more long term viable loans could be restructured.

Getting the finance to do that was proving too expensive or impossible on the market.

[Ulysses Gaze]

Bear in mind development debt is usually short term, 2/3 year debt. All good when you are selling of plans, not great when maybe more than half of a development is unsold or not even developed because they can't sell.

Problem is that more people are now trying to get out of 'Off the Plan" contracts they signed 2/3 yrs ago as they have only paid deposits and while initially approved for mortgages, banks are refusing to grant them these as the value of the properties have dropped since the initial contract was signed.

So developers are now trying to enforce specific performance of contracts which means court cases.....elongating their ability to get hold of cash.

[K-9]

Originally Posted by Ulysses Gaze

Problem is that more people are now trying to get out of 'Off the Plan" contracts they signed 2/3 yrs ago as they have only paid deposits and while initially approved for mortgages, banks are refusing to grant them these as the value of the properties have dropped since the initial contract was signed.

So developers are now trying to enforce specific performance of contracts which means court cases.....elongating their ability to get hold of cash.

I think most builders will try and negotiate a reduced price.
Better getting 80% of the original price now than waiting a few years with no guarentee.