Friday, March 28, 2008

You give me fever. But not property fever.

Urgh, and indeed bleaurgh. I am poorly. I was poorlyish yesterday but chose to ignore it. I know that sounds daft, but sometimes if you ignore poorly it gets into a huff and goes away.
Not so this poorly. I woke up at 3:30 this morning to find I had sweated through my panda bear jammies and my pillow, leaving me no recourse but to get up, change into a t-shirt, flip my pillow over and resume my dreamy feverish state if unconsciousness.
Fortunately we have spanish drugs here and one of them is called Frenadol, and over the counter sachet of powder that has the capacity to A) knock even the sturdiest of folk unconscious, and B) the ability to halt sickness before it get a chance to run rampant. If anyone is traveling abroad look for this product. FRENADOL. Awesome stuff all together, don't take it before driving.
I won't say I'm well, but I'm not dying, and this leads me directly to the property market.
According to the Indo this velly Gingerday, roughly 25 grand has been lopped off the average house price. This is rather a lot when you consider the banks over the last few years have been handing out pretty much 100% mortgages to a lot of folk. Folk who can scarce afford to see their equity go negative.
Apartments seem to be taking a pounding. In Balinteer as much as €50,000 has been knocked off the asking price of some apartments, a substantial amount of money and one which must be very aggravating for folk who have just bought there.
Around here house prices have been in steady decline too. Remax in Rathfarnham are actually having a sale, something I've NEVER seen an estate agent do. But the truth is properties are not moving. There are at least four houses in my surrounding area which have been on the market for over an year now and no budge. A friend of mine from Waterford told me that the agency he works for hasn't sold a mortgage since last November. Another friend of mine who works in finance says it's set to much much worse over the next 12 months.
'But what about the soft landing?" I asked.
'Harrumph, what about it?' He replied.
Prices were massively over inflated in most areas anyway, so this is a correction. But that's scant comfort to those who bought at the top end of the market. I have friends who are absolutely stretched to the max as is, their wealth is tied up in their homes. They're tied in. Even if they wanted to sell to release funds now there is no guarantee of a sale.
Nervous times.
Without banging the doom and gloom drums, I think we are in for a bumpy ride for the next year or two, I genuinely do. If you're thinking of buying now I would advise waiting. At least until the end of the year. When corrections occur they can be painful and sharp.



Blogger Lou said...

Hopefully though it'll allow some of us to finally get on the ladder, I've wanted to buy a place in Dublin for aaagggeess now but it's been hard to get a mortgage for anything at all in the area of Dublin I grew up in. In a year or so when I settle back home the prices should be low enough to buy some small shoebox...

Sorry you're not well Cat, on a Ginergday too of all days. Will there be a Friday Ginger forthcoming?

12:53 p.m.  
Blogger fatmammycat said...

I'm working on it, Lou. It's a doozy.

1:02 p.m.  
Blogger Lou said...

Cool because it actually IS my birthday. So I am doing no work and just pootling around the interbox and eating sugar. I've had so many skittles I've started to hallucinate... :D

1:05 p.m.  
Blogger Andraste said...

Sounds like you've nipped this poorly-ness in the bud. Cross fingers!

Same thing is happening this side of the pond. Luckily, we bought at the right time, we can afford our mortgage payments, and we're not planning on selling anytime soon - but there are for sale signs everywhere and every day there's more bad news, more foreclosures, and dire predictions.

Happy Birthday, Lou!

1:15 p.m.  
Blogger fatmammycat said...

Happy Birthday Lou! Remember birthday cake is carb loading.

Andraste, dire predictions indeed. Sub prime lenders are a relatively new breed of lender of here and listening to the ads are very disturbing I think. They offer so much and on -in my view- flimsy credit histroy. They're preying of folk who are desperate to get on the property ladder,(which I completely understand) but these people are very vulnerable when things get tougher and property prices drop.

1:47 p.m.  
Blogger Lou said...

Thanks! :-)

I also believe beer and smarties cookies are carb loading. There is every possibility I will pass out from a diabetic coma instead of from alcohol tonight!

I have an awful feeling this is only the tip of the iceberg as far as the sub-prime crisis is concerned. I've seen so much trading in mortgage bundles in the last few years, no one really knew how high-risk they were because they were classed as good debt. I think everyone must have known they were too good to be true but when you're earning a mahoosive bonus every year from it you just keep going...

1:57 p.m.  
Anonymous Sam, Problemchildbride said...

I read this the other day which did a good job of laying out the reasons for the cracks starting to show in Ireland's economy.

The US is in a mess, largely brought on by an unsustainable housing bubble bursting. Greed, unethical lending practices, adjustable rate mortgages and oily chickens coming home to roost have seen prices of property inflate beyond all reason and now, as prices plummet to try and make sales, people are unlikely even to get the intrinsic value of their homes back supposing they even find a buyer.

Many, many people who refinanced to realise the extra cash and buy that car or take that holiday, and gambled on prices continuing to rise, are on second mortgages with adjustable rates and now find the equity in their houses stripped into the negative and are having to make extortionate monthly payments as the adjustable part of ARMs starts to kick in.

These big mortgage companies were lending to people with no income for crying out loud. The supposed geniuses on Wall Street bought much of the debt and now the tax payer is having to bail out companies like Bear Stearns.

The supposed free market system in this country can be summarised thus. Capitalism recognises profits - money goes to the very lucky few at the top; but losses are socialised - we all get to suck it up when capitalism fails. Hardly the healthy capitalist system the Republicans tell us we're all in. Corporate greed in the US is beyond belief and yet while profit rarely trickles down from them to the man in the street, it's fine for us to absorb the losses.

2:09 p.m.  
Anonymous Sam, Problemchildbride said...

Hope you feel better soon, toots.

2:10 p.m.  
Anonymous The Bad Ambassador said...

Awww diddums!

I don't own a house - but the cpf does. A house which was bought pre-ridiculousness. Maybe I should propose?

2:40 p.m.  
Anonymous nonny said...

Yeah, holding out might not be a bad idea, but, all in all if you are going top live in the house you buy it won’t really make a difference. Investing in property long term is never a bad thing. I feel really sorry for the people who bought at the height of the property boom, young couples buying apartments and hoping to sell and buy houses later, people like my little mofo bro and his lovely lady. They bought in the country with the hope of affording a pad in Dublin this year. Sadly if they were to sell now they would lose at least 70k and that is not taking into consideration 2nd time buyers stamp duty. The only thing to do is either live in it or rent it. You need balls of steel for the latter.

I still think banks should be held accountable, had they not have lent people ridiculous amounts of cash, property prices would never have gotten so out of control. The number of homes repossessed last year is a perfect example of the consequences. And, I don’t believe all the responsibility should be pushed back onto the borrower, I mean ordinary people who bought million euro houses are probably away with the fairies but it’s the people who just wanted a home I feel sorry foe.

2:50 p.m.  
Anonymous The Bad Ambassador said...

I don't know about holding banks accountable nonny. If you are buying something worth many multiples of your salary shouldn't you at least exercise a little fiscal responsibility and consider how you plan to pay it back? Nobody is forced to stretch themselves to the limit.

If you go into a shop today and a Mars bar is €20, you will realise it is overvalued and walk away.

It should really be the same with property - stoopid famine!

3:07 p.m.  
Blogger Medbh said...

We dodged a bullet and got out of the U.S. housing market just in time. The third house we sold was the charm apparently. The only way I'm moving again is if it's to Ireland.

3:23 p.m.  
Blogger Lou said...

There are two pieces of advice I'm going to use when I buy. Don't borrow more than I can afford to pay back, and buy the wost house in the best area, rather than the other way around. Hopefully with that I should be ok.

Banks that provide mortgages should not take the blame for the current crisis. If you can't afford it, don't buy it!

3:27 p.m.  
Anonymous Anonymous said...

Lou, that's exactly why banks are to blame.

If they can't afford to give someone a loan don't give it!

If they weren't trying to earn as much money as possible by providing anyone and everyone with loans then they wouldn't be broke now and they wouldn't be begging the government for dig-outs.


3:45 p.m.  
Anonymous Sam, Problemchildbride said...

Bad Ambassador, I agree with you that people are responsible for their own decisions. In the US many many greedy people were looking to make a fast buck on property, sent for these sub-prime mortgages for second and third homes and are now left holding the baby. I could never understand what all the excitement over ARMs was anyway - they scare the shit out of me.

However, it's not just as simple as customer responsibility always. Most of these sub-prime lenders actively went out and sought customers with some pretty aggressive marketing practices. They targeted first time home buyers and convinced them that if the company saw no risk of the market shifting and them defaulting on their mortgage, then it was an acceptable risk. And no company's going to lend you money of they anticipate you can't pay it back, are they? I mean these guys are smart, aren't they?

No, they're not. They're greedy. Consumer greed and corporate greed are to blame in the US but in Ireland I don't reckon all these people who've been burned were trying to make easy money by speculating on property or second homes. I'd imagine most people were just trying to set out in life in their own house.

In addition to that, in Ireland, the building sector is 5 times the relative size of its US counterpart and so smaller shifts are going to be magnified 5 times. Ireland's tied to the euro and Brussels push to standardise practices is eroding the economic edge that made Ireland so attractive to investors in the Tiger years.

The downturn is about a lot more than just irresponsible decisions on the part of homeowners. The housing bubble has just masked the steady slowing in business investment for the last few years.

3:48 p.m.  
Blogger Lou said...

Morgor, what about credit card companies then? They give big limits to people who run up debt and can't pay the money back.

I'm all for corporate and social responsibility, but unfortunately the world doesn't work like that...

3:52 p.m.  
Anonymous The Bad Ambassador said...

It's beer o'clock and no Ginger!

4:59 p.m.  
Blogger fatmammycat said...

rectified bitches!

5:26 p.m.  
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