Are the banks really granting mortgages? To whom, what percentage of the property price, and under what conditions?
Yes, technically. Loans of up to 92%, valued under €300,000, are being granted mainly to first-time buyers from Bank of Ireland, ICS and AIB. Other lenders are giving up to 80% of the purchase price (see graph). But the qualifying conditions are becoming more stringent, and if the bank doesn't really want to grant you a loan, they'll find a reason. Anecdotal evidence suggests that, after initial approval, stringent creditworthiness checks are carried out. For example, if a would-be borrower is behind with credit card payments, the loan will be turned down. Job security is a huge factor and everyone is under scrutiny now, says Peter Bastable of Simply Mortgages.
"Those occupations on the danger list are widening day by day. It's no longer just construction workers, lawyers and architects affected by the downturn in property. Ability to make repayments will also be affected if the budget takes more out of disposable income, and if interest rates rise."
One of the biggest changes in the mortgage market is the killing off of switching for better rates, he adds. "A lot of lenders don't want short-term debts to be transferred, while a lot of mortgage-holders are either in negative equity or at borderline level."
Will Nama improve borrowers' chances of securing a loan?
It's doubtful, says Karl Deeter of Mortgagebrokers.ie. "Irrespective of Nama, you are not going to see a big uptake in property loans during a period of high unemployment. If you look at property crashes elsewhere, such as Finland during the 1990s, there is evidence of a suppression in demand for loans even after economic recovery. Also, we currently have the second-lowest interest rates in Europe, but those rates will inevitably rise. The majority of people are not cash buyers, and it has to be remembered that finance comes at a price."
Even with the Nama deal , the balance sheets of the banks are "perilously weak", says architect Emer O'Siochrú, who is also director of Smart Taxes. In assessing the current state of the housing market with regard to bank bailouts and Nama, she concludes that "The bankers are unprepared for the next great wave of personal debt that is swelling up and will hit them in 18-24 months time."
This indicates stringent conditions on lending for the foreseeable future, leaving Nama the big unknown.
Is anything selling at the moment?
There is a small amount of activity in Dublin among first-time buyers, but as one agent says, you couldn't exactly call it the proverbial green shoots. A price drop is the predominant factor in securing a sale. The biggest price cuts are in Dublin, where they've dropped an average of 35% since 2007 and this has resulted in more transactions than elsewhere, says Ronan Lyons, chief economist of Daft.ie.
"The number of properties for sale in Dublin has fallen by over 12% in the past year. In Munster, where there have been fewer price drops, the number of properties for sale is rising."
So are prices likely to fall further?
It seems likely, says Dr David Duffy of the ESRI. "Given that the key drivers in the housing market are economic conditions and employment – and the forecast is for further deterioration – prices are likely to fall further."
In the most recent house price index, Niall O'Grady of Permanent TSB comments on the "dramatic" rate of decline in prices, adding "there is no confidence in any recovery this side of 2010.".
Under the Data Protection Act it's not possible to find out what property is selling for. So how can an owner evaluate their property to put it on the market?
The government has announced plans to ammend the act and allow publication of sales figures at a future date. According to selling agent Felicity Fox, people are very educated and much more realistic about property prices than they once were. And they are very quick to spot a bargain.
"We tell the clients honestly what we feel a given property is worth and what we feel should be a quoting price. Some clients take that advice on board; some are under huge pressure and would prefer to quote lower while others prefer to leave some room in the asking price to negotiate. They are also by no means shy when it comes to feedback, whether they feel it is well-priced or very expensive. We have had quite a few properties recently with several bidders actively chasing and that is a reflection of the price quoted. Some properties have actually gone over the asking price while others have sold well below by 10% to 20%.
Homeowner unable to sell are renting out their homes, and then renting elsewhere themselves until prices improve. Is this a realistic option?
For many, it's a case of having no other choice, says one agent, particularly where clients are in negative equity, have outgrown their existing property and simply can't afford to take the open market value. But it can be risky. Some homeowners did this at the start of the downturn – selling their homes, renting, and putting off buying again until prices dropped, but they made a huge loss, explains Simon Ensor, director of Sherry FitzGerald.
"A lot of people used the proceeds of their house sale to buy what they thought were very safe Irish bank shares, lost all of their money, and now can't buy back in to the market. "
How long is it taking to sell a house under current conditions?
"How long is a piece of string?" asks one of the country's most experienced agents pessimistically. The market is so dead that the ESRI/Permanent tsb no longer even surveys shifts in first-time buyer homes and three-bed semi-detached properties because the sectors are so inactive that samples have become meaningless. Properties coming fresh to the market sell quicker than those that have been lingering a year or more, says Simon Ensor.
"That's because new arrivals are priced realistically, as opposed to those that came on at a higher price, are consistently dropping that price, and basically trying to play catch up."
Urban and rural selling times differ considerably: one agent says it takes anything from three to six months to sell a house in a city or town, while rural homes can take a year or more. Price is the main factor. Buyers are quick to bid when they see value and are slow if they feel an asking price is too high, says Felicity Fox.
"It's often a case of 'will there be a price reduction?' The moral of the story: buyers should never be afraid of bidding as you never know what a seller might accept."
Is it now possible to bargain the price on a brand new home?
Yes. The transaction process has changed radically from the days when new home prices continually escalated. It's now very much in the buyers' favour.
"Generally, negotiation on price is commonplace now," says Ronan O'Driscoll, director of New Homes at Savills, "except where developers have reduced prices to absolute bare minimum and are at a 'take it or leave it' stage."
Are rent-to-buy schemes a way out for first-time buyers unable to raise a deposit?
Variations of this scheme have come on to the market since 2008 which involve developers offering new apartments or houses initially on a two- or three- year rental with an option to buy after or during that period at an agreed price and with the rent paid being treated as part-payment of the price at sale closure. Hooke & MacDonald, agents for several such schemes, says it has arranged 150 transactions in recent months in three such developments in Dublin. If prices drop from current levels, some schemes will give a 10% reduction on today's prices at the end of the three-year rental period.
At face value, it is a good deal for tenants, but not so good for developers who have no guarantee of a sale at the end of the tenancy period. Other considerations to bear in mind are whether the rent is market-priced or priced for the rent-to-buy contract. If you were to rent a similar property in the same area, would you get it for the same rent or less?
What should mortgage-holders do when they are unable to meet repayments?
The ESRI predicts that the number of households in negative equity could rise to 350,000 by the end of 2010. Of those, around 10% could default on their mortgage repayments, according to Dr David Duffy, who bases his finding on international patterns.
"For any mortgage-holder unable to make repayments, the obvious advice is to talk to their lender as soon as any problem arises. There are possible solutions where an agreement may be made to lower repayments, or allow the borrower to take a holiday from their mortgage while continuing to live in the property. There is no real benefit to banks in repossessing a property – they're not interested in becoming landlords."
There are other radical solutions that may have to be adopted as the situation deteriorates regarding mortgage default. Emer O'Siochrú says 'equity partnership', as proposed by the Urban Forum, is one mechanism that allows families in serious mortgage arrears to stay in their home while paying rent until they can regain ownership.