Property Crash – Where to Now?
Richard Curran presented this overview of the Irish market, and breakdown of regional markets, on RTE last night to waiting public. People watched to see would the programme deliver on its aim to find out where the market is heading and where we should expect to be in five years time. The team at Buyers Broker researched for and contributed to this documentary earlier this summer and we were delighted to be able to add some consumer focus. It would have been better to see to see the programme discuss avenues for potential buyers to explore or initiatives for buyers that would kichstart the market, unfortunately, the emphasis was very much on negative equity. Curran started by examining the past experiences of other countries that have experienced a similiar boom-bust cycle and recovered. He focused on Finland and Japan to give the broadest range; Finland had experienced a four to five year drop followed by three years of stagnation in the market before prices show signs in increasing, whereas Japan suffered 10 years of decreasing prices and 15 years on, they have yet to recover to earlier peak prices. It was interesting to hear how other countries handled similar situations. It appeared to find that the Irish givernment had been relatively quick to react to changing conditions, and that while austerity hurt, it was necessary and continues to be necessary. His conclusion was that “survival of the currency and Irelands place in it is the most likely outcome”.
The most interesting aspect of the programme was how the researchers had broken down the markets on a city and county basis. This allowed us to see the regional drops, rather than just looking at national averages. Most importantly, this research looked at property type when assessing regional demand and supply. Unsurprisingly, there was a definite trend towards houses and against apartments. Whether it is historical or cultural, we Irish have not embraced apartment living. This means that while 3 bedroom semis show tentative signs of recovery in areas of high demand, apartments will continue to drag the market down for years to come.
The Frontline – Where to Now?
Immediately after the airing of the documentary, Pat Kenny presented The Frontline special, dealing with the fallout of the market, and the issue of negative equity for existing homeowners. After speaking to a number of homeowners about their experiences in dealing with the banks and trying to restructure their mortgages, there was little doubt that the banks are entirely unequipped to help struggling mortgage-holders. New Beginnings was well represented on the night and put forward an initiative that they claimed would amount to a win-win-win situation for the for banks, the borrowers and the state – an illustration was used to show that borrowers could maintain the mortgage repayments (capital and interest) albeit at a reduced rate of 35% of their disposable income for the full term of the mortgage and still discharge the full sum due. The only concession for for banks was a period of perhaps 10 years where no intereste would accrue to a portion of the loan – I am not aware of the calculations or formula but I would be interested to learn more. New Beginnings will look to the banks to adopt this model as a first step, but indicated strongly that they would be willing to seek the support of the Courts to have this imposed on the banks, if it is not adopted voluntarily. This is an interesting one to watch – it is no doubt the most practical solution put forward to date.
Buyers who tuned in to hear about negative equity mortgages, as marketed recently through Nama and the pillar banks will have been disappointed to note the term ‘negative equity mortgages’ being used in the context of the UK solution to homeowners trying to deal with negative equity, either to sell or trade up (or indeed, down). There was no discussion of possible incentives for would-be buyers.
The one lesson that we hope all prospective buyers take away from the programming last night is that the concept of a starter home is gone – do not buy an apartment unless you wish to live in an apartment – do not put up with a commute to work of 90 minutes unless you are prepared to commute for 90 minutes indefinitely. Most importantly, take your time, get independent advice and take a long term view. There is genuinely no margin for error in the current market, buyers need to buy right everytime.
For further information, please contact Buyers Broker Ltd on 01 4428 035 or email us on firstname.lastname@example.org.