Anyone experience negative equity on their house?

F

Flippo

Guest
Bought a new house in west Dublin in a new housing estate in Dublin last year. The final house in the estate was sold two months ago.
The price of the surrounding houses has gone down by €30 grand. Has this happened to anyone else in Dublin???
Don't know why this has happened...estate is very nice and the neighbours feel very happy with the area also.

I think the houses were overvalued when purchased....I haven;t heard much about this kind of thing happening before.....or are people too afraid of mentioning in case word spreads???
 
A few questions...

(1) Is this an investment property or your principal private residence?

(2) Does any transient fluctuation in house prices have any real and immediate impact on you (e.g. if you are staying put for the time being and don't want to or have to liquidate the property then it is arguably irrelevant)?

(3) Are you sure that you mean negative equity? This would normally only happen if prices dropped by c. 8% given that most properties are bought with a maximum of 92% mortgage and require a c. 8% deposit up front which means that the buyer immediately secures 8% equity in the property.

> I think the houses were overvalued when purchased.

Why did you buy then?
 
Overvalued...So Nothing Unusual Then...?

-"I think the houses were overvalued when purchased".

Yeah, yours and just about everyone elses' house which has been purchased recently!!!
 
What has the price of property in London/UK got to do with the price of property in Ireland? It's a completely different market with different influencing factors (e.g. interest rates, demographics, supply/demand, tax issues etc.).
 
house

I would argue there is a fair degree of similarity in both markets. Both have seen an explosion in buy to let recently which now is starting to slide. Both have seen rental values drop. Britain have had the start of the upswing in interest rates, I do agree you cannot compare the degree of house building in both countries as we are producing 6 times as many houses per head of population.
 
doomed

The difference between Ireland the Uk is that Uk can put up interest rates to curbe house prices going too far out of the first time buyers. Ireland does not have that facility. Ireland has to wait for CBE to do something about interest rates and they will not take little Ireland into consideratio!!
 
The original point

Just to get back to the original posting:

The price of the surrounding houses has gone down by €30 grand. Has this happened to anyone else in Dublin???
Click to expand...

Would this be due to the effect of stamp duty ? It is possible that no stamp duty was payable on the new houses, while second hand houses would be priced down to reflect the effect of this tax. This often happens, and will wash out over a period of a number of years.

Personally, I don't see why we offer such tax adavantages on new builds as opposed to second hand houses. It just creates house price blips, that benefits no-one other than the developer.

As for whether or not it was overvalued at the point of purchase, surely this would have been picked up by the mortgage company's valuer ? Did the purchase price approximate to the valuation ?
 
re UK Market

It seems many commentators in the UK are saying that property prices there have peaked. The peak they say was brought on by the Bank of England raising interest rates and quashing the excess demand in the market. There are more commentators there now brave enough to predict an actual crash something which they shyed away from doing for the last few years.

The same is bound to happen here, there is no way that our property market can continue towards the sky blissfully denying the laws of gravity. When the prices start falling in the UK it will trigger a crisis of confidence in our own property market which may happen even without the ECB raising interest rates that much.

Our property market was on a sustainable path up to around 2001 when the high tech recession happened. Up to this time the property market was dominated by first time buyers and returning immigrants coming to work in Ireland. There was alot of speculation in the market also with people buying to let but they didnt dominate the market. However since 2001 speculation and rising propert prices themselves have been fueling the market. People were putting there money into housing because they had fled from the equity market. Also the government was aiding this process because they wanted to maintain the construction boom in order to keep down unemployment figures. But the construction boom for the last few years was not based on sound fundamentals and demographics but on speculation. The construction boom was actually fueling the construction boom with some of the biggest speculators in the market involved in the construction industry.
 
uk market

It is widely predicted that the UK Bank will be rising interests rates again next week! Also the high cost of fuel will be also adding to the inflation price. Ireland will suffer the most from this because the majority of properties have heating based on oil.
 
housing market

Prices are overvalued by auctioneers therefore buyers should be very careful now not to pay very much over the odd for property because there is no way that they are going to get it back now.

I have been monitoring house prices in Ireland and found that after 1 to 2 years when a property has not sold they it is taken down to its proper value and I have seen that to be from 20 - 50k that is a lot of money. So bear in mind always that property is overvalue by that amount.
 
negative equity?

I'm not at all convinced that TetALee's illustrations of the UK situation apply to the Irish property market.

The pattern of purchasing here is almost the inverse to what I understand happens in Ireland (Dublin, anyway!) insofar as there is always a sharp fall-off of property sales during the summer months here. Add the fact we're about to get a 5th interest-rate hike in a year next Thursday...........and finally add that consumer borrowing has gone over the trillion pound mark and you get a small (very small!) pause. The "negative-equity" crisis here in the early 90's had minimal results on the long-term value of property. All it meant was that for between 5 and 10 years IF a home-owner whose property was worth a bit less than s(he) originally paid for it sold THEN there would be a net loss of a few thousand. The solution was to stay put until property prices began to rise again.

I suggest the Irish (or at least, the Dublin!) situation is different to conditions in the UK. The opening-up of the EU has had more effect in terms of immigration to Ireland with what looks like most settlement in Dublin. Though there has been a massive house-building programme around Dublin's environs over the past three years this has been very quickly absorbed as it was needed and neither that nor the ubiquitous "second-property-rented-out-by-amateur-landlord" phenomenon appear to have depressed property values.

As someone who has just (regretfully acknowledging I can't manage to maintene from UK for next 3 years till I retire/return Dublin) sold the family home in Dublin I am aware that in 5 - 10 years time it may have appreciated a great deal in value. Even if it does not the purchaser wants it as it is a good sound house with a large garden 2 miles from city-centre with good public transport shops etc. Amenity and preference are not affected by the market and negative equity is a concept which I suspect is being reified and given importance beyond its status. Enjoy your home!
 
joan

I work with a person who owns a home in London and Edinburgh he was letting out the property in Edinburgh but it has been empty for the last six months because he could not get tenants for it. It is now costing him money and wants to get rid of it. He is fortunate because he does not have a mortgage if he had then he would be in real trouble. That is how the buy to let market is going.
 
Irish market

I'm a little confused. Are we now discussing the English, Irish, or Scottish property markets ? All are very distinct and different.
 
Irish market

Tom, I agree. The topic should stay focused on the Irish market.
Rgds
RED
 
Re

Thanks everyone for the responses.......I don't think stamp duty would have an effect of over 30 grand reduction in the house price given that to by the same house for the original price (i.e. €260,000) second hand, the stamp duty would cost circa €8000 more....thus not nearly as much as the €30,000 difference.
 
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