New law to bring surge in seizures of buy-to-let properties
REPOSSESSIONS of investor properties are likely to surge when new personal insolvency laws come into effect, it has been warned.
TDs and Senators approved the Personal Insolvency Bill on Wednesday but it will not become law until President Michael D Higgins officially signs off on it.
But one of the country's leading stockbrokers has predicted that there will be a "substantial pick up" in repossessions as a consequence of the legislation, particularly in buy-to-let properties.
Goodbody also said that this could lead to a drop in house prices.
Eamonn Hughes of Goodbody said: "The insolvency legislation applies up to €3m. The bulk of residences that are owned as principal private residence are at numbers substantially less than that, but it will capture the amateur and professional buy-to-let investors that have multiple properties."
Goodbody said that the level of mortgage restructuring at the banks has been picking up pace in the last number of months, with the level of engagement between lender and buyer set to increase further once the legislation is enacted.
The latest figures from the Central Bank show that up to 20,000 homeowners are two years or more behind with their mortgage. About 7,000 buy-to-let mortgages are in arrears.
In October the Director of Banking Supervision Fiona Muldoon warned that the failure of banks to deal with buy-to-let mortgages and the arrears on residential homeloans risks bankrupting the country a second time.
Despite the mortgage arrears crisis, the level of repossessions has been relatively low with just over 1,351 properties seized since the Central Bank started compiling figures.
The new law cuts the period of insolvency from 12 years to three years – and lets debts of up to €3m be written off. It also contains measures to protect the family home.
The forecast comes just weeks after the latest quarterly review of the bailout programme by the troika advised that the Government should amend the law to remove a legal impediment to repossessions dating back to 2009.
But Taoiseach Enda Kenny stressed that there would be no mass repossessions of homes when the Government closes off the loophole.