Advertisement
If you have a new account but are having problems posting or verifying your account, please email us on hello@boards.ie for help. Thanks :)
Hello all! Please ensure that you are posting a new thread or question in the appropriate forum. The Feedback forum is overwhelmed with questions that are having to be moved elsewhere. If you need help to verify your account contact hello@boards.ie
Help Keep Boards Alive. Support us by going ad free today. See here: https://subscriptions.boards.ie/

Negative equity-Whats the big deal?

1…34689…13

Comments

  • #152
    srsly78
    Registered Users, Registered Users 2 Posts: 7,157 ✭✭✭srsly78


    Yes they should. What goes up must come down, nevermind the soft landing rubbish.


  • #153
    SBWife
    Registered Users, Registered Users 2 Posts: 1,287 ✭✭✭SBWife


    KELTICKNIGHTT wrote: »
    so your a broker , if so , your part of the problem

    that doesn't answer the question, should people have predicted almost 50-60% loss
    specially to have all happen in less than 10 yr period to have 50-60% loss, a rescission and loss of income at same time , , Does it ?
    now you calling people idiot's who have negative loss in there home, loss of income , interesting
    i guess your going to say they also should have guessed that the government bring out all these new taxes , property tax, water charges , septic tank charges the possibility of being force to have private pension which might be proposed to take out 15% of of there wages ?

    Please do the other posters a big favour and read your posts before hitting the submit button, given the lack of capitalisation and grammar they're getting hard to understand. Thanks.

    I think it was pretty evident (in 2004 - 2007 at least) that these were good times economically speaking. Unless you've never heard of the idea of the economic cycle, the fact that you couldn't turn on the radio or t.v. without hearing of all time lows in the unemployment rate might have suggested that this could increase. That every budget started with the idea of decreasing the tax burden while maintaining the low corporate tax rate. That house prices were hitting and in some cases surpassing levels seen in world class cities. All of this should have been a clue. The evidence was there in spades, just many people didn't want to see it.


  • #154
    KELTICKNIGHTT
    Registered Users, Registered Users 2 Posts: 3,781 ✭✭✭KELTICKNIGHTT


    SBWife wrote: »
    Please do the other posters a big favour and read your posts before hitting the submit button, given the lack of capitalisation and grammar they're getting hard to understand. Thanks.

    I think it was pretty evident (in 2004 - 2007 at least) that these were good times economically speaking. Unless you've never heard of the idea of the economic cycle, the fact that you couldn't turn on the radio or t.v. without hearing of all time lows in the unemployment rate might have suggested that this could increase. That every budget started with the idea of decreasing the tax burden while maintaining the low corporate tax rate. That house prices were hitting and in some cases surpassing levels seen in world class cities. All of this should have been a clue. The evidence was there in spades, just many people didn't want to see it.

    yes, i heard of economic lol

    i was asking other poster should people have know there property would drop 50-60%, did you think it drop that low. some property even dropped lower .
    Also with price drop of property of 50-60% plus a recession plus loss of employment, so are you saying people who are in negative value by huge amount and maybe loss of work should have know all this when they got there mortgage
    and
    to top it off,
    the government to bring out property tax, water charges and septic tank charges way back in 2002 ?, are you saying should have known this when they took out there mortgage in 2002 or before ??


  • #155
    The Corinthian
    Closed Accounts Posts: 19,777 ✭✭✭✭The Corinthian


    KELTICKNIGHTT wrote: »
    so your a broker , if so , your part of the problem
    Err, no, I'm not. Not in banking, property, brokerage or anything like that.
    that doesn't answer the question, should people have predicted almost 50-60% loss
    specially to have all happen in less than 10 yr period to have 50-60% loss, a rescission and loss of income at same time , , Does it ?
    Honestly; the drop in price was higher than I thought it would be (25% - 45%), but the recession coinciding with it and the speed of the loss when the bubble burst? That was a no brainer, TBH. Try Googling market bubbles and see what you get (hint: no historical example ever of a soft landing).
    i guess your going to say they also should have guessed that the government bring out all these new taxes , property tax, water charges , septic tank charges the possibility of being force to have private pension which might be proposed to take out 15% of of there wages ?
    No, but I could and would consider the possibility of these kind of things over a 20+ year mortgage's lifespan. Did you?


  • #156
    clairefontaine
    Closed Accounts Posts: 4,390 ✭✭✭clairefontaine


    KELTICKNIGHTT wrote: »
    yes, i heard of economic lol

    i was asking other poster should people have know there property would drop 50-60%, did you think it drop that low. some property even dropped lower .
    Also with price drop of property of 50-60% plus a recession plus loss of employment, so are you saying people who are in negative value by huge amount and maybe loss of work should have know all this when they got there mortgage
    and
    to top it off,
    the government to bring out property tax, water charges and septic tank charges way back in 2002 ?, are you saying should have known this when they took out there mortgage in 2002 or before ??

    Yes, I think what some people are suggesting is that you treat it like you are going to Paddy Powers, and just act is if it will all fall out of the bottom, assume the market will fall out from under your feet, assume the government will tax the bejeesus out of you, and assume wide spread massive lay offs, as well as a stock market crash, and assume all at the same time. Then assume the ECB will also become insolvent, and will start printing out money like there is no tomorrow so that inflation will make money comical, and also assume petrol will rise to E50 a litre too. Just assume apocolypse will you are taking out your mortgage. Don't leave out the possibility of earthquakes, nuclear war, and terrorist attacks.

    TLDR? Assume when you are taking out your mortgage you are committing economic arson on yourself.


  • Advertisement
  • #157
    KELTICKNIGHTT
    Registered Users, Registered Users 2 Posts: 3,781 ✭✭✭KELTICKNIGHTT


    The Corinthian wrote: »
    Err, no, I'm not. Not in banking, property, brokerage or anything like that.

    Honestly; the drop in price was higher than I thought it would be (25% - 45%), but the recession coinciding with it and the speed of the loss when the bubble burst? That was a no brainer, TBH. Try Googling market bubbles and see what you get (hint: no historical example ever of a soft landing).

    No, but I could and would consider the possibility of these kind of things over a 20+ year mortgage's lifespan. Did you?

    most people with the finance broker would have have allow for maybe 20-25 % but not 60%, no one could, if people knew or though a rescission, huge drop in value by 60% in property , and both to lose there employment plus the new government taxes on property, they would serious consider not buying , even emigrate .
    no one could seriously know it get this bad, if people claim they did know it get this bad, they lying.
    plus property in few years before big bang or even sooner , property was seriously over valued .


  • #158
    KELTICKNIGHTT
    Registered Users, Registered Users 2 Posts: 3,781 ✭✭✭KELTICKNIGHTT


    clairefontaine wrote: »
    Yes, I think what some people are suggesting is that you treat it like you are going to Paddy Powers, and just act is if it will all fall out of the bottom, assume the market will fall out from under your feet, assume the government will tax the bejeesus out of you, and assume wide spread massive lay offs, as well as a stock market crash, and assume all at the same time. Then assume the ECB will also become insolvent, and will start printing out money like there is no tomorrow so that inflation will make money comical, and also assume petrol will rise to E50 a litre too. Just assume apocolypse will you are taking out your mortgage. Don't leave out the possibility of earthquakes, nuclear war, and terrorist attacks.

    TLDR? Assume when you are taking out your mortgage you are committing economic arson on yourself.

    price of petrol or diesel has always gone up in good and bad times, thats doesn't have anything to do with value on property lol.
    don't do p . power :-)
    stock market is connected to banks,
    banks where pushing loans on people, even if people couldn't afford ,
    the banks went wild during the so called celtic tiger times which i didn't see .


  • #159
    clairefontaine
    Closed Accounts Posts: 4,390 ✭✭✭clairefontaine


    KELTICKNIGHTT wrote: »
    most people with the finance broker would have have allow for maybe 20-25 % but not 60%, no one could, if people knew or though a rescission, huge drop in value by 60% in property , and both to lose there employment plus the new government taxes on property, they would serious consider not buying , even emigrate .
    no one could seriously know it get this bad, if people claim they did know it get this bad, they lying.
    plus property in few years before big bang or even sooner , property was seriously over valued .

    Honestly it wasn't hard to see it was beyond all proportional thinking. I passed by a small plot of crappy land in Dalkey. It might have been 10 square feet with a shack on it and they were trying to sell it for 3 million.


  • #160
    KELTICKNIGHTT
    Registered Users, Registered Users 2 Posts: 3,781 ✭✭✭KELTICKNIGHTT


    clairefontaine wrote: »
    Honestly it wasn't hard to see it was beyond all proportional thinking. I passed by a small plot of crappy land in Dalkey. It might have been 10 square feet with a shack on it and they were trying to sell it for 3 million.

    looking back at first post where poster was saying if bought a house for 500k and now worth 300k, poster doesn't see the big deal,
    something out of a comic book comment to say.
    i don't think most people who house is worth 60% less now would see poster's point,, think if you sell the house to someone i paid 500k and only worth 300k , think they give you 500k, hmmm, don't think so.


  • #161
    clairefontaine
    Closed Accounts Posts: 4,390 ✭✭✭clairefontaine


    KELTICKNIGHTT wrote: »
    price of petrol or diesel has always gone up in good and bad times, thats doesn't have anything to do with value on property lol.
    don't do p . power :-)
    stock market is connected to banks,
    banks where pushing loans on people, even if people couldn't afford ,
    the banks went wild during the so called celtic tiger times which i didn't see .

    Price of petrol has everything to do with expendible income. More it costs the less you have. Plus it sends the price of goods up because they cost more to transport, and this is in import economy for its goods.


  • Advertisement
  • #162
    KELTICKNIGHTT
    Registered Users, Registered Users 2 Posts: 3,781 ✭✭✭KELTICKNIGHTT


    clairefontaine wrote: »
    Price of petrol has everything to do with expendible income. More it costs the less you have. Plus it sends the price of goods up because they cost more to transport, and this is in import economy for its goods.

    as does everything else. asking people to pay property tax, water charges , when people can barely pay mortgage,
    next the government will charge for the air we breath.


  • #163
    clairefontaine
    Closed Accounts Posts: 4,390 ✭✭✭clairefontaine


    KELTICKNIGHTT wrote: »
    as does everything else. asking people to pay property tax, water charges , when people can barely pay mortgage,
    next the government will charge for the air we breath.


    Dont worry, it's coming.

    No doubt there will be garden taxes, child benefit taxes, child support taxes, a hike on sales tax, bring back window tax, shoe tax, toilet paper tax, ,more fines, shorter amber lights so they can have more fines, they will think of any tax they can think of and give you nothing in return, because they have no money and there is no growth. There will be more emigration and more unemployment which means less revenue so more leeching off the people left here who have jobs.

    Soon enough they will speed up house reposessions, which will also increase negative equity across the board, but as a result you will see rentals increase, or possibly even more demand for rent allowance and a bigger social welfare bill, and that also means more tax.


  • #164
    skafish
    Registered Users, Registered Users 2 Posts: 392 ✭✭skafish


    clairefontaine wrote: »
    That's fair enough but Ireland should make its bankruptcy laws more akin to the UK or the US.


    Why?


  • #165
    Ryder
    Registered Users, Registered Users 2 Posts: 992 ✭✭✭Ryder


    skafish wrote: »
    Why?

    easy...why not? Of the various groups in neg equity...you have those with the same salary etc and can, and likely will pay.

    The group who have lost jobs and are on the dole....the new insolvency plan will take care of them....i don't think they will be affected

    Then you have the large middle group who have jobs but can no longer pay. The new insolvency plan will reduce them to living on the dole for 7years. Where is the incentive to work? I suspect that anyone with transferable skills/mobile will leave and abandon the property. Many who can't leave may just go on welfare...why work for free, so further burdening the tax payer. That's what you get when you apply sticking plaster solutions to systemic problems


  • #166
    SBWife
    Registered Users, Registered Users 2 Posts: 1,287 ✭✭✭SBWife


    KELTICKNIGHTT wrote: »
    , are you saying should have known this when they took out there mortgage in 2002 or before ??

    A property bought in 2002 is not down 50-60% from its purchase price. Most likely given a reasonable down payment and a the principal payments on a 25 or 30 year mortgage such a property has some positive equity. If I recall correctly property prices were pretty stagnant between 2000 and 2002, and I know that my home which I bought in late 2000 has significant amount of positive equity.


  • #167
    The Corinthian
    Closed Accounts Posts: 19,777 ✭✭✭✭The Corinthian


    KELTICKNIGHTT wrote: »
    most people with the finance broker would have have allow for maybe 20-25 % but not 60%, no one could, if people knew or though a rescission, huge drop in value by 60% in property , and both to lose there employment plus the new government taxes on property, they would serious consider not buying , even emigrate .
    A downside of 20% to 25% after a property bubble bursting is pretty optimistic and sounds like the wishful thinking that many were coming out with about 'soft' landings.

    But let's consider one simple scenario for a moment; it's 2004, you've got a chunk of change that you can put down as a deposit to buy a two bedroom apartment in Dublin, rather than rent it.

    For simplicity's sake, let's sat that around that time, such a place would set you back €300k and prices during the bubble were increasing by 15% p.a. This would mean that in 2005, your apartment would be valued at €345k - and if the bubble were to continue to grow up until today, the same apartment would be valued at the bargain price of €1,055,362.89.

    But here's the thing, bubbles do not continue to grow indefinitely. Neither do they simply stop growing and stabilize. They burst. Google it if you don't believe me. And that brings us to the the single biggest presumption (a pretty safe one) eventually the bubble would burst - and let's say that would see a 20% drop in value.

    Even given this mythical soft landing, if you bought in 2004 you'd have to keep your fingers crossed that it wouldn't burst until 2006 - otherwise you're in negative equity (€60k if it happened in 2004 and €24k if in 2005).

    Presuming, instead, you decide to hold off and pay rent (say a fairly stable €1,500 p.m. as rents really did not change that much, compared to property prices during the same period), you still be better off not buying and instead paying rent for 18 months overall.

    And that's with a 20% drop in value when the music stopped, which was wildly optimistic. At 25%, you're already better off buying in 2006 and renting until then; indeed there if you buy 2004 you'd better hope the bubble keeps growing until 2007, otherwise you're going to be in negative equity.

    Of course, the media, the bankers, property developers and political establishment were wildly optimistic about what the 'adjustment' that would eventually look like, but that is no excuse to avoid digging further for what is likely to be the biggest financial investment of your life. And it didn't take long to do so; all I needed was Google, a blank spreadsheet and a Sunday afternoon, back in Q4 2004, and I certainly wasn't alone in realizing that:
    1. We were not going to get a 'soft' landing; there's never been any 'soft' landing in history and so property values were going to drop by considerably more than 20% or 25%.
    2. Given the importance of the property market to the Irish economy, a recession was guaranteed to follow. I would have thought this point would have been obvious, but clearly some didn't join the dots on this.
    3. The bubble was not going to continue for another ten years - the hypothetical apartment was not going to end up being worth over a million Euro. Instead the bubble would be very lucky to last five years at best, and in the end it managed to last just under half that before the music stopped.
    And that's what it came down to; the music was going to stop, we just didn't know when and what the fallout level would be, but we could slot in a few numbers and see what we came up with.

    And when you started crunching the numbers and they began to argue that you needed unrealistically low levels of value depreciation and that the bubble would continue growing for two or three years it didn't make sense to buy to me in 2004.

    Now, I don't know when you bought (although if you've lost 60% I suspect you got in late), but this is the kind of research and analysis that many did and as it became increasingly apparent that we were dealing with an economic bubble it became increasingly apparent that the numbers didn't crunch and that the music was going to stop playing before too long.
    no one could seriously know it get this bad, if people claim they did know it get this bad, they lying.
    plus property in few years before big bang or even sooner , property was seriously over valued .
    No one could seriously know it get this bad, but it didn't take a genius to figure out that it would still get bad. Of course, you might be forgiven had you bought in 2001 or 1999, as it became obvious much later, but then again you wouldn't have 60% of the value of your home wiped out if you had.

    One thing that stands out in what you've said is that you could never have predicted "in less than 10 yr period to have 50-60% loss, a rescission and loss of income at same time"; you're joking, seriously? A slowdown and/or collapse of the property bubble would result in an effective decimation of an industry that was universally recognised to be the single most important driver of the Irish economy at the time. Oddly, a recession isn't that difficult to expect if that happens and with it harder, at least, times and loss of income. How did you miss that? Seriously?

    All the information needed to arrive to these conclusions was online ten years ago and even if you didn't know how to use a spreadsheet to crunch your numbers, that alone should have given people to pause.

    If they choose to look, of course - and honestly I think many didn't care to.


  • #168
    clairefontaine
    Closed Accounts Posts: 4,390 ✭✭✭clairefontaine


    SBWife wrote: »
    A property bought in 2002 is not down 50-60% from its purchase price. Most likely given a reasonable down payment and a the principal payments on a 25 or 30 year mortgage such a property has some positive equity. If I recall correctly property prices were pretty stagnant between 2000 and 2002, and I know that my home which I bought in late 2000 has significant amount of positive equity.

    The ones bought at the peak have halved, haven't they?

    Also, when they start repossessing and auctioning off the homes, increasing the supply on the market, how much further do you see the devaluation going?

    What is really sad is the same people who didn't predict it have head off the Australia and guess what's coming, oh no not again!


  • #169
    Ryder
    Registered Users, Registered Users 2 Posts: 992 ✭✭✭Ryder


    The Corinthian wrote: »
    A downside of 20% to 25% after a property bubble bursting is pretty optimistic and sounds like the wishful thinking that many were coming out with about 'soft' landings.

    But let's consider one simple scenario for a moment; it's 2004, you've got a chunk of change that you can put down as a deposit to buy a two bedroom apartment in Dublin, rather than rent it.

    For simplicity's sake, let's sat that around that time, such a place would set you back €300k and prices during the bubble were increasing by 15% p.a. This would mean that in 2005, your apartment would be valued at €345k - and if the bubble were to continue to grow up until today, the same apartment would be valued at the bargain price of €1,055,362.89.

    But here's the thing, bubbles do not continue to grow indefinitely. Neither do they simply stop growing and stabilize. They burst. Google it if you don't believe me. And that brings us to the the single biggest presumption (a pretty safe one) eventually the bubble would burst - and let's say that would see a 20% drop in value.

    Even given this mythical soft landing, if you bought in 2004 you'd have to keep your fingers crossed that it wouldn't burst until 2006 - otherwise you're in negative equity (€60k if it happened in 2004 and €24k if in 2005).

    Presuming, instead, you decide to hold off and pay rent (say a fairly stable €1,500 p.m. as rents really did not change that much, compared to property prices during the same period), you still be better off not buying and instead paying rent for 18 months overall.

    And that's with a 20% drop in value when the music stopped, which was wildly optimistic. At 25%, you're already better off buying in 2006 and renting until then; indeed there if you buy 2004 you'd better hope the bubble keeps growing until 2007, otherwise you're going to be in negative equity.

    Of course, the media, the bankers, property developers and political establishment were wildly optimistic about what the 'adjustment' that would eventually look like, but that is no excuse to avoid digging further for what is likely to be the biggest financial investment of your life. And it didn't take long to do so; all I needed was Google, a blank spreadsheet and a Sunday afternoon, back in Q4 2004, and I certainly wasn't alone in realizing that:
    1. We were not going to get a 'soft' landing; there's never been any 'soft' landing in history and so property values were going to drop by considerably more than 20% or 25%.
    2. Given the importance of the property market to the Irish economy, a recession was guaranteed to follow. I would have thought this point would have been obvious, but clearly some didn't join the dots on this.
    3. The bubble was not going to continue for another ten years - the hypothetical apartment was not going to end up being worth over a million Euro. Instead the bubble would be very lucky to last five years at best, and in the end it managed to last just under half that before the music stopped.
    And that's what it came down to; the music was going to stop, we just didn't know when and what the fallout level would be, but we could slot in a few numbers and see what we came up with.

    And when you started crunching the numbers and they began to argue that you needed unrealistically low levels of value depreciation and that the bubble would continue growing for two or three years it didn't make sense to buy to me in 2004.

    Now, I don't know when you bought (although if you've lost 60% I suspect you got in late), but this is the kind of research and analysis that many did and as it became increasingly apparent that we were dealing with an economic bubble it became increasingly apparent that the numbers didn't crunch and that the music was going to stop playing before too long.

    No one could seriously know it get this bad, but it didn't take a genius to figure out that it would still get bad. Of course, you might be forgiven had you bought in 2001 or 1999, as it became obvious much later, but then again you wouldn't have 60% of the value of your home wiped out if you had.

    One thing that stands out in what you've said is that you could never have predicted "in less than 10 yr period to have 50-60% loss, a rescission and loss of income at same time"; you're joking, seriously? A slowdown and/or collapse of the property bubble would result in an effective decimation of an industry that was universally recognised to be the single most important driver of the Irish economy at the time. Oddly, a recession isn't that difficult to expect if that happens and with it harder, at least, times and loss of income. How did you miss that? Seriously?

    All the information needed to arrive to these conclusions was online ten years ago and even if you didn't know how to use a spreadsheet to crunch your numbers, that alone should have given people to pause.

    If they choose to look, of course - and honestly I think many didn't care to.

    all correct, but a simplistic, retrospective analysis of a complex problem. Like it or not, people within the bubble had to live and didn't have the perspective to see the bubble that it was, and now is obvious. Looking for historical parallels in 2006 would have been a pointless exercise.....how much of history should we expect to repeat itself, and which bits?

    Yes, the data, was out there that this was a cyclical event, with a beginning and end. Should the average buyer been able to interpret this? I mean there is plenty of publically available information about healthcare...are doctors no longer responsible for mistreatment, engineers for poor design?

    Simplistic analyses do nothing to solve a real problem, and perpetuate the narrative that this is all the individuals mistake thereby guilting them into a debt harness with no gain.....i really think that the majority will see throught that and these insolvency plans will fail


  • #170
    SBWife
    Registered Users, Registered Users 2 Posts: 1,287 ✭✭✭SBWife


    clairefontaine wrote: »
    The ones bought at the peak have halved, haven't they?

    Also, when they start repossessing and auctioning off the homes, increasing the supply on the market, how much further do you see the devaluation going?

    What is really sad is the same people who didn't predict it have head off the Australia and guess what's coming, oh no not again!

    Working off the CSO numbers, the index peaked in September 2007 at 130.5 the most recent release was for Feb of this year when the index stood at 64.4, so just over 50% decrease.

    As for what will happen when the supply increases as a result of repossessions it'll depend on what type of properties come onto the market. There are areas, mainly in Dublin, where there is significant demand for family sized properties in mature neighbourhoods an increase in supply here probably wouldn't have much impact on the market. But there are other estates where the homes really have little value and a couple of repossessions could knock another large chunk off values, if no one really wants to live in an area, what are they doing to pay for a home there, becomes the question?

    If the banks are smart they'll more readily move to repossess properties that fit the earlier criteria and be more flexible with homeowners in less attractive areas. But overall my expectation is that while we might see a some further smallish drops in the overall number it'll hide a more and more bifurcated housing market.


  • #171
    The Corinthian
    Closed Accounts Posts: 19,777 ✭✭✭✭The Corinthian


    clairefontaine wrote: »
    The ones bought at the peak have halved, haven't they?
    Overall, the figure appears to be about 60%. Given this, it varies wildly in that properties in south Dublin city have decreased by the smallest amount, around 40%, while some areas, such as those outlying commuter 'towns' have been utterly decimated, with 80% being wiped out.

    Other factors also come into play; apartments have lost more than houses overall and estates that were only partially completed or have seen social housing introduced have suffered more than others.

    Daft comes out with a regular report that tracks many of these changes.
    Also, when they start repossessing and auctioning off the homes, increasing the supply on the market, how much further do you see the devaluation going?
    Possibly. It depends on how they're auctioned off and when. Waiting for the market to pick up more and then auctioning them off slowly will likely cause the least damage.
    What is really sad is the same people who didn't predict it have head off the Australia and guess what's coming, oh no not again!
    There was a thread not too long ago here where someone had left the keys to his home in the door and promptly moved to Australia, where he was in the process of buying. I thought the very same thing as you, when I read the thread.

    But what do you expect? There are some who genuinely believe that are blameless; it was the bankers, the property developers, the government or the media that fed the bubble. And as a result, they're unlikely to learn any lesson form the experience.

    A collapse of the property market in Australia is likely to make our own look like a minor adjustment.


  • Advertisement
  • #172
    SBWife
    Registered Users, Registered Users 2 Posts: 1,287 ✭✭✭SBWife


    Ryder wrote: »
    Yes, the data, was out there that this was a cyclical event, with a beginning and end. Should the average buyer been able to interpret this?

    When making arguably the most important financial decision of their lifetime they should at least try to understand the circumstances in which they were acting.

    We sold a home after getting married in 2006 everybody said we were insane, I was practically called an idiot to my face, you know what I did, shrugged my shoulders and changed the subject. Sometimes I think about the people who bought the place, they were both teachers this was their first investment property and they were buying because all their friends had investment properties. Now the value of the property is down about 55% below what they paid, I figure the mortgage payments are about €1,900 a month and the rental on the place a €1,000. It's a heavy price to pay for keeping up with the Jones.


  • #173
    Ryder
    Registered Users, Registered Users 2 Posts: 992 ✭✭✭Ryder


    SBWife wrote: »
    When making arguably the most important financial decision of their lifetime they should at least try to understand the circumstances in which they were acting.

    We sold a home after getting married in 2006 everybody said we were insane, I was practically called an idiot to my face, you know what I did, shrugged my shoulders and changed the subject. Sometimes I think about the people who bought the place, they were both teachers this was their first investment property and they were buying because all their friends had investment properties. Now the value of the property is down about 55% below what they paid, I figure the mortgage payments are about €1,900 a month and the rental on the place a €1,000. It's a heavy price to pay for keeping up with the Jones.

    your last line says it all really....all part of perpetuating the narrative of idiot buyer. Maybe you're right. Either way, we need real solutions or you may find your substantial profit dwindling if the economy continues on its trajectory....unless of course, you've digested the evidence available and have moved all assets outside governmental reach


  • #174
    The Corinthian
    Closed Accounts Posts: 19,777 ✭✭✭✭The Corinthian


    Ryder wrote: »
    all correct, but a simplistic, retrospective analysis of a complex problem.
    First of all, it wasn't actually retrospective - I actually did that analysis (or one very much like it, as I no longer have the original) in 2004.

    Secondly, it was only as simple or complex as it needed to be - all I was looking for was a model to estimate whether it made sense to buy or continue renting.

    And I was clearly not the only person who did this, nor was it really rocket science to do so.
    Like it or not, people within the bubble had to live and didn't have the perspective to see the bubble that it was, and now is obvious. Looking for historical parallels in 2006 would have been a pointless exercise.....how much of history should we expect to repeat itself, and which bits?
    So the property bubble in Ireland was the first ever property bubble? STFW, for Christ's sake.
    Yes, the data, was out there that this was a cyclical event, with a beginning and end. Should the average buyer been able to interpret this? I mean there is plenty of publically available information about healthcare...are doctors no longer responsible for mistreatment, engineers for poor design?
    I've heard the analogy of health care before and it is a false and foolish one.

    'Experts' in their fields are not infallible, even doctors. If a doctor told me I had cancer, I would seek a second opinion and perhaps a third. I would do my research and see what courses of treatment are available, instead of blindly accepting whatever I'm told. The doctor (or doctors, given the second and third opinions) would still be more knowledgeable, but ultimately it's my life and ultimately my responsibility to protect and there is always a chance they've got it wrong.

    Instead, you're telling us that people buying property had no responsibility to do their homework; to sit down, play Devil's Advocate and look at whether buying was a good idea. To ignore the warnings and rely only on experts whom, at the end of the day, were selling them something. Speaking of warnings here's just a few: Now the doctor may still be held to account for mistreatment - or not. Remember, they're held to account only if they have not carried out their work in good faith with all due diligence. Malpractice and mistreatment are not the same thing.
    Simplistic analyses do nothing to solve a real problem, and perpetuate the narrative that this is all the individuals mistake thereby guilting them into a debt harness with no gain.....i really think that the majority will see thought that and these insolvency plans will fail
    I don't believe that this is "all the individuals mistake". There were numerous points of failure other than those who bought and I agree that how some have gotten off scot free is scandalous.

    However, their culpability cannot wipe away the fact that much of this was certainly predictable long before before it happened and that by sitting down back then and doing a bit of research and crunching a few numbers many did realize this. Claiming, as many have, that no one could have foreseen any of this is complete and utter horseshìt, designed to play the victim so that they can avoid the consequences of what were ultimately their choices.


  • #175
    Ryder
    Registered Users, Registered Users 2 Posts: 992 ✭✭✭Ryder


    The Corinthian wrote: »
    First of all, it wasn't actually retrospective - I actually did that analysis (or one very much like it, as I no longer have the original) in 2004.

    Secondly, it was only as simple or complex as it needed to be - all I was looking for was a model to estimate whether it made sense to buy or continue renting.

    And I was clearly not the only person who did this, nor was it really rocket science to do so.

    So the property bubble in Ireland was the first ever property bubble? STFW, for Christ's sake.

    I've heard the analogy of health care before and it is a false and foolish one.

    'Experts' in their fields are not infallible, even doctors. If a doctor told me I had cancer, I would seek a second opinion and perhaps a third. I would do my research and see what courses of treatment are available, instead of blindly accepting whatever I'm told. The doctor (or doctors, given the second and third opinions) would still be more knowledgeable, but ultimately it's my life and ultimately my responsibility to protect and there is always a chance they've got it wrong.

    Instead, you're telling us that people buying property had no responsibility to do their homework; to sit down, play Devil's Advocate and look at whether buying was a good idea. To ignore the warnings and rely only on experts whom, at the end of the day, were selling them something. Speaking of warnings here's just a few: Now the doctor may still be held to account for mistreatment - or not. Remember, they're held to account only if they have not carried out their work in good faith with all due diligence. Malpractice and mistreatment are not the same thing.

    I don't believe that this is "all the individuals mistake". There were numerous points of failure other than those who bought and I agree that how some have gotten off scot free is scandalous.

    However, their culpability cannot wipe away the fact that much of this was certainly predictable long before before it happened and that by sitting down back then and doing a bit of research and crunching a few numbers many did realize this. Claiming, as many have, that no one could have foreseen any of this is complete and utter horseshìt, designed to play the victim so that they can avoid the consequences of what were ultimately their choices.

    i never said impossible to predict. I said easy after the event, and probably easy for a few with specialized knowledge and during the by bubble.

    Anyway, you and I could circle this for many weeks. The end result will be the same. Negative equity is a huge and growing problem. Up to 60billion at present? None of that is being acknowledged. The solution appears to be to harness mortgage holders to a yoke and presume that they will live in relative penury to pay back a dead asset....in fact in many cases without said asset. Is that realistic....not a chance. With likely rising taxes/ charges and falling income, at best these insolvency plans will need frequent renegotiation to keep the predetermined floor. I even suspect that many will jack in the 9-5 and live off the state/emigrate. Is it possible for you to crunch that for me and let me know the effect on the economy?

    Ps, I don't live in Ireland so my only vested interest is to return to a stable economy one day


  • #176
    clairefontaine
    Closed Accounts Posts: 4,390 ✭✭✭clairefontaine


    Ryder wrote: »
    i never said impossible to predict. I said easy after the event, and probably easy for a few with specialized knowledge and during the by bubble.

    Anyway, you and I could circle this for many weeks. The end result will be the same. Negative equity is a huge and growing problem. Up to 60billion at present? None of that is being acknowledged. The solution appears to be to harness mortgage holders to a yoke and presume that they will live in relative penury to pay back a dead asset....in fact in many cases without said asset. Is that realistic....not a chance. With likely rising taxes/ charges and falling income, at best these insolvency plans will need frequent renegotiation to keep the predetermined floor. I even suspect that many will jack in the 9-5 and live off the state/emigrate. Is it possible for you to crunch that for me and let me know the effect on the economy?

    Ps, I don't live in Ireland so my only vested interest is to return to a stable economy one day

    Ok, in fairness you did not need to be an expert to notice what was coming or what was pretty obvious. Believe me I am no economist and my math skills amount to what I can count on my ten fingers, but it was as clear as day to me that this was a fool's game, fool's gold, emperor's new clothes, whatever you want to call it. And people fell hook, line and sinker all because of their huge capacity for denial.

    That's not to say teh bankers didnt exploit this, fudge figures, fudge numbers, get in on it etc. And look what they are now, moved from lenders to debt collectors. Must be depressing sitting in a bank all day these days.

    Saying that, a solution has to be found that will not bring the whole country to its knees, and begrudgery and a punitive "that's what you get" argument that smacks of Sister Assumpta with her ruler out, is not going to get anyone anywhere.

    The government's approach has been foolhardy with its tax tax tax and gouge approach and no sign of growth in sight. Why they rescued from the top down and not the bottom up is something I always wondered. In other words, they pumped the banks with money but not the motrgage holders. Instead gouged the working people, some mortgage holders, some not, and took that money and lent it to the bank. But of course maybe the government needed to do that to make money itself by lending it [money approprated through the USC charge] to the banks. It is near becoming a case of the sorcerer's apprentice where it's hard to scope who is control of what and maybe it just not too big and complex to be in anyone's control.

    While people could have predicted the bubble, no one could have predicted the insane USC charges and phenomenal stealth taxes that are cutting into people's ability to pay for their over valued mortgages.


  • #177
    SBWife
    Registered Users, Registered Users 2 Posts: 1,287 ✭✭✭SBWife


    They had no choice but to rescue the banks when they did. They were insolvent and the alternative would have been to leave them to fail. If this had happened, I think the 9% GDP decline expected for Cyprus this year would look benign in comparison. However, the bank debt should have been given a haircut at this point rather then essentially being converted into government debt. The original investors in these securities were paid a premium above what government bonds paid to compensate them for the higher level of risk associated. To bail them out at face when things went belly up was a mistake.

    The second error was to leave the distressed homeowner situation until now, this has had tragic human costs. I think the PIP seems to be a step in the right direction. I think the 6 year period is about the right amount of time. BUT I'm worried about how the Government is going to police the banks during this period, for example no matter how often the Government push for it lending to small business continues to be less than what's politically wanted.

    As for the taxation policy I think if you could have foreseen the unravelling of the property price pyramid you would have expected higher taxes. The stamp duty take in 2006 was €1.6 Billion, these revenues had to be replaced somehow, higher VAT, higher income tax and more stealth taxes were the obvious/only alternative.


  • #178
    ardmacha
    Registered Users, Registered Users 2 Posts: 7,476 ✭✭✭ardmacha


    While people could have predicted the bubble, no one could have predicted the insane USC charges and phenomenal stealth taxes that are cutting into people's ability to pay for their over valued mortgages.

    Given that the government were getting such a large proportion of revenue from stamp duty, this was the easiest thing to predict. Taxes have returned to a 1995-2000 structure, as they inevitably had to.

    All of this was predictable enough in Ireland. But the extent of the international mess might have been harder to predict and this is now the dominant problem.


  • #179
    jased10s
    Closed Accounts Posts: 194 ✭✭jased10s


    so the cost of USC making the home owner not being able to pay their mortgage is a non discussion ?


  • #180
    clairefontaine
    Closed Accounts Posts: 4,390 ✭✭✭clairefontaine


    jased10s wrote: »
    so the cost of USC making the home owner not being able to pay their mortgage is a non discussion ?

    It should definitely be part of the discussion.

    People seem to be leaving it out though.

    As I said already, I have a friend who once hit with the USC -is the amount of one of her mortgages [has two].


  • Advertisement
  • #181
    The Corinthian
    Closed Accounts Posts: 19,777 ✭✭✭✭The Corinthian


    Ryder wrote: »
    i never said impossible to predict. I said easy after the event, and probably easy for a few with specialized knowledge and during the by bubble.
    It was easy for anyone willing to look is the point. That we were in a bubble was common knowledge, after that figuring out that bubbles burst (hence the name) isn't difficult to discover, as is what happens when it does.

    This is not occult knowledge, limited to a few with 'specialized knowledge', it's just a few hours of research on the Web and a little common sense.
    Anyway, you and I could circle this for many weeks. The end result will be the same. Negative equity is a huge and growing problem. Up to 60billion at present? None of that is being acknowledged. The solution appears to be to harness mortgage holders to a yoke and presume that they will live in relative penury to pay back a dead asset....in fact in many cases without said asset. Is that realistic....not a chance.
    I agree in so far as what you've described is not terribly realistic; more a hysterical sob story.

    Prices have apparently stabled and are beginning to increase again, eventually they will climb back to pre-2008 levels, although it may take years, so people are not actually holding onto any 'dead' asset (more hyperbole on your part). The economy will recover. To "harness mortgage holders to a yoke" (even more hyperbole) is not the answer, but neither is this nonsense of bailing them out, because that 60 billion has to ultimately be paid by someone - how about you chew on that reality too?
    Ps, I don't live in Ireland so my only vested interest is to return to a stable economy one day
    Likewise, so if all the idiots who overextended themselves get bailed out by the tax payer, then it makes little difference to me too - but I'd rather not return some day and find that Ireland has become a nation where we expect to be bailed out by those who less reckless (or lazy); and that is what will happen.
    clairefontaine wrote: »
    Saying that, a solution has to be found that will not bring the whole country to its knees, and begrudgery and a punitive "that's what you get" argument that smacks of Sister Assumpta with her ruler out, is not going to get anyone anywhere.
    The only people suggesting this are those who seem to want to avoid any culpability for their predicament. Unless they get bailed out completely, they're being 'harnessed to a yoke'.

    I don't believe that doing that would be practical or beneficial to the economy, but at the same time they do need to accept that they share a large part of the blame for why they're presently in the situations they're in.


Advertisement