Central Bank to limit amount banks lend for home purchase

matt-dublin

Cuddlesworth wrote: »

Thats not what he meant and you know it.

"that the number of first-time buyers taking out loans in January was up by 38% on the same month last year, and the average loan-to-value they were borrowing had increased from 80% to 82%."

Facing 20% year on year increases in certain markets, coupled with the possibility of another crash it is in Irelands best interests to curb the massive price increases and ensure that any more crashes don't cripple the banks loan books. Since both the purchasers and the banks seem incapable of actually doing that, so its up to the regulator to put caps on the market.

The market was already stabilising. There is no need to introduce such a heavy measure.

And that is what he meant

makeorbrake

matt-dublin wrote: »

You do realise that all of this won't lower hourlong prices??

Sure look at London where a dingy 1 bed flats in Balham go for over a million pounds!!! 3 bed houses in excess of several million. For absolute sh1tholes!

Dublin isn't London. By all means, use any other city to make your comparison but leave London out of it.

Larry Wildman wrote:

The heartlessness of some people is breathtaking.

You have to be joking, right? I'd have no problem letting people make their own (major) mistake in this regard if it didn't have an impact on everyone else! i.e. more rational, prudent individuals should not be impacted due to the financial irresponsibility of others.

Even if house prices don't fall, it would be better for most people if they grew by 5% instead of 10%. (They might fall, who knows...)

Apart from people trying to buy a house this/next year, think of someone who is 18/19 doing their Leaving Cert. What's the market going to look like in ten years if they are looking to buy? Left unchecked, maybe we'll have 10 years of runaway growth; maybe it'll be a proper bubble; maybe it'll burst within 10 years, maybe not.

The best option for the country/society is slow, steady rises. And for that 18 year old to know now he will need to save a large deposit.

I take your point that this is a bit sudden/harsh on those who were pretty much ready to buy in the coming months. However, I can't see how the Central Bank could have given more advance warning as it would have led to a frenzy ahead of implementation. It probably has bumped up activity and prices this quarter but if they said this was coming in on Jan 1, 2016, there would be a proper surge next year and then a real slump from overinflated prices - and a new generation of negative equity mortgages.

I think it was Karl Whelan who noted that some countries use these measures flexibly in the sense that they loosen up when prices are falling. That's not such a bad option.

Mr.McLovin

Deleted User wrote: »

I think it was Karl Whelan who noted that some countries use these measures flexibly in the sense that they loosen up when prices are falling. That's not such a bad option.

It would be abused here if politicians are in charge of it though, we can't even trust ourselves tbh

makeorbrake

Mr.McLovin wrote: »

It would be abused here if politicians are in charge of it though, we can't even trust ourselves tbh

This thread stands testament to that - and it's not just politicians that can't be trusted....in which case, just leave it fully implemented.

matt-dublin

makeorbrake wrote: »

Dublin isn't London. By all means, use any other city to make your comparison but leave London out of it.
You have to be joking, right? I'd have no problem letting people make their own (major) mistake in this regard if it didn't have an impact on everyone else! i.e. more rational, prudent individuals should not be impacted due to the financial irresponsibility of others.

Why shouldn't inuse London, it's a perfect example of over priced property when you have a dingy flat that 30 miles away from the city which will likely leave you with pneumonia?

And guess what drives the prices there, wait, renting and landlords. That dingy one bed in Balham is over £2000 a month in rent.

By comparison, a 1200 3 bed semi in Dublin 18 is what? €400k/£300k
Again 10-20 minutes from everywhere with dart/luas/bus routes everywhere.

For 300k in the London ud end up with a 4 hour daily commute before even having to pay congestion charges.

Mr.McLovin

Mr.McLovin wrote: »

It would be abused here if politicians are in charge of it though, we can't even trust ourselves tbh

I'm fine with the CB's proposal as is but if they are looking for a 'compromise'...

If there was a set formula for it which was controlled by the Central Bank then it could possibly be done independently. The banks will already be able to go outside the 80% LTV limit on 15% of mortgages. Maybe if there were two consecutive quarters of price drops this leeway could be loosened to 20%.

Or something. I'm making that up! But I agree it couldn't be left in the hands of politicians. That would be the end.

gaius c

Larry Wildman wrote: »

I have a friend whose circumstances are as follows:

She and her husband bought an apartment before they were married. They lived in it until they had two kids. By that time, the economic crisis meant that their apartment was in negative equity so they were stuck with it but it was totally unsuitable for their needs. So they rented a house. They are now paying pretty sizeable rent, paying a hefty amount of tax on their rental income, paying high childcare costs and still managing to save a deposit for a house. Renting long term doesn't suit them because of the uncertainty around being turfed out year on year. Rents are also going through the roof and will go higher because of these measures. This impacts on their ability to save - A vicious circle so to speak.

They almost have 10% of the purchase price for a home in the area where their children are in school. For them, this measure is devastating - They are being forced to rent when they don't want to. They are accidental tenants and accidental landlords. Prices won't fall (they didn't fall in New Zealand when this was brought in). Why should my friends be prevented from buying a house? They have never been out of work, despite the recession. They earn good money. A subsequent fall in the value of their house won't really bother them because it's a home for life.

What I see in the country is an infrastructure that seems designed to support wasters and scroungers and to frustrate and make life difficult for people who just try to do their best.

If the 20% rule had been in place when they bought the apartment, they would be in less negative equity now, possibly in positive equity actually.

makeorbrake

matt-dublin wrote: »

Why shouldn't inuse London, it's a perfect example of over priced property

London is a centre of financial services internationally -at a completely different level than Dublin. Like I said, by all means use any other city that's remotely comparable to make your point but don't use London.

gaius c

makeorbrake wrote: »

London is a centre of financial services internationally -at a completely different level than Dublin. Like I said, by all means use any other city that's remotely comparable to make your point but don't use London.

No no. It's perfectly reasonable to compare the largest city in western Europe (and the EU), a genuine honest to god megacity with the 3rd smallest capital city in the EU, which is approx the 53rd or 54th largest city in Europe.

Michael D Not Higgins

matt-dublin wrote: »

The market was already stabilising. There is no need to introduce such a heavy measure.

And that is what he meant

No it's not what I meant, I said average not standard.

20% is a good level to aim for, as demostrated internationally among many markets and pointed out by the CBI. The UK market has similar problems to Ireland, and the IMF have warned them of a housing bubble.

http://www.bbc.co.uk/news/business-27731567

It also called on the Bank of England to enact policy measures "early and gradually" to avoid a housing bubble.

jay0109

matt-dublin wrote: »

Why shouldn't inuse London, it's a perfect example of over priced property when you have a dingy flat that 30 miles away from the city which will likely leave you with pneumonia?

And guess what drives the prices there, wait, renting and landlords. That dingy one bed in Balham is over £2000 a month in rent.

By comparison, a 1200 3 bed semi in Dublin 18 is what? €400k/£300k
Again 10-20 minutes from everywhere with dart/luas/bus routes everywhere.

For 300k in the London ud end up with a 4 hour daily commute before even having to pay congestion charges.

a 1,200 sq ft semi in D18 for 400k and it's 10-20mins from everywhere!!!! This thread is getting delusional on so many levels

Mr.McLovin

matt-dublin wrote: »

Sure look at London where a dingy 1 bed flats in Balham go for over a million pounds!!! 3 bed houses in excess of several million. For absolute sh1tholes!

London is a metropolis there is absolutely no comparison, actually there probably is only a handful of cities in the world would be comparable

SpaceTime

makeorbrake wrote: »

Dublin isn't London. By all means, use any other city to make your comparison but leave London out of it.
You have to be joking, right? I'd have no problem letting people make their own (major) mistake in this regard if it didn't have an impact on everyone else! i.e. more rational, prudent individuals should not be impacted due to the financial irresponsibility of others.

I agree, there are too many comparisons being made with huge cities like London, NYC, Paris, Madrid, etc all of which are multiple times bigger than Dublin and have metropolitan / urban zones larger than the entire Island of Ireland population wise.

Compare Dublin to maybe Brussels (bit of a huge conurbation though so not really comparable), Amsterdam, Copehnagen, Oslo, Stockholm, Marseilles, Toulouse, Lille, Bordeaux, etc.. it's in that kind of size range.

In a UK context, Glasgow's probably the closest to it population-wise as all the English cities have much, much larger hinterlands and tend to be a conurbation of medium towns outside the city itself.

Dublin compares quite well with the regional French large cities though, similar population spread.

Cork fits in somewhere about the size of Aberdeen and about 2/3 the size of Belfast.

I think sometimes we forget that the Cork-Dublin motorway and train service actually compares extremely well to the Glasgow-Aberdeen connections or to the Bordeaux-Périgueux connections. That's basically what it's equivalent to. Not London-Manchester or Paris-Lyon.

kippy

Fkall wrote: »

This simple fact is often forgotten.

In our parents generation, those earning less than the average industrial wage rented from the country/city council.

Indeed they did. Rented or got a mortgage via the council I believe.

Talk of social housing and assistange from other groups (local authorities) as well as telling people to rent in order to avoid falling foul of these new rules is well and good but the reality is the state is in a mess when it comez to providing social housing as it is, rents are still only going one way and right now there are major issues in providing viable alternatives to people who will not be able to buy in future.

The Spider

SpaceTime wrote: »

I agree, there are too many comparisons being made with huge cities like London, NYC, Paris, Madrid, etc all of which are multiple times bigger than Dublin and have metropolitan / urban zones larger than the entire Island of Ireland population wise.

Compare Dublin to maybe Brussels (bit of a huge conurbation though so not really comparable), Amsterdam, Copehnagen, Oslo, Stockholm, Marseilles, Toulouse, Lille, Bordeaux, etc.. it's in that kind of size range.

In a UK context, Glasgow's probably the closest to it population-wise as all the English cities have much, much larger hinterlands and tend to be a conurbation of medium towns outside the city itself.

Dublin compares quite well with the regional French large cities though, similar population spread.

Cork fits in somewhere about the size of Aberdeen and about 2/3 the size of Belfast.

I think sometimes we forget that the Cork-Dublin motorway and train service actually compares extremely well to the Glasgow-Aberdeen connections or to the Bordeaux-Périgueux connections. That's basically what it's equivalent to. Not London-Manchester or Paris-Lyon.

London may be a bit of a stretch, but those other cities you mention are an even bigger stretch. A few things need to be taken into account when comparing Dublin to other cities in Europe and not just the demographic size.

Dublin's/Ireland's main export markets are with the UK and US, more than any other European country, so you really need to look west not east when making comparisons. The other thing that needs to be taken into account and it's a big one, is that Dublin is pretty much established as the technology headquarters for all the big players, Facebook, Google, SAP, Intel, Groupon...

I could go on but you get the idea, and every indigenous Irish Tech company, now the fact of the matter is that these companies command high salaries, 50k is considered a low wage in these companies (outside of tech support).

On top of that you have the IFSC and the pharma companies.

Dublin is as has been pointed out smaller than London, however the amount of big firms located in Dublin paying large salaries dwarfs the other cities you mentioned, point me in the direction of the burdgeoning tech centre in Glasgow please.

Because Dublin is so much smaller and contains so much, house prices are going to be high, and possibly higher if more and more tech companies set up here, you only have to look at the Web Summit to get an idea of how many future companies are looking towards Dublin.

Shares are given to employees in tech companies all of them have share save schemes which allows people to get big deposits together much quicker than saving alone.

In terms of property try buying a house or apartment in San Francisco and you'll see how much room there could be left for prices to rise. I think Dublin prices are going to be beyond the average worker for the forseeable future.

Deleted User

Deleted User wrote: »

The best option for the country/society is slow, steady rises. And for that 18 year old to know now he will need to save a large deposit.

As housing is a social good, and high house prices simply represent a transfer of money from working people to landowners and speculators, I'd like to see a permanent fall in the price of housing.

It would also be good for the economy and the mental health of the average 18 year old if they were not always aware of the large deposit he or she will need to save before having children.

Larry Wildman

[Deleted User] wrote: »

I've a friend who doesn't earn much, pays extortionate rent and has three kids. Yet he has saved 5% of the house he wants (a 4-bed detached in Howth). Your 10% rule discriminates against him and is an outrage.

A ridiculous contribution.

Your "friend" hasn't seen the goalposts moved mid-game.

10% works fine and worked fine in Ireland.

Greyian

Larry Wildman wrote: »

A ridiculous contribution.

Your "friend" hasn't seen the goalposts moved mid-game.

10% works fine and worked fine in Ireland.

During the boom, 100%+ mortgages were on offer.

The goalposts have been moved for Ixelles' friend...as they should have been.

Michael D Not Higgins

Larry Wildman wrote: »

A ridiculous contribution.

Your "friend" hasn't seen the goalposts moved mid-game.

10% works fine and worked fine in Ireland.

Obviously it doesn't and it hasn't. The numbers of mortgage arrears and negative equity properties demonstrates that. LTI may be a more suitable means for determining the long term affordability of individual loans but LTV protects the system as a whole.

Greyian

Greyian wrote: »

During the boom, 100%+ mortgages were on offer.

The goalposts have been moved for Ixelles' friend...as they should have been.

I was, of course, being facetious - as you both probably realised but just in case someone lands on that page and thinks I was being...ridiculous.

Larry, I've acknowledged that it's a shock for a small group of people who were about to buy with 10% deposit. But I also think it's impossible to give too much advance notice because it would cause a mini-bubble and bust - which is not good for them either. They either wait or buy something else. Upsetting when they've been building up to it, obviously. But policy is drafted to serve the greater good rather than the hard cases.

Deleted User wrote: »

As housing is a social good, and high house prices simply represent a transfer of money from working people to landowners and speculators, I'd like to see a permanent fall in the price of housing.

It would also be good for the economy and the mental health of the average 18 year old if they were not always aware of the large deposit he or she will need to save before having children.

What do you mean by permanent fall? If you mean you'd like to see house prices fall and then stay stable, I'm with you. And I think these measures will help more than hinder.

I don't really understand the other part. Why would you not want young people to be aware of this?

Greyian

Deleted User wrote: »

I was, of course, being facetious - as you both probably realised but just in case someone lands on that page and thinks I was being...ridiculous.

Larry, I've acknowledged that it's a shock for a small group of people who were about to buy with 10% deposit. But I also think it's impossible to give too much advance notice because it would cause a mini-bubble and bust - which is not good for them either. They either wait or buy something else. Upsetting when they've been building up to it, obviously. But policy is drafted to serve the greater good rather than the hard cases.



What do you mean by permanent fall? If you mean you'd like to see house prices fall and then stay stable, I'm with you. And I think these measures will help more than hinder.

I don't really understand the other part. Why would you not want young people to be aware of this?

I assumed you were being facetious, I was just trying to re-iterate the point (which I believe is the one you were making), that any policy change will move the goalposts for some person/group of people.

As for Orinoco's post, I'd assume he meant that 18-year-olds shouldn't be aware of needing a huge deposit. They should know they need a deposit, and they should know what that deposit will be (approximately, obviously there will be fluctuations), but that the deposit shouldn't ever reach the stage where it's really daunting, because it would mean house prices have risen too far.

Larry Wildman

gaius c wrote: »

If the 20% rule had been in place when they bought the apartment, they would be in less negative equity now, possibly in positive equity actually.

But it wasn't.

So introducing this measure "big bang" style is shafting them.

Phasing it in would make more sense.

Greyian

Greyian wrote: »

I assumed you were being facetious, I was just trying to re-iterate the point (which I believe is the one you were making), that any policy change will move the goalposts for some person/group of people.

As for Orinoco's post, I'd assume he meant that 18-year-olds shouldn't be aware of needing a huge deposit. They should know they need a deposit, and they should know what that deposit will be (approximately, obviously there will be fluctuations), but that the deposit shouldn't ever reach the stage where it's really daunting, because it would mean house prices have risen too far.

But isn't it better for them to have to borrow less in the long run if houses are generally affordable?

If a new bubble goes unchecked, house prices could be at (inflation-adjusted) 2007 levels by the time today's 18-year-olds are looking to buy. Whereas this new measure has the potential to cool things off before it's out of control.

I suppose the question is which of these two scenarios are preferable (and I admit I'm exaggerating/guessing just to illustrate the point):

- To have to save 35k and borrow 315k for a 3/4-bed house costing 350k
- To have to save 50k and borrow 200k for a 3/4-bed house costing 250k

I'm house-hunting and I want it yesterday(!) but, emotion aside, the logical option is the one where we wait a bit longer but take on a lighter debt burden.

I hear friends/family telling me to buy now on the basis that 'mortgages are long anyway - 25 years, 35 years - it's not that big a deal'. Well, it is! It's the difference between freedom and/or retirement in my late 50s or late 60s.

Michael D Not Higgins

Larry Wildman wrote: »

But it wasn't.

So introducing this measure "big bang" style is shafting them.

Phasing it in would make more sense.

No matter how it's done, someone will complain about being shafted. Phasing it in will cause a boom of panic buying to get in before the door shuts. In fact, we've already seen on this forum the panic of people looking for mortgage approval before Christmas so they can buy in the new year under the old rules.

matt-dublin

[Deleted User] wrote: »

But isn't it better for them to have to borrow less in the long run if houses are generally affordable?

If a new bubble goes unchecked, house prices could be at (inflation-adjusted) 2007 levels by the time today's 18-year-olds are looking to buy. Whereas this new measure has the potential to cool things off before it's out of control.

I suppose the question is which of these two scenarios are preferable (and I admit I'm exaggerating/guessing just to illustrate the point):

- To have to save 35k and borrow 315k for a 3/4-bed house costing 350k
- To have to save 50k and borrow 200k for a 3/4-bed house costing 250k

I'm house-hunting and I want it yesterday(!) but, emotion aside, the logical option is the one where we wait a bit longer but take on a lighter debt burden.

I hear friends/family telling me to buy now on the basis that 'mortgages are long anyway - 25 years, 35 years - it's not that big a deal'. Well, it is! It's the difference between freedom and/or retirement in my late 50s or late 60s.

The point is the house prices won't drop for the foreseeable future.
The new rule favour investors and there's a shortage of supply.

While this is the case investors will buy up anything available and rent it back to the original prospective buyers for a healthy profit.

Until there's a hefty supply of 3 and 4 bed semis with decent gardens you will not see any price drops.

matt-dublin

Not to mention the building regulations changing to a minimum BER rating for all new builds ensures higher prices of new builds.

So basically everything is against the buyers.

Mr.McLovin

matt-dublin wrote: »

The point is the house prices won't drop for the foreseeable future.
The new rule favour investors and there's a shortage of supply.

While this is the case investors will buy up anything available and rent it back to the original prospective buyers for a healthy profit.

Until there's a hefty supply of 3 and 4 bed semis with decent gardens you will not see any price drops.

But that's just tough shít really, same goes for those who bought in the boom. Nobody is holding a gun to anybody's head.

There are currently 2750 3+ bed houses for sale in Dublin on myhome.ie, I'm sure one could find a house 3/4 bed house that they could afford but with some concessions on the area or we could keep pumping prices and borrowing as much as we can because that should make everything ok?

A lot of people are just going to have to face up to reality that the country is changing and it might not seem fair but that's life.

matt-dublin

Mr.McLovin wrote: »

But that's just tough shít really, same goes for those who bought in the boom. Nobody is holding a gun to anybody's head.

There are currently 2750 3+ bed houses for sale in Dublin on myhome.ie, I'm sure one could find a house 3/4 bed house that they could afford but with some concessions on the area or we could keep pumping prices and borrowing as much as we can because that should make everything ok?

A lot of people are just going to have to face up to reality that the country is changing and it might not seem fair but that's life.

That is just ridiculous, let me guess you have a house and don't want to
Buy anything in the near future. U also bought before the boom and are quite happy where you are??

The_Conductor

Its more than the 'higher end of the market' (as you define it) that has become unaffordable. A 20% deposit for an average house in Lucan is probably in the region of 50k now- even small little pokey holes are north of 200k- and a 3 bed townhouse with management charges/fees- is also gone well north of 200k in the West Dublin/North Kildare area.

House prices have shot up in the Pale- its not just a salubrious suburb thing.