Irish Property Owners Association – a ‘taxsault’ on property owners?

This is a statement sent out from the IPOA, it makes a lot of very valid points and also raises the spectre of cost-push inflation in rental costs. Nobody stands to gain from the current increase in rental costs, not the tenant, not the landlord who is using the increase to set off higher costs from taxes and other state imposed costs and certainly not the people who manage or live in rented property. The only beneficiary of this is the exchequer.

It has been reported that rental rates in some parts of the country are increasing, but that is hardly surprising given the enormous direct and indirect taxation levied on landlords.

The landlords’ national representative body, the Irish Property Owners Association (IPOA), invented a new verb to describe the situation – to “taxsault”.  And they said that is precisely what is happening now.  “Private landlords cannot be expected to subsidise the rising costs of letting,” said the IPOA’s Margaret McCormick. “They have to cover their costs including heavy mortgages, try to earn a sustainable income and pay their taxes, …

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The Dublin property market in a word… Farcinating

I looked up ‘farcinating’ because it’s a mash of ‘farcical’ and ‘fascinating’. Thankfully the internet always delivers.

How prices in Dublin can go up 8% YoY when the market is half cash beggars belief. It’s a false signal, if and when we are wrong about this we’ll apologise, but let’s take a look at some key issues that support this view.

1. Put a blank county & address search into the Property Price Registry for 2013 and you’ll find that there were 13,320 transactions this year. At the same time the IBF/PWC data indicate that there was 5,297 mortgages drawn down this year. That would indicate a market that is transacting in cash to the tune of 60% or more. (clear issue being late registration could mean some 2012 transactions crept into 2013 but probably not enough to fundamentally change this point).

2. Something that mainstream commentary has missed out on is that the ‘low supply’ in Dublin is …

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Newstalk Lunchtime: Jonathan Healy & Karl Deeter on CSO house price increases

We spoke to Jonathan Healy today and made the point that (didn’t seem to crop up elsewhere yet) that banks are creating a false scarcity in properties for sale by sitting on non performing loans and not moving in on them. We demonstrated only yesterday that the ‘flim flam’ of ‘we may or may not repossess you’ is a real thing.

The investors don’t fear them, our chat with a strategic defaulter only solidified that belief. At the same time the absence of reasonable lending amounts coupled with this false scarcity means prices will rise, and the good news for banks is that it means provisioning less for loss making loans!

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Banking flim-flam, ‘We’ll huff and puff and may or may not blow your house down!’

The banks are constantly issuing threatening letters, we have posted many of them here. We have seen it all at this stage, couples in their 60’s with lots of equity being told to sell up when they clearly didn’t have to, others who are able to get massive write downs and every other combination of fact you can imagine.

Today we will look at the huffing and puffing portion of banks chasing a person for debts. The page to the left is a chronological example of letters a borrower will get from the bank. In this instance the person is defaulting because they don’t want to go on capital and interest and are engaging in what amounts to a game of ‘chicken’ with the banks.

The first letter is standard, it came after the client missed about 4 months of payments, to this point there were two calls then this letter.

The letter starts off fairly heavy, in terms of implications, they …

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What banking insiders think of what banks are going to do

We got a comment on our site from an ex-banker who heard a radio segment where we were talking about banks and repossessions. We got in touch and asked if we could post his comment as a stand alone entry, he agreed, his thoughts are very interesting and in part might help explain why we have repossession orders without repossessions, eye opening reading…

I listened to your piece on Newstalk this morning (19/08/2013) regarding ‘strategic defaulters’ and I just wanted to congratulate you for highlighting the reality of this issue.

I worked for the former *closed bank* for over 17 years and for a two year period I was it’s Mortgage (Residential) Administration Manager. Although I’m out of banking now I still help former clients with negotiations with various banks.

My experience over the past couple of years, and especially this year, in ‘dealing’ with the banks, foreign and domestic, has exposed some incredibly unethical and unfair practices and on the whole I fear …

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Spin me right round’ – some thoughts on IBF data

In statistics there are two key components, the first is the actual ‘data’ the second is the ‘inference’ or what the data actually means. If you saw that one summer was hotter than the last by collecting daily average temperatures that would have statistical significance, if on the other other hand you saw that July was 56% hotter than January then you’d be stating the obvious and your ‘inference’ would be laughable.

That we can see this when it comes to meteorology is obvious, and almost nobody would take such news as having any significance, but when it happens in finance it can go unchecked although Eamon Quinn at the Wall Street Journal caught the IBF out on their release which is about mortgage lending being ‘56% up this quarter’.

Here’s the actual quote they lead with ‘The latest figures from the IBF/PwC Mortgage Market Profile, published today, show that the number of new mortgages issued in Q2 2013 has increased by 56.1% on the previous quarter.’ And it …

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Defining ‘Strategic Default’

One of the things the whole strategic default issue lacks is any set definition. There are words that get used with motives embedded in them, such abuse of language only exists when there is not a set meaning to the word. To call a default strategic is two very different things depending on who is talking about it.

To a bankers mind it might mean any loan unpaid where the person has a penny to spare, to a borrower it might only be where a person withholds all money from the lender and goes and lives the life of Reilly.

I’m asking for your help on this one, please use comments to add your thoughts and I’ll re-edit the post appropriately.

To start with I’ll attempt to define a strategic default on multi-investment properties, there are other types so feel free to give the example or way of defining it as you see it.

1. Multi-investment property investors: Where the person is collecting rent and paying interest only, then the bank look for capital and interest and the person goes …

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The non-recovery recovery which is or isn’t happening

Robert Kitchen of NUIM did a great post on people talking up the market. He stated that “What the data shows is that housing unit sales are relatively consistent over the past three and a half years, except for a brief surge at the end of 2012“.

As a person who trades in this area I don’t share the view that it’s totally consistent, there are peaks and troughs as seen in the graph from that blog.

He also states that “The first six months of 2013 are very similar in pattern to 2010.  In fact, in the first six months of 2013 only 273 more units have been sold than the first six months of 2010.  The data does not suggest then that there has been a bounce back in market activity to any significant degree”.

I suppose that comes down to what you call significant, if you are looking for any trend activity then take a look at …

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More on pseudo-scientific-legalese from Kilkenny

Something that was a strong point of (supposed) fact in the meeting at Kilkenny was that mortgage loans now are not called ‘mortgage loans’ instead they are ‘lines of credit’.

It was also implied that the change of language was very important and meant something.

As a person working in this industry daily that caught me by surprise, thankfully, and unlike other attendees we have the resources to look into this.

See the pdf scan for yourself. The person who said this was telling the truth, at least in part, the ‘credit facility’ thing is mentioned, but elsewhere it’s all about ‘mortgage’ and ‘mortgage loan’, the entire concept is misguided.

If you click on the loan document (click the picture) you’ll see on the first page that it does mention ‘credit facility’ – albeit the scan I did was awful because I had to double black out personal …

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Talking with a strategic defaulter…

That strategic defaulters do or don’t is just a sideshow about quantifying their numbers, for several years we have been dealing with them on the advisory side of our company. Banks have large legal departments and teams chasing borrowers, and in turn the borrowers will from time to time hire their own professionals as a counterweight to the process, what you are about to read isn’t intended as justification, ethical reasoning or anything else, it’s just an insight into the thoughts of a strategic defaulter, why they did it and what has happened so far.

The person in question is a white collar professional and the director of a relatively well known company, she agreed to speak to us on the basis that we kept her identity private. She has a family home and six investment properties.

Karl: Did you make a concious decision to default on your loans? If so why?

Yes, because the bank were insisting I go on interest and capital repayments on the investment properties and the figures just wouldn’t add up so I chose to …

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