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

CastleForbes Square

Beech Park Leixlip

City Park

Hampton Wood Dublin 11

Stocking Wood Rathfarnham

The Jolly Mariner Athlone

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

Waltrim Grove

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.

The Nationalist

Navan

East Wall Dublin 3

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.”