Half of us now in negative equity misery…

HUNDREDS of thousands of Irish homeowners could face negative equity as early as June.

A report from NCB stockbrokers has outlined that as many as 45pc of householders could owe more on their mortgage than their house is worth.

NCB economist Brian Devine says that house prices, as officially measured, are still overvalued.

“Our estimate for Ireland suggests the number of homes in negative equity ranges between 29pc and 46pc depending on the price decline assumed,” Mr Devine outlined.

NCB believes prices are already 35pc below their peak, meaning close to one in three homeowners are already in negative equity.

“There is little reason to believe that house prices will not continue to fall as future employment prospects remain bleak, further tax hikes are in the pipeline, confidence remains low, emigration is likely and there remains a large supply of properties for sale,” the NCB report claimed. “Affordability may have improved sharply but until confidence and job certainty are restored this means very little to many prospective buyers.”

In an analysis comparing the advantages of renting or buying, Mr Devine said that as long as the house will be worth more than €145k in 25 years’ time, it “makes sense for a household to purchase rather than rent at current prices”.

“If prices are not greater than €145k in 25 years’ time it would represent the most spectacular collapse in real (inflation adjusted) house prices on record,” he added.

The report said that housing transactions would slow down as homeowners were reluctant to accept the loss on their home and refused to sell the property for a realistic price.

“They will set higher asking prices causing properties to sit on the market,” the report said.

Figures from the last Permanent TSB house price index showed prices were down 3.6pc in December and additional falls of 10pc or more could well be recorded before June.

However, the stockbrokers said that there are clear signs of improvement in the general economic situation in Ireland.

Report by Claire Murphy – Evening Herald

Ireland Property – Daft Property – http://daftproperty.blogspot.com

The tax credit is coming to an end and the market will be more open for investors to purchase properties.

The tax credit for first time home buyers and move-up buyers is coming to an end, except for some veterans so by removing this incentive the market should be more free to balance itself.  There is still a lot of artificial propping-up of the market, but real estate has not been a true free market in generations and it will probably never be as there are too many benefits for all parties to promote it.

I don’t think the tax credit is a major influence, it’s not that much money after all, especially as you climb in the price brackets, but it does have an influence on the investors sweet spot in the range up to 0,000 and waiting for it to end may be prudent.  

Just take a look at the graph above.  Look how sales peaked during the month preceding the last deadline November 31st 2009.  We won’t see the peak for the current deadline until later after the fact, but it will be a bit more subdued as, unlike the previous time, the contract does not need to close prior to April 30th, rather only the contract needs to be completed and then close by June 30th 2010.

As I mentioned in, This Is The End Of The Government Subsidy For Home Buyers: The Tax Credit, And There Is An Active Tussle Out There , the last month or two and especially now, active buyers will be trying to get their contracts in before April 30th, because if you are in the market it only makes sense to try and get the tax credit versus waiting a few weeks. 

This is causing a lot of homes to be taken of the market, maybe artificially and come May and June the supply should increase and quite a few buyers will already have a home, there will be a lull and choices will increase for investors.  This is speculation of course, but investors certainly will not lose any opportunities by waiting for a few weeks and even months.

The Greater Phoenix market is such a wonderful opportunity for buyers and investors.  Real estate is inexpensive and in many cases, under priced: a result of lower confidence, overall distress and a weak economy, but the future sure looks good for this metro area.

So for now, please be patient, but get ready to take action in a short time.

See Also

• Getting Started in Real Estate Investing
  a short guide and articles
• View all bank owned homes for sale in Greater Phoenix
  REO homes for sale
• Phoenix Housing Market
  Data, graphs, and commentary

Why patience may be rewarded even at the risk of not getting the tax credit and the current flurry of activity.

In the last few weeks the pressure has been building, the activity growing and the flurry of active buyers anxious to get homes under contract. Why?  Because come May 1st 2010, a first time home buyer’s and move-up buyer’s contracts will no longer qualify for a tax credit: ,000 and ,500 respectively.  

I don’t think people are buying because of the tax credit: that would be silly, but for those in the market it makes sense to try and get the tax credit where possible as long as it does not make you go ga ga and lose your scruples.

Investors have the luxury of waiting: we’ll talk about this in a day or two, but others wanting to get it need to have a contract signed and accepted by the end of April.  It does not, however, need to close until June 30th 2010.  

This difference in contract signing and closing is allowing a lot of people to bid on short sales as well.  

This is different from that last deadline where buyers had to close by the end of November 31st of they were out of luck, except that the credit was extended, so no worries.  

This different means that it’s not only normal and lender owned homes getting action, short sales are attractive prey as well, almost to a fault, because in some cases, many in fact, buyers are putting in offers on multiple short sale properties with the intent of only buying one.  

They are doing this because not all short sales go through and to have a choice when the time comes to chose: but that’s also putting a lot of sellers at risk of foreclosure when these buyers don’t buy and since most buyers will only buy one home, some of these short sales may become good buys in the future when they come back on the market, often already approved by the lenders.

This flurry of activity is hard to avoid.  Homes even up to half a million are on the market only a few days and already have contracts.  The amount of pending homes, those under contract has never been as high as it is now, not even in the over heated times of 2005/6.  As of 4/24/2010 there are nearly 15,000 pending homes.  That’s just a little bit more then 2009 and nearly double that of 2008, but there is a market difference in inventory that’s in the most popular price brackets under 0,000.  That’s why, despite the almost equal total inventory, it’s more difficult to find homes to buy.

I don’t think the market is over-heated, there is simply too much distress for that, but we may have a small slump following the expiration of the tax credit allowing those who did not get there in time to find the selection a little bit more desirable, especially when the short sales start reappearing back as active, in fact, it may be wise to be in back up position on the better picks.

See Also

• Search short sales, normal and REO homes in Greater Phoenix
  All Phoenix real estate for sale is here.
• Home Buyers Guide
  Be a better buyer.

As the government continues to pump billions into our much discredited banking system, many Irish people unable to find work here are facing into a future outside of this country. John Downes, News Investigations Correspondent, spoke to some of the new Irish diaspora about their recent experiences of emigration…

By any stretch of the imagination, they were a startling set of figures, prompting echoes of a past which we thought we had left behind.

According to ESRI data released last week, we can expect net emigration of 60,000 in the year to this April – and a further 40,000 by April 2011. That’s almost 1,000 of our best and brightest leaving every week.

Yet the ESRI’s predictions are simply the latest – if most stark – indications of a return to mass emigration among Ireland’s unemployed, as the downturn has continued to take its toll.

In September, for example, the Central Statistics Office revealed that Ireland witnessed a return to net emigration for the first time since 1995, with the number of emigrants increasing by over 40% to 65,100 in the 12 months to April 2009.

A significant portion of those emigrating were non-Irish nationals returning home. But the CSO figures, which are by now almost a year out of date, also suggested that a new wave of emigration had already begun among Ireland’s jobless masses.

By last month alone, there were more than 433,000 people on the seasonally adjusted live register, reflecting an increase of 65,918 alone in the 12 months to March.

If the ESRI’s predictions are correct, as many as 100,000 of these will have emigrated over a two-year period to April 2011.

So while the government continues to invest billions of euro in the banks via Nama, it appears that many Irish people unable to find work here are now facing into the prospect of having to build a life outside their home country.

Many are highly educated and are simply desperate to escape an economic downturn which has robbed them of a future on these shores. Others find themselves effectively stranded abroad and unable to return home due to a lack of job opportunities.

The Sunday Tribune spoke to some of these new Irish emigrants around the world, and asked the question: What now for this new Irish diaspora?

Michael Dennehy, UK – ‘I had a couple of buddies living in Woolwich, London and they said there were jobs going… I had a job within three days’

One of Michael Dennehy’s first moves after he lost his sales job in Cork last year was to seek out his contacts within the Irish community in London.

Within weeks, the 27-year-old was working in construction there while playing for the Cuchulainns GAA club based in south London. The link between the two was not entirely coincidental.

“I had a couple of buddies living in Woolwich, and they said there were jobs going. They had a house over here with five bedrooms, and only two of them in the house. I had a job within three days. One of the guys in the club had a construction business and he gave me a labouring job.”

The work was very different from what he was used to, having worked continuously in the sales business since his late teens.

“I wouldn’t exactly be Captain Construction, but it gave me a little bit of income and got me on my feet. It was ground work – anything from digging the ground to general labour – and I did it for a couple of months. It suited me fine at the start.”

Since making the move to London, he has prospered, and now rents his own apartment in Islington.

More importantly, he has moved back into sales, working for a company which supplies the motor trade. It is a similar sales rep role to the one he had in Ireland.

“With the GAA I’ve made a lot of friends. I think if I hadn’t had the GAA aspect I wouldn’t have fitted in as well,” he says. “You have people to go out socialising with straight away – there’s a structure in place. You head out with the guys at the weekend. And obviously I got a job out of it too.”

While he is enjoying life in the UK, and always had it in the back of his mind to travel abroad to work at some stage, he says he would more than likely still be at home if it had not been for the downturn here.

“There are good prospects within the company I am working for, whereas in Ireland I don’t think there are any,” he says.”Eight or nine of my friends back home are unemployed, drawing the dole. A couple have gone to Australia.

“There isn’t much happening at home, and nothing to go back for as far as I’m concerned. I talk to my parents and friends – they tell me there is nothing for me jobs wise.”

“I’d say I will move back to Ireland more than likely, but it depends on how things are. I wouldn’t move home just to go on the dole.”

Derek Flynn, Dubai – ‘If it had been different I would have loved to have stayed in Ireland and have a family’

It was in late 2008 that chef Derek Flynn (37) and his wife Angela first began to notice the tell-tale signs of recession-era Ireland at the small bar and restaurant they ran in Killala, Co Mayo.

They could see the business changing: customers were not drinking or dining out midweek, and the weekend trade became quieter.

The situation did not improve, and he looked into taking a lease on various other kitchens in the area. But rents were too expensive, and people still wanted “big money” regardless of the business downturn.

Just over a year earlier, the pair had jumped at the chance to return home from Dubai, where they had lived since 2000.

“The reason we went back was because Ireland was doing so well. It was great to be close to home again. my father is a farmer, so I enjoyed my time doing a bit on the farm again. In Killala, a small fishing town, working in the bar and restaurant was enjoyable and lively. Being home was what I wanted,” he says.

The recession in Ireland put an end to all that, however. Last September, the couple moved back to the United Arab Emirates, where Flynn now works as an executive chef.

“Living away from Ireland does mean you miss your family an awful lot, but they come out to visit,” he says. “It is a shame what has happened in Ireland and I hear from friends it’s not really improving. It saddens me to think the government are not trying hard enough. Ireland was booming for years, and to think no money was put away for the rainy day, it doesn’t seem right ? what are the government doing?

“If it had been different I would have loved to have stayed in Ireland and settled there to start a family. Schools are good here, but there are no rolling green fields for children to roll around in. I hope it improves in Ireland soon.”

Pat Lowney, Canada – ‘I just came at first for a year out and did not intend to stay for as long as I have done’

For engineering technician Pat Lowney (34) from Beara in Cork, the reality of emigration during a downturn truly began to kick in after he was made redundant from the local consulting firm in Vancouver where he had been working. It was the third round of layoffs at the firm.

“I first came to Canada in October 2007. I just came at first for a year out and did not intend to stay for as long as I have done. It was not a nice feeling to be out of work in a foreign country, especially when your visa depends on you being employed,” he says.

“But the option of returning to Cork was not there, as the recession was far worse.”

He eventually found more work with a firm of consulting engineers, which is involved with a multi-billion dollar road-building project called the Port Mann highway.

Despite having worked in both the USA and Australia previously, he found it difficult to settle into life in Vancouver at first.

He cites the “lacklustre nightlife scene” as one key difference, adding that it took him about six months to really “crack” the city.

As is the case for so many other Irish emigrants, key to this was the role of local Irish organisations such Vancouver’s Irish Sporting and Social Club.

“I went to Gaelic football training and it took off from there. There were many nationalities at training as it was a downtown location. From there I met some fellow snowboarders and gradually built up my friends network,” he says.

Lowney has no plans to move home at present, although he would like to do so eventually. This is because it would be “next to impossible” to secure a job in civil engineering here.

Instead, he intends to apply for permanent residency to give himself a more secure footing in Canada.

“I guess I’m stuck here for the immediate future but I could think of worse places to be… I miss family more than I miss Ireland. If I could meet with them every six months that would be ideal, but that’s not possible: a flight home is about ,300,” he says.

“I have returned to Ireland to act as groomsman for one of my best friends’ wedding. It was good to meet all my friends and family again, but all people said was ‘stay where you are, boy, there’s nothing going on here’.”

David Joyce, South Africa – ‘The quality of life here is so good and the country is truly beautiful. The only downside is the political situation’

‘The weather is too good here. I was home last month for my sister’s wedding and I was miserable with the cold, my friends in the construction industry on the dole, the flooding in Ballinasloe etc. One friend told me I was missing nothing, which was a bit chilling.”

There are not many people who would leave a permanent, pensionable teaching job in Ireland during the depths of a recession.

But when David Joyce’s South African fiancée could not get work here, he decided to do just that last September.

Originally from Lawrencetown, near Ballinasloe, Joyce now lives in North Riding, a suburb north of Johannesburg. He met his partner when they taught at the same school in London.

In 2007, they moved back to Ireland where he got a permanent post at a primary school in the village of Eyrecourt in Galway.

But work as a trainer with Fás and the local VEC dried up for his fiancée last year.

That, coupled with a 10% paycut for Joyce as a result of the government’s pension levy on public sector workers, prompted them to decide that making the move to South Africa would be worthwhile.

He currently works teaching English to foreign students, which he enjoys in part due to the relaxed nature of the work.

“I couldn’t get a job as a primary teacher unfortunately. It’s tough to get work. Networking is everything down here, worse than Ireland even. If I didn’t have a South African partner I wouldn’t have a chance,” he says. “On average, the working day starts earlier here, but everyone who can finishes early on a Friday [lunchtime].”

You can “never say never” when it comes to returning home permanently, but for now it is not on the agenda, Joyce says.

“The quality of life is so good and the country is truly beautiful,” he says. “The only downside here is the political situation and the fact it is so far away from home, plus there is no security net for you if you fall which is very scary. If you fall, you fall hard in this country. That’s why there are people begging at the traffic lights, blacks and whites. It makes you realise how wonderful the Irish welfare state truly is, no matter how much it costs.”

Oran McGonagle, USA – ‘I don’t feel stuck in America but I definitely feel there is something pushing me away…’

‘Coming from a small town in Donegal to living in a city like Boston is always going to be different… I would say the quality of life is better here, the drawbacks to that being that I miss my family and all my friends at home. But that is the price I have to pay.”

Oran McGonagle (24), moved to the USA in June because there were “simply no opportunities in Ireland” for business and computing graduates such as himself.

Originally from Moville in Co Donegal, last year he took advantage of a new internship visa system which allows Irish graduates to spend up to 12 months working in America.

“When I finished my degree the only jobs available were ones where degree level was not required,” he says. “Everybody was looking for experience and I could not get the chance to get any because of the downturn.”

He now lives in an area of South Boston called Dorchester, where he works as an advertising and promotions manager for an Irish bar, The Banshee.

He found work relatively easily, he says, in no small part due to the recognition among American businesses that Irish graduates are of a high standard.

“Anyone I know who came here with a degree level qualification is doing very well for themselves and have opportunities for promotion,” he says.

He says Dorchester, which has a strong Irish community, is “the way Ireland was before we had all the wealth. That community feeling is definitely alive in the Irish abroad.

“I have applied for a long-term visa now so I will not be heading back home in the foreseeable future.

“I don’t feel stuck in America but I definitely feel there is something pushing me away from Ireland, which is a terrible feeling to have about your own country,” he says.

“I feel Ireland needs to rectify the situation for graduates as quickly as possible. There are more and more young people landing in Boston every week.

“I was talking to an older emigrant who has been living here for years and he believes that the cycle has just begun again, from his generation coming here, to the new graduates landing. Which is a scary thought for Ireland.”

Gina Galvin, Singapore – ‘I looked at opportunities but there was very little choice… There was more of a pull to move abroad’

‘Iwould like to return to Ireland for sure, I don’t know when… [but] I would have to feel I am getting value for my money, for example buying a house should not be a frightening thought, taxes should be more attractive, public transport and roads should be improved.”

When Gina Galvin (41) was offered the choice between taking redundancy or moving abroad with her company, TNT Express, she did not even consider coming back to Ireland and bringing her senior management skills with her.

There were simply not the opportunities for her here, while the price of property and the general state of the economy were other major disincentives.

“I looked at opportunities in Ireland but during the time of making my decision there was very limited choice, nothing in the salary range or in the same industry available, and nothing at the level I was looking for. There was definitely more of a ‘pull’ to move abroad,” she says.

“I have family and friends in Donegal and all over Ireland and the feedback about returning was not good.”

Having been based in Windsor in the UK for more than seven years, the Donegal native opted instead to relocate to Singapore last April, where her company now has its headquarters.

She currently works as a regional director for the company in the Asia Pacific region, and describes the change as “one of the best moves” she has ever made.

Among the major plus points for her are the low tax rates, the excellent ‘ex-pat’ social life, and the weather in Singapore.

“I do feel very sorry for the young trying to find work at home, especially my family and friends who have lost their jobs and there are no opportunities even on the horizon for them. Many feel insecure and have no confidence in the future,” she says.

“In my opinion moving back to Ireland is a big risk. Everyone got greedy and prices increased, crime increased and there seemed to be no control over what was going on. I would like to move back to Ireland but I don’t have great confidence in the economy nor am I willing to take the risk for a while yet.”

Karl Stafford, Australia – ‘I applied for financial work but ended up working as an orderly in the operating theatres of a large private hospital in Sydney’

‘If I was to return to Ireland right now, I know there would be little or no chance of finding work in the financial sector. I don’t know what I would do. I might consider doing a masters or something, I really don’t know.”

Dubliner Karl Stafford did not leave Ireland for Australia due to the recession – but the former AIB employee can’t expect to return to a job in financial services here anytime soon.

Stafford (27) and his girlfriend Lydia Finnerty had been planning their round-the-world trip for a while before finally setting off on their travels in February 2008.

While there were tentative signs of a recession at the time, the sheer scale of what would transpire had yet to become known.

“We had decided we’d like to see the world before we got too old or too settled in our jobs. We planned a round-the-world trip which was originally six months in Asia, six months in Australia and six months in New Zealand and South America,” he explains. “We both had a lot of savings and originally only planned to work in Australia for three or four months, then move on.”

Stafford had gone straight into AIB after graduating college with a degree in international business and languages, and liked working there.

When they first arrived in Australia, they travelled around for a while before deciding to settle in Sydney.

“When I got to Sydney I started applying for financial work. But this was in the height of the financial crisis, and even though Australia didn’t officially go into recession, businesses were very conservative about hiring people, especially people on working holiday visas,” he says. “So I ended up working as an orderly in the operating theatres of a large private hospital in Sydney. Although the work itself was no fun, it was a great place to work and I made so many great friends there.”

He is currently working on a contract basis for a large investment bank, and has a good mix of Irish, English and Australian friends. But he is aware that his options for returning home to Ireland are limited. His situation is further complicated by the fact that he can only stay in Australia if he is sponsored by his current employer. The clock is ticking for him as his current visa is due to expire in October.

“If I can’t get sponsored before then, I’ll have to leave Australia,” he says. “I don’t know if I’d stay here forever, I suppose if things picked up in Ireland and there were plenty of jobs a few years down the line then I would like to go back.”

Aisling Reihill, New Zealand – ‘I always wanted to go away. But I would have stayed at home if I had got a job’

When Aisling Reihill (23) graduated with a degree in physiotherapy from the University of Ulster last year, she already suspected the prospects of work at home were slim.

The British National Health Service was not hiring, and the situation south of the border was no better.

She arrived in New Zealand at the end of October and started work within a matter of days at a private practice based in Auckland.

Reihill says that one of the reasons the group chose New Zealand was because it is easier to be registered for work there than in Australia, where you usually need a company to sponsor your visa.

“I actually had the job set up before I arrived. I had got on the internet and sent my details to places which said they needed physios,” she says. “There is a really good lifestyle here – the people are very laid back. It’s a bit like at home. But there is also loads to do at the weekends, and, of course, there is the weather.”

Since she and her friends arrived in New Zealand, several others from her class have followed suit.

Some of them have struggled to find work, however, amid increasing competition for posts.

“I planned to come out here for a year. I’ve been away six months and the job situation back home is not getting any better,” she says. “I’m going to stay here for a year, and once I finish here, I can go straight to Australia, which I probably will do as the money is way better there.

“I’d say that, in the last year of college, I always wanted to go away. I don’t know if that was because I knew the job situation was so bad or not. But I would probably have stayed at home if I had got a job.

“I definitely would like to move back home in the future but the jobs just aren’t there at the moment.”

Report – Tribune News.

See The New Zealand Report: How To Migrate, Live, Work Or Invest In New Zealand

Ireland Property – Daft Property – http://daftproperty.blogspot.com

Being strangled by the monthly mortgage noose…

OVER the past number of weeks and months, we have become used to speaking in billions.

Seven billion to recapitalise AIB and Bank of Ireland; a €22bn cash injection into Anglo Irish Bank; €81bn worth of developer loans transferred to NAMA — the list and amounts of money appear to be endless.

But for many, the only real amount that matters is the one they need to pay each month to keep a roof over their head.

Unfortunately, for tens of thousands of Irish families, this amount is far greater than their income and the mortgage rope around their neck simply gets tighter and tighter each month.

According to the Financial Regulator, more than 28,000 homeowners have not been able to repay their mortgage for more than three months. Another 30,000 have been forced to renegotiate their mortgages.

I suspect this figure of almost 60,000 is merely the tip of the iceberg and will only increase.

Considering that more than 230,000 people have been made unemployed in the past two years, the likelihood is that tens of thousands more homeowners are struggling to repay the mortgage at the expense of food, electricity, clothing and other basic necessities.

Many families are struggling to breathe and there is little light at the end of the tunnel.

We have already seen all of the major banking institutions increase interest rates in the past month and most have indicated that this will be the first of many such rises this year.

Most of these increases occurred as large developer loans were being transferred to NAMA. Many suspect that banks will now return to the business of banking — that means more interest rate increases and more aggressive management of bad debts.

Under the Statutory Code of Conduct on Mortgage Arrears, banks cannot seek to repossess a property for 12 months after the first repayment is missed.

For many, however, that simply delays the inevitable as arrears, interest, penalties and bills accumulate with little prospect of ever being repaid. After that year has passed, there is no protection for homeowners and the gloves are off.

LAST year alone, the number of repossession orders granted by the High Court increased by 66pc. Worryingly, the majority of cases date back to 2007 and 2008 when the effects of this recession had not even hit.

A lot has changed since then. Rising interest rates, mounting arrears and negative equity mean that for many homeowners there simply is no way out.

So what assistance if any is available to those fighting to keep their home? Limited state assistance is available in the form of the Mortgage Interest Supplement — a short-term support to help you pay the interest portion of your mortgage.

More and more people are availing of this supplement and the cost of it to the State increased five times in just two years to €60m in 2009.

However, for every homeowner accessing the supplement, another is being refused.

The Department of Social and Family Affairs is currently reviewing the scheme but it is now more important than ever that the supplement is made available to those in difficulty.

The Government has realised that urgent action needs to be taken to assist homeowners. An expert group is to return to the Government in June with a detailed set of proposals. But the fear is that for many families this will simply be too late.

We are all discussing the financial cost of helping people in mortgage trouble but little discussion has taken place with regard to the cost to society.

In time, we will see the real effects on people’s physical and mental health and on family relationships. Anecdotally, we hear of more people suffering depression, higher numbers at risk of suicide and increased rates of marital breakdown.

There will be a cost to helping families and homeowners in difficulty — but the longer-term cost of failing to act may be much greater.

Report by Aoife Walsh – Irish Independent.

Aoife Walsh is national communications officer with the voluntary housing organisation Respond.

Ireland Property – Daft Property – http://daftproperty.blogspot.com

The pickings are slim in REOs

See Also

• Bank Owned Residential Properties For Sale
  full list of REO homes at inphoenix.com
• Phoenix Housing Market
  data, graphs, commentary
• Home Buyer’s Guide
  Become an informed buyer

A review of the short sale and pre-foreclosure market in Greater Phoenix and why inventory is up 30% but sale are up 150%.

See Also

• Phoenix Housing Statistics
  graphs, data, commentary
• Search Short Sale and Lender Owned Homes
  Full details

The great property scam is back to rip us off again…

They’re back! The creeps, the snake-oil salesmen and spoofers who condemned a generation to negative equity are cheerleading again.

The advertisers are salivating too because the “property porn” industry sees a chance to sell its fantasy again. The papers are once more displaying “dream homes” replete with doctored photographs and Mediterranean blue skies — all at “knock down” prices. It’s time to buy again, or so I’m reliably told by those who were so reliable last time that they gave us NAMA!

I am not saying that property won’t recover ever, of course it will; but not from here. Irish property is still extortionately expensive. It is expensive not just on a comparative basis but, more crucially, it is expensive on the basis of what is happening in the economy. Any government that is urging people to buy houses right now clearly has no intention of learning anything from the mistakes of the past few years and therefore is condemned to repeat them — with catastrophic results.

If you were a Martian economist and were asked to put together a blueprint for how Ireland can learn from this boom/bust travesty, the first point on the list would be that Ireland should try to ‘lock in’ the competitive gain that cheap property gives a country.

We should let property fall to a level that we can all afford and then start again. As well as a labour force that is willing and educated, low taxes and cheap land should be part of our competitive offering. In that way, we can afford to pay our workers more, because we are paying our landlords less.

But that isn’t happening. And worse still, the property hoodlums are back on the street again. To have been ripped off by the property scamsters once is bad enough, to be ripped off twice is a travesty.

Buying a house now makes absolutely no economic, financial or social sense because prices are condemned to fall much further and anyone who buys now will be suckered into the false rally, known as a ‘dead cat bounce’. Given what we now know about the boom, it’s hard to feel sorry for someone who believes the hype-property brigade. But even a cursory glance at the financial numbers today — just a little bit of due diligence — suggests that we have a long, long way to go before house prices reach the bottom. So beware, see through the glossy brochures and don’t say you weren’t warned . . . again.

Here is the nub of the issue. The reason the property merchants are back is because over the past 24 months, Ireland has been turned from a democracy to a ‘bankocracy’. A bankocracy is a country in which every major decision is taken to bolster the interests of the banks.

A democracy was one of those quaint ideas, like the notion that a state would be governed according to the interests of the citizens. In this ‘bankocracy’, because Irish banks can only be saved if the property market rises, the State will do everything in its power to extort cash from the citizen to give it to the banks via the property market one more time.

Everything the State has done so far has been to promote a bankocracy over democracy. It is far from clear why it is doing this. What is obvious is that the politicians who presided over this mess have no intention of learning from it. Initially, the guarantee — which I was a supporter of — was about containing the crisis. If you see a contagious bank crisis as a forest fire, doing nothing in the chaos of September 2008 and allowing the banks to go under would have been like a firefighter letting a forest fire blaze out of control, irrespective of what was burned in its wake. The State had to do something at the time.

However, the initial advice was to limit the guarantee to two years and then let it lapse. In this way, you could contain the crisis, see how bad the banks were and step back, giving the problem back to the banks and their creditors who had (a) caused it in the first place but also (b) are best placed to unravel it.

We are now being told that if we were to take the guarantee away now, the banks would collapse because of their funding difficulties. Well if a bank, as a business, can’t survive without government support, then it ceases to be a proper business and should be given to a liquidator to get the best price for any assets it has. The deposits can be guaranteed, transferred and form the capital base of a new or existing bank and away we go. No old bank, no old problem.

But that is how a capitalist democracy works. However, Ireland is not a capitalist democracy; it is a cronyist bankocracy where the government has tied the interests of the citizen to the interests of the bankers with calamitous results.

The government believed the banks’ hostage-taking stance. The banks claimed that they had a hostage called ‘the economy’ and that if the government didn’t give them the cash they would pull the trigger and sink everything. Now that the hostage-takers have been rewarded with a huge ransom, we face a concerted effort to inflate the property market again. Having given ‘cash for trash’ via NAMA, the only way that the ransom can be validated is through inflating the market again. But it won’t work. Prices will keep falling.

Look at the chart to see why. For the market in Ireland to clear, investors have to take up most of the slack. This means in people’s heads they need to have a profit model, which validates why they are buying property. In the commercial world, the yield — which is how much rent the property makes — is the crucial barometer.

Let’s say the yield on property has to be 7pc at least to make it worthwhile investing in property, then we can see with some clarity how much prices are still overvalued. The average cost of a house in Ireland is €250,000. The average rent per month is €863. This gives a paltry yield of 3.48pc per year. Now to get the yield up to 7pc, either rents have to double — which is not going to happen because wages are falling, taxes rising, unemployment rising and emigration is back — or prices have to fall. So average house prices must fall by another 45pc to reach fair value of €135,620. Unless prices fall back dramatically, you would be mad to buy because you would simply be paying the banks a subsidy on top of the tax you are going to pay to bail them out!

Another way of looking at how overvalued houses are is to examine the chart. The chart shows how much out-of-whack houses prices still are with respect to the average wage. Up until 1996, house prices and wages moved in tandem. After that, house prices moved out of synch. By 1999/2000 there was a clear bubble emerging and the rest is history. But as you can see, if rises in house prices are to get back to where they bear some relation to rises in wages, house prices have to fall back dramatically. In fact, to get back to a proper yield, house prices must tumble.

Anyone tempted to buy now should try to see through the spin that says: “Now is time to buy”. But this shouldn’t be that difficult. After all, who is saying that now is the time to buy? The sellers! Enough said.

Report by David McWilliams – Irish Independent

Ireland Property – Daft Property – http://daftproperty.blogspot.com

Cuffe backs demolition of some ‘ghost’ estates…

NEW GREEN Party Minister of State for the Environment Ciarán Cuffe yesterday said the blame for unfinished, or “ghost” housing estates lay with “the ‘cargo cult’ of rezoning for all the wrong reasons” that drove development in recent years.

In his first major speech since taking office last month Mr Cuffe said “selective demolitions will be a necessary part of the tasks required to tackle the legacy of one of the more unsavoury aspects of Ireland’s building boom”.

Addressing the annual conference of the Irish Planning Institute (IPI) in Tullamore, Co Offaly, he said: “I have no doubt that some loans that will come into the possession of the Nama will result in the demolition of badly designed buildings in inappropriate locations.”

But demolition would not be the only option.

“We now have to look quite realistically at the future use of unfinished estates and the needs of residents . . . It’s not as simple as sending in a bulldozer. That would happen in cases where there are significant health and safety issues,” Mr Cuffe said.

Nama’s new planning committee, which holds its first meeting today “will have a key role in this”.

Local authorities would also have “a strong role to play”, even in cases where Nama was involved, and so would the Department of the Environment.

He told planners that a team from the department would determine just how many unfinished housing estates there are. “We don’t yet have a clear figure, but hope to have that by the end of the summer,” he said.

As a “signed-up member of the institute” and former lecturer in urban planning, Mr Cuffe said his new role as Minister of State with special responsibility for planning, horticulture and sustainable travel “affords me an exciting opportunity to improve and enhance our planning system from within”.

IPI president Gerry Sheeran, in his opening address to the conference, said it was vital the advice of planners was “not ignored, as happened in the past” with the overzoning of land, which had led to the proliferation of unfinished housing estates.

“Decisions of councils to zone large amounts of lands, which in many cases were multiples of the development land required for the projected population, may have been seen at the time as benign and without negative consequences in the booming economy – but there are victims.

“These victims are those living in unfinished housing estates or those housed on land zoned in floodplains. The overzoning was not done in the interest of the common good but for sectoral interests, such as landowners and developers, and frequently against the advice of professional planners.”

Nama presented an opportunity for a plan-led rather than developer-led approach and should not be “driven by seeking the best return possible as had been the case during the boom.”

“Indeed, good planning can increase the value of land by achieving a better use mix or by providing public infrastructure such as public transport or can ensure the provision of social infrastructure such as schools, community facilities, parks and social housing in a timely and coherent fashion,” Mr Sheeran said.

Referring to recent flooding around the country, he said while climate change was playing a part, man-made interventions were also to blame – damage to bogs, short-sighted river drainage schemes, modern forestry techniques, large areas of Tarmac and concrete and the zoning of land in floodplains.

“The skills and talents of planners are essential to ensuring that we develop more sustainable, attractive and cohesive communities to live in, adopt more sustainable methods of travelling, build strong and vibrant town centres, address the issue of declining rural areas and enhance and protect our built and natural heritage.”

Costly Development Expert Outlines Problems Of One-off Housing Surge

ONE-OFF houses accounted for 46 per cent of the reduced national output of housing last year. But in some rural counties, mainly in the west, the proportion was much higher, according to an analysis by James Nix, of the Irish Environmental Network.

At the Irish Planning Institute’s annual conference in Tullamore, Co Offaly, he said one-off houses accounted for 80 per cent in Co Galway, followed by Kilkenny and Mayo (75 per cent), Leitrim (74 per cent), Roscommon (73 per cent) and Monaghan (71 per cent).

The fact that one-off houses accounted for almost half of the housing output nationally was due to the recent sharp drop in construction of scheme houses and apartments, rather than because of any surge in the building of one-offs, he explained.

Construction of apartments and scheme housing has plummeted, from 50,000 in the peak year of 2006 to less than 10,000 in 2009. The comparable figures for one-off houses were 22,800 in 2006, down to 12,000 of the total output of 26,400 units in 2009.

“While a small number of these homes will have been constructed near schools, shops and workplaces, the overwhelming majority are distant from services,” Mr Nix said. Since 2004, he estimated that it had cost “well over €1 billion” to provide them with services.

“This figure includes an additional €120 million on postal services and some €720 million on school transport. Other areas with substantially higher costs include road maintenance, bin collection, electricity and phone connections,” he told 150 planners at the conference.

Now, an increasing share of our housing output was more expensive to serve. “The slump in completions brings into view a key question for the 2010 to 2020 period: are close to half of all homes built in Ireland in the coming years going to be one-off?” he asked.

“Ireland’s competitiveness is being steadily eroded by the continued development of a pattern of housing which is particularly energy intensive,” Mr Nix warned the planners. “As oil prices rise, this cost burden will become ever more apparent.

“Put simply, unless dispersed development is restrained, councils will have to devote a disproportionate amount of their revenue on road maintenance, while bin collection and other council-provided services will also be more expensive,” he said.

This could be overcome by replacing stamp duty with a site value tax, as proposed in the revised Government programme. Such a tax would not only raise funds for cash-starved councils but would also act as a disincentive to hoarding land, he said.

Report by FRANK McDONALD – Irish Times

Ireland Property – Daft Property – http://daftproperty.blogspot.com

Cuffe backs demolition of some ‘ghost’ estates…

NEW GREEN Party Minister of State for the Environment Ciarán Cuffe yesterday said the blame for unfinished, or “ghost” housing estates lay with “the ‘cargo cult’ of rezoning for all the wrong reasons” that drove development in recent years.

In his first major speech since taking office last month Mr Cuffe said “selective demolitions will be a necessary part of the tasks required to tackle the legacy of one of the more unsavoury aspects of Ireland’s building boom”.

Addressing the annual conference of the Irish Planning Institute (IPI) in Tullamore, Co Offaly, he said: “I have no doubt that some loans that will come into the possession of the Nama will result in the demolition of badly designed buildings in inappropriate locations.”

But demolition would not be the only option.

“We now have to look quite realistically at the future use of unfinished estates and the needs of residents . . . It’s not as simple as sending in a bulldozer. That would happen in cases where there are significant health and safety issues,” Mr Cuffe said.

Nama’s new planning committee, which holds its first meeting today “will have a key role in this”.

Local authorities would also have “a strong role to play”, even in cases where Nama was involved, and so would the Department of the Environment.

He told planners that a team from the department would determine just how many unfinished housing estates there are. “We don’t yet have a clear figure, but hope to have that by the end of the summer,” he said.

As a “signed-up member of the institute” and former lecturer in urban planning, Mr Cuffe said his new role as Minister of State with special responsibility for planning, horticulture and sustainable travel “affords me an exciting opportunity to improve and enhance our planning system from within”.

IPI president Gerry Sheeran, in his opening address to the conference, said it was vital the advice of planners was “not ignored, as happened in the past” with the overzoning of land, which had led to the proliferation of unfinished housing estates.

“Decisions of councils to zone large amounts of lands, which in many cases were multiples of the development land required for the projected population, may have been seen at the time as benign and without negative consequences in the booming economy – but there are victims.

“These victims are those living in unfinished housing estates or those housed on land zoned in floodplains. The overzoning was not done in the interest of the common good but for sectoral interests, such as landowners and developers, and frequently against the advice of professional planners.”

Nama presented an opportunity for a plan-led rather than developer-led approach and should not be “driven by seeking the best return possible as had been the case during the boom.”

“Indeed, good planning can increase the value of land by achieving a better use mix or by providing public infrastructure such as public transport or can ensure the provision of social infrastructure such as schools, community facilities, parks and social housing in a timely and coherent fashion,” Mr Sheeran said.

Referring to recent flooding around the country, he said while climate change was playing a part, man-made interventions were also to blame – damage to bogs, short-sighted river drainage schemes, modern forestry techniques, large areas of Tarmac and concrete and the zoning of land in floodplains.

“The skills and talents of planners are essential to ensuring that we develop more sustainable, attractive and cohesive communities to live in, adopt more sustainable methods of travelling, build strong and vibrant town centres, address the issue of declining rural areas and enhance and protect our built and natural heritage.”

Costly Development Expert Outlines Problems Of One-off Housing Surge

ONE-OFF houses accounted for 46 per cent of the reduced national output of housing last year. But in some rural counties, mainly in the west, the proportion was much higher, according to an analysis by James Nix, of the Irish Environmental Network.

At the Irish Planning Institute’s annual conference in Tullamore, Co Offaly, he said one-off houses accounted for 80 per cent in Co Galway, followed by Kilkenny and Mayo (75 per cent), Leitrim (74 per cent), Roscommon (73 per cent) and Monaghan (71 per cent).

The fact that one-off houses accounted for almost half of the housing output nationally was due to the recent sharp drop in construction of scheme houses and apartments, rather than because of any surge in the building of one-offs, he explained.

Construction of apartments and scheme housing has plummeted, from 50,000 in the peak year of 2006 to less than 10,000 in 2009. The comparable figures for one-off houses were 22,800 in 2006, down to 12,000 of the total output of 26,400 units in 2009.

“While a small number of these homes will have been constructed near schools, shops and workplaces, the overwhelming majority are distant from services,” Mr Nix said. Since 2004, he estimated that it had cost “well over €1 billion” to provide them with services.

“This figure includes an additional €120 million on postal services and some €720 million on school transport. Other areas with substantially higher costs include road maintenance, bin collection, electricity and phone connections,” he told 150 planners at the conference.

Now, an increasing share of our housing output was more expensive to serve. “The slump in completions brings into view a key question for the 2010 to 2020 period: are close to half of all homes built in Ireland in the coming years going to be one-off?” he asked.

“Ireland’s competitiveness is being steadily eroded by the continued development of a pattern of housing which is particularly energy intensive,” Mr Nix warned the planners. “As oil prices rise, this cost burden will become ever more apparent.

“Put simply, unless dispersed development is restrained, councils will have to devote a disproportionate amount of their revenue on road maintenance, while bin collection and other council-provided services will also be more expensive,” he said.

This could be overcome by replacing stamp duty with a site value tax, as proposed in the revised Government programme. Such a tax would not only raise funds for cash-starved councils but would also act as a disincentive to hoarding land, he said.

Report by FRANK McDONALD – Irish Times

Ireland Property – Daft Property – http://daftproperty.blogspot.com