Will the property market pick up within the next 2 years

The_Conductor

SimpleSam06 wrote: »

The first time I saw this phenomenon was back in 2006 at the peak, one bedroom houses, I can't recall where exactly. The second time I heard of it was recently on one of the threads here. Two occurences in as many years doesn't make it common.

I'd have to agree too- especially as the consensus is that rents are falling- and are this side of going into freefall. Availability on most of the major websites is increasing between 10 and 15% month on month- which is a reflection of a lot of the non-nationals, particularly those who were employed in construction but of late also retail, moving to greener pastures. Sure- house/apartment prices are in freefall- but so too are rents. Which is falling faster- prices, I'd hazard a guess- but if you factor the fall in people seeking properties to rent, along with the accelerating increase in supply- the writing is on the wall there too......

KhanTheMan

SimpleSam06 wrote: »

The first time I saw this phenomenon was back in 2006 at the peak, one bedroom houses, I can't recall where exactly. The second time I heard of it was recently on one of the threads here. Two occurences in as many years doesn't make it common.

Its not an occurrence. Its a trend. This phenomenon is quite common, apart from when property prices are too expensive. If you look back at house prices and rents through the years you'll find that generally when house prices are a relatively reasonable price then for the type of home ftbs buy, it actually makes more sense to buy it than rent it. I even remember back in 2001 myself and my girlfriend were renting a 2 bed house and had mortgage approval where we were saveing about 10% on the place we wanted to buy compared to the rent we were paying on the next road, but the .com bust put us off and we went to Oz instead.

Personally i dont think rents are going to move that much at all, but its just a guess. All i can see is that noone i know at all is struggling to pay their rent. This may change if jobs are lost on a large scale and these people cant get new jobs at all though.

And rents just dont fall that much in reality, but yet people say "rents are falling" all the time.

You just have to look up "rents are falling" on boards.ie to see the many threads with examples of threads at that time and you can clearly see that rents arent falling much at all over the years.

http://www.boards.ie/vbulletin/showthread.php?t=144698&highlight=rent+falling

http://www-srv-3.boards.ie/vbulletin/showthread.php?t=2054957230


Just a couple of quick examples i found. There are more on various other sites including daft.ie.

Rents are just not as volatile as people seem to think.

astrofool

Rent allowance really sets a floor to what rents can fall to, and as desirability goes up, so does the relative price.

KhanTheMan

astrofool wrote: »

Rent allowance really sets a floor to what rents can fall to, and as desirability goes up, so does the relative price.

Good point, but by the same token, rent allowance can be adjusted downwards. Though you can imagine the flak if they did that. FF are hanging by their fingernails as it is.

asdasd

most of that is irrelevant khanman. People are often stuck in a rental Market if they can't get credit. If banks demand 20% deposit then very few people can afford the 40 k on the 200 k house. This was the case in the 80s. You stayed in the rental Market and saved the deposit. Back then a mortgage could be way cheaper than rent. Point 2: housing normally falls in price in a recession, not normally before. Work that one out yourself. Point three. Poles going home. Prices, and rents are falling. And that will continue.

KhanTheMan

asdasd wrote: »

most of that is irrelevant khanman. People are often stuck in a rental Market if they can't get credit. If banks demand 20% deposit then very few people can afford the 40 k on the 200 k house. This was the case in the 80s. You stayed in the rental Market and saved the deposit. Back then a mortgage could be way cheaper than rent. Point 2: housing normally falls in price in a recession, not normally before. Work that one out yourself. Point three. Poles going home. Prices, and rents are falling. And that will continue.

It's not as hard as you seem to think to get a mortgage. Check it out. What's happening at the moment in the lower end of he Market is not difficulty to get the mortgage. It's actually people holding out because they don't know where all the pieces will fall. Rents are not volatile in general. Inflation sees that rent becomes more affordable whether it rises or falls anyway. Even at the higher prices of rents compared to a scads ago they are easier to afford now.

The_Conductor

KhanTheMan wrote: »

It's not as hard as you sen to think to get a mortgage. Check it out. What happening at the moment in the lower end of he Market is not difficulty to get the mortgage. It's actually people holding out because they don't know where all the pieces will fall. Rents are not volatile in general. Inflation sees that tent becomes more affordable whether it rises or falls anyway. Even at the higher prices of rents compared to a scads ago they are easier to afford now.

People have unreasonable and unrealistic expectations when they are looking at apartments/houses though. It used to be that a multiple of 10 times or even 12 times earnings was looked at- in the knowledge that the bank would be only too happy for dear daddy to go guarantor on the mortgage. Its now pretty much a multiple of 5 Times the higher, + 1 time the lower- multiples which people are unused to, and have difficulty getting their heads around. Also- since the hay-day of mortgages- the credit unions cannot give deposits for mortgages any longer (as they get reported to the bureau too now). So- yes- people can get mortgages- but the deposit aspect is murdering a lot of people, and most everyone else is just totally unrealistic about what they can reasonably expect to borrow........

KhanTheMan

smccarrick wrote: »

Its now pretty much a multiple of 5 Times the higher, + 1 time the lower- multiples which people are unused to, and have difficulty getting their heads around

So a couple each earning €30k for examole would only be allowed to borrow 5 x 30 = 150k + 30k = €180k.

I think you're mistaken here.

I also think your assumption that people find it hard to save enough for a deposit are off too. Most people who will be buying houses are savers (and if they are not they shouldnt be allowed to buy anyway). People have a lot more saved these days than you might think too. Many people still have their SSIAs sitting in the bank too.

SimpleSam06

KhanTheMan wrote: »

Its not an occurrence. Its a trend.

Oh I agree completely, and I expect over time for more and more of these situations to crop up. They've been thin on the ground for the last few years, which makes their reappearance noteworthy. Still doesn't make houses good value, but its a start.

KhanTheMan wrote: »

This phenomenon is quite common

Only in sane property markets.

KhanTheMan wrote: »

Personally i dont think rents are going to move that much at all, but its just a guess. All i can see is that noone i know at all is struggling to pay their rent.

Rents are just not as volatile as people seem to think.

This is the thing with rent, and you can't make statements about the volatility or lack thereof of rental rates without examining it in closer detail. Rent is completely different from property prices in that it follows supply and demand much more closely than property. Its irrelevant whether or not people can afford rents - if landlords can't let out their BTL, they will drop the price until someone bites, because its better to have some money coming in rather than no money at all.

As things stand in Ireland we have a grotesque oversupply of rental properties, ergo rental prices will fall. This will in turn reflect upon the true value of property prices; once rents stabilise at their true value, we'll have a clearer picture of where property prices should be.

The_Conductor

KhanTheMan wrote: »

So a couple each earning €30k for examole would only be allowed to borrow 5 x 30 = 150k + 30k = €180k.

I think you're mistaken here.

I also think your assumption that people find it hard to save enough for a deposit are off too. Most people who will be buying houses are savers (and if they are not they shouldnt be allowed to buy anyway). People have a lot more saved these days than you might think too. Many people still have their SSIAs sitting in the bank too.

A rough rule of thumb is that the multiple you may be approved for is 4 to 5 times the higher salary + once the lower salary. However most institutions are now shying away from this focusing on a different calculation altogether- which is looking at your net income (after tax and all bills) and granting you a mortgage which can be satisfied by a maximum of 35% of your net income (to a maximum of 85% of the cost price of the property in most cases- with up to 100% still on offer for certain professions, but with very tightened criteria).

Have a chat with the mortgage advisor in any of the local branches of the banks- you'll also be shocked to hear of the low number and low values of the mortgages recently approved.

I also think you are being hopelessly optimistic about most people having sizeable deposits squirreled away- and the idea that SSIAs are still a factor can in the vast majority of cases be safely ruled out of the equation.......

S.

KhanTheMan

smccarrick wrote: »

A rough rule of thumb is that the multiple you may be approved for is 4 to 5 times the higher salary + once the lower salary. However most institutions are now shying away from this focusing on a different calculation altogether- which is looking at your net income (after tax and all bills) and granting you a mortgage which can be satisfied by a maximum of 35% of your net income (to a maximum of 85% of the cost price of the property in most cases- with up to 100% still on offer for certain professions, but with very tightened criteria).

Have a chat with the mortgage advisor in any of the local branches of the banks- you'll also be shocked to hear of the low number and low values of the mortgages recently approved.

I also think you are being hopelessly optimistic about most people having sizeable deposits squirreled away- and the idea that SSIAs are still a factor can in the vast majority of cases be safely ruled out of the equation.......

S.

So which is it your last post or your second last post.

Talking to the mad people i know who are buying at the moment they have plenty of savings and are easily getting mortgages.

Why not just go to the banks own websites which will give you a ballpark figure of what kind of loan particular salaries will get you. They seem to tally very closely with the loans my friends have been getting the last couple of months.

kazzer

smccarrick wrote: »

the credit unions cannot give deposits for mortgages any longer (as they get reported to the bureau too now).

Since when was this? Is it ALL credit unions? Jesus, can ordinary people have any advantage these days....

The_Conductor

smccarrick wrote: »

Its now pretty much a multiple of 5 Times the higher, + 1 time the lower- multiples which people are unused to, and have difficulty getting their heads around.

Correct as a rule of thumb

smccarrick wrote: »

most institutions are now shying away from this focusing on a different calculation altogether- which is looking at your net income (after tax and all bills) and granting you a mortgage which can be satisfied by a maximum of 35% of your net income (to a maximum of 85% of the cost price of the property in most cases- with up to 100% still on offer for certain professions, but with very tightened criteria).

This is the way the institutions are actually calculating the mortgages (for the most part- there are exceptions).

I don't see how there is a problem with this- they're not mutually exclusive?

Re: your friends with plenty of savings- they are very much in the minority- most people do not have large savings built up (but are starting on them, as obviously they now have to a) find the deposit and b) prove the capacity to save x amount on a monthly basis).

As a rule of thumb 4 or 5 times the main salary + once the minor is a decent rule of thumb- its not a bad way of trying to figure in your own head what you might be entitled to. Obviously individual circumstances differ- but it is a rule of thumb.

I don't see what the problem is?

The_Conductor

kazzer wrote: »

Since when was this? Is it ALL credit unions? Jesus, can ordinary people have any advantage these days....

Its not all credit unions- but in 2007 and 2008, a large number of credit unions did join the ICB- which means they notify the ICB of any loans they issue, and these loans in turn are visible to a mortgage lender when they are accessing your mortgage application. The list here is out of date (I believe a further 18 credit unions have since joined (out of almost 200 in total)).

KhanTheMan

smccarrick wrote: »

I don't see what the problem is?

The only problem that i have is that the last few statements you have made here are not consistent. You make a statement as if you are talking from a knowledgable standpoint and then when you get picked up on it you adjust it.

First it was 5 times the first salary + 1 times the second.
Then when its pointed out that thats unworkable you tell us a different method.

Same with the credit unions statements.

Seems to me, like the rest of us you dont actually know for sure how maximum loan amopunts are calculated.

I've been into the banks recently to keep an eye on how much i can get a loan for IF i stay in Ireland and if property prices get to a reasonable level for me to buy. I know several people actually stupidly buying at the moment and the figures they are telling me. I have first hand recent experience of how they calculate loan amounts and i can say that it is very close to what is derived from their online calculators.

The easiest way for us all to figure out how much a particular salary gets you is to go to the online mortgage calculators and plug in the details.
Im not saying they are entirely accurate, but they are a lot closer than methods puts forward by a person who changes their mind in the next post about how they are calculated.

Affordability is not the big reason people arent buying, its uncertainty of the future that is by far the main reason.

People dont have to believe anything any of us say here at all. Some people are polar in their views one way or the other and will not entertain any arguments from the oppsite side. All people have to do is go find out the details for themselves.

asdasd

Talking to the mad people i know who are buying at the moment they have plenty of savings and are easily getting mortgages.

An anecdote is not a statistic. Mortgage approvals are way down. Thats the statistic.

As for rent. You mentioned that buying was cheaper thatn renting in 2001 - I think tht my have been the case. In fact one of the metrics that convinced me that property was overvalued was the fall in rents, follwed by a stagnation from 2001-2007. There was a slight rise then, and now it falls again. Property zoomed again as did the Price to Rent ratios - which are still high.

Nevertheless even if owning is cheaper than renting ( which I am unconvinced of ) it does still not make it worthwhile economically in a weak market to buy a declining asset.

spockety

Affordability is a big factor I think, but perhaps not in the way you think.

Sure there are mortgages available, and there are properties available that people can get on their wage, but I think that a lot of people are waiting for properties in the areas that they DESIRE to come down to a more realistic level.

Gone are the days of dual income couples on a combined 80k+ buying 2 bed apartments in far flung developments. These people are rightly wondering why their relatively high level of income should not get them a 3 bed semi in a relatively decent area. And it should, as pre-2001 it would have. You are still seeing houses in dodgy areas asking 350K+ on daft etc., and until you see those hitting 130k (where a single income family on national wage can afford to buy in with 10k deposit @ 92% over 25 years), and nicer areas hitting the 300K mark for a good house you could live in for life, then nobody will buy.

There are buyers, but affordability needs to factor in what it is exactly that people can afford to buy relative to what they should be able to buy based on their income or (like it or not) social status.

KhanTheMan

asdasd wrote: »

An anecdote is not a statistic. Mortgage approvals are way down. Thats the statistic.

As for rent. You mentioned that buying was cheaper thatn renting in 2001 - I think tht my have been the case. In fact one of the metrics that convinced me that property was overvalued was the fall in rents, follwed by a stagnation from 2001-2007. There was a slight rise then, and now it falls again. Property zoomed again as did the Price to Rent ratios - which are still high.

Nevertheless even if owning is cheaper than renting ( which I am unconvinced of ) it does still not make it worthwhile economically in a weak market to buy a declining asset.

And yet you've still missed my main point. Which is to check out the situations for yourselves. Which Noone seems prepared to do at all.
it's not hard to do at all. Maybe people just don't want to get a real picture either way.

rockbeer

If the formula of 5 times the first salary + 1 times the second is broadly accurate (and I'm not saying whether it is or not so don't shoot me down), one thing that can be said for certain about it is that it is not cautious by historical standards, and could even be said to be high-risk.

3 + 1 used to be the common rule of thumb only 20 or 30 years ago.

Although crude, these earnings-based formulas are reflections of affordability, based on assumptions about what proportion of their incomes buyers can committ to housing costs. KhanTheMan, it makes no sense to say on the one hand that 5 + 1 is unrealistic and on the other that affordability is not a barrier to entry. People might be getting loans but that doesn't mean they can afford them - it rather suggests the banks might still be being over-generous.

The point about property prices is that they don't exist in a vacuum. By definition, at least in stable, mature markets, they reflect what people can actually afford to pay on an ongoing basis. If they don't, the result is the sort of instability we're seeing now.

What exactly is 'affordable'? That's something to argue over, but if we take 5 + 1 as a yardstick, it's fairly obvious that prices still have a long way way to fall before stability is achieved.

The_Conductor

Different institutions are using different measures- they do not have a standard- if you look at similar discussion threads on TPP and DAFT- there are similar discussions about this constantly.

As a rule of thumb 4-5 Times the higher + once the lower is still generally accepted as a reasonable off the cuff manner for calculating mortgage eligibility levels. How is this unworkable (in general)?

You used an example of a couple on 30k + 30k qualifying for a mortgage of 180k- I am guessing from the way you phrased it that you feel they should qualify for more? If so- perhaps you might like to expand on this? Also- you might like to expand on why you believe an offer of 180k would be unfair. Of course its only a single example, and dependent on what jobs they are in and their personal circumstances- which may give them a higher (or indeed a lower) entitlement. Its not a one-size fits all approach.

Re: the 35% of Net Income- that is a calculation from Bank of Ireland. Perhaps other lenders use different calculations- if you have more knowledge on this- I am sure people would be only too happy to hear your information. Personally I only deal with RBS and BOI- and don't have time to check the info elsewhere- I've other things to do.

Re: credit unions- after the scandal last year most of the larger credit unions did join the CIB, which makes taking out a loan from them to fund the deposit aspect of a mortgage a non-runner. I do not have a current list of all CIB members. In general the information is accurate- but obviously under specific circumstances its not. 3 years ago no credit unions were members of the CIB- and you borrow from them to your hearts content safe in the knowledge your bank would never find out- that is the point I was making.

Your own personal circumstances may very well differ significantly from those of the average person walking down the street- that does not mean that your experiences are the norm, or reflective of what a random person could expect to encounter.

The information in my posts could have been phrased better, certainly- but in general is not inaccurate (obviously you disagree based on your own circumstances- which you haven't elaborated on), but if you care to check the DAFT discussion forums or The Property Pin- these are regular debates that we have- and the information is pretty much in keeping with consensus.

The point I was trying to make- is that lending institutions were happy to lend in a lot of cases up to or even over double the ratio that they now are, as little as 2 years ago. People still assume this to be the case- or in some cases working off mortgage approval in principle which issued months ago- are making offers on property only to subsequently find out that the lending institution that gave them the approval in principle are now not willing to stand by the offer (there are 2 seperate threads in this forum from different people detailing their experiences of this).

Regarding the online calculators- they're fine if there are no extenuating circumstances- even what you consider to be very minor things can have a massive effect on the mortgage amount a bank might be willing to offer you (e.g. a long term overdraft on a current account, credit card levels, or in some cases personal circumstances outside of earning levels or potential- such as long term illnesses or medical conditions which may impede protection of the mortgage and in turn the level of mortgage a lender is willing to offer).

I offered further information clarifying my earlier posts- and perhaps I could have phrased my initial posts better- but I don't see that its necessarily inconsistent.

asdasd

And yet you've still missed my main point. Which is to check out the situations for yourselves. Which Noone seems prepared to do at all.
it's not hard to do at all. Maybe people just don't want to get a real picture either way.

Thats not even an anecdote, its a sorta "could happen to you" anecdote.

Why should I "check out for myself' by going to a particular mortgage lender - even if he offered me more money than I would expect that would be a anecdote not a statistic.

the statistics are clear - the removal of 100% loans, the demands for deposits, the reduction in mortgage approvals. Your stories are stories of the "I 'ave friend, innit, who was offered 20 times his salary, innit".

As for why people whould rent and not buy I answered that when I said it does still not make it worthwhile economically in a weak market to buy a declining asset. even if rents are more expensive than mortgages for that property.

KhanTheMan

Let me try again.

Im not saying if its a good idea to buy. I'm saying that peoples ideas here on lack affordability are off the wall.

Look up on the banks websites or go in and talk to a bank manager and ask him what a 30K (which i have picked because its a realively low wage for people planning to buy a house and the norm now is for 2 people to buy a house together) each earning couple will qualify for a maximum mortgage.

Then when you've found out the payments see what is available to rent for that.
If you can afford to pay €1200 a month rent on the house, you can afford to pay the mortgage if its around €1200 a month on it.

Go work it out yourselves. You dont even have to believe a word anyone says here. So no point tieing yourselfs up in knots arguing against the point. Look it up. The means to find out for yourselves are there. What could be easier.

Here, as my last act here i'll even post a screenshot from just one calculator. Plenty more if you're bothered to even look. Lets say its out by a whopping 60k , it still makes a 300k mortgage loan no problem.

(example is a couple on 30k each. i've given then no overtime or bonuses or loans)

asdasd

that loan calculator is busted.

ZYX

asdasd wrote: »

An anecdote is not a statistic. Mortgage approvals are way down. Thats the statistic.

That is the statistic but not the answer. Are banks refusing mortgages or are people not looking for mortgages?
Permanent TSB have an approval in principle calculator
http://www.yourmortgage.ie/YourMortgage/AIP.do
They will still offer 92% mortgages.

gurramok

ZYX wrote: »

That is the statistic but not the answer. Are banks refusing mortgages or are people not looking for mortgages?
Permanent TSB have an approval in principle calculator
http://www.yourmortgage.ie/YourMortgage/AIP.do
They will still offer 92% mortgages.

Yes, they will only get that loan amount without any loans outstanding. They still need that 8% deposit, 30k saved up. Other lenders need 20% deposit on an apt, that is a huge amount of money to save up. (see www.mortgages.ie)

Now to Khans point, from memory, it was about 33% of FTB's in 2006 were on 100% mortgages hence that portion of the market has disappeared. I've stated before, people are still buying houses, its the level of people buying which has collapsed on previous years. We have people who will still buy, we have people who still cannot afford to buy(majority in my view) and we have people who are waiting for the bottom before buying.


And to Khans second point about rents. He posted rent threads from 2004 and 2006 with anecdotal from 2001.

Rents climbed from 2004 to early 2007 and started to tumble back this year to where they were in 2001 (see daft index for proof of this)
House prices were reasonable in 2001 hence it did make sense to buy back then than to rent.
Khan has still not given examples of the amounts of his/her friends are getting in mortgages and from what professions, please spill the beans

ZYX

gurramok wrote: »

Yes, they will only get that loan amount without any loans outstanding. They still need that 8% deposit, 30k saved up. Other lenders need 20% deposit on an apt, that is a huge amount of money to save up. (see www.mortgages.ie)

Not true. I just checked Bank of Ireland and they also give 90% mortgages. Your link to mortgages.ie also shows you can borrow 92%. Why bother going to a lender who needs 20% deposit? Also 30K saved would be for a property costing €375,000. For a €200,000 property the deposit needed would be €16000

astrofool

I'd echo the sentiment that 5x +1 is completely wrong when it comes to what banks are willing to offer as a mortgage, it may have been years ago, but is not in use by any bank in the Irish market today.

Most use the % of income available for housing (which has gone up as other costs have come down), and the second income always counts for a lot more than 1x.

Give any mortgage broker a quick ring, give the details, and you'll get your answer within minutes.

ZYX

astrofool wrote: »

I'd echo the sentiment that 5x +1 is completely wrong when it comes to what banks are willing to offer as a mortgage, it may have been years ago, but is not in use by any bank in the Irish market today.

Most use the % of income available for housing (which has gone up as other costs have come down), and the second income always counts for a lot more than 1x.

Give any mortgage broker a quick ring, give the details, and you'll get your answer within minutes.

Well use guramoks link to www.mortgages.ie and they will offer €383,000 to a couple on €30k each.

spockety

And when that couple has kids and one of them becomes a stay at home parent...?

gurramok

ZYX wrote: »

Well use guramoks link to www.mortgages.ie and they will offer €383,000 to a couple on €30k each.

Thats for both buyers aged 30 and married. Your been a bit misleading, its for 40 years term and 40% joint income per month.