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

dinnyirwin · 11-02-2014 8:52am

The_Conductor wrote: »

I think its more the case that it would put a value on the home childcare- and it suits too many people to not enumerate it. We are rapidly reaching the situation where its simply not possible financially, for those in work, to have children. The way all our resources are focused on the unemployed- is all well and good- but its at a very high cost to those in work- whose dependency ratio is going up and up all the time. Its not politically correct to admit that we know of people who have made lifestyle choices to stay at home and have children- instead of entering the market place (esp. when there are so many people who are unable to find work)- but the simple fact of the matter is- this is a significant cadre of people. Working people pay to allow non-working people stay at home and have children........

Anyhow- we have veered so far off topic- I'm calling time on this particular debate, we're going to focus back on the core again- which is- the potential for falls in house prices, due to repossessed properties hitting the market (and no- its not a meandering debate about South Co. Dublin either- time is also called on that).

Now there is a debate that is going on a long time. When does time get called on that one, or do people keep say its going to happen forever. Its just about a year now since this thread started.

Reminds me of the debate about the cut in rent allowance reducing rents.

Whats next. Glut of reposessed houses could depress rents by up to 50%

Villa05 · 11-02-2014 11:40am

I must have missed the post where all the arrears disappeared

cookie1977 · 11-02-2014 11:43am

Villa05 wrote: »

I must have missed the post where all the arrears disappeared

Come on now. Even you must agree there's unlikely to be a glut of repossessed houses coming onto the market to drive down prices anywhere near 50%? Which was the point of the thread. We can continue to argue the merits and demerits of this but at least concede that argument no?

marathonic · 11-02-2014 12:19pm

dinnyirwin wrote: »

Now there is a debate that is going on a long time. When does time get called on that one, or do people keep say its going to happen forever.

Time doesn't get called on that because that's the topic of the original post. The reason time got called on the other topics is that they're off topic, not that they aren't an issue.

Piriz · 11-02-2014 12:37pm

cookie1977 wrote: »

Come on now. Even you must agree there's unlikely to be a glut of repossessed houses coming onto the market to drive down prices anywhere near 50%? Which was the point of the thread. We can continue to argue the merits and demerits of this but at least concede that argument no?

it's 25% BTW.. the selling of Irish Nationwide mortgage loan book could result in an increase in repossessions.. this could be repeated with sale of other loan books, the personal insolvency cases could result in lots of homes returning to the market along with the homes of those who run to the UK for bankruptcy..

the above is speculation but very possible IMO. This coupled with high unemployment, emigration, taxes, restricted lending, is forcing downward pressure. The high level of cash sales may dry out soon...

marathonic · 11-02-2014 1:09pm

The banks have access to a lot more figures than the general public and use these figures to make decisions.

For example, and these figures are purely made up for illustrative purposes, let's say that Bank of Ireland expects to have 50% of the Irish mortgage market in 2014 and intend to lend €1 billion.

They know that, in a lot of cases, houses aren't selling because people cannot obtain mortgages as opposed to they think houses are overvalued. With the above two figures, Bank of Ireland would expect about €2 billion worth of mortgages to be drawn down in 2014.

With this in mind, if they have €2 billion worth of reposessed houses on their books, they know that they cannot possibly sell if placed on the market immediately - especially considering the fact that all the other lenders have reposessed properties on their books as well.

Therefore, rather than flood the markets with reposessed properties, it makes much more sense to release them over a period of a few years.

Also, if they review the propertypriceregister and see that 1000 properties sold in Dublin in 2013, why would they consider releasing 1200 properties to the market unless they anticipate increased mortgage lending or additional numbers of cash buyers. This would only depress prices further as there is only so much cash available to purchase whatever number of properties are on the market - so they wouldn't get much more for the 1200 properties than they would if they only released 1000 properties to the market.

cookie1977 · 11-02-2014 1:19pm

Back in the old days mortgage interest rates were quite high until the "new" (now old and gone) lenders entered the market. Back then we had a reasonable number of home grown banks in a little bit of a cartel. You don't think that now some of the big (discounter) players have left the irish market and that the home grown bank numbers have shrunk that the remaining few aren't communicating with each other about repossession sales etc...?

As it has been over the past year (and not that I agree with it at all) repossessions will be slowly and strategically released onto the market. Seen as Dublin is also seeing high rents, the repossessions here are probably ticking over the debt on the properties for the banks.

Can I ask Piriz what you mean by "it's 25%"?

D3PO · 11-02-2014 1:23pm

Piriz wrote: »

the above is speculation but very possible IMO. This coupled with high lowering unemployment, easing of emigration, taxes, restricted an increase albeit small amount in lending, is forcing preventing downward pressure. The high level of cash sales may dry out soon...is irrelevent as most purchases are mortgaged

Fixed your post for you.

Piriz · 11-02-2014 1:41pm

D3PO wrote: »

Fixed your post for you.

You didn't fix much...

Just because unemployment is lowering does not mean it is not still high.. circa 13% with circa 25% - 30% for youth unemployment..

Emigration may be easing but this does not negate the fact that a huge number of people have emigrated since the recession thus easing the demand on property..

dunno why you crossed out taxes...you know this was implying increases in taxes like USC, property and water charges etc.. effecting affordability..

mortgage lending is still restricted...and rightly so.. this is relevant !!

Cash sales are relevant, it was stated that 50% of residential property sales were cash sales in 2013.

now you can stay away from my posts in future thanks..

MouseTail · 11-02-2014 1:46pm

An economic recovery is well underway. Demand is only going one way. Its what is done with the supply lever that will determine the rate of house price acceleration. It would be interesting to know who owns land banks in areas of high demand.

Piriz · 11-02-2014 1:47pm

cookie1977 wrote: »

Can I ask Piriz what you mean by "it's 25%"?

Hi cookie,

in my post number 2828 i quote you saying "Even you must agree there's unlikely to be a glut of repossessed houses coming onto the market to drive down prices anywhere near 50%?" whereby the thread title states 'up to 25%'.

cookie1977 · 11-02-2014 1:55pm

Piriz wrote: »

Hi cookie,

in my post number 2828 i quote you saying "Even you must agree there's unlikely to be a glut of repossessed houses coming onto the market to drive down prices anywhere near 50%?" whereby the thread title states 'up to 25%'.

I've been on this thread way too long

D3PO · 11-02-2014 1:57pm

Piriz wrote: »

You didn't fix much...

Just because unemployment is lowering does not mean it is not still high.. circa 13% with circa 25% - 30% for youth unemployment..

Emigration may be easing but this does not negate the fact that a huge number of people have emigrated since the recession thus easing the demand on property..

dunno why you crossed out taxes...you know this was implying increases in taxes like USC, property and water charges etc.. effecting affordability..

mortgage lending is still restricted...and rightly so.. this is relevant !!

Cash sales are relevant, it was stated that 50% of residential property sales were cash sales in 2013.

now you can stay away from my posts in future thanks..

the point is theres nothing new in any of your reasons that would change the current situation your banging an old drum.

none of these things will cause the as the title says glut of reposessions that could depress prces by 25%

the point is that as a country we have turned a corner

unemployment is dropping

deals as born out by AIBs revelations last week are being dont in a realistic pragmatic way on arrears

etc etc etc

and reposessions have not shot through the roof, nor is there any intention of banks doing so nor does the country have the number of court days available to faciliate the kind of increase in reposession hearings that would be required to depress the market in that way even if they wanted to.

im not saying we dont still have serious economic problems nor that things are rosy in the garden but its completely implausible for anybody to believe that reposessions could cause proces to drop by 25%

Piriz · 11-02-2014 2:16pm

D3PO wrote: »

your banging an old drum.

it is unfair to state this when you completely ignored the first paragraph of my earlier post:

"the selling of Irish Nationwide mortgage loan book could result in an increase in repossessions.. this could be repeated with sale of other loan books i.e. Bank of Scotland, the personal insolvency cases could result in lots of homes returning to the market along with the homes of those who run to the UK for bankruptcy.. "

Now i coupled this with the other dire economic facts and argue that property prices could decrease... nevertheless i'm not claiming that property will decrease by 25% neither does the thread title it is 'up to 25%'.

D3PO · 11-02-2014 2:28pm

Piriz wrote: »

it is unfair to state this when you completely ignored the first paragraph of my earlier post:

"the selling of Irish Nationwide mortgage loan book could result in an increase in repossessions.. this could be repeated with sale of other loan books i.e. Bank of Scotland, the personal insolvency cases could result in lots of homes returning to the market along with the homes of those who run to the UK for bankruptcy.. "

'.

I dont see this as a reason tbh for a number of reasons.

Firslty the sale of the mortgage book will be done at a discounted rate. So immediatly the buying of the packaged mortgages is in a position to write down a level of arrears without actually taking a hit.

This is a far more favourable prospect for any bank than looking to reposess a house in NE, it costs less in administration, it takes less time, and it likely yields a better financial return for the bank over the long run.

Id also argue that a small player like Irish nationwide wouldnt really have the ability to distort the market with their housing arrears. I could be wrong I dont know how large their mortgage book is/was off hand nor do I know there last states level of arrears.

I dont disagree that Nationwide, BOSI and Personal insolvency wont have an impact in the level of reposessions however I dont believe that it will be significantly large nor do I believe that banks will ever firesale to the point that prices get depressed.

They have done a lot wrong over the past decade plus but they arent complete fools. With the money pumped into our main banks the fact is they are now liquid albeit it only becasue of state intervention.

That means they can apply prudent financial practices to return the most money they can and reposession and resale of properties en mass isnt the way for them to do so.

El_Dangeroso · 11-02-2014 2:33pm

D3PO wrote: »

Firslty the sale of the mortgage book will be done at a discounted rate. So immediatly the buying of the packaged mortgages is in a position to write down a level of arrears without actually taking a hit.

Why would they? Basically what they are getting a discount for is taking on risk. Namely the risk of the loan they are buying not being repaid.

Why on earth would they choose to write down loans in order to reduce risk than just repossessing and eliminating the risk entirely?

Presumably any write off would bring the mortgage in line with current market values, thus making the option of repossession far more attractive than a write down.

Villa05 · 11-02-2014 6:18pm

cookie1977 wrote: »

Come on now. Even you must agree there's unlikely to be a glut of repossessed houses coming onto the market to drive down prices anywhere near 50%? Which was the point of the thread. We can continue to argue the merits and demerits of this but at least concede that argument no?

That may be true for some areas, however I live in an area that is walking with BTL's, a trickle of these coming on the market is allowing prices to fall slowly. Some areas are stable but very fragile.

D3PO · 11-02-2014 6:31pm

El_Dangeroso wrote: »

Why would they? Basically what they are getting a discount for is taking on risk. Namely the risk of the loan they are buying not being repaid.

.

I didnt say they would I said they are in the position to if strategy means its the best option for them to take.

El_Dangeroso · 11-02-2014 7:14pm

D3PO wrote: »

I didnt say they would I said they are in the position to if strategy means its the best option for them to take.

No one can say what will happen, but I think the option of write-downs is far less likely by a faceless corporation buying faceless debt than repossessions. Time will tell.

cookie1977 · 12-02-2014 8:09am

El_Dangeroso wrote: »

No one can say what will happen, but I think the option of write-downs is far less likely by a faceless corporation buying faceless debt than repossessions. Time will tell.

But isn't that part of the point here, "time will tell". This thread started a year ago while the troika were still in charge and despite this no serious effort was put in to the arrears crisis. So now with local and then national elections coming down the line do people really really believe that we could see enough of an increase in repossessions that would lead to wide spread double digit drops in prices? Honest question that as I'd love to hear people explain their thinking behind this.

Going back while I've wanted everything possible done (short of debt right offs) to help people stay in their properties to avoid repossessions and I was also in favour of immediate repossessions of BTL's that had non viable arrears and even that, the lowest hanging fruit, has not happened. Do people think that this (or any government) want to see repossessions of family homes coming up to elections because I certainly don't believe it will happen.

The banks and politicians are happy with the status quo. Now if there another financial crisis then that could scupper things but I don't forsee that in the short term.

dinnyirwin · 12-02-2014 8:55am

cookie1977 wrote: »

But isn't that part of the point here, "time will tell". This thread started a year ago while the troika were still in charge and despite this no serious effort was put in to the arrears crisis. So now with local and then national elections coming down the line do people really really believe that we could see enough of an increase in repossessions that would lead to wide spread double digit drops in prices? Honest question that as I'd love to hear people explain their thinking behind this.

Going back while I've wanted everything possible done (short of debt right offs) to help people stay in their properties to avoid repossessions and I was also in favour of immediate repossessions of BTL's that had non viable arrears and even that, the lowest hanging fruit, has not happened. Do people think that this (or any government) want to see repossessions of family homes coming up to elections because I certainly don't believe it will happen.

The banks and politicians are happy with the status quo. Now if there another financial crisis then that could scupper things but I don't forsee that in the short term.

SOmeone started a thread a long time ago about rents going up and gave good reasons. They same people who are posting in here about a glut of repos all had plenty to say (including links) about why rents wouldnt go up and they would go down.

It just goes to show that it is correct that only time will yell, and I think time IS telling.

gaius c · 12-02-2014 9:22am

D3PO wrote: »

Firslty the sale of the mortgage book will be done at a discounted rate. So immediatly the buying of the packaged mortgages is in a position to write down a level of arrears without actually taking a hit.

Not quite, as I've explained here before, debt vultures are short term players. They don't want to be sitting around 20+ years waiting for their money to drip back. Instead they want an instant return on their investment.

Here's how it works.
1. Original loan €500k
2. Asset now worth €250k and loan in arrears
3. Bank sell the loan for €150k
4. Debt vulture offers borrower a deal. Pay €220k on the spot and buy the loan out.
5. Borrower doesn't have this cash to hand or can't raise the finance (probably due to them already having bad credit), then the debt vulture repos and sells for €190k. The repo moves quicker because a deal with a writedown had already been offered. They'd make more money by point 4 but they still make a tidy pile of money if they have to repo.

This deal is probably most attractive to folk who have been salting cash away out of reach of the banks. If they've been spending their tenants' rent on ski holidays instead, they are goosed.

Anybody expecting a free lunch of writedowns, no questions asked while keeping the asset is in for a big shock (or most likely, their relatives when the will turns out to bequeath them debt rather than assets).

cookie1977 · 12-02-2014 9:28am

gaius c wrote: »

Not quite, as I've explained here before, debt vultures are short term players. They don't want to be sitting around 20+ years waiting for their money to drip back. Instead they want an instant return on their investment.

Here's how it works.
1. Original loan €500k
2. Asset now worth €250k and loan in arrears
3. Bank sell the loan for €150k
4. Debt vulture offers borrower a deal. Pay €220k on the spot and buy the loan out.
5. Borrower doesn't have this cash to hand or can't raise the finance (probably due to them already having bad credit), then the debt vulture repos and sells for €190k. The repo moves quicker because a deal with a writedown had already been offered. They'd make more money by point 4 but they still make a tidy pile of money if they have to repo.

This deal is probably most attractive to folk who have been salting cash away out of reach of the banks. If they've been spending their tenants' rent on ski holidays instead, they are goosed.

Anybody expecting a free lunch of writedowns, no questions asked while keeping the asset is in for a big shock (or most likely, their relatives when the will turns out to bequeath them debt rather than assets).

Making massive assumptions here I think. If corporate life was really like this then we'd all be rolling in it. We're not talking about Bain Capital here and US laws. Repossessions are a slow process and by now many people have worked out (unfortunately) ways of slowing the entire process down.

D3PO · 12-02-2014 12:21pm

gaius c wrote: »

Not quite, as I've explained here before, debt vultures are short term players. They don't want to be sitting around 20+ years waiting for their money to drip back. Instead they want an instant return on their investment.

Here's how it works.
1. Original loan €500k
2. Asset now worth €250k and loan in arrears
3. Bank sell the loan for €150k
4. Debt vulture offers borrower a deal. Pay €220k on the spot and buy the loan out.
5. Borrower doesn't have this cash to hand or can't raise the finance (probably due to them already having bad credit), then the debt vulture repos and sells for €190k. The repo moves quicker because a deal with a writedown had already been offered. They'd make more money by point 4 but they still make a tidy pile of money if they have to repo.

This deal is probably most attractive to folk who have been salting cash away out of reach of the banks. If they've been spending their tenants' rent on ski holidays instead, they are goosed.

Anybody expecting a free lunch of writedowns, no questions asked while keeping the asset is in for a big shock (or most likely, their relatives when the will turns out to bequeath them debt rather than assets).

that would make sense only that isnt the way it works.

Firstly the crackdown on CFD's and many other packaged products mean that the mortgage book is sold to another bank not a debt vulture

Secondly the buyer of the discounted mortgage has to fulfil the same obligations that the original bank does in terms of attempting to restructure so they cannot just make an offer for the loan to be cleared and then jump into trying to reposess.

The repo moves no quicker at all, and even if it did the fact still remains that even if this was the case (and it is not) the amount of court time to hear repo hearings does not change so the bottleneck remains.

the number of repos even if there is a will to go this way is completly determined by the ability to get a court hearing an increased appetite to repo makes no difference to the repo numbers if the ability to handle the hearings does not match the increased demand.

Cuddlesworth · 12-02-2014 1:19pm

cookie1977 wrote: »

Now if there another financial crisis then that could scupper things but I don't forsee that in the short term.

We had a financial crisis in the 70's and 80's, things picked up in the mid 90's, then we had quite a blip with the dot com crash in the 00's. Then obviously the crash in 2008.

Its 2014 and as I'm beginning to learn that none of our economic policy's have a immediate effect. Its been 6 years since the crash, "the road to recovery" is being spouted by politicians. We have the worst arrears of large debt in Europe, perhaps the world.

And to me, its difficult to say there will not be another crisis in the short term. One in which we are ill prepared to face.

gaius c · 12-02-2014 2:58pm

D3PO wrote: »

that would make sense only that isnt the way it works.

Firstly the crackdown on CFD's and many other packaged products mean that the mortgage book is sold to another bank not a debt vulture

Really? Who?
I imagine that foreign banks are just queuing up to get some exposure to the toxic waste on Irish banks books...
Taking borrowers with bad credit rating onto their books and contaminate their balance sheet... :rolleyes:

Secondly the buyer of the discounted mortgage has to fulfil the same obligations that the original bank does in terms of attempting to restructure so they cannot just make an offer for the loan to be cleared and then jump into trying to reposess.

Why not? The borrower has failed to fulfill their obligations. It's in your terms and conditions that if you don't keep up repayments, you may lose your house. Just because your delinquent loan has been repackaged and sold doesn't reset the clock on your obligation to repay your loans.

The repo moves no quicker at all, and even if it did the fact still remains that even if this was the case (and it is not) the amount of court time to hear repo hearings does not change so the bottleneck remains.

Actually it does move quicker because the institution holding the loan won't be crippled by indecision and concern over melting their balance sheet. They'll act quicker and get it to the courts quicker. Once it's there, the wheels of heaven might grind slow but they grind exceedingly small

the number of repos even if there is a will to go this way is completly determined by the ability to get a court hearing an increased appetite to repo makes no difference to the repo numbers if the ability to handle the hearings does not match the increased demand.

This is speculation and hearsay because we haven't had the increased volume of repos yet. They move along just fine for the likes of Start Mortgages.

D3PO · 12-02-2014 3:40pm

gaius c wrote: »

Really? Who?
I imagine that foreign banks are just queuing up to get some exposure to the toxic waste on Irish banks books...
Taking borrowers with bad credit rating onto their books and contaminate their balance sheet... :rolleyes:

Where did I suggest foreign banks would be the ones to buy these packaged loans ..... ?

Why not? The borrower has failed to fulfill their obligations. It's in your terms and conditions that if you don't keep up repayments, you may lose your house. Just because your delinquent loan has been repackaged and sold doesn't reset the clock on your obligation to repay your loans.

Why ot ? Eh becasue there is a personal insolvency process and also a financial regulator led procedure that any bank must follow with arrears. You cant just skip that process because you have bought part of a loan book your still bound by the same procedures the original bank has to abide by.

Actually it does move quicker because the institution holding the loan won't be crippled by indecision and concern over melting their balance sheet. They'll act quicker and get it to the courts quicker. Once it's there, the wheels of heaven might grind slow but they grind exceedingly small

Whilst indecision would be a factor its a very small one. They may get it to court quicker but they still cant even try and get it there until they follow due process.

This is speculation and hearsay because we haven't had the increased volume of repos yet. They move along just fine for the likes of Start Mortgages.

They do indeed move along fine for Start very easy to handly handfulls of repos. For repos to impact the market your talking valumes of tens on the current rate being required.

I really cant understand how 6 years into this mess that anybody can genuinely believe that all of a sudent a repo tidal wave will com forth and shatter house prices.

you dont need to be an economics genius to realise thats implausible completely.

Piriz · 12-02-2014 10:47pm

D3PO wrote: »

I really cant understand how 6 years into this mess that anybody can genuinely believe that all of a sudent a repo tidal wave will com forth and shatter house prices.

you dont need to be an economics genius to realise thats implausible completely.

in fairness the can has been kicked down the road for 6 years..this is why it may indeed be possible.. there is an enormous amount of non performing mortgages that have yet to be dealt with, there is 1000's of applicants for personal insolvency, there is large numbers heading to the UK for bankruptcy..

also, there is a cohort or people buying at the moment (presumably the generation who have cash and/or good jobs with loan approval..) this cohort is finite, the next generation will not have the purchasing power of those currently in the market... this next generation are hitting their mid 20's...

a significant decrease in property price is possible..particularly the average 2-3 bed

El_Dangeroso · 12-02-2014 11:11pm

I think another thing to factor in is we currently have a demographic bubble in the 30-34 age group.

This is the prime settling down getting married buying a house type.

Look at that sharp drop off in the 25-29 age group.

I don't think we are going to see a raft of house price drops in the next 6 months or even a year, but if I were to bet, I'd be thinking that we'd be looking at a gentle slope back down from 2016 onwards unless other factors such as net immigration come into play.

MouseTail · 13-02-2014 12:32am

We are still building nowhere near replacement rate.

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

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