That's rubbish, sure there's no property crash, ask the lads above who said so. And it certainly hasn't caused a recession!
adam
[QUOTE=Reality Bites;1013603]DEVELOPERS START TO PANIC
Glenkerrin is stepping in to help out those no longer able to secure loans of up to 95%.
Potential buyers of its properties Stillorgan, Ballinteer and Lucan will have to pay 5% of the asking price. They can then avail of an interest-free loan of 15% of the price to be repaid in seven years.[/QUOTE]
The slight catch to the Glenkerrin "interest free loan" is that you pay them back 15% of the value of the property in seven years. i.e. if the property increases in value by say €100000 in that seven years you pay back the original 15% plus 15% of the increase in value. No so "interest free" now is it?
This was confirmed by Ray Grehan the boss of Glenkerrin this morning on the breakfast show on newstalk.
Last edited by sparkey; 04/09/2008 at 10:56 AM.
The truth fears no questions...
It's only when the tide goes out that you learn who's been swimming naked
That's rubbish, sure there's no property crash, ask the lads above who said so. And it certainly hasn't caused a recession!
adam
Let me get this straight. I want to buy a €300k flat. I only have €15k saved. The bank will only give me 80%, €240. So I get an interest free loan of €45k from the developer.
Five years time, when I haven't been able to put away €45k in savings because paying off my mortgage (especially the first five years) is such a strain on my finances, I don't have the loan money to pay back. Developer takes my thumbs. Is that how it works?
It seems to only benefit a buy-to-let investor.
Ceci n'est pas une signature
Surely its the opposite?
Its a somewhat pragmatic decision to finally accept that there was no demand at the previously advertised prices and they are trying to stimulate the market with more realistic prices.
I'd also imagine their bankers are strongly in favour of getting some cashflow going. Read into that what you will!
PS I admire them for trying to capture a bit of any potential upside, its bit cheeky, but neither here nor there in the grand scale of things.
Last edited by OneRedArmy; 04/09/2008 at 1:53 PM.
You need to be able to afford both the mortgage and the loan from the developer. Its no silver bullet solution. It simply replaces the credit union loan or other personal loan that people previously tended to get to cover the deposit which banks have no interest in granting.
Also, as part of your mortgage assessment the bank will want to know how you are funding the other 20% of the purchase price (over the 80% they will lend). If they get a sniff you're borrowing it, whether it be from a developer or elsewhere, they'll likely reduce your borrowing according.
Basically what the developer is doing is selling an 85% share of the property now and he is holding an equity stake of 15%. Which you agree to buy off in seven years time at its future market value. i.e. Win-Win for the developer.
The truth fears no questions...
It's only when the tide goes out that you learn who's been swimming naked
I wouldn't say its win-win, particularly given the sunk cost the developer has invested in purchasing the land and building the properties, both at top rates.
This is all about providing cashflow to service the loans as banks are getting antsy. Also, the banks are also likely to have taken equity stakes in a number of developers as part of re-structuring debt.
Totally agree with your second sentence. But if a developer realises 85% of his sale price now he will have covered his development and land costs with possiblly a bit to spare. Then he hopes to recoup his profits in seven years time in quite possibly better market conditions and with more added value.
The truth fears no questions...
It's only when the tide goes out that you learn who's been swimming naked
I believe it is fairly common for Developers to keep the last units & rent them. I know in my complex they kept about 10% of the units & are still renting. I suppose having 15% of different apartments is not that much different than keeping the last 15% in their own name.
I suppose the main difference is the interest free bit.
IF prices increase the owner of the 85% could (industry jargon warning!) "release equity" to pay the 15% if not able to save it.
That's different though - they do that because they can keep control of the management of the estate/ complex/ block until all units are sold. This way they can cream it on the maintenance fee's rather than handing it over to a Management Company that is responsible to the residents. It's just another money making racket.
If you attack me with stupidity, I'll be forced to defend myself with sarcasm.
As Macy said above. Also it is a way of deferring their tax liability by not selling all of a development in the one tax year, but still servicing the loan with the rent money. If the property is still kept in the development name then it can still be sold on as a new property even though it may hve been rented out for a year or two.
Last edited by dahamsta; 04/09/2008 at 4:08 PM.
The truth fears no questions...
It's only when the tide goes out that you learn who's been swimming naked
Tax liability makes some sense. My complex was finished 6 years ago & Developers still have up to 10% of the units rented. There was downturn in 2003 which is why I thought they kept the units in their name. If they wanted to sell since then they would have had no problem. The Management Company is controlled 100% by residents & Developer has no bigger input than anyone else.
The IF was a big one
Depends on how far the sale price has fallen as to whether there is any surplus. Based on what I'm seeing, I doubt it.
Also, I'd say from what we know now, the chances of property values being materially higher in 7 years time is less than 50%. It took the UK the guys of a decade to escape from negative equity.
Property Crash programme on TV3 last night with Karen Coleman, interestly enough Ray Grehan felt it was nothing to do with Developer Greed, more the lack of Zoned Land
Lack of land supply for variety of reasons must have pushed land prices up. This of course could be lack of zoned land as well as people sitting on zoned land. I don't know the reason but there must be hundreds of acres of land inside the M50 in Dublin yet builders were spreading the suburbs into neighbouring counties.
Interesting (well to me anyway) article in yesterday's Independent: http://www.independent.co.uk/news/uk...n-1012202.html
follows the domino effect of a woman losing her job in a window sealant company, all the way to the top
Presumably there was an initial lack of supply early on (ie 5-10 years ago), which accounted for early price rises, but with the huge overcapacity at the minute and resulting fall in prices that long ago ceased to be a valid reason and pyramid-selling tactics took over.
You Just got to Love Estate Agents , browsing on one of their websites I laughed when i saw what they are now calling the Property Crash - Its no longer a Price Correction, Its an Advanced Price Correction !!
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