There’s quite a lot I can’t figure out about Ireland these days. Perhaps I’m spending too much time in Spain.

For example, why is the government 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%?

It’s a big problem in Ireland that people don’t seem to see foreclosures and fire sales as a necessary evil to stimulate demand and reduce supply. There is simply no way to recover quickly without it.

It reminds of of how the French always seem to sympathise with business owners rather than consumers.

Let me give you an example of how a more ruthless banking system can help stimulate a devastated property market. 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.

All comments welcome.

Kind Regards

Colin Murphy

Director

www.torcana.com

Tags: distressed property, Florida Foreclosure services, mortgage lending, Orlando Sentinel, Overvalued Irish land
Posted in General Opinion, USA Property |

I watched a great documentary last night about the famous Frost / Nixon interviews of the late 1970s, and after it finished, I couldn’t help but indulge myself by drawing a few interesting parallels between the character arc of David Frost and that of the average property investor over the last couple of years.

David Frost used to be a somewhat confident, adventurous and carefree man who achieved easy fame through a variety of lightweight and rather wacky tv shows. He then came up with a brainwave involving an exclusive interview with Richard Nixon. Against all the odds he pulled it off and syndicated a series of groundbreaking interviews with the highly controversial ex President worldwide.

During the first three programmes Frost was alternately cautious, fearful and overawed by his subject; but by the fourth programme, a much more focused and aggressive interviewer had emerged. He went onto receive immense critical acclaim for the incredible responses and emotions he drew from the famously shrewd and taciturn Nixon.

Confident, adventurous and carefree are also adjectives that could easily describe the mindsets of many property investors purchasing during the high flying years of 2002-2007. Cautious, fearful and overawed would also be an accurate depiction of how most felt towards the end of 2008.

It’s all changing now though. Today’s buyers are, if you’ll permit me to finish the narrative, much more focused and aggressive than those who preceded them. The Irish and the British are still buying properties, but they are much less inclined to purchase for a quick return and are instead carefully analysing distressed properties in US, Spain and Florida. They are also negotiating hard with sellers to achieve a high rental yield and are very focused on timely delivery.

There’s no doubt that it’s still very stormy out there, but as indicated in Issue 2 and in the Orlando Sentinel today, there are many clues out there that suggest we could be in the process of turning a very important corner.

Kind Regards

Colin Murphy

Director

www.torcana.com

Tags: buyer attitudes, distressed property, Frost Nixon Interviews, market activity, Orlando Sentinel, Torcana
Posted in General Opinion |