Wednesday, May 26, 2010

Crunch! and the boom is gone

Want to know what a real HPC looks like?

This solution (demolition) is the only answer for Spain and Eire IMO.

Posted by chrisch @ 09:47 AM (1393 views)
Please complete the required fields.



8 thoughts on “Crunch! and the boom is gone

  • little professor says:

    Demolition is the right answer in Detroit (which this article is about) because there is a massive oversupply of housing compared to the population. People have left Detroit in droves due to the collapse of the car industry which was the main employer. This left whole neighbourhoods of vacant housing which would not sell at any price (there are thousands listed for sale at $1, they can’t shift them) and are subsequently taken over by gangs or set on fire.

    The same doesn’t apply to ‘Eire’ – there is no oversupply of housing, young Irish people are still having to overextend themselves in order to buy even a modest starter home. Despite the major house price crash over there, prices are still way too high. What they need is to build more houses and allow prices to fall further to a more realistic level, not demolish houses to keep prices high.

    Reply
    Please complete the required fields.



  • One of the problems in places like Detroit is the property tax structure. If you live in a neighbourhood where 50% of the houses are abandoned, you still pay full property tax because it is levied on the value of the whole property (land + building), even though the house next door pays zero tax. This gives you a further incentive to leave, thus driving more people out of the neighbourhood.

    This could be resolved by a Land Value Tax, whereby all the plots on the street would pay the same tax rate. Since the majority of those abandoned homes have been repossessed by the banks, LVT gives the banks an incentive to sell them on as quickly as possible to someone who can make use of them (FTBs, landlords, flippers, etc.). If nobody wants them, the properties fall to the government who can then decide what to do (probably bulldoze them).

    Reply
    Please complete the required fields.



  • tenant super says:

    Agree that the demolition solution is not right for Ireland where there is a shortage of social housing and property is still overvalued. Once the market finds its natural floor (if government interventions fail to prevent this as is widely expected) the unsold stock will start to shift to locals and to people with an Irish connection working in the UK and Australia in anticipation of a move back home when the jobs market improves. The floor is not going to be anything like Detroit but when we can pick up a nice bungalow (the kind that is currently selling for about 150k) in Athenry for 75k euro…

    Agree with LP, “What they need is to build more houses and allow prices to fall further to a more realistic level, not demolish houses to keep prices high” but when the golgafrinchams adopted the leaf as currency they embarked on a massive program of deforestation so who knows what madness will prevail.

    Reply
    Please complete the required fields.



  • tenant super says:

    chrisch, there are more than 50,000 families on the social housing waiting list in the republic of Ireland. Probably double that are living with parents or in house shares when they would ideally like to buy.

    The ghost estates (houses not flats) are empty not because the property isn’t needed but because those who would buy the houses cannot afford them and NAMA (bad property loans transferred to a government bad bank) is an artificial prop that has meant there has been no need for a firesale.

    Take all the houses on the NAMA portfolio and designate 60,000 as social housing; have a firesale of the rest and demolish the rabbit hutches that were never fit for purpose anyway and empty home problem solved.

    They won’t do this as they need to keep a floor under prices to protect bank portfolios and also to try and prevent decades long negative equity. There is also the problem of resentment when a person who bought a 260k home and is slogging their guts over the mortgage, has a neighbour on one side who bought for 60K and a neighbour on the other paying a social housing rent.

    Most here would agree it is tough titty but that idea of responsibility and free market has long gone.

    Reply
    Please complete the required fields.



  • I’d like to live in Dublin, but I can’t afford to buy a house there. I am about to buy a 3-bed house in a nice area of Cardiff (Whitchurch) for £210,000. According to daft.ie, the cheapest 3-bed on the market at the moment in Templeogue (where my parents live) is 350,000 euro.

    [For those who do not know Dublin, I should point out that Templeogue is not by any means the most desirable area in the city.]

    Reply
    Please complete the required fields.



  • tenant super says:

    … also the article on ghost estates is slightly misleading. The 266,000 identified empty properties are not all fit for habitation. I don’t know whether you’ve ever been to Ireland but drive along any country road and you will see at regular intervals very old, very small, single-story farm cottages which are just wrecks/ shells and are generally only sold on the land value.

    Reply
    Please complete the required fields.



  • @ drewster – Interesting. So if the house sell for $1000 and the cost of rebuilding is $100000, this implies that the land value is -99000.
    So is it the local council who have to pay the occupier for being there ?

    I suppose detroit can offer those housing to some hard working and educated foreign immigrant who will promise to stay there and rebuild the place who can then buy the house off the state for an agreed sum (maybe $50000) when the area stablised..

    Reply
    Please complete the required fields.



Add a comment

  • Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
  • Please note that any viewpoints published here as comments are user´s views and not the views of HousePriceCrash.co.uk.
  • Please adhere to the Guidelines

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>