Housing bubble starting to pop?

SkepticOne

Agents cut Dublin property prices

Reductions of up to 33% hit second-hand house market, writes Susan Mitchell.

Estate agent s are slashing the prices of property in Dublin, according to a survey carried out by The Sunday Business Post.

The survey found that agents had cut prices by as much as €2 million. Price cuts of 33 per cent were not unusual across the secondhand market. [...]

Drop in house prices at the top end of market

[...]The price falls come amid increasingly pessimistic forecasts from the country’s leading economists. AIB chief economist John Beggs said prices for second-hand properties at the top end of the market could fall by between 5 per cent and 10 per cent this winter.

Bank of Ireland chief economist, Dan McLaughlin said house price inflation would fall to 3 per cent next year, down from 14 per cent this year.

Mortgage brokers have predicted that house price inflation will drop to zero next year and warned of ‘‘a small risk’’ that property values would fall in 2007 for the first time in 12 years. Agents have said that it has become a buyers’ market.

Despite the slowdown in the market, first-time buyers on the average wage cannot afford to buy in Dublin. A survey found that a couple on the average industrial wage will still need to raise €163,000 - on top of a mortgage - to buy a house in Dublin.

DonalMcTavish

SkepticOne wrote:

Agents cut Dublin property pricesDrop in house prices at the top end of market

They mean Asking Prices?

These articles are just sensationalism again.
Why cant they just give unbiased reports and that will tell us all if we need to wait and keep saving or should buy now before the price to buy a house goes up again.

Despite the slowdown in the market, first-time buyers on the average wage cannot afford to buy in Dublin. A survey found that a couple on the average industrial wage will still need to raise €163,000 - on top of a mortgage - to buy a house in Dublin.

That is just such a stupid comment i dont know where to start.

They talk about millionaire houses in their article and then give this little bit about the bottom end of the market to back up their point.

What survey? who did it? who did they survey? how many did they survey? show us the survey.
Where are they talking about in Dublin? Foxrock, Tallaght, Blackrock, Santry, City, Ballymun?
What is a home? 2 bed, 3bed, 6 Bed? apartment, house, mansion,
On top of a mortgage of how much ?

We want to buy a 3 bed house somewhere in Dublin.
If we settled for a 2 bed we could afford one easily. But we want a 3 bed the most as my fiance is pregnant.
It doesnt mean we cant afford a home. we just feel we would like a bigger house than what we can afford right now so we are waiting to see if they fall. Its just so hard to judge with all of the arguments around which only take one side and just forget about evidence for the opposite arguement.
If we had bought last year we could have got the 3 bed we wanted but we waited and now cant get it. if we wait longer will we not even get the 2 bed.
its just so hard to know what to do. if stamp duty falls we will be better off and will buy straight away but if it doesnt will we be worse off not buying the 2 bed?

Sponge Bob

DonalMcTavish wrote:

These articles are just sensationalism again.

well they are true but not representative. They are no worse than property supplement porn with blue skys 24/7 in Sherriff St.

DonalMcTavish wrote:

We want to buy a 3 bed house somewhere in Dublin.
If we settled for a 2 bed we could afford one easily. But we want a 3 bed the most as my fiance is pregnant.
It doesnt mean we cant afford a home. we just feel we would like a bigger house than what we can afford right now so we are waiting to see if they fall.

Sensible lad, there was me thinking you thought that property prices could only go up .Watch Lucan so. Bid no higher than €350k and wait for one seller to accept an offer for what would have been c €400k in May.

All you need is one seller.

SkepticOne

DonalMcTavish wrote:

What survey? who did it? who did they survey? how many did they survey? show us the survey.
Where are they talking about in Dublin? Foxrock, Tallaght, Blackrock, Santry, City, Ballymun?
What is a home? 2 bed, 3bed, 6 Bed? apartment, house, mansion,
On top of a mortgage of how much ?

The newspaper did a survey of the main Irish banks of how much they would lend to two first-time buyers on €30,500 each. NIB would lend €250,000 up to EBS with €330,000. Average was €292,726.

Seems to me that these are huge amounts to be lending to people on fairly standard salaries.

CiaranC

Couple of questions, maybe some of you could shed some light.

Reading of an imminent crash, one thing I consistantly heard was that apartments and properties out in commuter land would be the first to be hit, instead everyone is talking about 3 bed semis in Lucan and 4 beds in Foxrock dropping in price. Whats the deal?

Secondly, why are the banks still falling over themselves to give away money if they think a crash is coming?

Surely they must know people are simply going to stop paying a mortgage if 50% of the value of the property is wiped away? Why would you continue servicing a debt on a property worth half of what you paid for it? Wouldnt you just leave the keys in the door and walk away like they did in the UK during their crash? Doesnt this leave banks open to huge danger and huge losses?

The nearer the peak of the market the more risk for the bank, yet we saw them go further and further in giving out mortgages. Are we suggesting that financiers in banks have no clue whats happening?

SkepticOne

CiaranC wrote:

Surely they must know people are simply going to stop paying a mortgage if 50% of the value of the property is wiped away? Why would you continue servicing a debt on a property worth half of what you paid for it? Wouldnt you just leave the keys in the door and walk away like they did in the UK during their crash? Doesnt this leave banks open to huge danger and huge losses?

Handing the keys in the door does not get rid of your mortgage. The bank will try and sell the property for whatever they can get but you will still owe the difference. If it is, say, 50% on a 300,000 mortgage then you will be left with an unsecured loan of 150,000. Ouch!

If there is widespread voluntary reposessions, as you say, then that will lead to further deterioration of prices as the banks dump properties onto the market.

gurramok

CiaranC wrote:

Couple of questions, maybe some of you could shed some light.

Reading of an imminent crash, one thing I consistantly heard was that apartments and properties out in commuter land would be the first to be hit, instead everyone is talking about 3 bed semis in Lucan and 4 beds in Foxrock dropping in price. Whats the deal?

Dunno about Foxrock but the likes of Lucan, Clonee/Ongar are traffic nightmares on edge of city with lack of amenties. Same goes for commuter land.
Obviously those areas well serviced will hold their value more.

CiaranC wrote:

Secondly, why are the banks still falling over themselves to give away money if they think a crash is coming?

Surely they must know people are simply going to stop paying a mortgage if 50% of the value of the property is wiped away? Why would you continue servicing a debt on a property worth half of what you paid for it? Wouldnt you just leave the keys in the door and walk away like they did in the UK during their crash? Doesnt this leave banks open to huge danger and huge losses?

The nearer the peak of the market the more risk for the bank, yet we saw them go further and further in giving out mortgages. Are we suggesting that financiers in banks have no clue whats happening?

Banks are in denial of whats happening. Just look at the latest comments of what the like of Austin Hughes of IIB spurts out.
They want your money. of course if market falls, they give out less money in mortages with less interest coming into their coffers hence they shutup about falling prices.
Its not as simple as handing in keys, those that jumped on the bandwagon with jumbo mortgages will still owe a deficit when prices fall if they sell as SkepticOne just described.

indiewindy

Banks are just worried about maintaining earnings growth for their shareholders, the new NIB product must be causing them some sleepless nights. I dont see prices falling where I am , they are actually still rising mainly due to the Sunday times saying it was the best value commuter place to buy:mad:

A lot of people still seem to see property as a sure thing one way bet, but with pressure at cadburys and now Wellman on the horizon and the rumours about Dell and whether or not they will move production to Poland etc etc. 07 is looking crucial in this mad spiral or property porn as spongebob called it

ronbyrne2005

Banks know most people wont hand back keys to their home and face a large bill even if houses fall 50%. Most people bought their houses more than 3/4 years ago so even if prices dropped 50% they would still have positive equity(albeit very much reduced). People who have bought more recently will mostly continue paying their mortgages and be stuck in that home for many years. Repossesions only really become a big prob for bank when a significant amount of their customers can't pay their mortgage due to widespread job losses in the economy(a recesssion is'nt expected anytime soon even if property market drops significantly(20+%) in next few years)

miju

CiaranC wrote:

Secondly, why are the banks still falling over themselves to give away money if they think a crash is coming?

Surely they must know people are simply going to stop paying a mortgage if 50% of the value of the property is wiped away? Why would you continue servicing a debt on a property worth half of what you paid for it? Wouldnt you just leave the keys in the door and walk away like they did in the UK during their crash? Doesnt this leave banks open to huge danger and huge losses?

The nearer the peak of the market the more risk for the bank, yet we saw them go further and further in giving out mortgages. Are we suggesting that financiers in banks have no clue whats happening?

simple answer to this is more profits for the banks , the fact is that the banks are not majorly exposed to defaulted mortgage as the mortgage debt is usually sold on to a hedge fund or something similiar fairly quickly after its taken out

Sponge Bob

miju wrote:

the fact is that the banks are not majorly exposed to defaulted mortgage as the mortgage debt is usually sold on to a hedge fund or something similiar fairly quickly after its taken out

Securitisation it is called. It dramatically increases the risk the bank will repossess ( and quickly) unlike in the past where they could freeze the mortgage (in effect allow the mortgage owner to 'rent their own house' ) . Irish banks in the past were generally very reluctant to repossess formally , especially a family home . That may have changed but we do not know yet.

The bank still acts as a collection agent for the long term bond it has securitised , if there is a non performance the bank has to repo quickly or they themselves will end up paying the shortfall in funds due under the bond , if they repossses they 'get away' with it to a degree .


Securitisation is a powerful incentive to repossess and sell in other words, were their loan book ' in house ' and not sold they could be more flexible .

Afuera

ronbyrne2005 wrote:

Most people bought their houses more than 3/4 years ago so even if prices dropped 50% they would still have positive equity(albeit very much reduced). People who have bought more recently will mostly continue paying their mortgages and be stuck in that home for many years.

While most people may have bought there property more than 4 years ago, the numbers that have taken on mortgages in the last 4 years is still very high. I think that it's running at a figure of around 400,000+ over the last 4 years. The number of households in the whole country is 1.8 million, so we're talking about nearly 25% of households in the country at risk of negative equity if there was a drop as big as you said. The big question is whether the economy is strong enough to survive such a drop, as it would have knock on effects for employment, immigration, etc.

antoinolachtnai

Re securitization and repossession, is there evidence of this in other countries?

Really though, is it ever really in the interests of banks to do widespread repossessions?

Afuera

antoinolachtnai wrote:

Really though, is it ever really in the interests of banks to do widespread repossessions?

The credit rating of the bank itself would be badly hit if they decided not to try and recover their bad debts. They would find it increasingly difficult to borrow money from abroad, or sell on derivitives and it would force their cost of borrowing up as there would be a higher risk premium.

antoinolachtnai

If you are a bank, and you have a reasonably current loan book, you would just be undermining the value of your most recent homeloans if you started dumping houses into the market.

If this happens, your own most recent loans, which haven't yet been securitized will be into negative equity. You won't be able to raise money on the strength of them. You will also damage the value of the securitized loan books if you bring about a market collapse. So you will avoid this if it can.

Sponge Bob

TBH I am worried about the banks. The last time there was a downturn of any sort was 25 years back when banks were run by bankers.

Now they have all retired and the banks are run by salesmen not bankers. I personally believe they will panic once there is a generalised downturn and force investors who invested post 2000 to dump ( they have less leverage with homeowners on the family home ) .

Banks can still call in an investment mortgage in extremis (even if its fully paid up or 'performing' ) or else they can call in the investor to a meeting and <cough> advise them . That sort of advice will come from about 4 bank type chappies intimidating and haranguing the investor at length in an office , anybody ever seen it in action ????

They will internally review the antics of certain investors and do these advice sessions in any sustained downturn , say if prices are off by 10-15% by this time next year across the board. They would be irresponsible if they did not TBH

As the homeower (including the FTB) is only around half the market in the past few years I expect that the interest only mortgage investor type who has built no real equity up will be the primary focus of the banks revenue assurance measures .

I only vaguely remember the early 1980s myself but you would be astonished at the number of people who were 'called in' out of the blue by the banks back then and I mean solvent sober types who owed nothing and had never non performed .

Lots of 50 and 60 years old can tell sordid tales of stampeding panicking bankers.

Afuera

antoinolachtnai wrote:

If you are a bank, and you have a reasonably current loan book, you would just be undermining the value of your most recent homeloans if you started dumping houses into the market.

If this happens, your own most recent loans, which haven't yet been securitized will be into negative equity. You won't be able to raise money on the strength of them. You will also damage the value of the securitized loan books if you bring about a market collapse. So you will avoid this if it can.

I think you're overestimating how much control a bank has in the market. While they may try and hold off as long as possible on wholesale repossessions (for the good reasons you've detailed here), builders and investors will be in a position to dump houses into the market far faster than the banks anyway. At the end of the day, the banks are answerable to their shareholders and they would be reckless to carry bad debts which would affect their long-term credibility.

To be honest, in the case of a crash in the market it's very hard to see how the banks are going to get out unscathed. I'm sure the recent property sell offs by BoI and AIB is a play to keep their liquidity high, but it wouldn't be a great surprise if their stocks got crucified at the first sign of trouble with the mortgage lending market.

D'Peoples Voice

antoinolachtnai wrote:

If you are a bank, and you have a reasonably current loan book, you would just be undermining the value of your most recent homeloans if you started dumping houses into the market.

If this happens, your own most recent loans, which haven't yet been securitized will be into negative equity. You won't be able to raise money on the strength of them. You will also damage the value of the securitized loan books if you bring about a market collapse. So you will avoid this if it can.

If AIB held onto the repossessed houses it would be funny becos they just sold off their commercial property interests only to replace them with residential property interests. Give their CEO a big bonus i say.

Personally I can see banks repeat what they did a few years ago, and that was to reduce the loan to value rates they are willing to give loans to, so instead og giving 100% mortgages they may move to 80%. That's why some banks such as NIB are actively trying to win over customers who have very low loan to value ratios from other banks. My guess is that we will continue to see an increasing number of mortgages being approved, the majority of which will be people moving their EXISTING mortgages from one bank to another.

hmmm

antoinolachtnai wrote:

If you are a bank, and you have a reasonably current loan book, you would just be undermining the value of your most recent homeloans if you started dumping houses into the market.

Banks in the US are instructive as they have experience of foreclosures and negative equity. In their case they will both move to foreclosure, and as they are not in the business of managing a stock of residential properties they will sell immediately and recoup what losses they can. If we think that an Irish bank will turn into a property management company we're dreaming.

CiaranC

Not much consensus on the bank question then.

gurramok

20pc of new homes built since 2002 lay empty

http://www.unison.ie/irish_independent/stories.php3?ca=9&si=1711139&issue_id=14798

There is no housing shortage, just greed.
Hell of alot of empties to be dumped by speculators at their choosing as we witness in 2nd hand market now.

miju

it seems that the "fundamentals" of immgration for next year has just been dealt a body blow

http://www.rte.ie/news/2006/1024/eu.html

Sponge Bob

Nope, plenty more supply in the 10 accession states from 2004 .

http://epp.eurostat.ec.europa.eu/pls/portal/docs/PAGE/PGP_PRD_CAT_PREREL/PGE_CAT_PREREL_YEAR_2006/PGE_CAT_PREREL_YEAR_2006_MONTH_10/3-03102006-EN-AP.PDF

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miju

Sponge Bob wrote:

Nope, plenty more supply in the 10 accession states from 2004 .

http://epp.eurostat.ec.europa.eu/pls/portal/docs/PAGE/PGP_PRD_CAT_PREREL/PGE_CAT_PREREL_YEAR_2006/PGE_CAT_PREREL_YEAR_2006_MONTH_10/3-03102006-EN-AP.PDF

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sorry i'm failing to see the connection between unemployment figure tables for EU states and immigration.....care to explain?

CiaranC

You dont see a connection between unemployment and emigration?

Sponge Bob

CiaranC wrote:

You dont see a connection between unemployment and emigration?

20% unemployment in Ireland in 1987 had nothing to do with the fact that 1% of the population left in that year .


20% unemployment in Ireland in 1988 had nothing to do with the fact that 1% of the population left in that year too .


NEARLY 20% unemployment in Ireland in 1989 had nothing to do with the fact that 1% of the population left in that year as well .

D'Peoples Voice

CiaranC wrote:

You dont see a connection between unemployment and emigration?

I'm guessing here, but maybe what miju means is,
we know there is a connection between high unemployment and high emigration,
and there is a connection between high employment creation and high immigration,
but that does not mean there is a connection between low unemployment and high immgration.

CiaranC

Heh, are you taking the piss?

Jvizzle

If your looking for a cheap appartment I hear some are going at a knock down price in Clondalkin, might have to live next to someone who is dealing 10million in Herion and has a sub machine gun. But beggars can't be choosers.

miju

what i was getting at is that high unemployment in another country does not equate to people coming here to work (theres other countries that they can go to besides ireland)

on the other foot high unemployment here does not equate to everyone emigrating , though if that was the case then supply would increase further (and before anyone asks i'm aware unemployment in ireland is low)