AT LEAST 140,000 homeowners have fallen into negative equity, with this figure expected to rise to 200,000 by the end of next year, it was warned last night.
Jim Power, chief economist with Friends First, said: "I reckon the majority of first-time buyers who bought into the market over the last three years are in negative equity."
Analysing the gains made up to the peak of the housing boom, and the losses since, Mr Power said negative equity was affecting "at least 140,000 people and that's rising by the day".
He warned that, in terms of the recession, "we haven't seen anything yet" and predicted the numbers in negative equity could reach 200,000 by the end of 2009.
Latest Census figures show there were 570,000 residential mortgage holders in 2006, with tens of thousands of new mortgages taken out since.
So the continuing decline in house prices means that one in three mortgage holders are likely find themselves trapped in a home worth less than the loan they took out to pay for it.
With €125bn owed on Irish mortgages, homeowners facing rising debts will be desperate for another European Central Bank interest rate cut, which could come on Thursday.
According to Mr Power: "Negative equity becomes a serious problem if you lose your job. It doesn't matter where house prices are or where interest rates are when you're faced with having to sell your property in a situation like that.
The Indo
Sunday, November 2, 2008
Saturday, October 11, 2008
170,000 homeowners facing negative equity
MORE than half of those who climbed onto the property ladder between 2005 and 2007 will fall into negative equity by the end of next year if house prices continue to drop, according to new research.
Dermot O’Leary, chief economist at Goodbody Stockbrokers, expects by the end of 2009 house prices will have fallen 30% from their peak in February 2007.
This would leave some 170,000 with mortgages worth more than the value of their homes, with those who bought between spring 2006 and summer 2007 at greatest risk.
A sharp slowdown in property sales has made it difficult to gauge the scale of the slump, but O’Leary believes values are already down 20%. Sherry FitzGerald, the estate agency, said prices have dropped by 17% nationally since June 2006, and by more than 23% in Dublin.
Negative equity is a big problem for borrowers who want to move home or who fall into mortgage arrears, because they would be forced to sell at a loss.
“It’s an issue if you’re no longer able to pay the mortgage because you can’t afford to sell,” said O’Leary. “It’s a problem for those who are losing their jobs and it’s going to become a bigger problem as unemployment rises.”
More than 6% of the workforce is already unemployed and O’Leary expects this will grow to 8% next year.
Those who borrowed most or all of the prices of their homes are the most exposed.
One in three first-timers used 100% mortgages to get on the ladder in 2006, according to the Department of the Environment. This dropped to 26% last year as a slowing market caused banks to restrict availability of these loans. Lenders have now abandoned them completely.
Sunday Times
Dermot O’Leary, chief economist at Goodbody Stockbrokers, expects by the end of 2009 house prices will have fallen 30% from their peak in February 2007.
This would leave some 170,000 with mortgages worth more than the value of their homes, with those who bought between spring 2006 and summer 2007 at greatest risk.
A sharp slowdown in property sales has made it difficult to gauge the scale of the slump, but O’Leary believes values are already down 20%. Sherry FitzGerald, the estate agency, said prices have dropped by 17% nationally since June 2006, and by more than 23% in Dublin.
Negative equity is a big problem for borrowers who want to move home or who fall into mortgage arrears, because they would be forced to sell at a loss.
“It’s an issue if you’re no longer able to pay the mortgage because you can’t afford to sell,” said O’Leary. “It’s a problem for those who are losing their jobs and it’s going to become a bigger problem as unemployment rises.”
More than 6% of the workforce is already unemployed and O’Leary expects this will grow to 8% next year.
Those who borrowed most or all of the prices of their homes are the most exposed.
One in three first-timers used 100% mortgages to get on the ladder in 2006, according to the Department of the Environment. This dropped to 26% last year as a slowing market caused banks to restrict availability of these loans. Lenders have now abandoned them completely.
Sunday Times
Thursday, August 28, 2008
Fear of negative equity haunts owners
Negative equity is not just a problem for homeowners who want to sell their homes: borrowers may also find themselves unable to shop around for better deals, writes Caroline Madden
SOME SAY it's purely a theoretical problem unless you have to sell your home, while others have compared it to burning €50,000 in cash in your back garden. So is negative equity worth losing sleep over or has the issue been blown out of proportion?
Negative equity occurs when a mortgage is greater than the value of a property. As property prices have fallen nationally by 12.1 per cent since February 2007 - at least according to the Permanent TSB/ESRI house price index which measures mortgage drawdowns - borrowers who took out high loan-to-value mortgages and in particular 100 per cent mortgages and bought at the peak have been pushed into negative equity.
In the summer of 2005, First Active broke new ground with the introduction of the first 100 per cent mortgage in the State - making it possible for first-time buyers to get onto the property ladder without scrimping and saving for a deposit.
Other lenders quickly followed suit with EBS, First Active, Ulster Bank, Permanent TSB and Bank of Scotland soon offering similar products. However, in recent months lenders have effectively withdrawn 100 per cent mortgages from the market.
It is difficult to pin down exactly how many of these loans were taken out, as no official cumulative figures have been collated and the banks have been understandably coy on the subject, but it is estimated that one-third of all first-time buyers in 2006 opted for 100 per cent finance, which equates to 12,350 home loans.
In 2007, 5.5 per cent of loans provided were 100 per cent mortgages, which amounts to almost 8,700 mortgages. So, at a conservative estimate, 21,050 homeowners have 100 per cent mortgages and are therefore extremely vulnerable to negative equity.
Of course it's not just those who borrowed the full price of their home who are at risk. Given the magnitude of the recent fall in property prices, anyone with a high loan-to-value mortgage is in the danger zone. According to Davy Stockbrokers, 69 per cent of first-time buyers in 2006, which equates to roughly 25,570 mortgages, had a loan-to-value ratio of more than 90 per cent.
Davy has predicted that 40,000 first-time buyers would face an average paper loss of €18,200 if house prices fall by 10 per cent this year. Prices have already fallen by 5 per cent in the first half of the year according to the Permanent TSB/ESRI figures and anyone in the market will tell you that where properties are selling at all the fall is far greater.
The Irish Times
SOME SAY it's purely a theoretical problem unless you have to sell your home, while others have compared it to burning €50,000 in cash in your back garden. So is negative equity worth losing sleep over or has the issue been blown out of proportion?
Negative equity occurs when a mortgage is greater than the value of a property. As property prices have fallen nationally by 12.1 per cent since February 2007 - at least according to the Permanent TSB/ESRI house price index which measures mortgage drawdowns - borrowers who took out high loan-to-value mortgages and in particular 100 per cent mortgages and bought at the peak have been pushed into negative equity.
In the summer of 2005, First Active broke new ground with the introduction of the first 100 per cent mortgage in the State - making it possible for first-time buyers to get onto the property ladder without scrimping and saving for a deposit.
Other lenders quickly followed suit with EBS, First Active, Ulster Bank, Permanent TSB and Bank of Scotland soon offering similar products. However, in recent months lenders have effectively withdrawn 100 per cent mortgages from the market.
It is difficult to pin down exactly how many of these loans were taken out, as no official cumulative figures have been collated and the banks have been understandably coy on the subject, but it is estimated that one-third of all first-time buyers in 2006 opted for 100 per cent finance, which equates to 12,350 home loans.
In 2007, 5.5 per cent of loans provided were 100 per cent mortgages, which amounts to almost 8,700 mortgages. So, at a conservative estimate, 21,050 homeowners have 100 per cent mortgages and are therefore extremely vulnerable to negative equity.
Of course it's not just those who borrowed the full price of their home who are at risk. Given the magnitude of the recent fall in property prices, anyone with a high loan-to-value mortgage is in the danger zone. According to Davy Stockbrokers, 69 per cent of first-time buyers in 2006, which equates to roughly 25,570 mortgages, had a loan-to-value ratio of more than 90 per cent.
Davy has predicted that 40,000 first-time buyers would face an average paper loss of €18,200 if house prices fall by 10 per cent this year. Prices have already fallen by 5 per cent in the first half of the year according to the Permanent TSB/ESRI figures and anyone in the market will tell you that where properties are selling at all the fall is far greater.
The Irish Times
Monday, July 28, 2008
New homeowners caught in negative-equity loan trap
THOUSANDS of first-time buyers are being forced to pay out sky-high mortgage rates because negative equity has trapped them with their current lender.
The new buyers, who purchased their houses with 100pc mortgages, are now unable to switch to a cheaper lender because they have no equity built up in their homes.
They have been hit by a double whammy -- stuck with high repayments and a house worth less than the price they paid.
Those who took out 100pc mortgages have probably seen about €50,000 each wiped off the value of their homes.
The relentless fall in house prices since the start of 2007 has resulted in many of these people finding themselves in negative equity. This is where the value of the mortgage is greater than the value of the property.
As many as 40,0000 new buyers could be in negative equity, according to recent calculations by stockbroking firm Davy. This calculation was based on first-time buyer house prices falling by 10pc in the past year. In the past year alone, first-time buyer houses have fallen by 9.4pc.
The Indo
The new buyers, who purchased their houses with 100pc mortgages, are now unable to switch to a cheaper lender because they have no equity built up in their homes.
They have been hit by a double whammy -- stuck with high repayments and a house worth less than the price they paid.
Those who took out 100pc mortgages have probably seen about €50,000 each wiped off the value of their homes.
The relentless fall in house prices since the start of 2007 has resulted in many of these people finding themselves in negative equity. This is where the value of the mortgage is greater than the value of the property.
As many as 40,0000 new buyers could be in negative equity, according to recent calculations by stockbroking firm Davy. This calculation was based on first-time buyer house prices falling by 10pc in the past year. In the past year alone, first-time buyer houses have fallen by 9.4pc.
The Indo
Tuesday, June 3, 2008
Monday, June 2, 2008
Negative equity hits 250,000 - and there is worse to come
After months of gloomy forecasts, analysts have finally confirmed the news that homeowners had been dreading for months: that large numbers of British householders have slipped into negative equity.
According to the investment bank Citigroup, a quarter of a million of them now owe more than their properties are worth since house prices started to drop at the end of last year.
Citigroup said prices had dipped by 7 per cent since the autumn and the bank's chief UK economist, Michael Saunders, yesterday warned that house prices could fall by 15 per cent or more by the end of 2009. Such a drop would leave at least a million homeowners in negative equity.
The Guardian
Saturday, May 31, 2008
Housing market bad on both sides of coin
"First-time buyers have been hit and hit hard by the credit crunch, and so far our Government has done nothing to help them or intervene in the market," said Labour's finance spokeswoman Joan Burton.
"Cowen himself killed the property market stone dead by failing to act on stamp duty in December 2006 and now he and his Government are on auto-pilot," said Labour's deputy leader.
For mortgage holders, the news of house-price collapses means they are waking up this morning in negative equity. People are carrying mortgages on properties worth less than their borrowings, but many of those are in for the long haul and will survive the current crisis.
But at the extreme end of the collapsed housing sector is the increasing number of repossession orders being made to the High Court by financial institutions.
Last week alone saw a number of leading financial institutions, such as AIB and Bank of Ireland, take their place on the list beside the sub-prime lenders seeking to repossess properties from payment defaulters. Sub-prime lenders, which provide loans and mortgages to those with chequered credit histories, filled the lists at the courts last week. Two lenders -- Start mortgages and GE Capital -- accounted for most of the cases.
Worryingly, the number of possession applications this year remains at the same high level of 2007, which had jumped 50 per cent on 2006, showing the drastic impact of what happens when things go wrong.
Despite the claim by the Financial Regulator Pat Neary that relying on repossessions is the "final option", Dermot O'Leary of Goodbody Stockbrokers said that there was no doubt that throughout this year, consumers would see house repossessions increase. "They are the byproduct of a slowdown, and while they have been at a historic low, there is no doubt we will see the number of housing repossessions rise as the slowdown takes hold," he said.
In the face of the increasing number of banks taking back properties, the need now arises for establishing a State- backed mortgage relief fund beyond the current system set in place by the Department of Social Welfare.
Such a fund to help those remain in their homes is surely more humane than booting people out on the street. Two factors will continue to keep the house market depressed throughout this year and into 2009.
Firstly, credit is far less available than it was 12 or 24 months ago. Banks across the board have tightened up on their lending criteria, with the aforementioned death of 100 per cent mortgages.
Borrowers seeking mortgages have had to resort to saving deposits, forcing many to sit by and watch house prices tumble without being able to do anything about it.
Secondly, the ECB is now highly unlikely to reduce interest rates in 2008, despite previous indications that such a drop might happen. That means the squeeze on already stretched mortgage holders is not about to subside until sometime next year.
The Sindo
"Cowen himself killed the property market stone dead by failing to act on stamp duty in December 2006 and now he and his Government are on auto-pilot," said Labour's deputy leader.
For mortgage holders, the news of house-price collapses means they are waking up this morning in negative equity. People are carrying mortgages on properties worth less than their borrowings, but many of those are in for the long haul and will survive the current crisis.
But at the extreme end of the collapsed housing sector is the increasing number of repossession orders being made to the High Court by financial institutions.
Last week alone saw a number of leading financial institutions, such as AIB and Bank of Ireland, take their place on the list beside the sub-prime lenders seeking to repossess properties from payment defaulters. Sub-prime lenders, which provide loans and mortgages to those with chequered credit histories, filled the lists at the courts last week. Two lenders -- Start mortgages and GE Capital -- accounted for most of the cases.
Worryingly, the number of possession applications this year remains at the same high level of 2007, which had jumped 50 per cent on 2006, showing the drastic impact of what happens when things go wrong.
Despite the claim by the Financial Regulator Pat Neary that relying on repossessions is the "final option", Dermot O'Leary of Goodbody Stockbrokers said that there was no doubt that throughout this year, consumers would see house repossessions increase. "They are the byproduct of a slowdown, and while they have been at a historic low, there is no doubt we will see the number of housing repossessions rise as the slowdown takes hold," he said.
In the face of the increasing number of banks taking back properties, the need now arises for establishing a State- backed mortgage relief fund beyond the current system set in place by the Department of Social Welfare.
Such a fund to help those remain in their homes is surely more humane than booting people out on the street. Two factors will continue to keep the house market depressed throughout this year and into 2009.
Firstly, credit is far less available than it was 12 or 24 months ago. Banks across the board have tightened up on their lending criteria, with the aforementioned death of 100 per cent mortgages.
Borrowers seeking mortgages have had to resort to saving deposits, forcing many to sit by and watch house prices tumble without being able to do anything about it.
Secondly, the ECB is now highly unlikely to reduce interest rates in 2008, despite previous indications that such a drop might happen. That means the squeeze on already stretched mortgage holders is not about to subside until sometime next year.
The Sindo
Through the floor
AS HOUSE prices in America continue their rapid descent, market-watchers are having to cast back ever further for gloomy comparisons. The latest S&P/Case-Shiller national house-price index, published this week, showed a slump of 14.1% in the year to the first quarter, the worst since the index began 20 years ago. Now Robert Shiller, an economist at Yale University and co-inventor of the index, has compiled a version that stretches back over a century. This shows that the latest fall in nominal prices is already much bigger than the 10.5% drop in 1932, the worst point of the Depression. And things are even worse than they look. In the deflationary 1930s house prices declined less in real terms. Today inflation is running at a brisk pace, so property prices have fallen by a staggering 18% in real terms over the past year.
The Economist
Up to 40,000 Irish first-time house buyers face negative equity
Up to 40,000 Irish first-time house buyers who bought properties with 100 per cent no deposit mortgages will face an average paper loss of €18,200 each, if house prices fall 10 per cent this year, according to research by Davy Stockbrokers.
Davy says in its weekly market comment report that a 10 per cent drop in house prices would lead to negative equity – where a mortgage loan is higher than the value of a property – to the value of €728 million, or 0.5 per cent of residential mortgages.
It is forecasting a 12 per cent decline in house prices this year but said first-time buyer house prices were falling at a faster rate.
A 10 per cent drop in house prices would leave 40,000 first-time buyers in negative equity by the end of this year, Davy said.
In 2006, 36 per cent of mortgages to first-time buyers were 100 per cent home loans, while 69 per cent had a loan-to-value (LTV) ratio of more than 90 per cent.
Davy said a fall in house prices ranging from 5 to 15 per cent would leave between 22,000 and 55,000 first-time buyers in negative equity.
Davy analyst Stephen Lyons, said falling house prices and rising negative equity had personal rather than financial consequences. “If a person’s job is lost, that would be a big concern but unemployment is not on the same par as in the UK in the early 1990s when there was negative equity.”
Lyons said first-time buyers might change their plans to sell so as to avoid making a loss. “I don’t think anyone will want to realise the loss. I think people will sit and hold on to their property, and hope that the capital appreciation will come back so those who had intended to stay in a property for three to four years will probably stay for longer,” he said.
Finfacts.ie
Davy says in its weekly market comment report that a 10 per cent drop in house prices would lead to negative equity – where a mortgage loan is higher than the value of a property – to the value of €728 million, or 0.5 per cent of residential mortgages.
It is forecasting a 12 per cent decline in house prices this year but said first-time buyer house prices were falling at a faster rate.
A 10 per cent drop in house prices would leave 40,000 first-time buyers in negative equity by the end of this year, Davy said.
In 2006, 36 per cent of mortgages to first-time buyers were 100 per cent home loans, while 69 per cent had a loan-to-value (LTV) ratio of more than 90 per cent.
Davy said a fall in house prices ranging from 5 to 15 per cent would leave between 22,000 and 55,000 first-time buyers in negative equity.
Davy analyst Stephen Lyons, said falling house prices and rising negative equity had personal rather than financial consequences. “If a person’s job is lost, that would be a big concern but unemployment is not on the same par as in the UK in the early 1990s when there was negative equity.”
Lyons said first-time buyers might change their plans to sell so as to avoid making a loss. “I don’t think anyone will want to realise the loss. I think people will sit and hold on to their property, and hope that the capital appreciation will come back so those who had intended to stay in a property for three to four years will probably stay for longer,” he said.
Finfacts.ie
Saturday, May 24, 2008
Fall in US house prices heralds problems for all
Worriers are spoilt for choice at present. But there is probably nothing investors should worry about more than the future for US house prices. This applies even for those who live nowhere near the US.
The US housing market is wildly out of whack, with a huge overhang of 4.55m unsold houses. Data on Friday showed this backlog at a record level, which would take more than 11 months to clear if sold at a normal pace.
The median house price, according to government figures, is down 8 per cent from a year ago. The S&P Case-Shiller index, based on 20 large cities, suggests the problem is worse than this, with prices down 15 per cent in nominal terms since the peak in 2006.
There are various ways in which the market could return into balance. But what is most important is how prices adjust.
This may seem debatable. After all, lower prices should mean that more people can afford their own home. Another way to bring the market into balance, a slowdown in construction, would have nasty economic consequences of its own.
But prices are more important. This is firstly because of their impact on the economy. There is a debate over what economists call the “wealth effect” – the tendency of homeowners to spend more when they feel wealthier due to their extra wealth on paper. But when prices were going up, this effect looked substantial.
The dramatic rise in real house prices coincided with an epic collapse in US savings, as shown in the graphic. It reached the point where the savings rate became negative, so that Americans spent more than they earned.
It follows that the risk of a negative wealth effect is now quite severe. Consumer confidence surveys, showing sharp falls in recent months, confirm this.
The Financial Times
Sunday, May 11, 2008
ACCA boss suggests government should form state bankruptcy body
The government should set up a high-level group to deal with the rise in bankruptcies caused by the global credit crunch, according to the head of one of country’s largest accountancy bodies.
Brendan Foster,the newpresident of ACCA Ireland, said the current shortage of bank finance was leading to a significant increase in personal debt for individuals who had provided personal guarantees on loans. Foster said many of these people had counted on the market ‘‘going the right way’’, andwere now facing major financial difficulties.
‘‘Many of these individuals will face financial ruin when the dust settles and the banks pursue these personal obligations.
‘‘The consequence is judgments and loss of credit worthiness or worse, bankruptcy,” said Foster, a founding partner of FosterMcAteer accountants.
Speaking after his election to the post of ACCA president this weekend, Foster said that, while the government was proposing radical changes to corporate insolvency, there were no provisions or proposals to deal with personal debt.
He said the government should set up a review group made up of representatives of the business community and financial institutions, to consider practical means of dealing with this issue.
‘‘Unlike in Britain, there is no practical solution available to assist individuals to deal with these situations.
The Sunday Business Post
Brendan Foster,the newpresident of ACCA Ireland, said the current shortage of bank finance was leading to a significant increase in personal debt for individuals who had provided personal guarantees on loans. Foster said many of these people had counted on the market ‘‘going the right way’’, andwere now facing major financial difficulties.
‘‘Many of these individuals will face financial ruin when the dust settles and the banks pursue these personal obligations.
‘‘The consequence is judgments and loss of credit worthiness or worse, bankruptcy,” said Foster, a founding partner of FosterMcAteer accountants.
Speaking after his election to the post of ACCA president this weekend, Foster said that, while the government was proposing radical changes to corporate insolvency, there were no provisions or proposals to deal with personal debt.
He said the government should set up a review group made up of representatives of the business community and financial institutions, to consider practical means of dealing with this issue.
‘‘Unlike in Britain, there is no practical solution available to assist individuals to deal with these situations.
The Sunday Business Post
Sunday, May 4, 2008
Friday, May 2, 2008
Irish national average house prices fell 8.9% in year to March 2008
Irish national average house prices fell by a further 0.7% in March according to the latest edition of the permanent tsb / ESRI House Price Index. This follows a similar reductions [0.8%] in February and [0.7%] in January. This continues to indicate some easing in the rate of reduction compared to the final quarter of last year, when the monthly average price change was -1.3% [October], -1.1% [November] and -1.5% [December].
In the first three months of 2008 average national prices fell by 2.2%.
This compares to a fall in prices of 3.9% in the last quarter of 2007. Measuring the rate of growth in the 12 months (year on year) to March, average national prices were down by 8.9%. This compares to a decline of 8.8% recorded in the 12 months to February.
The average price paid for a house nationally in March 2008 was €281,643. This compares to €287,887 in December 2007.
The index does not take account of volume/activity in the market which is significantly down, as reflected in stamp duty receipts and mortgage approvals.
Methodology
Dermot O'Leary, Chief Economist of Goodbody Stockbrokers,commented last November that the data are reflective of prices at the mortgage payment stage of the house-buying process. This can be some 3-4 months after a sales price is agreed, and, in a slower market, this lag could get extended further. Therefore, there is a significant lag between market prices and the official house price data. Secondly, the type of properties in the ptsb database may be concentrated towards the lower price range in the market.While recognising the fact that the ptsb data takes account of the different characteristics of the house, the average price in the country is well below the estimates contained in the dataset from the Department of the Environment. Finally, price incentives, which have become common for new scheme developments, would not get reflected in the data.
Commenting on the results, Niall O’Grady, General Manager Marketing, permanent tsb bank said: "This result in March confirms the continuing softening in both house prices and transactions numbers across the spectrum as the market moves to more realistic levels of affordability. The data also clearly shows that sellers who are targeting first time buyers have adjusted their prices very significantly in an attempt to reignite demand.”
FinFacts
In the first three months of 2008 average national prices fell by 2.2%.
This compares to a fall in prices of 3.9% in the last quarter of 2007. Measuring the rate of growth in the 12 months (year on year) to March, average national prices were down by 8.9%. This compares to a decline of 8.8% recorded in the 12 months to February.
The average price paid for a house nationally in March 2008 was €281,643. This compares to €287,887 in December 2007.
The index does not take account of volume/activity in the market which is significantly down, as reflected in stamp duty receipts and mortgage approvals.
Methodology
Dermot O'Leary, Chief Economist of Goodbody Stockbrokers,commented last November that the data are reflective of prices at the mortgage payment stage of the house-buying process. This can be some 3-4 months after a sales price is agreed, and, in a slower market, this lag could get extended further. Therefore, there is a significant lag between market prices and the official house price data. Secondly, the type of properties in the ptsb database may be concentrated towards the lower price range in the market.While recognising the fact that the ptsb data takes account of the different characteristics of the house, the average price in the country is well below the estimates contained in the dataset from the Department of the Environment. Finally, price incentives, which have become common for new scheme developments, would not get reflected in the data.
Commenting on the results, Niall O’Grady, General Manager Marketing, permanent tsb bank said: "This result in March confirms the continuing softening in both house prices and transactions numbers across the spectrum as the market moves to more realistic levels of affordability. The data also clearly shows that sellers who are targeting first time buyers have adjusted their prices very significantly in an attempt to reignite demand.”
FinFacts
Saturday, April 26, 2008
Rainy days...without an umbrella
There are first-time buyers who have borrowed five and six times their annual salary to purchase houses that are now worth 20 per cent less than they were a year ago. They are trapped in that dreaded purgatory called ‘negative equity’ and, if the recent trends in the housing market are anything to go by, they have more chance of descending into property hell than heaven in the next few years.
They will spend the rest of the their working lives paying off ridiculous mortgages - no longer available to new borrowers - for houses that were grossly overvalued in the first place. Now that’s what you call getting cheated twice. It’s no wonder there are a lot of long faces amongst the socalled ‘Pope’s Children’ in the early months of 2008.
Anyone who bought into the Irish property market from 2003 onwards is likely to face negative equity in the coming years. Those who bought with 100 per cent mortgages are most at risk as the sale of the house - even with a few years of repayments - would not cover the cost of the mortgage.
The question that must be asked now is why did the banks make these huge loans available to people who had not saved a single cent for their new home. It shouldn’t have happened and it is easy to criticise youngsters who were foolish enough to go buying a home when they hadn’t made the sort of sacrifices that were required by previous generations when they were putting together their ten or twenty per cent down-payment.
The problem for many young couples in the last few years is that they would have had to save for a decade to get the money together for ten per cent of the asking price of an average semi-detached house in most of our major towns. They were in a Catch-22 situation and the bank appeared to offer them the perfect get-out clause with the 100 per cent mortgage.
But the greater portion of blame for this unprecedented mess must lie with the political parties - and I include Fine Gael and Labour along with the Government partners of Fianna Fáil and the Progressive Democrats. Obviously the Government must shoulder the bulk of the responsibilty for what has happened in the banking and property sectors. Not once in the past five years did a Government minister issue even a moderate word of caution to young, first-time buyers who were effectively been fleeced by both their local mortgage broker and property developer. But, unfortunately, the Opposition parties were equally silent or, if they did have something to say about it, they didn’t get their message across very well because this writer doesn’t remember hearing it.
The shambolic situation that now exists in the property/banking environment is as much the result of bad governance as it is the inevitable denouement of reckless profiteering. The bankers lent a lot of young Irish people their umbrellas back in the sunny days of 2005 and 2006 when property prices were soaring and 100 per cent mortgages were being handed out quicker than you would pick up money in a game of Monopoly. At one point you were nearly afraid to walk past your local bank in case you were grabbed by the scruff of the neck and marched inside to be presented with a wad of cash. There was a time when you needed a shotgun to hold up a bank but in 2005 and 2006 all you needed to produce was a property brochure from your local auctioneer and the manager was whipping out the chequebook.
We can assume the days of the 100 per cent mortgages are over forever. The bankers have reclaimed their umbrellas for the rainy days ahead. And they have left a lot of young people utterly unprotected for the economic rainstorm that is already upon us.
Western People
They will spend the rest of the their working lives paying off ridiculous mortgages - no longer available to new borrowers - for houses that were grossly overvalued in the first place. Now that’s what you call getting cheated twice. It’s no wonder there are a lot of long faces amongst the socalled ‘Pope’s Children’ in the early months of 2008.
Anyone who bought into the Irish property market from 2003 onwards is likely to face negative equity in the coming years. Those who bought with 100 per cent mortgages are most at risk as the sale of the house - even with a few years of repayments - would not cover the cost of the mortgage.
The question that must be asked now is why did the banks make these huge loans available to people who had not saved a single cent for their new home. It shouldn’t have happened and it is easy to criticise youngsters who were foolish enough to go buying a home when they hadn’t made the sort of sacrifices that were required by previous generations when they were putting together their ten or twenty per cent down-payment.
The problem for many young couples in the last few years is that they would have had to save for a decade to get the money together for ten per cent of the asking price of an average semi-detached house in most of our major towns. They were in a Catch-22 situation and the bank appeared to offer them the perfect get-out clause with the 100 per cent mortgage.
But the greater portion of blame for this unprecedented mess must lie with the political parties - and I include Fine Gael and Labour along with the Government partners of Fianna Fáil and the Progressive Democrats. Obviously the Government must shoulder the bulk of the responsibilty for what has happened in the banking and property sectors. Not once in the past five years did a Government minister issue even a moderate word of caution to young, first-time buyers who were effectively been fleeced by both their local mortgage broker and property developer. But, unfortunately, the Opposition parties were equally silent or, if they did have something to say about it, they didn’t get their message across very well because this writer doesn’t remember hearing it.
The shambolic situation that now exists in the property/banking environment is as much the result of bad governance as it is the inevitable denouement of reckless profiteering. The bankers lent a lot of young Irish people their umbrellas back in the sunny days of 2005 and 2006 when property prices were soaring and 100 per cent mortgages were being handed out quicker than you would pick up money in a game of Monopoly. At one point you were nearly afraid to walk past your local bank in case you were grabbed by the scruff of the neck and marched inside to be presented with a wad of cash. There was a time when you needed a shotgun to hold up a bank but in 2005 and 2006 all you needed to produce was a property brochure from your local auctioneer and the manager was whipping out the chequebook.
We can assume the days of the 100 per cent mortgages are over forever. The bankers have reclaimed their umbrellas for the rainy days ahead. And they have left a lot of young people utterly unprotected for the economic rainstorm that is already upon us.
Western People
Friday, April 25, 2008
House prices slashed
WEXFORD auctioneers are slashing house prices in the town in a bid to revive flagging sales as the property market continues on its downward spiral.People who bought homes in some new estates in the town at the peak of the market, particularly during the past 18 months, now face negative equity. Those with 100 per cent mortgages are particularly exposed, but due to the large re
WEXFORD auctioneers are slashing house prices in the town in a bid to revive flagging sales as the property market continues on its downward spiral.
People who bought homes in some new estates in the town at the peak of the market, particularly during the past 18 months, now face negative equity. Those with 100 per cent mortgages are particularly exposed, but due to the large reductions in house prices this year even those recent buyers with 92 per cent mortgages could now be into negative equity in some Wexford estates.
Wexford People
WEXFORD auctioneers are slashing house prices in the town in a bid to revive flagging sales as the property market continues on its downward spiral.
People who bought homes in some new estates in the town at the peak of the market, particularly during the past 18 months, now face negative equity. Those with 100 per cent mortgages are particularly exposed, but due to the large reductions in house prices this year even those recent buyers with 92 per cent mortgages could now be into negative equity in some Wexford estates.
Wexford People
Sunday, April 20, 2008
Dramatic house price cuts leave lone parent in negative equity
HOUSE prices in a second Carlow estate have plummeted this week by €60,000, but not everyone is happy.
The news that ten bungalows in Sand Hills on the Browneshill Road are down from €320,000 to €260,000 following a the dramatic slash in the price of houses in The Paddocks will be music to the ears of first-time buyers or investors.
But one lone parent living in The Paddocks told The Nationalist she is disgusted by the actions of the developer.
Well-known business woman Lynda Maher described the staggering •65,000 drop in the cost of a four-bed semi in The Paddocks on the Browneshill Road as “very unfair”.
“I’m not even in my house a year yet and it is really very hard to believe how prices could fall by such a huge sum in under 12 months. Of course I’m very angry with the developer.
“If I wanted to sell my house in the morning, now I would be out by over
•100,000,” said Lynda.
“I work six days a week, often 11 hours a day to try and cover my bills but if I could have got my house at •65,000 less I wouldn’t have to be working so hard to make ends meet,” she said.
Saturday, April 19, 2008
Housing Woes in U.S. Spread Around Globe
“We know we’re already in negative equity,” said Emma Linnane, a 31-year-old university administrator.
She bought a cozy, one-bedroom apartment in the Dublin suburbs with her fiancé, Paul Colgan, in May 2006, at the peak of the market. They paid $575,000 — at least $100,000 more than it would fetch today. “I sometimes get shivers thinking about it,” Ms. Linnane said, “but I’ll let the reality hit me when I go to sell it.”
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