NAMA Chairman Frank Daly says property crash is over


More like XX

Time to start building again. :wink:

Wonder will my comment on the page be approved???

Ireland’s (and the world’s) largest property holder talks up the market.

And Mr Daly knows how to talk…

From the article

I’m sorry to burst that particular bubble, but for the vast majority of house owners, who borrow a significant percentage of the purchase price using traditional Irish mortgages they ARE, always have been and will continue to get into negative equity on the day they buy.

Why? Because regardless of what property prices are doing, the buyers are liable for the full amount of the principle plus interest on their loan from day one, an amount that is at minimum 150% of the sum they borrowed (depending on rates and loan duration), which, unless the country is experiencing the “mother of all bubbles” will be significantly more than the price the property is being purchased for (or “worth”) … therefore, they are in negative equity … as have almost every generation of Irish house buyers and as they will continue to be.

The vast majority of Irish residential property purchasers who borrow significant percentages of the transaction price, even in a market experiencing normal price inflation are in Negative Equity on the day they purchase and for many of their early years as mortgage payers.

IMHO, nice sound bite Mr. Daly, but woefully factually inaccurate. :unamused:

Blue Horseshoe

Guess not.

Looks like the “market will stay inflated until you pull together the money to pay” plan has worked.
We’ll be paying this bill for decades to come in lost competitiveness.

Wouldn’t mind but it was fairly short, articulate and composed. Just pointing out the flaws in Daly’s spiel.

That’s a very strange definition of “negative equity”.

They’re only liable for future interest if they choose to retain the property and not refinance or repay early.

You may as well say that renters are “liable” for all future rent until they die, or people with a chocolate habit are “liable” for future cocoa inflation.

You know that most people can pay back their loans or a portion thereof without major penalty? My [then] fixed mortgage even allowed me to pay off 10% a year without penalty

bizarre comment - it’s not even related to the dictionary defintion … ive+equity

Frank Daly is wrong to say that the property slump has now ended.

It ended in spring 2013.

It ended in parts of Dublin in early 2012.
It has not ended in parts of rural Ireland yet

The definition of Negative Equity used within economics (as opposed to the common view) is when an borrower has a liability of X taken out to purchase an asset Y, where the value of Y is less than X. When the loan repayment value is higher than the value of the asset, then the borrower is considered to be in negative equity. Only when the amount due on the debt is less than the value of the asset is the position no longer one of NE.

The common view is that NE is only caused only by the movement in the asset price downward. That is inaccurate.

WRT to mortgage arrangements; the most common arrangement in Ireland is that the borrower has a liability to pay the full amount (principle and all future interest … recall that the repayments are loaded to pay more of the interest towards the start of the term) from day one. Variations will exist, as will the willingness of the lender to negotiate, but that does not change the starting day one position … the obligation to pay the full future amount exists.

Blue Horseshoe

And with a bit of luck may never end

:confused: :confused: :confused:

For standard variable rate mortgages in Ireland in general that’s not the case. You can sell the house at any time and repay any principle owed. You are not liable for any future interest that could have been paid had the loan gone to full term.

What are you talking about?? Are you saying that if one sells their house today they have to pay back the principal plus all future interest payments they would have had to pay if they kept the mortgage for the full term? Because that is obviously “woefully factually innacurate” :unamused:

Nonsense. The borrower is liable for the capital outstanding plus interest accrued not potential interest to the end of the term. If one day after taking out a mortgage you won the lotto and could pay it off you would be liable for the capital plus approx 0.01% interest

if you’re going to get into “Economic” definitions shouldn’t you include the utility enjoyed by the purchaser - in the case of an investor that would be rent to be received (until death of the renter presumably)

Woefully factually inaccurate. :unamused:

Comment appears at last under my fake name - other comments in same vein.