Hello and welcome to Issue 6 of the www.Torcana.com Newsletter.
It’s getting harder to keep track of everything that’s happening in the property world these days, as every country seems to be tackling problems in new ways.
The news cycle in the UK at the moment is preoccupied with the MP Expenses scandal, although a fairly small report in the BBC today that repossessions have gone up 50% year on year was of much more interest to me.
This is a very important trend, as repossessions force average property prices down, and that’s the only way long term demand will be stimulated.
Birmingham – From £83,412
As you’ll see in our website, prices have been reduced by up to 40% from a 2009 RICS valuation in a new project we’re promoting in Birmingham city centre. We will be making a lot of noise about in the coming weeks so please get in touch asap if you’d like to receive the availability list early.
Can Germans Hold their Drink?
Germany, by far the biggest and most fiscally sensible EU member, has suffered its largest contraction since reunification, with exports down 19% and a year on year GDP decline of 6.7%. Doesn’t really seem fair does it? If the last 15 years can be imagined as a huge EU party, then Germany was drinking club sodas for the duration but still ended up with the worst hangover afterwards. Those statistics above were mostly responsible for a half cent fall in the euro against the dollar, good news for those who have been diversifying into dollar assets.
What can Ireland Learn from Other Property Markets?
A few regular readers commented that the “Green Shoots – Is property making a comeback?” title of last week’s newsletter was far too optimistic. That certainly would be a ludicrous title to a newsletter on the Irish property market, but I was really referring to certain parts of the USA and, to a lesser extent, the UK, both of whom have taken much more drastic action than we have to correct the huge imbalances in their property markets.
Speaking of which, I was quite dismayed to read the main headline in the Irish Times this morning confirming what many of us have feared – that the head of the National Treasury Management Agency (NTMA), who is supposed to be running the states “bad bank” has nowhere near the staff necessary to manage all these loans, and worse still, he still doesn’t know how it will be set up and operated. Apparently a committee is being setup to have a discussion about it next week. It’s enough to make you weep.
Is it better to protect than repair?
Why is Ireland so preoccupied with protecting the level of house prices when most of the people trying to sell are buy to let investors and property developers? Why are major banks cutting mortgage lending by 80% while average house prices have only fallen 20-30%?
The property bubble in Orlando, Florida started in late 2006, and the banks were absolutely ruthless with people who got caught out – mostly investors and developers, but yes, ordinary people too. The numbers of foreclosures increased dramatically, and the asking prices for them just kept falling and falling, first by 20%, then 40%, and eventually, in early 2009, by 70-75% from peak levels. Initially, the supply rocketed and demand fell off a cliff.
Without a doubt, a weaker banking and political system or a stronger lobbying group would have put a stop to it. Didn’t happen like that though. You keep dropping prices, you get rid of the rot in the system, and eventually, guess what? People will start buying again.
Let’s compare Orlando housing activity in April 2009 with April 2008
- House prices have fallen 37%
- 48% more homes were sold
- 50% of all homes sold were distressed priced or bank owned
- Properties are selling 15% quicker
- There is 20% less inventory than a year ago
Source: Orlando Realtors Association
In an ideal world of course, we would politely request points 2, 4 and 5 above. But I can’t see that happening somehow.
Myself and my colleagues are more than happy to discuss the issues raised in these notes, and as always, there’s a great selection of properties for you to look through below.
Kind Regards
Colin Murphy
Director
www.torcana.com
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