The trapped and the priced-out
NO OTHER generation grew up with such high hopes. Not alone were things going to get better, but the received wisdom was it was likely to go on forever. For the most part, the negative equity generation weren’t property speculators or wealthy landowners. They did what others did before them: they trusted the authorities.
Today, the figures tell only one part of the story. They show that more than half of people with a mortgage now have a loan worth more than the house itself, and that about 13 per cent of these mortgage holders, or 170,000 people, are in arrears for 90 days or more – an increase of 60 per cent in two years.
What they don’t show is the thwarted expectation of those who worry about having children because they’re squeezed into apartments with no spare room or garden, or couples who are delaying getting married because they can’t afford a wedding, or young people who are borrowing from parents to keep their heads above water.
A common refrain relates to a feeling of being stuck. Instead of moving up the property ladder, they feel saddled with homes or apartments they can’t afford and, ironically, can’t afford to get rid of.
While policy measures such as the new personal insolvency scheme and increased mortgage interest relief offer some hope, few see an alternative to shouldering a lifetime of debt.
REGINA MULLIGAN used to look forward to social occasions. Now, the 45-year-old looks for excuses to avoid them.
A public servant on a salary of just over €50,000, she bought a house eight miles outside Enfield, Co Meath, in 2006. The €1,700 mortgage was at the upper end of what she could afford, but she wanted space for her two children.
Her circumstances have changed dramatically since. Her husband lost his warehouse job at the end of 2007. While her position is safe, salary cuts and pension increases now mean the bulk of her take-home pay goes on servicing the mortgage.
She tries to keep the family fed on €25 a week. Before she goes shopping, she sits down with a calculator to stretch her budget to the last cent.
Even central heating is carefully considered. She bought a €100 fill of oil just before Christmas, but usually the open fire has to suffice.
Two cars in the driveway have been replaced by one – an ageing Opel Safira. To save money, she cycles a few miles to the nearest bus-stop and gets a private bus to and from work during the week.
What is most frustrating to her is the sense that the system isn’t helping her. Under the eligibility limits for unemployment benefit, her net pay is over the threshold by €19.25 per week. As a result, her husband gets nothing.
Neither are they entitled to the medical card, family income supplements or other social safety nets.
“This makes us effectively worse off than a couple on minimum wage,” she says. “It makes me wonder what the incentive to work is . . . What’s also frustrating is that people assume I must be well-off because I work in the public sector. You’re almost embarrassed to say you’re a public servant these days.”
A FEW miles away, at a neatly maintained housing estate in Kells, Co Meath, James (32) is recounting how life has changed for his family and others on the same road.
Three years ago, he, his partner and their three children left a housing estate in Navan to move to a detached home in an upmarket development populated by professionals, teachers, gardaí and sales executives.
While most on the road are private about their personal circumstances, there are the tell-tale signs of the recession’s bite: the second car disappearing from driveways; fewer lights on in the houses early in the morning when he heads out to work; the families who’ve been forced to quietly leave and rent out their homes.
He, too, is feeling the pinch. While he still has his job as a food sales executive, his pay has been cut by 10 per cent. On top of that there are the higher taxes, reductions in children’s allowance and the rising cost of essentials such as fuel.
“The mortgage is €1,600 a month. Two days after paying it, all we have to live on is a couple of hundred euro,” he says. “I’m working between 60 and 80 hours a week. The phone is never off. It feels like I’m working just to pay a mortgage, not to raise a family.”
Some months, he says, they ended up using the credit card for shopping and to pay bills. Any savings they had have long since been used up. They would trade downwards, except they’d lose at least €100,000 on the mortgage. “What really gets me is that despite all that’s happened, there is nothing to stop banks putting up rates. Since we took our mortgage rate out with Permanent TSB, the interest rate has jumped from 2.65 per cent to 5.15 per cent.
“The cost of everything seems to be going up, and my take-home pay is going down. And then there are household charges, water taxes and whatever else on the way . . . If it wasn’t for the negative equity, I’d definitely consider leaving the country. I just don’t see an end to this.”
WITH SO MANY feeling stuck, can public policies tackle the problem?
Last month the Government unveiled a new personal insolvency scheme that included provisions for mortgage debt.
Under the proposed voluntary debt-settlement systems, struggling homeowners would be permitted to restructure their mortgages with their banks outside the formal court insolvency procedure.
This would most likely involve reduced mortgage payments or a mortgage holiday over a period. Extra mortgage interest relief for first-time buyers who bought at the height of the boom is another initiative.
Single first-time buyers will benefit by up to €1,000, while couples will benefit by €2,000.
In the longer term, some housing surveys show a growing number of young people don’t want to own a home or can’t see themselves affording one, which is a reverse aspirations for this age group.
This generational divide in the property market could lead to prolonged housing stagnation, with young people unable to buy and older homeowners unwilling to sell, say some experts.
Ruairí McCaul is one of the young people who can’t see himself affording a house anytime soon.
McCaul celebrated his 30th birthday last year. He had hoped he’d be married, have bought a house and have a growing family by that age.
“I always imagined I’d head along the same course as my parents. They got married, had the house built . . . That gets ingrained with you, I suppose,” McCaul says.
Instead, he’s renting in Galway city along with his partner and their seven-year-old daughter. They would get married, but can’t afford to throw a big party.
They would like to have a second child, but don’t know where they’d find the money. And as for a mortgage, they haven’t even bothered to approach a bank.
“A few years ago, I suppose we were moving up the ladder and progressing. Now, it’s hard to see what the future holds.”
Like many of his generation, he is angry at those in authority who did little to put the brakes on a runaway economy, and frustrated at the knowledge that each pay cut or tax hike is ultimately linked to the Government’s decision to pay the property gambling debts of a private bank.
“I think younger people are now more sceptical about authority or vested interests . . . I was watching TV recently and saw Vincent Browne questioning the ECB . . . More tough questioning like this should be directed at the current Government.
“We need a more open forum regarding the ongoing bank bailout and the potential for a second bank bailout.”
CASE STUDY: BUSINESSWOMAN
I just couldn't afford to live in the house anymore'
THE WORST moment for Jillian Godsil came when she tried to sell the curtains of her dream home.
She had already sold the oven to make ends meet, as well as most of the furniture, a toilet and even a granite drinking trough from the garden. But when the lady in the shop offered to buy just a single curtain from her, she broke down in tears.
"I just cried my eyes out," says Godsil (46) a mother of two. "It felt symbolic. I felt so bad. It had come to this. My poor house was stripped of its curtains. And now, no one even wanted them."
Raheengraney House near Shillelagh, Co Wicklow, is a rambling guesthouse dating from the 1700s. She bought it with her then husband just over a decade ago.
They poured their life savings and earnings into the house, renovating and redecorating the home and its grounds.
As the economy expanded, everything felt on the up. Her work as a public relations consultant was booming.
On the back of the rising value of their house - worth €1.6 million at the height of the boom - they bought two apartments in Portugal, one for holidays and another as an investment. If the rise in their fortunes was steep, their collapse was faster still.
The perfect storm of a marriage break-up, the economic downturn and property crash combined to send her life into a tailspin.
The properties plummeted in value and work began to dry up for her business.
Her English husband moved to Britain.
"I just couldn't afford to live in the house anymore," she says. "There was also the feeling that this marital home was now a divorce home."
When she tried to sell it, she received an offer for €500,000. The bank refused to sanction the sale as the mortgage was €900,000 and she had no realistic way of repaying the remainder.
They sold one of the Portuguese apartments - which paid for her legal fees - but were not able to sell the other.
Today, she lives in a small cottage with her two teenager daughters a few miles away from Raheengraney House. Her children moved out of boarding school and into the local secondary school.
But she remains upbeat. Godsil is rebuilding her public relations business and has tried to park her worries about the house and missed mortgage repayments to one side.
The change in attitude, she says, has been liberating.
The house is still for sale; she also has numerous ideas such as reopening it as a wedding venue. Things will work out in time, she says.
"I am a chirpy, optimistic person. Horrible things have happened, but I'm a firm believer that what doesn't kill you makes you stronger. I'm alive, I'm living. It's a case of upwards and onwards but never backwards."