How many houses are in negative equity now?

B

Bronte

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Moved from this thread: Is there a house price index for Dublin?

Brendan Burgess said:
It suggests that Dublin house prices are back to about 2003 levels, which feels about right.
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From another source I've heard they are at 2003 levels in Dublin.

What would be interesting to know, is when the vast bulk of properties that are in negative equity will be out of it. I presume it was in 2005/2006 or 2007 that most of these were bought. So in percentage terms how far from the current 2014 reflecting 2003 prices does it have to go. Not saying or thinking or discussing that it will of course.
 
Hi Bronte

An interesting question.

If you bought a house in Dublin at the peak in Q3 2006, you would have paid €549k for it.
Let's say you had stamp duty + €50k deposit, so you borrowed €500k.
If you borrowed €500k on a cheap tracker over 30 years, you would owe around €395k today.
Your home is worth around €390k (€354k at Dec 2013 +10%)
So your negative equity has been eliminated through a combination of house price rises and repayment of capital

It's worse in the following situations

  • If you had an interest only loan, so have not been repaying capital
  • You have been in arrears so have not been making the scheduled repayments
  • You didn't have a cheap tracker
  • You bought outside Dublin(?)
  • You bought in parts of Dublin which have seen below average increases
  • You bought an apartment in Dublin
  • You took out a 100% mortgage
For example, if you bought a property in a ghost estate in Leitrim, prices may never recover, so your only way out of negative equity is to repay the loan.

It's better in the following situations

  • You bought at any time other than Q3 2006 - For example, in the quarter before and the quarter after the peak, house prices were 9% less, although this does not feel right to me.
  • You bought in parts of Dublin which have seen above average increases
  • You overpaid your mortgage because you had such a cheap tracker
  • You had more than a 10% deposit
  • You had a term shorter than 30 years, so you have paid off more capital
 
One of the big factors which people underestimate is the amount of capital they pay off if they have a cheap tracker.

If you borrowed €500k at a SVR of 4.5% over 30 years, 8 years ago, you owe €425k today.

If you borrowed €500k 8 years ago on cheap tracker of 2%, you owe €395k today.

SVRs were as low as 3% for much of the last 8 years. Even the cheapest trackers were over 2% of some of the last 8 years, so the above is a fair average.

Of course, if you had a cheap tracker, not only were paying off more capital, but your repayments were very low as well.
 
I do not have stats on numbers of houses .....but the general trend in a popular semi commuter town, where prices historically were regarded as expensive.

2000/2001. 150000

2003. 170000

2005. 230000

2007. 310000

2010. 200000 (highest lucky!)

2012. 125000

2013. 135000

2014. 140000

2014 now asking 160000 /170000 but no sales yet at those prices. If these prices are attained it would reflect 2003 approx, but would reflect a 30% increase since lowest ebb in 2012.

These prices pertain to one area (established private estate).

Those who unfortunately bought in 2006/2007 at 280000/300000 have a major equity gap still.

This is just an unscientific look at a small area outside of Dublin.
 
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