I watched with interest this week two events that happened on the Emerald Isle and one of them was not the debate on the forthcoming EU Treaty. Enough has been said about that, you have heard arguments for both the yes and no side so I will leave it there.
The two events that caught my eye were the distressed property auction on Tuesday and the word from the Central Bank that not enough was being done to solve the ever mounting mortgage arrears problem. Funny thing is the two issues are linked.
Firstly let’s look at the mortgage arrears problem. Let’s look at the facts. 75,000 loans are currently in arrears of 90 days or more. The banks have been told to identify those loans that have no hope of being repaid and enter into arrangements where the owners willingly give up their homes. Then these properties will be sold on the open market where the proceeds will go towards the repayment of the mortgage. What happens the shortfall I don’t know. I suppose a mixture of write off by the banks, extra lump sum funds being provided by the mortgage holder, continued reduced repayments will all be considered. For this process to be equitable I feel it needs to be standardised across all banks and communicated to all concerned. At this stage it is most likely not practical to treat each mortgage on a case by case basis as the cost of this is enormous due to the every increasing numbers of mortgages in trouble. Having a standardised strategy, policy and procedures across the banking industry is the most cost effective and equitable way of dealing with this ever growing problem. It must also be said that unless the economic situation of our domestic economy improves this issue will get a lot worse.
It would be interesting to know the breakdown of how many of the 75k loans have no hope of ever being repaid and the number held by people with no sustainable or stable income v’s those who have some kind of income but just cannot sustain the level of debt that they have accrued. Unfortunately I don’t have these figures so I have to make assumptions.
Let’s assume the following
50% are no hopers at all, owners are happy to give up these properties willingly and are sold on the open market – 37k
35% are manageable and arrangements can be made to keep the people in the home and keep the mortgages performing – 26k
15% are write offs, the mortgage holders will not enter into a voluntary arrangement and the home will have to be reprocessed through the courts. – 12k
These numbers are first of all conservative and secondly are very frightening considering the small size of the Irish property market at present. So with this new directive coming from the Central Bank and assuming it will be implemented in the coming months the consequences will be far reaching,
My opinion is that three things will happen as follows:
It will force people out of their family homes and into rented/social accommodation.
Based on the above figures 37k homes will be surrendered. This means that 37k families need to find alternative accommodation in a very short period of time. I can only assume this will be achieved by either people renting accommodation or looking to the social welfare department to house them. The scale of this is massive and if it happens in a short period of time I can only hope that there are plenty of houses for rent out there and that the social welfare department can cope with the increased demand for social housing. The other 12k that play hardball with the banks will have a little longer to stay in their homes as it takes a very long time to have a forced repossession through the courts. Again a lot of these families will end up looking to the state to house them. In total you are looking at 49k families having to relocate in the next few years. This is a very serious social problem. It is all very well for the banks to try and recover their debts but I do not think that the social impact has been thought out. This is an issue for both the banks and the government so having a well thought out strategy and co operation between many parties is required. It is not just a bank problem.
It will flood the already fragile property market.
My worry here is that 49k homes will come on the market in the next few years. Again this is a large amount when you consider that only about 12k mortgages are being drawn down each year and I do not see this increasing as the banking and euro crisis continues. The chance of these properties being sold, even at reduced prices, is very remote. Our property market supply will be well in excess of the demand keeping prices low for a very long time.
It will force the banks to realise any write off provisions that exist.
Well I think this is expected and the banks involved have made provision for these write downs. Problem is that flooding the market with properties will reduce the amounts recovered for each mortgage. I do hope that the bank’s provisions have been generous enough to cover the realised losses. Time will tell.
In summary the moral of the story is that the banks by recovering their debts which they are quite entitled to do could have a serious social impact on our country and on our population. Yes the Central Bank are doing their job in forcing the issue however other government departments need to be involved in the process and must work with the banks in order for this process to be carried out in an orderly manner. Otherwise the consequences could lead to further hardship and even social unrest in certain area. We are dealing with people here not corporations. Because of this any strategy, process or procedures put in place have to take account of the human factor, not something our banks have experience of unfortunately. One could ask the question where is the NAMA for the individual mortgage holder? With so much residential property about to be transferred to our banks there is an argument that we need an equivalent of NAMA where residential property is transferred to and managed in a controlled and professional manner. This would allow existing owners to transfer the property over but remaining living in their homes paying rent. The social effect would be minimised if this happened. The entire portfolio could be feed to the market in stages controlling supply and demand.
Regarding by to let mortgages, fast action should be taken here. The banks should appoint receivers to each individual property where mortgages are not performing and ensure that all rent collected is used to service the mortgage. If the property is empty it could be put on the rental market. If after this process it becomes clear that there is no hope of the loan been serviced in an adequate manner then unfortunately the banks have to pursue the owners in the courts to try and get judgements on the properties in question and any other assets owned by the mortgage holder. This is a very unfortunate situation but there can only be debt forgiveness under the terms of the law. The new rules to be introduced on personal debt and bankruptcy will have to be applied to these cases. By to let mortgages can be treated in a more aggressive way than that of home mortgages as the human factor is not as prevalent.
In saying all this, you have to remember the big picture. We are not the first country or indeed won’t be the last to have a property bubble that went pop. The UK, Switzerland, Sweden and Japan all suffered property crashes in the early nineties. There must be models out there that our banks and government can look to and learn from.
This leads me back to the second thing that caught my eye this week. This was the distressed property auction that took place on Tuesday. Wow not a good result. For me it shows that the property market has not bottomed out and that people are still looking for unrealistic prices for property. Now this may not be a fair representation of the entire market as some of the property on offer was not in desirable locations and I would have to question the quality but for me the number of withdrawals was fare too high. I have to agree with Mc Williams that the Irish property market still has more to fall. 15% – 20% of current values I would think. Sorry for being the bearer of bad news but the sudden sale of reprocessed homes hitting the market over the next year or two is not going to help. On top of that a banking sector that is reluctant to lend will also reinforce this.
I would be very interested in hearing suggestions and ideas as to how the banks and government could deal with the mortgage crisis. In the mean time I will do some more research on models used in other countries twenty years ago. This issue needs serious debate in Ireland and it should not just be left to the banks to handle the problem as they do not have the experience or resources to do so.
Thursday, May 24, 2012
Thursday, April 19, 2012
Water Water Everywhere
Well what a week it has been in the Emerald Isle there is loads of things happening. Where do I begin?
It looks as if we are going to have water charges introduced in a few years. Good idea. We should pay for our water so the government can stop subsidising the water system to the tune of over 1bn a year. I have no issue with this nor it seems do the majority of households. Having to pay for the meter and its installation well I can accept this as it looks as if the cost will be spread out over twenty years. Assuming households are billed by monthly for water usage then it will add about €7 to the bill. I do fear that it will take a lot longer that the current plan but time will tell. Remember the promise of post codes, well the authorities failed to implement that one so hopefully they will do better with water charging.
I see Bord Gais, oh the company that has failed to send me consistent bills for gas over the past ten years, has been assigned the task of providing the billing. Good luck, that will be interesting. Currently my gas meter is read once a year, last year I didn’t get a bill for six months, this year I have received one bill so far when I should be getting monthly bills. If they are as good at billing for gas as they are for water they won’t collect much money so let’s see how that pans out.
Next was the ERSI report on a property tax, and suggesting it was linked to household income, interesting but very difficult and expensive to implement. This however suggest that the tax will be aimed at the occupiers of the property as opposed to the household charge which is aimed at the home owner. Playing devil’s advocate here are we going to have an occupiers tax as well as a owners tax……………….interesting thought.
Heath care, wow a hot topic. This landed Mr. Obama in deep trouble in the states when he tried to implement changes. I don’t like the sound of what is being proposed for Ireland. The plan seems to be to introduce an Aussie style medicare system which gives access to the same level of healthcare to everybody. Nice concept but as somebody who works very hard and pays private health insurance I will be very annoyed if my access to healthcare under the new system is not as good as what I get at the moment because I do not mind paying for it.
And finally to the referendum, well it’s going to be close and threats like we will not get any more money if we need a second bail out won’t convince people to vote yes. In fact if we did vote no and we did need another bailout the simple solution for Ireland would be not to repay the bank debt. That would set the cat among the pigeons and probably solve our problems but our well educated non street wise politicians haven’t got the balls to stand up to Europe and play hard ball.
That’s my rant for the week, just about to board a flight for the Emerald Isle. I assume it’s raining at home and look forward to getting an update on all the news for my taxi driver.
It looks as if we are going to have water charges introduced in a few years. Good idea. We should pay for our water so the government can stop subsidising the water system to the tune of over 1bn a year. I have no issue with this nor it seems do the majority of households. Having to pay for the meter and its installation well I can accept this as it looks as if the cost will be spread out over twenty years. Assuming households are billed by monthly for water usage then it will add about €7 to the bill. I do fear that it will take a lot longer that the current plan but time will tell. Remember the promise of post codes, well the authorities failed to implement that one so hopefully they will do better with water charging.
I see Bord Gais, oh the company that has failed to send me consistent bills for gas over the past ten years, has been assigned the task of providing the billing. Good luck, that will be interesting. Currently my gas meter is read once a year, last year I didn’t get a bill for six months, this year I have received one bill so far when I should be getting monthly bills. If they are as good at billing for gas as they are for water they won’t collect much money so let’s see how that pans out.
Next was the ERSI report on a property tax, and suggesting it was linked to household income, interesting but very difficult and expensive to implement. This however suggest that the tax will be aimed at the occupiers of the property as opposed to the household charge which is aimed at the home owner. Playing devil’s advocate here are we going to have an occupiers tax as well as a owners tax……………….interesting thought.
Heath care, wow a hot topic. This landed Mr. Obama in deep trouble in the states when he tried to implement changes. I don’t like the sound of what is being proposed for Ireland. The plan seems to be to introduce an Aussie style medicare system which gives access to the same level of healthcare to everybody. Nice concept but as somebody who works very hard and pays private health insurance I will be very annoyed if my access to healthcare under the new system is not as good as what I get at the moment because I do not mind paying for it.
And finally to the referendum, well it’s going to be close and threats like we will not get any more money if we need a second bail out won’t convince people to vote yes. In fact if we did vote no and we did need another bailout the simple solution for Ireland would be not to repay the bank debt. That would set the cat among the pigeons and probably solve our problems but our well educated non street wise politicians haven’t got the balls to stand up to Europe and play hard ball.
That’s my rant for the week, just about to board a flight for the Emerald Isle. I assume it’s raining at home and look forward to getting an update on all the news for my taxi driver.
Saturday, March 31, 2012
Household Charge
Well what a disaster. Do our leaders never learn from history? It was tried in the eighties and it failed then and was always going to be very difficult to implement in these harsh economic times. In fact I think it all went wrong in the implementation. From my calculations less than 40% of households paid the charge. This means that the councils will have to chase up approx. 800,000 households to enforce this tax. What are the changes of that happening? Well it will cost a fortune and consume so much of civil servants time you would have to question the viability of collecting it. It should be scrapped at this stage and the government should have a re think in consultation with householders.
I am not against some form of household charge, property tax, council tax call it what you may. I am just totally against a lazy, badly thought out, inequitable charge. If I had been presented with a bill in the post I would be more inclined to pay it on time in the same way I pay other house hold bills but the fact that you had to go to a lot of trouble to pay this charge turned me against it. I am not in the habit of doing the government’s administration work for them. They don’t do mine.
I also find the level of detail that you have to submit on the registration form intrusive. In the UK for example people pay council tax. The head of the household is sent an annual bill with a name and address on it. That is the only information that the local council know about the householder. There are multiple payment options available all fully documented on the form. It is simple. The household will then get a booklet in the door every year outlining the amount of funds collected and full details on how it is all spent. It is simple and open and fair and waivers exist under certain conditions. If the government want to introduce some kind of a household charge here this is an example as to how to implement it. A solid infrastructure has to be put in place before a charge like this will be successful. This is something that is lacking and was never thought about or put in place.
Now this is a household charge. The purpose of which is to pay for local services that the occupants will avail of. Agree. Well if this is the case why is it the owner of the property that has to pay it and not the occupier? If Ted is living in Bondi Beach in Sydney and has rented his two up two down house out I would think the government have no change of collecting the charge for that property, not because Ted refuses to pay it but because he doesn’t know about it. But assuming Ted has a standard Lease in place with his tenants you can be sure there is a section in it relating to the payment of services that puts the onus onto the tenants to pay such charges as the household charge as it is not strictly speaking a property tax.
If you ask me for my address well the house has a mad up name and on the official planning map of the area there is a house with the same site number on the same road so I think it will be very difficult for the local council to present me with a bill. Now don’t get me wrong I fully intend to pay the charge in the next few months, penalties and all provided it is not scrapped. I am hoping that the fact that 1M homes have not paid it will force a rethink and next time they will get the implementaiton of such a tax right.
I am not against some form of household charge, property tax, council tax call it what you may. I am just totally against a lazy, badly thought out, inequitable charge. If I had been presented with a bill in the post I would be more inclined to pay it on time in the same way I pay other house hold bills but the fact that you had to go to a lot of trouble to pay this charge turned me against it. I am not in the habit of doing the government’s administration work for them. They don’t do mine.
I also find the level of detail that you have to submit on the registration form intrusive. In the UK for example people pay council tax. The head of the household is sent an annual bill with a name and address on it. That is the only information that the local council know about the householder. There are multiple payment options available all fully documented on the form. It is simple. The household will then get a booklet in the door every year outlining the amount of funds collected and full details on how it is all spent. It is simple and open and fair and waivers exist under certain conditions. If the government want to introduce some kind of a household charge here this is an example as to how to implement it. A solid infrastructure has to be put in place before a charge like this will be successful. This is something that is lacking and was never thought about or put in place.
Now this is a household charge. The purpose of which is to pay for local services that the occupants will avail of. Agree. Well if this is the case why is it the owner of the property that has to pay it and not the occupier? If Ted is living in Bondi Beach in Sydney and has rented his two up two down house out I would think the government have no change of collecting the charge for that property, not because Ted refuses to pay it but because he doesn’t know about it. But assuming Ted has a standard Lease in place with his tenants you can be sure there is a section in it relating to the payment of services that puts the onus onto the tenants to pay such charges as the household charge as it is not strictly speaking a property tax.
If you ask me for my address well the house has a mad up name and on the official planning map of the area there is a house with the same site number on the same road so I think it will be very difficult for the local council to present me with a bill. Now don’t get me wrong I fully intend to pay the charge in the next few months, penalties and all provided it is not scrapped. I am hoping that the fact that 1M homes have not paid it will force a rethink and next time they will get the implementaiton of such a tax right.
Wednesday, February 22, 2012
Beware of Chinese Leaders Bearing Gifts
Well I noticed a change in the language spoken in the media last weekend in relation to the Chinese Vice-President Xi Jinping’s visit to Ireland. It was nice of him to drop by after his visit to the UK. I notice some interesting phrases mentioned on the radio especially reported on RTE. The visit is seen as a fix to our economic woes and the thinking is that our trade with China will bring us out of recession. Well I hope it does. It was reported that Ireland was the only country that he visited in Europe that is part of the Euro. So what? It was then reported that Ireland is the only member of the Euro that is English speaking, so what again? It was also reported that China will become one of Ireland largest trading partners over time, I don’t think so. The UK is our largest trading partner and the Irish government should never forget this. These facts mean nothing. Are some commentators making it out that these small and truely not revelant facts gives us some competitive advantage over our other EU partners including the UK? Well I don’t think so. To me it is all spin but in fairness these little facts do help in the overall picture but do not replace competitiveness and quality of product.
Why is China now so important to Ireland? Well it is a very large country whose population are getting a taste for western type food including meat and dairy so it does open up large potential export markets. All good stuff but small little Ireland will never be able to cater for the demand that may come. China will use our ideas and try and replicate them in there own country. We need to cute and ensure that we get something from this and our methods and ideas are not stolen for somebody else’s benefit. Our very close friends across the Atlantic have a very different view on China so let’s watch this space and see how things develop in the future.
Why is China now so important to Ireland? Well it is a very large country whose population are getting a taste for western type food including meat and dairy so it does open up large potential export markets. All good stuff but small little Ireland will never be able to cater for the demand that may come. China will use our ideas and try and replicate them in there own country. We need to cute and ensure that we get something from this and our methods and ideas are not stolen for somebody else’s benefit. Our very close friends across the Atlantic have a very different view on China so let’s watch this space and see how things develop in the future.
Friday, December 30, 2011
Looking Forward with Hope
What a year 2011 was. I am not going to reflect and spell out all that happened but we sure had some highs and lows and in some ways nothing has changed.
On the economic front we are really in the shit now even more so than any other time in the last four years. We are still broke because we are carrying a mountain of debt now converted to sovereign debt. Did you ever. How did we let our politicians get away with this? It is truly scandalous and totally immoral. It just shows that we are not in control of our own destiny and are having to take instructions from our European partners. We need to grow some balls and start standing up for ourselves if we are to recover sooner rather than later. If we continue taking instruction from our partners including the Troika we will suffer economically for a very long time. There are other ways out of this crisis that have been well documented by some leading economics. Look at Iceland now, laughing all the way to the bank. We are being crippled by being part of the Euro, and by our mountain of debt. Both of these can be sorted if our politicians would just grow some balls and implement some tried and tested economic policies. Get out of the Euro and default on our bank debt. Yes it will be painful for a few months but then we start again and get back to prosperity relatively quickly.
The alternative is to continue along as we are, indefinitely, seeing our young people emigrate, public services crumble, no consumer spending and the insiders continuing to bleed the country’s finances dry in order to maintain over inflated re numeration packages. If we continue like this what in fact will happen is that the whole place will come to a complete and utter standstill as revenue to the government totally dries up. All the young people with skills and hope will have left the country, entrepreneurs will have found other markets to make their fortune in and because we will be forced by Europe to abolish our attractive corporation tax rate it will be harder to attract foreign investment from multinationals. Our IFSC will totally disappear when the financial transaction tax is introduced in all European countries except for the UK.
We really need to do something radical in 2012 to differentiate ourselves from the rest of Europe otherwise we are in for a long time of austerity which will totally damage our country beyond repair.
And as for the new European Treaty well if we sign up to that there will be no going back. This will be the nail in our coffin. The UK is Ireland’s biggest trading partner and Ireland is the UK’s biggest trading partner. The UK has its own currency, we are tied to the Euro, the UK will not sign up to the new European Treaty, we will if there is no referendum. Emmmm I have to ponder on this one because to me the consequences of these ‘differences’ between two very closely tied countries cannot be a positive thing from an economically or social point of view.
Have we not learnt anything from history? We still seem to continue to take the official line in order not to be seen to be disruptive or to upset anybody. Well what is better, upsetting our European partners or taking a brave step that will secure our future prosperity? I will leave you with that thought and I sincerely hope that in 2012 our leaders will make the right decisions.
On the economic front we are really in the shit now even more so than any other time in the last four years. We are still broke because we are carrying a mountain of debt now converted to sovereign debt. Did you ever. How did we let our politicians get away with this? It is truly scandalous and totally immoral. It just shows that we are not in control of our own destiny and are having to take instructions from our European partners. We need to grow some balls and start standing up for ourselves if we are to recover sooner rather than later. If we continue taking instruction from our partners including the Troika we will suffer economically for a very long time. There are other ways out of this crisis that have been well documented by some leading economics. Look at Iceland now, laughing all the way to the bank. We are being crippled by being part of the Euro, and by our mountain of debt. Both of these can be sorted if our politicians would just grow some balls and implement some tried and tested economic policies. Get out of the Euro and default on our bank debt. Yes it will be painful for a few months but then we start again and get back to prosperity relatively quickly.
The alternative is to continue along as we are, indefinitely, seeing our young people emigrate, public services crumble, no consumer spending and the insiders continuing to bleed the country’s finances dry in order to maintain over inflated re numeration packages. If we continue like this what in fact will happen is that the whole place will come to a complete and utter standstill as revenue to the government totally dries up. All the young people with skills and hope will have left the country, entrepreneurs will have found other markets to make their fortune in and because we will be forced by Europe to abolish our attractive corporation tax rate it will be harder to attract foreign investment from multinationals. Our IFSC will totally disappear when the financial transaction tax is introduced in all European countries except for the UK.
We really need to do something radical in 2012 to differentiate ourselves from the rest of Europe otherwise we are in for a long time of austerity which will totally damage our country beyond repair.
And as for the new European Treaty well if we sign up to that there will be no going back. This will be the nail in our coffin. The UK is Ireland’s biggest trading partner and Ireland is the UK’s biggest trading partner. The UK has its own currency, we are tied to the Euro, the UK will not sign up to the new European Treaty, we will if there is no referendum. Emmmm I have to ponder on this one because to me the consequences of these ‘differences’ between two very closely tied countries cannot be a positive thing from an economically or social point of view.
Have we not learnt anything from history? We still seem to continue to take the official line in order not to be seen to be disruptive or to upset anybody. Well what is better, upsetting our European partners or taking a brave step that will secure our future prosperity? I will leave you with that thought and I sincerely hope that in 2012 our leaders will make the right decisions.
Saturday, September 24, 2011
History Always Repeats Itself
I quietly laughed to myself when I read this article in the Irish times a few weeks ago.Irish Times. So what it tells me is that all the talk of lessons learnt from the latest financial crisis is only talk. What happened in Ireland in the last ten year will most likely happen again in my lifetime. The general consensus will be that it is different this time and yes it will be but the consequences will be the same. Note to self, next time sell everything before it goes belly up and hold cash for a comfortable retirement.
Thursday, September 1, 2011
An Irish Solution to an Irish Problem
Ah yes I stated in my previous article,the issue of debt forgiveness is a very complex one and it is not in the nature of the Irish culture or our government to implement a solution to this on a national scale. I said that I can see something being done on an individual basis and being kept very quiet, the cute whore scenario as I call it. Well true to form there is something being done on an individual basis as can been see by this artilce in the Irish Independent Independent Article. Enough said on the subject.
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