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Realistbear

Some Irish Logic On Debt Levels

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http://www.finfacts.com/irelandbusinessnew..._10006350.shtml

Mr. Duffy said the change in attitudes towards mortgage debt in the past twelve months revealed some interesting divergences. ‘A small minority, most likely recent borrowers have become more concerned about their debt levels but a notably larger group recognise that
while borrowing costs have increased, the value of their properties have risen sharply
.’

There has been a clear deterioration in the situation of low income borrowers as interest rates began to increase. In addition, many of those in their 40’s also face difficulties because while they are asset rich, many are also cash poor at present.’

Mr. Hughes said that most borrowers were well prepared for a rising trend in interest rates. ‘The vast majority will be able to withstand significant increases. However, as many as
80,000 borrowers will have to tighten their belts if interest rates rise even modestly further.

"while borrowing costs have increased, the value of their properties have risen sharply"

This is a scary statement. The "value" of the property is an opinion whereas the debt is real. A house can go up in perceived asking price by 1000% but it makes no difference to the size of the repayment. :o

Edited by Realistbear

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This is a scary statement. The "value" of the property is an opinion whereas the debt is real. A house can go up in perceived asking price by 1000% but it makes no difference to the size of the repayment. :o

Not at all.

Many of us are comfortable with debt and prepared to accept the accompanying risks.

I notice from my foreign property exploits that a disproportionate percentage of investors buying abroad are Irish.

Britain was built on risk. Read about any early traders venturing to the Spice Islands or inventors and you will find a big dollop of risk was inherihent, although often looking back people fail to recognise the risks involved just as people now say those who got into B2L in 1995 were just lucky.

Some of us like a bit of spice in our lives but that doesnt makes us muppets, we fully realise the downsides.

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Read about any early traders venturing to the Spice Islands or inventors and you will find a big dollop of risk was inherihent, although often looking back people fail to recognise the risks involved just as people now say those who got into B2L in 1995 were just lucky.

Some of us like a bit of spice in our lives but that doesnt makes us muppets, we fully realise the downsides.

Umm, didn't the spice traders introduce Opium to ensure that addicts would trade spices at unfairly low prices to ensure that they could feed their addiction? I'm sure there's an analogy in there somewhere.... ??? :blink:

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This report is an absolute classic - one to print out and keep. The contradictions are startling.

The financial position of Irish consumers is very healthy; the value of the houses they own and their deposit accounts exceed their debts by around €440 billion.

ok. <_<

2 out of 3 Irish borrowers feel their debts are now putting a burden on their household finances.

oh? :huh:

Roughly 40 per cent of borrowers reckon their financial position would deteriorate substantially if interest rates rose by 1 per cent.

WTF? :blink:

So that's healthy? What a load of (beyond) ridiculous tosh. :angry:

EDIT: So did we really expect an IIB Bank report to say there was a serious debt problem? That would be like Ford reporting problems wth car ownership.

Edited by Flash

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And the ECB couldn't give a toss about the poxy Irish housing market. 1% is nothing to Europe as whole.

Irish BTL market collapsing - the "sell" signal for the UK market?

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Not at all.

Many of us are comfortable with debt and prepared to accept the accompanying risks.

I notice from my foreign property exploits that a disproportionate percentage of investors buying abroad are Irish.

Britain was built on risk. Read about any early traders venturing to the Spice Islands or inventors and you will find a big dollop of risk was inherihent, although often looking back people fail to recognise the risks involved just as people now say those who got into B2L in 1995 were just lucky.

Some of us like a bit of spice in our lives but that doesnt makes us muppets, we fully realise the downsides.

There is a world of difference between risk and stupidity. The Irish market is based on opinion and the debt burden is out of control and getting worse the longer the bubble inflates. Smart money must have left the market at least 2 years ago to leave the amateur risk takers to keep it going up to the pop.

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There is a world of difference between risk and stupidity. The Irish market is based on opinion....

And of course it's just your opinion that people are behaving stupidly.

There is high risk and low risk and a thousand points in between. Buying property per se is not especially risky. Most of the people buying and selling at the moment are not FTB-ers, and therefore a sizeable lump of any purchase price will be accounted for with transferred equity.

Does this make property transactions risk-free? No, of course not but the risk is greatly mitigated. There can still be a decline in prices, or even a "crash" but most people are pretty well insulated. If you're buying for the long term and don't over-leverage yourself, then property is still not especially "high risk". A spell of negative equity, or IR going up a bit is a nuisance, to be sure, but for the great majority, it doesn't amount to a great risk.

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The most telling phrase for me is the reference to many being 'asset rich but cash poor'. Therefore, they're skint but look, their house(s) is/are worth loads!

Any business struggling with cash flow would liquidate assets to ease the pain. So its either attempt to sell up in a declining market or end up getting repo'd.

All the flats in my building and many in Manchester were bought by Irish BTL-ers. The selling up has started, I forsee a major pull-out in the coming year.

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Any business struggling with cash flow would liquidate assets to ease the pain. So its either attempt to sell up in a declining market or end up getting repo'd.

You know less about business than you think.

All the flats in my building and many in Manchester were bought by Irish BTL-ers. The selling up has started, I forsee a major pull-out in the coming year.

I suspect that first sentence is an anecdotal exaggeration, and the second is just wishful thinking. You can't just have "a major pull-out" in a market which you'd like to think is in freefall. If the market really does crash, BTL-ers have to decide whether to sell low and lose a big chunk of cash, or to hang on in there and ride it out.

Despite HPC-ers Armageddon fantasies of ruined BTL-ers weeping in the streets, the more prosaic truth is that the great, great majority will pull in their horns and ride it out. Certainly, if people know in advance that a severe price drop is around the corner they may well rush to market, but they don't all have your crustal ball, and I think you'll find that investors will not be queuing up to dump property at knockdown prices. They will hang on in there. Even if the market doesn't recover for years, they will hang on in there. It's just what people do.

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Despite HPC-ers Armageddon fantasies of ruined BTL-ers weeping in the streets, the more prosaic truth is that the great, great majority will pull in their horns and ride it out. Certainly, if people know in advance that a severe price drop is around the corner they may well rush to market, but they don't all have your crustal ball, and I think you'll find that investors will not be queuing up to dump property at knockdown prices. They will hang on in there. Even if the market doesn't recover for years, they will hang on in there. It's just what people do.

So why did people not sit tight in the early nineties and "ride it out"? The answer: interest rate rises meant that they could not afford to. So, rolling forward to 2006 you feel that the Irish investor will just ride it out when each rate rise is adding heavily to their debt servicing costs? The only way they can "hang on in there" is to pass the extra cost on to tenants and hike the rents, which is simply not possible.

Each 25 basis points rate rise adds around 85 Euro to the average (yes the average!) mortgage in Dublin. Many BTL'ers are much more highly leveraged than that.

The next 12 months will be very interesting. Many are pulling out of the market now - Hamilton Osbourne King, the Gunne family, AIB and BOI selling their branch network etc. etc.

Edited by Flash

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And of course it's just your opinion that people are behaving stupidly.

There is high risk and low risk and a thousand points in between. Buying property per se is not especially risky. Most of the people buying and selling at the moment are not FTB-ers, and therefore a sizeable lump of any purchase price will be accounted for with transferred equity.

Does this make property transactions risk-free? No, of course not but the risk is greatly mitigated. There can still be a decline in prices, or even a "crash" but most people are pretty well insulated. If you're buying for the long term and don't over-leverage yourself, then property is still not especially "high risk". A spell of negative equity, or IR going up a bit is a nuisance, to be sure, but for the great majority, it doesn't amount to a great risk.

And its just your opinion that they are not? :blink:

Many are no insulated and that is the problem. IO and 120% mortgages have become more common the less affordable property has become. The last "spell" of negative equity was during the Great Crash, 7 years. 1989-96. In a bubble market there is not much protection at all.

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And its just your opinion that they are not? :blink:

Many are no insulated and that is the problem. IO and 120% mortgages have become more common the less affordable property has become. The last "spell" of negative equity was during the Great Crash, 7 years. 1989-96. In a bubble market there is not much protection at all.

Quite.

The point I was trying to make (apparently quite ineffectively!) and which Brass Farthing appears to have missed, is that most of the BTL investors in cities like Manchester and Liverpool are not big players, they are just people with one or two properties - and they have very little in the way of a safety net should things start to get tight financially. They are hocked to the banks on IO mortgages, with no capital repayment vehicle in many cases.

Massive oversupply of brand new 2 bed flats is leading to lengthy and costly voids. If you don't think people are selling up in droves may I suggest a stroll though 'New Hulme', much of which is uninhabited new builds and a lot of which is up for sale. A drive down Chorlton Road on Saturday was a real eye opener for me - half of it is on the market. Yet still developers are throwing up more flats at a rate of knots, which will just exacerbate the situation.

Edited by Mancghirl

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Quite.

The point I was trying to make (apparently quite ineffectively!) and which Brass Farthing appears to have missed, is that most of the BTL investors in cities like Manchester and Liverpool are not big players, they are just people with one or two properties - and they have very little in the way of a safety net should things start to get tight financially. They are hocked to the banks on IO mortgages, with no capital repayment vehicle in many cases.

Massive oversupply of brand new 2 bed flats is leading to lengthy and costly voids. If you don't think people are selling up in droves may I suggest a stroll though 'New Hulme', much of which is uninhabited new builds and a lot of which is up for sale. A drive down Chorlton Road on Saturday was a real eye opener for me - half of it is on the market. Yet still developers are throwing up more flats at a rate of knots, which will just exacerbate the situation.

Manchester is starting to show a little weakness in the cheaper properties with semis down over 5% in the last Q according to the ODPM:

Manchester £144,428 -5.6%

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There is a world of difference between risk and stupidity. The Irish market is based on opinion and the debt burden is out of control and getting worse the longer the bubble inflates. Smart money must have left the market at least 2 years ago to leave the amateur risk takers to keep it going up to the pop.

Direct property investment (as opposed to packaged indirect investing in pensions etc) affords a lot of control and in my opinion is'nt that risky, afterall you get to own something real.

'Smart money' does'nt rely on big institutuions to do all the work. No serious entrepeneur Ive ever met relies on silly pensions et al. They carve thier own mine.

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Direct property investment (as opposed to packaged indirect investing in pensions etc) affords a lot of control and in my opinion is'nt that risky, afterall you get to own something real.

'Smart money' does'nt rely on big institutuions to do all the work. No serious entrepeneur Ive ever met relies on silly pensions et al. They carve thier own mine.

'Smart Money' also understands liquidity. There is a huge risk leveraging yourself in an asset that you cannot sell in a bear market. I would rather own the shares of a property developer than hold property directly.

So dogbox, did you ever by into that German property play, Speymill? I topped up recently. :)

Edited by Flash

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'Smart Money' also understands liquidity. There is a huge risk leveraging yourself in an asset that you cannot sell in a bear market. I would rather own the shares of a property developer than hold property directly.

So dogbox, did you ever by into that German property play, Speymill? I topped up recently. :)

No I didnt, Im pretty cautious when it comes to shares. Still toying but might rather invest in a 15 or 18m marina berth in Saidia which comes with a 60 year lease. And no, I dont have a boat!

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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