Is a further huge crash in house prices imminent?

LeDroit

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So you want the Govt to retrospectively tear up commercial contracts at will.

Nice BUT are you prepared for the consequences ?

A Leaseholder who suffered as a result of this would be quite correct in going to court and would quite likely WIN.

A Commercial contract exists between 2 parties and Govt has no right in retrospectively going back and siding with a single side for NO BENEFIT.

The idea that its Commercial Rents that are holding back SME's and Businesses is bogus as there will be always Leaseholders / Landlords willing to look at different terms.
Wrong. What landlord would 'look at different terms' if they have personal gurantees on upward only rents? Commercial Rents under these terms aren't falling. Tenants first let staff go as it's the only big cost they can affect and then they default. Landlords will go after personal assets rather than take lower rents. The leases can't be sold because who'd buy an UO Lease when all new leases don't have that clause? We effectively have two markets in leases now.

The govt, with a constitutional amendment if necessary, should void all UO reviews in commercial leases. It would protect businesses, protect employment, encourage activity and investment in the sector and maximise exchequer returns through VAT, Corp Tax, Cap Gains, PAYE and PRSI.

Restricting a free market in commercial rents is damaging the economy.
 


Tomas Mor

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What Michael Soden is basically saying is that there needs to be a firesale/auction of the vast quantity of property assets NAMA is amassing to get the property market out of paralysis.

Problem is if property is offloaded, it will go to the favoured friends who will be in another win win situation and we common people lose again.
 

libertarian-right

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As Brian Lenihan clearly stated, NAMA was "needed" to establish a "floor in the market". The idea that NAMA can somehow control the prices in the property market is just absurd, doomed to complete and utter failure. Plus this blunder will cost the state (ie the taxpayer).

Letting prices fall is good for economic growth!! Are they clueless in the Dept of Finance?! Low property prices gives people more money to spend on....yes that's right..the thing Cowen all wants us to do, start spending in other parts of the economy, not have most of people's income going towards a house in bogtown with no services or infrastructure.

What a mess this country has become.
 
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captainwillard

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House prices in Japan fell this year. After twenty years of falling prices, interspersed by periods of flat prices, the housing market is still adjusting to the excesses of the eighties.
 

Glucose

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As Brian Lenihan clearly stated, NAMA was "needed" to establish a "floor in the market". The idea that NAMA can somehow control the prices in the property market is just absurd, doomed to complete and utter failure. Plus this blunder will cost the state (ie the taxpayer).

Letting prices fall is good for economic growth!! Are the clueless in the Dept of Finance?! Low property prices gives people more money to spend on....yes that's right..the thing Cowen all wants us to do, start spending in other parts of the economy, not have most of people's income going towards a house in bogtown with no services or infrastructure.

What a mess this country has become.
+1
 

blindjustice

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The govt have just about made every mistake they possibly could, Nama was effectively designed to stop property prices falling. If you then cut the income of every person in the country, how can they be expected to afford current prices ? It's the worst of both worlds. House prices will go where they are going , it is simply inevitable but this government will have pissed away further billions in a vain attempt to prevent.
[ame=http://www.youtube.com/watch?v=pWlz1IKWfw4]YouTube - "A floor in the market"[/ame]

A floor in the market.....Lenihans words himself....he is using our money to keep us poor and keep our cost of living artificially high....since the money is mostly all spent now the damage is done.

The only way to get out of this mess quickly (3-5 years) is, unfortunately, a default - a reset is needed. This will last 10 years easily maybe as long as 15......!
 

Vega1447

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Soden also said Banks should use honeypots to ..

"persuade" people to transfer from tracker mortgages - to crystallise the losses from trackers.

He actually used the word "honeypots"...

This guy may not be in BoI anymore but thinks like he still is.

He actually said the banks should offer people 10-20K "inducements" to move from tracker to variable mortgages.

The interviewer was too polite to point out that only people up to their neck in debt would be desperate enough to take this deal..

'Cos the borrower would spend the remaining 15-20 years cursing themselves for taking it...
 

'orebel

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"persuade" people to transfer from tracker mortgages - to crystallise the losses from trackers.

He actually used the word "honeypots"...

This guy may not be in BoI anymore but thinks like he still is.

He actually said the banks should offer people 10-20K "inducements" to move from tracker to variable mortgages.

The interviewer was too polite to point out that only people up to their neck in debt would be desperate enough to take this deal..

'Cos the borrower would spend the remaining 15-20 years cursing themselves for taking it...
I seem to recall some financial expert a while back saying that only an idiot would bail on a tracker unless they were offered 25% of their mortgage as an inducement.
 

adrem

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The govt have just about made every mistake they possibly could, Nama was effectively designed to stop property prices falling. If you then cut the income of every person in the country, how can they be expected to afford current prices ? It's the worst of both worlds. House prices will go where they are going , it is simply inevitable but this government will have pissed away further billions in a vain attempt to prevent.
No it wasn't - it was effectively designed to clean up bank balance sheets, which would in turn allow them to access capital which would in turn unclog the credit crunch. It hasn't got there yet and therefore it is (rightly) criticised. I would tend towards waiting until they actually complete the initial stage (asset valuation and transfer process) before leaping to a conclusion that it hasn't worked or won't work.

Following an examination of the options available the consensus amongst the Government’s advisors including the Central Bank, the Financial Regulator and the NTMA, was that an asset management agency approach was the best means of ensuring the stability of the financial system, the protection of depositors and ensuring that banks were freed up to lend to the real economy
http://www.nama.ie/Publications/2009/NAMAFAQs.pdf
 

LeDroit

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I seem to recall some financial expert a while back saying that only an idiot would bail on a tracker unless they were offered 25% of their mortgage as an inducement.
Maybe that's the solution to two problems.

It eliminates negative equity allowing people to sell and move while also improving the banks liquidity. Hmmm.
 

Glucose

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"persuade" people to transfer from tracker mortgages - to crystallise the losses from trackers.

He actually used the word "honeypots"...

This guy may not be in BoI anymore but thinks like he still is.

He actually said the banks should offer people 10-20K "inducements" to move from tracker to variable mortgages.

The interviewer was too polite to point out that only people up to their neck in debt would be desperate enough to take this deal..

'Cos the borrower would spend the remaining 15-20 years cursing themselves for taking it...
oh yeah, i forgot he said this little gem as well.

Does anyone have a recording of this interview. Would love to hear it again.
 

oceanclub

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No it wasn't - it was effectively designed to clean up bank balance sheets
Sorry, but you're wrong. Brian Lenihan himself admits that NAMA was designed to put a floor on the market:

In relation to foreclosure I quite agree with you. If we have a flood of property dumped on the market we will have utterly, an utterly unsustainable position and that’s one of the reason why we have to establish NAMA and try and establish a floor in this market. We’re very near it on the basis of the figure that we now have and the data that we now have about the yield for property, because the yield is at an all time high relative to the assets which is a clear, objective economic indicator that we’re approaching the trough.
P.
 

'orebel

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Well they better get that property unto the market as soon as possible, as property is a depreciating asset, prone to vandalism and theft.
Even without vandalism or theft a property left unoccupied with no heating or maintenance will fall into disrepair very quickly.
 

Cassandra Syndrome

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It is simple demand and supply economics.

On the demand supply, for example yesterday a report showed planning permission granted for Q2 2010 was one of the lowest ever at less than 3,000 housing units. At the moment there are between 250 and 400 housing units sold a week. Those who can get mortgages have a ceiling of 3 times their salary, which is the proper time tested method. They also have up to 20% deposit to pay.

With the average industrial wage now down to between 30,000 and 35,000, shrinking population, perceived value of further falls in house prices, the demand side for houses is extremely deflationary. For a single person its on average €100,000 to €150,000 price range. A couple both working €200,000 to €250,000 price range.

However it is on the supply side that the real craic begins. Already there are up to 100,000 housing units on the market, propped up by asking prices. At the current rate of sales thats at least 5 years worth of inventory. However in the NAMA portfolio there may be a further 300,000 units. That's immense.

You could graph this out and try and work out a natural equlibrium. It could be as low as €50,000 giving that level of supply. NAMA acts as a negative externality that is trying to keep prices above the natural equilibrium, but like gravity the market always wins.

So rather than a 20 year Japan like torturous readjusting, just sell them all now and get it over with. Sell them for a couple of grand if need be.

They are all white elephants if nobody is owning, renting or living in them as they need maintenance.

Most importantly there are people sleeping rough in this country and 50,000 people on housing waiting lists. Hello?
 

Glucose

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It is simple demand and supply economics.

On the demand supply, for example yesterday a report showed planning permission granted for Q2 2010 was one of the lowest ever at less than 3,000 housing units. At the moment there are between 250 and 400 housing units sold a week. Those who can get mortgages have a ceiling of 3 times their salary, which is the proper time tested method. They also have up to 20% deposit to pay.

With the average industrial wage now down to between 30,000 and 35,000, shrinking population, perceived value of further falls in house prices, the demand side for houses is extremely deflationary. For a single person its on average €100,000 to €150,000 price range. A couple both working €200,000 to €250,000 price range.

However it is on the supply side that the real craic begins. Already there are up to 100,000 housing units on the market, propped up by asking prices. At the current rate of sales thats at least 5 years worth of inventory. However in the NAMA portfolio there may be a further 300,000 units. That's immense.

You could graph this out and try and work out a natural equlibrium. It could be as low as €50,000 giving that level of supply. NAMA acts as a negative externality that is trying to keep prices above the natural equilibrium, but like gravity the market always wins.

So rather than a 20 year Japan like torturous readjusting, just sell them all now and get it over with. Sell them for a couple of grand if need be.

They are all white elephants if nobody is owning, renting or living in them as they need maintenance.

Most importantly there are people sleeping rough in this country and 50,000 people on housing waiting lists. Hello?

Hey Cassandra, what do you think of the Government line that NAMA will return a profit?

Michael Soden is advocating a firesale. FF are not.
 

jpc

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Hey Cassandra, what do you think of the Government line that NAMA will return a profit?

Michael Soden is advocating a firesale. FF are not.
Michael Soden is articulating the reality of the countrys property disaster
FF are in denial
 

Cassandra Syndrome

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Hey Cassandra, what do you think of the Government line that NAMA will return a profit?

Michael Soden is advocating a firesale. FF are not.
Its impossible Glucose. The labour and overhead costs of maintaining the properties in NAMA could be up to €4 Billion a year. Thats a lot of selling and renting that has to occur before we even think about paying off the €40 Billion Loan over 10 years.

In my opinion NAMA will make up to a €40 Billion loss. Add in Anglo and all the other bank recapitilations and eventual nationalisations, it will be North of €100 Billion in present value.
 


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