Central Bank to limit amount banks lend for home purchase

cooperguy

The decision I have to make is whether to purchase this year or hold out till next year when prices may level off or drop by a bit. Though Im based in Galway so it hasnt been quite as crazy as Dublin (but prices in the city have been rising fairly fast!).

Mongfinder General

cooperguy wrote: »

The decision I have to make is whether to purchase this year or hold out till next year when prices may level off or drop by a bit. Though Im based in Galway so it hasnt been quite as crazy as Dublin (but prices in the city have been rising fairly fast!).

If prices are rising fast in Galway then FTB's in Dublin haven't a hope. Outside of Galway City I wouldn't let an animal live there.

ffactj

Frank Lee Midere wrote: »

You're just posting the same link twice. Your argument reminds me of the people who dismissed Kelly and McWilliams from 2004-2008.

Accidental copy and paste twice. It happens.

Its probably not the first time you've used that line about people dismissing Kelly and McWilliams over the last 15 years or so i bet.

I couldnt tell you whats going to happen with prices tbh. But at least I know im not clairvoyant. Its a mugs game trying to predict property prices. They are guesses, not predictions.

Mongfinder General

ffactj wrote: »

Accidental copy and paste twice. It happens.

Its probably not the first time you've used that line about people dismissing Kelly and McWilliams over the last 15 years or so i bet.

I couldnt tell you whats going to happen with prices tbh. But at least I know im not clairvoyant. Its a mugs game trying to predict property prices. They are guesses, not predictions.

McWilliams, Kelly, Lee etc, even a stopped clock tells the time right twice a day. Even when they each spin out a version of the truth most of us don't want to hear it. The truth is not conducive to the modern day standards of living.

cooperguy

Mongfinder General wrote: »

If prices are rising fast in Galway then FTB's in Dublin haven't a hope. Outside of Galway City I wouldn't let an animal live there.

There are some great places in the countryside around Galway to live. You should come visit and you'd see! Doesn't really matter to me anyway, I am buying in the City.

Mongfinder General

cooperguy wrote: »

There are some great places in the countryside around Galway to live. You should come visit and you'd see! Doesn't really matter to me anyway, I am buying in the City.

I've been around Ballinfoyle and Castlepark. They looked rough enough. Ballinasloe was awful.

El_Dangeroso

Mongfinder General wrote: »

I've been around Ballinfoyle and Castlepark. They looked rough enough. Ballinasloe was awful.

Galway has the least rough areas of any city in Ireland. That's probably why it's so desirable.

Mongfinder General

El_Dangeroso wrote: »

Galway has the least rough areas of any city in Ireland. That's probably why it's so desirable.

Sadly, that's probably true. There are some desperate kipps around the country. Even parts of Athlone are Dodge City.

Frank Lee Midere

ffactj wrote: »

Accidental copy and paste twice. It happens.

Its probably not the first time you've used that line about people dismissing Kelly and McWilliams over the last 15 years or so i bet.

I couldnt tell you whats going to happen with prices tbh. But at least I know im not clairvoyant. Its a mugs game trying to predict property prices. They are guesses, not predictions.

Not really. Here's a real prediction rooted in economic theory.

House prices always return to their historical norm - a multiple relative to income.

Frank Lee Midere

Mongfinder General wrote: »

McWilliams, Kelly, Lee etc, even a stopped clock tells the time right twice a day. Even when they each spin out a version of the truth most of us don't want to hear it. The truth is not conducive to the modern day standards of living.

The stopped clock cliche rears it's ugly head once again. Kelly is an academic economist. He wasn't just predicting a crash, he fully understood the reasons why it was inevitable.

These threads are hilarious. One year of growth in the Irish economy, the second biggest housing growth in Europe and the same tired arguments from 2006 are out again.

This time is different

ffactj

Frank Lee Midere wrote: »

Not really. Here's a real prediction rooted in economic theory.

House prices always return to their historical norm - a multiple relative to income.

People can pretend all day long that there is some weight to their predictions if they like. There isnt.

The whole economic landscape is constantly changing. It is IMPOSSIBLE to predict future house prices. They are still only guessing, no matter what they say.

Its amazing how many economists we have in Ireland now.

Sounds like you think its always 2006 tbh.

Look at the economy 5, 10, 15, 20, 25, 30 years ago. At each point in time who would have any idea of what was coming in the next 5? Nobody.

Frank Lee Midere

ffactj wrote: »

People can pretend all day long that there is some weight to their predictions if they like. There isnt.

The whole economic landscape is constantly changing. It is IMPOSSIBLE to predict future house prices. They are still only guessing, no matter what they say.

Its amazing how many economists we have in Ireland now.

Sounds like you think its always 2006 tbh.

Look at the economy 5, 10, 15, 20, 25, 30 years ago. At each point in time who would have any idea of what was coming in the next 5? Nobody.

I'm not saying economics can predict the near term. In the long term property trends to it's historic multiple of income. It's fairly easy to predict an over priced market.

Also in the long term stock market valuations tend towards a p/e of about 15.

ffactj

Frank Lee Midere wrote: »

I'm not saying economics can predict the near term. In the long term property trends to it's historic multiple of income. It's fairly easy to predict an over priced market.

Also in the long term stock market valuations tend towards a p/e of about 15.

So we are agreed then. When people predict future property prices its just a guess and should be treated as such by all.
There is no magic ingredient that anyone has that makes their guess any better than any other person, be they bull, bear or cow.

Barely Hedged

Frank Lee Midere wrote: »

You're just posting the same link twice. Your argument reminds me of the people who dismissed Kelly and McWilliams from 2004-2008.

So for half a decade they were predicting price falls in a market that was clearly overheating. Sure that's easy, the hard part is pin pointing when it is going to happen and supplying specifics something you have a parallel with

http://touch.boards.ie/thread/2057157969/7

"So no, what will happen this year is a fall, cash buyers will wait it out, the fall will accelerate, cash buyers will panic and the dead cat bounce will resume its downward trajectory. Im thinking of buying mid next year at about 40% less than today,"

Villa05

ffactj wrote: »

So we are agreed then. When people predict future property prices its just a guess and should be treated as such by all.
There is no magic ingredient that anyone has that makes their guess any better than any other person, be they bull, bear or cow.

I think the Developer of the property below has a fair idea on the future direction of house prices

http://www.boards.ie/vbulletin/showthread.php?t=2057308366

ffactj

Villa05 wrote: »

I think the Developer of the property below has a fair idea on the future direction of house prices

http://www.boards.ie/vbulletin/showthread.php?t=2057308366

I doubt it.
Developers know what the price is now, and what it costs to build a house and how long. Thats all they know.

Many of them ended up with riches beyond their wildest dreams at one point.
They were building, and guessing future trends, not predicting and it paid off for them.
And then many ended up ruined because they found they couldnt actually predict future prices after all.

Property prices are made up of so many variables its just impossible to predict them.

P. Breathnach

ffactj wrote: »

So we are agreed then. When people predict future property prices its just a guess and should be treated as such by all.
There is no magic ingredient that anyone has that makes their guess any better than any other person, be they bull, bear or cow.

While it is true that nobody can make accurate predictions, some interpretations of markets are better than others.

I am confident that moves to restrict the amounts that people can borrow (even if it is only some people who are affected by the restrictions) will result in prices in some market segments being lower than they might otherwise have been.

If I had a family home to sell in Dublin 6 at a market level of about €500k, and if I had held back in the hope of further price rises, I'd now be regretting my decision.

The_Conductor

P. Breathnach wrote: »

While it is true that nobody can make accurate predictions, some interpretations of markets are better than others.

I am confident that moves to restrict the amounts that people can borrow (even if it is only some people who are affected by the restrictions) will result in prices in some market segments being lower than they might otherwise have been.

If I had a family home to sell in Dublin 6 at a market level of about €500k, and if I had held back in the hope of further price rises, I'd now be regretting my decision.

I'd have to echo this sentiment.
I'd temper it with an observation- many people in the higher demand areas held off selling property- on the assumption of further price rises. Anyone who 'had to sell' most probably has done so.
Were we to bring in incentives to encourage particular groups of people to sell- such as those who are over 65- whereby they could sell their PPR without the proceeds being considered as means for nursing home care- or attracting CGT etc- perhaps older people could be persuaded to move into more appropriate accommodation to their needs as they now are.

There are some interesting schemes in place- such as in Scotland- which have encouraged this very behaviour.

We don't have a shortage of 'family homes' we have a surplus of them in fact- however- people need some sort of incentive or impetus to move to accommodation more suitable to the various stages in their lives.

We Irish, are damn stubborn though.........

the world wonders

ffactj wrote: »

So we are agreed then. When people predict future property prices its just a guess and should be treated as such by all.
There is no magic ingredient that anyone has that makes their guess any better than any other person, be they bull, bear or cow.

I see. So when Met Éireann issue a weather forecast, it is "just a guess". Never mind all the centuries of theory about atmospheric fronts, the Coriolis effect, anticyclones and depressions, and the rigorous mathematical analysis using million-euro supercomputers they apply to the problem, they know nothing more than your granny predicting cold spells based on the number of magpies on the tree in her back garden

In other words, just because the future is uncertain and predictions are never guaranteed 100% accurate, that does not mean that all predictions are of equal value.

The_Conductor

All predictions are not of equal value.
You can calculate the statistical probability associated with various predictions by looking at historical events- this is equally applicable to the financial markets, as it is to the weather. Anyone who has studied statistics can describe this process to you ad nauseum.
Economics- is a science- just as surely as meteorology is.

Some people have a better record with their predictions- than do others. Some scientific disciplines- are better known for their retrospective navel gazing, than their future forecasting and the betterment of their disciplines. Economists fall into the latter category, meteorologists, into the former.

For the record, I am neither.

ffactj

P. Breathnach wrote: »

While it is true that nobody can make accurate predictions, some interpretations of markets are better than others.

I am confident that moves to restrict the amounts that people can borrow (even if it is only some people who are affected by the restrictions) will result in prices in some market segments being lower than they might otherwise have been.

If I had a family home to sell in Dublin 6 at a market level of about €500k, and if I had held back in the hope of further price rises, I'd now be regretting my decision.

Even the people who are skilled at and whose job it is get it wrong more often than not.

These are people who are trained in economics and have worked in the field for countless years.

So I wouldnt be taking anyones predictions from an internet forum as a skilled interpretation anyway. They are just guesses.

ffactj

the world wonders wrote: »

I see. So when Met Éireann issue a weather forecast, it is "just a guess". Never mind all the centuries of theory about atmospheric fronts, the Coriolis effect, anticyclones and depressions, and the rigorous mathematical analysis using million-euro supercomputers they apply to the problem, they know nothing more than your granny predicting cold spells based on the number of magpies on the tree in her back garden

In other words, just because the future is uncertain and predictions are never guaranteed 100% accurate, that does not mean that all predictions are of equal value.

Maybe you should look into how Met Eireann do their forecasts.
Then come back and tell everyone why its not the same thing.

Mongfinder General

Frank Lee Midere wrote: »

The stopped clock cliche rears it's ugly head once again. Kelly is an academic economist. He wasn't just predicting a crash, he fully understood the reasons why it was inevitable.

These threads are hilarious. One year of growth in the Irish economy, the second biggest housing growth in Europe and the same tired arguments from 2006 are out again.

This time is different

How is Morgan Kelly's latest prediction working out -

http://www.independent.ie/business/small-business/morgan-kelly-economist-who-called-housing-crash-back-with-sme-warning-30076348.html

The thing is most of us knew where it was headed in 2006/2007 and most of us didn't care because most of us thought we could get out of it before having to pay the piper. The majority of those who got caught in negative equity are having their mortgages heavily subsidised on trackers, the rest are basically untouchable because we don't repossess houses from those who engage with a lender.

So what's the reward for those who lectured the careless and clueless about not buying back in 2006. Penal interest rates of 4% above the ECB base rate, outrageous demands for cash up front (20% deposit, at a minimum) and the likelihood of a god awful commute from some awful suburb they don't really want to live in because they can't afford their dream dog box in Dublin 6W.

You like apples? How 'bout them apples?

Not sure if anyone has posted this but someone on Ask About Money posted this IMF study on the impact of LTV/LTI limits for mortgage lending:

• Transaction activity drops significantly in the three-month period following the tightening of LTV/DTI regulations.
• Price appreciation slows down a bit later, in a six-month window rather than the three-month window.
• Price dynamics appear to be reined in more after LTV tightening rather than DTI tightening.
• Expected house price increases in the future become lower after policy intervention.
• Plans to purchase of a home are more likely to be postponed by those who already own a property, i.e., potential speculators, but not by those who do not own a property, i.e., potential first-time home buyers.
• Tighter limits on loan eligibility criteria, especially on LTV, curb expectations and speculative incentives.

Policy implications of our analysis are encouraging. In housing markets, expectations are key as they often facilitate the settling in of bubble dynamics. If, as suggested by the evidence presented here, limits on LTV curb expectations and discourage potential speculators, they can be effective tools to tame real estate booms and contain the associated risks.

NZ_2014

Are mortgages for construction industry professionals still a non runner?

The_Conductor

NZ_2014 wrote: »

Are mortgages for construction industry professionals still a non runner?

No- but they are subject to minimum lengths of time in permanent employment, no bonuses or non-core pay is counted- and depending on the lender- only lower LTVs may be considered.

Shop around though- different lenders have different criteria.

El_Dangeroso

El_Dangeroso wrote: »

In my experience most banks want to lend 3X salary max, and I think I've queried with all the big ones.

I just did an online calculator with EBS and the result was 4.25x joint income for self-employed and 4.5x for 'private sector'.

Just for the sake of simplicity, I put in joint income of 100k. That fictitious couple would apparently get 450k. Add a deposit of 50k and they are shopping foe houses selling at 500k..

Under new rules, this couple wouldn't get a mortgage due to LTV limits.

Let's say they have 100k in the bank, plus their 100k income (pretty good going and well above average). They would have had spending power of 550k but now have 'just' 450k: i.e. 100k plus borrowings of 3.5 times income.

Even fairly well-off FTBers have less to play with due to the loan-to-income ratios. There will still be cash buyers and people whose parents are keen to part with a six-figure sum but the higher and of the market will surely be worst affected.

NZ_2014

The_Conductor wrote: »

No- but they are subject to minimum lengths of time in permanent employment, no bonuses or non-core pay is counted- and depending on the lender- only lower LTVs may be considered.

Is this extra measures for this particular industry or all industries/professions?

Six months saving and permanent employment and a min 20% deposit enough for most other industries?

Giblet

Deleted User wrote: »

I just did an online calculator with EBS and the result was 4.25x joint income for self-employed and 4.5x for 'private sector'.

Just for the sake of simplicity, I put in joint income of 100k. That fictitious couple would apparently get 450k. Add a deposit of 50k and they are shopping foe houses selling at 500k..

Under new rules, this couple wouldn't get a mortgage due to LTV limits.

Let's say they have 100k in the bank, plus their 100k income (pretty good going and well above average). They would have had spending power of 550k but now have 'just' 450k: i.e. 100k plus borrowings of 3.5 times income.

Even fairly well-off FTBers have less to play with due to the loan-to-income ratios. There will still be cash buyers and people whose parents are keen to part with a six-figure sum but the higher and of the market will surely be worst affected.

They would be paying a large percentage of their earnings on a mortgage if they they got more, 100k income with about 2k going towards a mortgage a month, any more is crazy. 100k isn't that much to be paying out nearly 33% on a mortgage. They would have child care costs if they had children either of about 900 euro a month.

makeorbrake

http://www.independent.ie/irish-news/central-bank-urged-to-relax-mortgage-rules-on-20pc-deposits-30674896.html


Finally the CB shows signs of doing something positive and immediately, it looks like .gov are going to fudge it!


Banana republic in action...