Central Bank to limit amount banks lend for home purchase

The Spider

MarkAnthony wrote: »

It's possible to overstate the CGT exemption, but I do suspect the number of cash-buyers to drop off significantly next year. There will always be cash buyers but you'd be a bit strange to miss out of an exemption worth 33% of your potential profit.

Don't see it, that's aimed at investors to be honest, any actual home buyers ma not be what you'd call cash buyers, but I reckon there's easily enough with 20% to buy the available property.

AfterHrsProp

Its also important to remember the new regulations are not set in stone, if you can show a good savings history, a record of paying rent every month, a reasonable deposit & a strong salary you may not need 20% of your mortgage. The banks are looking at each customer on a case by case basis so if you show them at least some of the above, the new regulations may not apply to you.

MarkAnthony

The Spider wrote: »

Don't see it, that's aimed at investors to be honest, any actual home buyers ma not be what you'd call cash buyers, but I reckon there's easily enough with 20% to buy the available property.

Oh I don't disagree with you there, but I think cash buyers and the new CB rules have fueled the rise this year. Once the cash buyers are stripped out, I think the bottom of the market will stabalise, and frankly I think it already is (fingers and toes firmly crossed). I can only really comment for D7/8 but recently I've seen a few of things happen;

(i) A house with an asking price of 99K go for 160K+ with the sale agreeing very quickly. (In my view obviously an investor) Viewing were an hour long with small crowds. (D8)

(ii) Houses at the upper end of their value 250K bracket - not having offers on them when you're arranging viewings and the viewings being private/semi-private.

(iii) Houses which need renovating popping up but staying there and not selling which would seem to indicate people are being a bit more savvy. (D7)

Now my little forays are hardly statistically significant and it should be said that sub 300K you really are looking at houses with significant flaws. But we do seem to be hitting a ceiling in terms of property values in D7/8 (cheaper areas in D8). There seems to be only so far people will be pushed.

What I can see happening (and frankly already is) that property in D10/11/12 and eventually D15 see upwards pressure. I'm also sure the upper end has no end in sight but frankly anything is South Co. Dublin id out of my price range so I can't comment.

GinaI

AfterHrsProp wrote: »

Its also important to remember the new regulations are not set in stone, if you can show a good savings history, a record of paying rent every month, a reasonable deposit & a strong salary you may not need 20% of your mortgage. The banks are looking at each customer on a case by case basis so if you show them at least some of the above, the new regulations may not apply to you.

if have a strong salary you are in a position to save for 20%. why should you be exempt from the new rules?

MayBea

MayBea wrote: »

I am inclined to agree with matt-dublin...there is some possibility of 80% maximum might slow things down, but the effect would probably be minor to moderate (given that we will have the same portion of cash buyers in 2015).

According to The Irish Times (Wed, Aug 13, 2014):
The latest IBF/PwC Mortgage Market profile for the second quarter of the year shows that some 8,228 new mortgages were drawn down in the six months to June 30th. However, according to the Property Price Register, 15,435 properties were actually sold during this period, indicating that 47 per cent of all property purchases were funded without a mortgage.
On top of that (Independant, 27/11/2014 ):
Mr Honohan told an Oireachtas Committee yesterday... that last year 2013, the number of loans of more than 80pc to first-time buyers was 2,800

Therefore we have 15,435 properties sold in 6 months with only approx. 1,400 being sold to FTB with mortgages exceeding 80% LTV.
It would be right to say that around 9% of all purchases were made by the FTB with 85%-90% mortgages.

That comment from Honohan was an interesting one and does indeed suggest that the new rules won't have the devastating effect that some newspaper headlines would have us believe.

But it also makes me think the impact of the CGT exemption has been overlooked. On the one hand investors are getting terrible interest rates at the bank so are looking for somewhere to put their cash, but property is about to become much less appealing as they'll have to pay (I think) 33% take on any profit they make.

Michael D Not Higgins

MayBea wrote: »

I am inclined to agree with matt-dublin...there is some possibility of 80% maximum might slow things down, but the effect would probably be minor to moderate (given that we will have the same portion of cash buyers in 2015).

According to The Irish Times (Wed, Aug 13, 2014):
The latest IBF/PwC Mortgage Market profile for the second quarter of the year shows that some 8,228 new mortgages were drawn down in the six months to June 30th. However, according to the Property Price Register, 15,435 properties were actually sold during this period, indicating that 47 per cent of all property purchases were funded without a mortgage.
On top of that (Independant, 27/11/2014 ):
Mr Honohan told an Oireachtas Committee yesterday... that last year 2013, the number of loans of more than 80pc to first-time buyers was 2,800

Therefore we have 15,435 properties sold in 6 months with only approx. 1,400 being sold to FTB with mortgages exceeding 80% LTV.
It would be right to say that around 9% of all purchases were made by the FTB with 85%-90% mortgages.

And what percentage of non-FTB are at above 80%? This image shows a lot of what happened during the bubble and continues to threaten another if we don't let the Central Bank do their job.

The Spider

The Spider wrote: »

Don't see it, that's aimed at investors to be honest, any actual home buyers ma not be what you'd call cash buyers, but I reckon there's easily enough with 20% to buy the available property.

Investors are actual home buyers. The figures MayBea quoted suggest nearly half (47%) are cash-only purchases. Many are investors buying apartments but they also buy semi-detached houses to rent to students, families etc.

MarkAnthony

Deleted User wrote: »

But it also makes me think the impact of the CGT exemption has been overlooked. On the one hand investors are getting terrible interest rates at the bank so are looking for somewhere to put their cash, but property is about to become much less appealing as they'll have to pay (I think) 33% take on any profit they make.

+1 million

2-3% in a savings account if you're lucky or:

Buy 2 bed for 150K invest 50K in doing it up and furnishing it.
50K back in capital allowances over 8 years at 12.5% (87.5% of it back over 7 years)
Annual rent of c.15K * 7 = 105K
Assume a market increase of 10% per year = 389K sale price.

Obviously the 105K will be subject to tax although less the investment of the 50K the 239K won't be.

Obviously these are extremely rough figures and my tax law knowledge is limited, but you can't tell me those figures won't have caused some sort of gold rush.

allibastor

allibastor wrote: »

If you look at the rate of house in what would be considered the entry level house buying bracket it is nearly all snapped up by cash waiting buyers.

Any entry level house is now in the control of a LL who will use this to rent out, effectively removing the bottom level of housing, so people either need to rent longer to afford more, or end up moving out.

This is a bit of an exaggeration IMHO but your point is taken - there have been plenty of investors with cash buying-to-let. But this becomes a bit less attractive if they have to pay capital gains tax (which will be the case if they buy after Dec 31).

I keep seeing people predict that if prices dip sellers won't sell. Earlier this year when prices were rising some people (David McWilliams included) said sellers would hold off in a rising market because they reckon they'll get more for it next year.

Both can't be true.

Even when prices were falling year after year there were still some houses coming to market for various reasons - trading up, splitting up (family breakdown), packing up (emigration), bowing out (death).

2015: supply will be static; demand will be lighter (fewer investors; slightly fewer FTBs)

allibastor

Deleted User wrote: »

This is a bit of an exaggeration IMHO but your point is taken - there have been plenty of investors with cash buying-to-let. But this becomes a bit less attractive if they have to pay capital gains tax (which will be the case if they buy after Dec 31).

I keep seeing people predict that if prices dip sellers won't sell. Earlier this year when prices were rising some people (David McWilliams included) said sellers would hold off in a rising market because they reckon they'll get more for it next year.

Both can't be true.

Even when prices were falling year after year there were still some houses coming to market for various reasons - trading up, splitting up (family breakdown), packing up (emigration), bowing out (death).

2015: supply will be static; demand will be lighter (fewer investors; slightly fewer FTBs)

Yes, A bit of an exaggeration but if 47% of buyers are cash buyers it does put a spin on the stats.
I would like to see a break down of house value vs buyer statistics, I would imagine a lot of house buyers who are cash buyer will also be buying on the cheaper end of the scale.
Rent for a 2 bed in Dublin at 1200+ or rent for a 4 bed house at 1800+.
The price for purchase would be nearly double for the house as the apartment with only smaller gains to be made.

Agreed. I think that explains that particularly hefty increases in Dublin apartments - up 26.9% from Oct 2013 to Oct 2014.

It's the fastest growing sector of the market. It would probably be the 'fastest slowing' (!) sector if cash investors decide to do other more tax-efficient things with their cash e.g. lob it into their pension

MarkAnthony

Deleted User wrote: »

Agreed. I think that explains that particularly hefty increases in Dublin apartments - up 26.9% from Oct 2013 to Oct 2014.

It's the fastest growing sector of the market. It would probably be the 'fastest slowing' (!) sector if cash investors decide to do other more tax-efficient things with their cash e.g. lob it into their pension

Apartments are an interesting one.

I don't think these are being purchased by the same type of people that are buying houses. People buying houses are looking to keep them for the exemption period and then dispose of them at a profit, taking advantage of the bubble that's happening at the moment.

I think people buying apartments are looking for a longer term investment.

Open to correction/discussion ofc.

Maybe but what makes you think so?

Deco99

GinaI wrote: »

if have a strong salary you are in a position to save for 20%. why should you be exempt from the new rules?

I would suggest you have answered your own question. Because you are in a position to save the 20% quickly means you are less riskier than the person who cant, therefore they require the 20% upfront. I'd imagine it would be relative to the mortgage size. If you can easily afford the mortgage, then there wont be any hassle. The point alot of people seem to be missing is if you are struggling to save 20% and the mortgage repayments represent a large portion of your income then you may need saving from both a) yourself and b) a bank that has no problem with you spending as much as you can on a mortgage. In steps the Central Bank, a regulatory body to regulate.... followed by a Government in the back pocket of people who obviously got stung in the crash wanting to keep the prices of houses rising on the back of the working poor.

MarkAnthony

Deleted User wrote: »

Maybe but what makes you think so?

There isn't the demand for apartments from owner occupiers. I think they're seen as an investment and the yields on them are higher than houses and the hassle level a lot lower. Therefore I think they're being bought as pension plans rather than shorter term investments. I also think one needs to be careful of percentage rises. The limited number of apartments selling to individuals where cheaper than dirt 24 months ago.

Just my 2 cents.

MarkAnthony

MarkAnthony wrote: »

There isn't the demand for apartments from owner occupiers. I think they're seen as an investment and the yields on them are higher than houses and the hassle level a lot lower. Therefore I think they're being bought as pension plans rather than shorter term investments. I also think one needs to be careful of percentage rises. The limited number of apartments selling to individuals where cheaper than dirt 24 months ago.

Just my 2 cents.

Yeah, all true. Good point re the percentage rises being from a very low base. Friend of mine was buying an apartment in D1 recently - no interest in houses as the cheapest house he could hope for sub-200k was not in an area he'd want to buy. Deal done for cash, tenant found within days of getting keys.

When it came to bidding on a '150k' apartment, it was not a massive deal to end up paying 180k, even though that's a 20% increase on the asking. If he bought it next year he'd miss the CGT benefit so it was worth throwing a few extra quid at it this year. He'd have a different approach now (for any sale closing in 2015).

MayBea

Michael D Not Higgins wrote: »

And what percentage of non-FTB are at above 80%? This image shows a lot of what happened during the bubble and continues to threaten another if we don't let the Central Bank do their job.

This is unknown, unfortunately.. It is said that: The total number of Irish home mortgages issued in 2013 was 14,985, with 52% of it being the FTB loans.

Michael D Not Higgins wrote: »

... what happened during the bubble and continues to threaten another if we don't let the Central Bank do their job.

I agree with the latter point.

MayBea

The Spider wrote: »

There may be more supply eventually in Dublin, Cherrywood for example but that project is nearly a decade away from completion I would estimate.

This is an interesting one, The site has approval for a new town shopping centre, 3,800 apartments and houses. It also includes parks, schools and a health centre (The Irish Times).
They're claiming to build new homes on the vacant land as “quickly as possible” because of the city’s housing crisis.

The Spider

MayBea wrote: »

This is an interesting one, The site has approval for a new town shopping centre, 3,800 apartments and houses. It also includes parks, schools and a health centre (The Irish Times).
They're claiming to build new homes on the vacant land as “quickly as possible” because of the city’s housing crisis.

Any developer will have to get a great return, as this will be the biggest development in years in Ireland, and by the time planning permission, costs etc are all accounted for let alone getting the builders to do the work, we'll be years away from it getting finished.

Prices are rising but you do hear builders saying they can't build for less than x amount, so I reckon there must be a substantial return on any investment here.

Michael D Not Higgins

MayBea wrote: »

This is unknown, unfortunately.. It is said that: The total number of Irish home mortgages issued in 2013 was 14,985, with 52% of it being the FTB loans.

I disagree that it's unknown. You can infer it from the graphs supplied. 2013 had only 50% of mortgages below 80% LTV. The 80-90% has replaced the 90+% of the year of the bubble bursting but we still have a problem with deposits.

MayBea

Michael D Not Higgins wrote: »

You can infer it from the graphs supplied. 2013 had only 50% of mortgages below 80% LTV.

Thank you, I can see it now, indeed.
There is one curious fact about this (if all the above data is correct), which is that almost 65% of the non-FTB in 2013 have loans of more than 80pc LTV.

Michael D Not Higgins

MayBea wrote: »

Thank you, I can see it now, indeed.
There is one curious fact about this (if all the above data is correct), which is that almost 65% of the non-FTB in 2013 have loans of more than 80pc LTV.

I would imagine with younger FTBs they're more willing to give a higher LTI in exchange for a lower LTV, the risk being offset by the fact that they will be likely to increase their income over the years. The older people are further in their careers and are unlikely to get as many pay rises, thus increasing the risk for high LTI. The graphs don't show the breakdown between the combined LTIs and LTVs which may have shown what I describe above.

As an example, someone trading up their house, having paid off half the mortgage. Let's say someone bought at 100k, sold at 200k, they get 150k, use 50k as a deposit for a 500k house. They've gotten married in the meantime and they now fulfil the 3.5 LTI for with their increased income, and use the rest of the money for extension, pension top up, etc.

Skelp

The Spider wrote: »

Any developer will have to get a great return, as this will be the biggest development in years in Ireland, and by the time planning permission, costs etc are all accounted for let alone getting the builders to do the work, we'll be years away from it getting finished.

Prices are rising but you do hear builders saying they can't build for less than x amount, so I reckon there must be a substantial return on any investment here.

672 posts......almost all of them pimping the property market.

Are you sure you are not Charlie Weston in disguise!!

The Spider

Skelp wrote: »

672 posts......almost all of them pimping the property market.

Are you sure you are not Charlie Weston in disguise!!

Nope not Charlie, when I see a realistic argument around here about it falling I'll be all ears, but all of it for the most part is wishing for something and regret and anger over missing the bottom!

By the way I've been pretty much on the button with everything I've said!

The_Conductor

Guys- back ontopic- and less of the personalising of posts. If you can't stay ontopic- I'm closing this thread. Regards, The_Conductor

Just a couple of days left to get your submissions in - consultation closes December 8. Here is the consultation paper again for those who are interested.

Not much in the newspapers about this since Honohan's appearance at the Oireachtas Committee last week. Noonan weighed in to say he thinks it's a bit harsh on FTBs. Jim Power says it's 'prudent and sensible'. Nothing new really.

----

Interesting stats on mortgage lending this week (down 1/4 billion euro in October). That, coupled with Honohan's explanation of how many people would have been affected had these rules been in place last year (<3,000), makes me think the impact might not be as big as earlier expected.

I reckoned these lending limtss would be a game-changer, undoing some of the runaway price rises we've seen this year, but now wonder if it'll just be a mild dampener. Time will tell...

It looks like the boom/bubble has been driven by cash. A good chunk of this is probably from investors. The end of the CGT exemption will make the market less attractive to investors starting Jan 1 so, if anything, that might be of more significance to 2015 prices. (And, yes, that's as much hope as it is expectation!)

Michael D Not Higgins

Deleted User wrote: »

Interesting stats on mortgage lending this week (down 1/4 billion euro in October). That, coupled with Honohan's explanation of how many people would have been affected had these rules been in place last year (<3,000), makes me think the impact might not be as big as earlier expected.

That was just FTBs that would have been affected. Only half of mortgages in the last few years were 80% LTV or lower. If now it has to be 15% maximum for LTVs greater than that we're looking at 35% of all mortgages being affected which is 5000-6000 mortgages a year.

The reality though is the 15% is based on value of the total not in terms of numbers of mortgages so is likely to be lower again (I'm imagine those on high incomes are a lower risk and more likely to be buying higher value properties at a higher LTV). That means it could come down to <10% of the total and affect another thousand mortgages.

This doesn't even consider LTI which is an area where young lower income applicants are likely to get income increases and prove lower risk at a LTV of 80%, but an LTI greater than 3.5.

Coupled together I reckon it will be nigh on impossible for the average person to justify exceeding the limits and it will have a positive impact on keeping the price increases in check.

gaius c

Deleted User wrote: »

Just a couple of days left to get your submissions in - consultation closes December 8. Here is the consultation paper again for those who are interested.

Not much in the newspapers about this since Honohan's appearance at the Oireachtas Committee last week. Noonan weighed in to say he thinks it's a bit harsh on FTBs. Jim Power says it's 'prudent and sensible'. Nothing new really.

----

Interesting stats on mortgage lending this week (down 1/4 billion euro in October). That, coupled with Honohan's explanation of how many people would have been affected had these rules been in place last year (<3,000), makes me think the impact might not be as big as earlier expected.

I reckoned these lending limtss would be a game-changer, undoing some of the runaway price rises we've seen this year, but now wonder if it'll just be a mild dampener. Time will tell...

It looks like the boom/bubble has been driven by cash. A good chunk of this is probably from investors. The end of the CGT exemption will make the market less attractive to investors starting Jan 1 so, if anything, that might be of more significance to 2015 prices. (And, yes, that's as much hope as it is expectation!)

The market was starting to stall anyway as prices had run out of reach of buyers. Right now, it's the last of the CGTE cash buyers being mopped up (IT had an article talking about 3 sisters in Clare ganging up to buy a house all cash!) and god only knows what's happening with the mortgage buyers. If they get 10% approval now, they could stay bidding up prices into next year but not able to close.

Stock is absolutely appalling anyway.

dynamited

Estate agent got in touch with me today (haven't heard from him in months ) asking if I was still interested in a 3 bed semi I enquired about in May..It was on the market for 220k it's still for sale


Why contact me out of the blue eh



hmmmmm

mr_seer

dynamited wrote: »

Estate agent got in touch with me today (haven't heard from him in months ) asking if I was still interested in a 3 bed semi I enquired about in May..It was on the market for 220k it's still for sale


Why contact me out of the blue eh



hmmmmm

EA working on a Sunday? Desperate indeed