Central Bank to limit amount banks lend for home purchase

dr.fuzzenstein

dr.fuzzenstein wrote: »

The property bubble was not caused by 90% mortgages.
It was caused by speculators, banks lending way, way over what they should have lent based on income and 110% mortgages.
I myself was lent way more over what I should have been lent, the bank took future earnings increases into account and non-existent rent from letting out rooms in a house I didn't even own yet. Then I took out a loan for the deposit. ("Is this for a holiday and car and NOT a deposit" they asked and I said "eeerrrm, yeah, why not?" At the same time the limit on my credit card was increased without my asking. It was duly maxed out).
That sort of thing is not great. I lived to tell the tale, I still have my house, most debt is paid and I'm not in negative equity. So it's not all doom and gloom.

Maybe I'm misreading this but the way you have phrased this puts the responsibility on the banks. They lent you way too much, the bank took account of future earnings and rent from letting a room in the new house. They lent you the deposit and increased your credit limit.

You might have said: I borrowed way too much. I speculated about my earnings to get more credit and said I'd let a room in the house. I lied to the bank when taking a loan for the deposit. And then I maxed out my credit card. You also say you've paid most of your debts. Good for you. Hope you'll be paying the rest.

Anyway, you reckon speculators caused the crash under the old 'lend/borrow loads' regime. And that a new 'lend/borrow prudently' regime would also favour speculators. Can both of those assertions be true?

To be honest, your tale just screams 'Regulate this system pronto'.

gaius c

MouseTail wrote: »

Are these 1500 properties vacant or tenanted?

It does not give a breakdown of where in the country the properties are or whether they are currently idle or rented.

Linky

I know of a few empty ones. Viewed one last night. It's been empty for at least 4 months, possibly longer.
Edit: Not NAMA houses btw. The above are bank houses. Waste of time looking at NAMA houses anyway.

johnp001

gaius c wrote: »

Linky

I know of a few empty ones. Viewed one last night. It's been empty for at least 4 months, possibly longer.

See this page nama-house-price-list
It links to county by county lists of NAMA property for sale - last updated Nov 14. The descriptions don't clearly identify the exact property in a lot of cases but if you had knowledge of a particular area it could be useful.

gaius c

Deco99 wrote: »

So people who cant afford to borrow are coming on here to complain they are not allowed borrow? Or at least if not themselves that others who dont earn enough should be encouraged and allowed get into massive unaffordable debt? The media spin has well and truly wotked on this one.

Truthfully, I don't think the "FTBs" complaining about the rules are believable. That letter Edna released simply isn't plausible. The wailing and gnashing of teeth is actually coming from folk who have "interests" in property, either owning it or making money on the buying & selling of it.

A trade unionist wanting more expensive housing just takes the biscuit and shows how nuts Ireland is with respect to property.

johnp001

gaius c wrote: »

Truthfully, I don't think the "FTBs" complaining about the rules are believable. That letter Edna released simply isn't plausible. The wailing and gnashing of teeth is actually coming from folk who have "interests" in property, either owning it or making money on the buying & selling of it.

A trade unionist wanting more expensive housing just takes the biscuit and shows how nuts Ireland is with respect to property.

It is very disingenuous of those with vested interests in property to be protesting these new rules under the guise of championing the interests of the downtrodden FTB/low income family/etc...

gaius c

johnp001 wrote: »

It is very disingenuous of those with vested interests in property to be protesting these new rules under the guise of championing the interests of the downtrodden FTB/low income family/etc...

Massively so. It's the screeching that really gives away just how scared these rules are making them. There's virtually no balance whatsoever in any coverage, which isn't a surprise when you consider that our banking system passed the stress tests based on paper valuations of our housing stock.

If there was even an element of "well sensible lending limits are all well & good but..." to the debate then it would be a bit more credible but the commentators seem to be climbing over each other to outdo themselves in hysteria.

We've had price rises at rates higher than during the original bubble. We have affordability even lower than at the peak of the bubble yet the establishment are fighting tooth & nail to prevent sensible lending limits.

P. Breathnach

bluesteel wrote: »

bizarre logic.

The land is the most volatile part of the price - builders won't build if the market value is less than cost of materials, labour etc. but the price of land is not fixed!

If you were asked to value an empty site how would you do it? You'd get the market value of a completed house and site - and subtract the costs like materials, building, solicitor etc. It's not rocket science

It's not rocket science; it's economics.

Most average Joes and Janes don't pretend to understand rocket science, but they are quite comfortable making pronouncements of economic matters - no matter how limited their understanding is of the laws of supply and demand.

There is an element of the laws of supply and demand that is troublesome: expectations. If those who own building land are given a basis to believe that the price of land will rise, then they may hold on to that land. If the CB proposals become decisions, the market for land may crystallise, and those holding land banks might have to take the price hit that they have been hoping to avoid.

Deco99

I am sick of this already, the longer the rules are held off being introduced the longer the vested interests have to get involved. Jack O'Connor claiming that the builders wouldnt build was ludicrous, He is saying builders wont build for the huge profits they used to earn, but there is still profit to be made and someone will fill that gap, as has been said, the price of land and scarcity will only remain high as long as the expectation of a price rise is there, cool that expectation and that comes down, most wont be able to sit on it forever. Like any other industry, the construction one will have to adapt. Scandalous that our National Broadcaster and the Property papers are constantly putting this back up to try and pressurise a change of policy. Greed is a terrible sin.

Just to clarify, I am hopefully, a FTB, I see the 20% Deposit as an opportunity for me to pay less back to the banks over the lifetime of loan. I had the 10% but am probably a good bit from the 20% depending on what i get. But 20% get you a lower rate, as well as less overall to pay back. What I see out in the market is property that is overvalued because enough people can get loans to outbid each other. An end to that could bring back some value to the market and a chance to actually get onto the property ladder without being chained to it. Paying my entire disposable income on repayments is not a life i envisage for myself.

Kinet1c

Bandwagon folk.. "We want regulation, just don't regulate us, regulate people who come after us"... :rolleyes:

The Spider

Deco99 wrote: »

I am sick of this already, the longer the rules are held off being introduced the longer the vested interests have to get involved. Jack O'Connor claiming that the builders wouldnt build was ludicrous, He is saying builders wont build for the huge profits they used to earn, but there is still profit to be made and someone will fill that gap, as has been said, the price of land and scarcity will only remain high as long as the expectation of a price rise is there, cool that expectation and that comes down, most wont be able to sit on it forever. Like any other industry, the construction one will have to adapt. Scandalous that our National Broadcaster and the Property papers are constantly putting this back up to try and pressurise a change of policy. Greed is a terrible sin.

So why didn't builders build since the crash, I'm sure there would have been some profit, in fact land prices were more than likely cheaper in 2012, the reason there is a supply shortage is because no houses were built for six years.

Deco99

The Spider wrote: »

So why didn't builders build since the crash, I'm sure there would have been some profit, in fact land prices were more than likely cheaper in 2012, the reason there is a supply shortage is because no houses were built for six years.

Possibly because some of the following:

Banks not lending at all. We now need to stop them from going too far.

People holding out until prices went up due to expectations.

Wages being cut purchasers. Consumer confidence. High wages for contractors.

El_Dangeroso

Exactly, credit is still ridiculously tight for builders.

We have credit tightening on the supply side and credit loosening on the demand side when the exact opposite needs to be taking place.

dr.fuzzenstein

[Deleted User] wrote: »

Maybe I'm misreading this but the way you have phrased this puts the responsibility on the banks. They lent you way too much, the bank took account of future earnings and rent from letting a room in the new house. They lent you the deposit and increased your credit limit.

You might have said: I borrowed way too much. I speculated about my earnings to get more credit and said I'd let a room in the house. I lied to the bank when taking a loan for the deposit. And then I maxed out my credit card. You also say you've paid most of your debts. Good for you. Hope you'll be paying the rest.

Anyway, you reckon speculators caused the crash under the old 'lend/borrow loads' regime. And that a new 'lend/borrow prudently' regime would also favour speculators. Can both of those assertions be true?

To be honest, your tale just screams 'Regulate this system pronto'.

Yes and yes and I'm grand, ta very much.
I'm using myself as a bad example and I would do it all again. The resulting house is very nice.
I'm saying that this country doesn't have a middle gear, no common sense, no moderation. Its either houses for all and sundry or houses only for the cream of society.
Even in the bad old days things would not have been as bad if the banks had kept to the tiny bit of regulation that was there. But its all hysteria and "won't somebody please think of the children". It swings to extremes on both ends. Its sometimes quite funny to watch.

mickman

El_Dangeroso wrote: »

Exactly, credit is still ridiculously tight for builders.

We have credit tightening on the supply side and credit loosening on the demand side when the exact opposite needs to be taking place.

how do you know this ?

jay0109

mickman wrote: »

how do you know this ?

Tom Parlon was on the radio recently asking the Govt to step in and provide funding/guarantees saying Builders were unable to get loans from the Banks

El_Dangeroso

mickman wrote: »

how do you know this ?

Because I was involved in a public tendering process for a new building and many bids fell through due to failure to raise inadequate bond.

Greyian

I thought it would be interesting to look at the Property Price Register website, to see what kind of deposit/salary people would need under the new rules (20% deposit/3.5 times income, obviously subject to changes though).

For the period October to December 2014, there were 4376 entries for Dublin, excluding any transactions marked as "not full market value". These had an average sale price of €364,604.08, and a median selling price of €269.127.00.

However, some of these entries were for purchases of multiple properties at once (e.g. a €20,216,517.86 payment for 75 apartments at Lansdowne Gate). Obviously, this skewed the average and the median higher than they actually are. I tried to adjust for this, by dividing the total expenditure on property (€1,595,507456) by the adjusted number of sales (i.e. counting that €20m payment as 75 different apartments, each sold at €20m/75), which gave total properties sold of 4820.
Note: I may have missed some of the multiple property purchases, so the revised average I give could actually still be higher than the real average.
Using the new properties sold figure, the average selling price would fall 9.2%, from €364,604.08 to €331,086.83). There would also be a (much smaller) adjustment to the median, but I will need to manually create entries for each of the multiple properties to calculate the exact change.

But what do these figures actually mean?
Well, we can use the original median figure for our calculation, along with the revised average figure, as it more accurately reflects reality than the original average figure found.
If the average property price is €331,086.83, the minimum deposit required to purchase the average property is €66,217.37.
That would leave a mortgage figure of €264,869.47. To drawdown a mortgage of this size, a minimum (combined) salary of €75,676.99 would be required.
It would be fair to say, however, than the median property price is far more relevant.
If the median property price is €269,127.00, a minimum deposit of €53,825.40 would be required.
That would leave a mortgage figure of €215,301.60. To drawdown a mortgage of this size, a minimum (combined) salary of €61,514.74 would be required.

So, to purchase a median property in Dublin, you will need a deposit of €53,825.40, along with a combined salary of €61,514.74.
These figures are a far cry from some of the statements made so far in this thread, suggesting people would need salaries of €150,000 (or higher) to afford to purchase in Dublin.
What these figures, also omit, is the fact that many first-time buyers would be expected to purchase a property that is regarded on being on the lower-end of the "property ladder", before trading up. As such, it isn't unreasonable to expect them to purchase lower-cost properties, thus requiring lower deposits and lower salaries in order to purchase. The difficulty of raising a larger deposit (when "trading up") should be less of an issue, as their deposit should be derived (partially, at least) from the property they are selling (as they have increased their equity while repaying the mortgage).

El_Dangeroso

Well done, nothing like some hard figures to cut through the emotional polemic.

johnp001

Greyian wrote: »

I thought it would be interesting to look at the Property Price Register website, to see what kind of deposit/salary people would need under the new rules (20% deposit/3.5 times income, obviously subject to changes though).

For the period October to December 2014, there were 4376 entries for Dublin, excluding any transactions marked as "not full market value". These had an average sale price of €364,604.08, and a median selling price of €269.127.00.

However, some of these entries were for purchases of multiple properties at once (e.g. a €20,216,517.86 payment for 75 apartments at Lansdowne Gate). Obviously, this skewed the average and the median higher than they actually are. I tried to adjust for this, by dividing the total expenditure on property (€1,595,507456) by the adjusted number of sales (i.e. counting that €20m payment as 75 different apartments, each sold at €20m/75), which gave total properties sold of 4820.
Note: I may have missed some of the multiple property purchases, so the revised average I give could actually still be higher than the real average.
Using the new properties sold figure, the average selling price would fall 9.2%, from €364,604.08 to €331,086.83). There would also be a (much smaller) adjustment to the median, but I will need to manually create entries for each of the multiple properties to calculate the exact change.

But what do these figures actually mean?
Well, we can use the original median figure for our calculation, along with the revised average figure, as it more accurately reflects reality than the original average figure found.
If the average property price is €331,086.83, the minimum deposit required to purchase the average property is €66,217.37.
That would leave a mortgage figure of €264,869.47. To drawdown a mortgage of this size, a minimum (combined) salary of €75,676.99 would be required.
It would be fair to say, however, than the median property price is far more relevant.
If the median property price is €269,127.00, a minimum deposit of €53,825.40 would be required.
That would leave a mortgage figure of €215,301.60. To drawdown a mortgage of this size, a minimum (combined) salary of €61,514.74 would be required.

So, to purchase a median property in Dublin, you will need a deposit of €53,825.40, along with a combined salary of €61,514.74.
These figures are a far cry from some of the statements made so far in this thread, suggesting people would need salaries of €150,000 (or higher) to afford to purchase in Dublin.
What these figures, also omit, is the fact that many first-time buyers would be expected to purchase a property that is regarded on being on the lower-end of the "property ladder", before trading up. As such, it isn't unreasonable to expect them to purchase lower-cost properties, thus requiring lower deposits and lower salaries in order to purchase. The difficulty of raising a larger deposit (when "trading up") should be less of an issue, as their deposit should be derived (partially, at least) from the property they are selling (as they have increased their equity while repaying the mortgage).

This is caused by the stamp duty returns being filed incorrectly. If you notify the stamp duty section of revenue they will correct these errors and when they make a correction to the stamp duty records then this will filter through to the PPR and be retrospectively reflected in the PPR data.

matt-dublin

Problem with your information Grayian is that a lot of people don't have equity on their old property. This is where the new rules will destroy the market. The people with apartments looking to move to a house and start a family.

Also those figures sound like they're for a 2 bed bungalow in Saggart, not Dublin.

MouseTail

matt-dublin wrote: »

Problem with your information Grayian is that a lot of people don't have equity on their old property. This is where the new rules will destroy the market. The people with apartments looking to move to a house and start a family

I wouldn't think that's a large enough cohort to destroy the market.

dr.fuzzenstein

The bottom line is, to get into the property market you need €40k if you do indeed manage to buy one of the finest Celtic tiger cardboard and plasterboard kips. Its all well and good saying "oh, but your mortgage is only 160k (leaving aside the outrageous interest rates at around 5% from robbing bastard Irish banks), first time byers do not have that kind of money. With the rents they way they are going (I guarantee you double digit increases for the foreseeable future), that kind of savings can only be achieved by not spending any money whatsoever and not having kids.
I'm all for sensible but 20% deposit is silly.

jay0109

dr.fuzzenstein wrote: »

The bottom line is, to get into the property market you need €40k if you do indeed manage to buy one of the finest Celtic tiger cardboard and plasterboard kips. Its all well and good saying "oh, but your mortgage is only 160k (leaving aside the outrageous interest rates at around 5% from robbing bastard Irish banks), first time byers do not have that kind of money. With the rents they way they are going (I guarantee you double digit increases for the foreseeable future), that kind of savings can only be achieved by not spending any money whatsoever and not having kids.
I'm all for sensible but 20% deposit is silly.

Chasing the market up is 'silly'. People need to be protected from themselves

Cuddlesworth

Deco99 wrote: »

the price of land and scarcity will only remain high as long as the expectation of a price rise is there, cool that expectation and that comes down, most wont be able to sit on it forever.

Why not? Land owned outright has next to no ongoing cost for retention. Land which is surrounded by existing developments, is pretty much guaranteed to rise in value as its a finite resource. There are sites in Dublin in long established areas which are still empty to this day.

Electric Sheep

dr.fuzzenstein wrote: »

The bottom line is, to get into the property market you need €40k if you do indeed manage to buy one of the finest Celtic tiger cardboard and plasterboard kips. Its all well and good saying "oh, but your mortgage is only 160k (leaving aside the outrageous interest rates at around 5% from robbing bastard Irish banks), first time byers do not have that kind of money. With the rents they way they are going (I guarantee you double digit increases for the foreseeable future), that kind of savings can only be achieved by not spending any money whatsoever and not having kids.
I'm all for sensible but 20% deposit is silly.

Yes, that is why historically people did the saving of the deposit before getting married and having kids. It's common sense.

It's silly to expect to do the saving after you have kids and so much less disposable income as a result.

dr.fuzzenstein

Electric Sheep wrote: »

Yes, that is why historically people did the saving of the deposit before getting married and having kids. It's common sense.

It's silly to expect to do the saving after you have kids and so much less disposable income as a result.

How long does it take to save €50k?. People will have to put off marriage and kids till their 50's.

Edit
Though a lot if people would have the deposit if they just have a smaller wedding.
The Irish must all be hugely wealthy if they think nothing of digging out 20k on a wedding and 60k on a house. Enviable to have that kind if cash just lying around.

Kinet1c

dr.fuzzenstein wrote: »

How long does it take to save €50k?. People will have to put off marriage and kids till their 50's.

Where does it state they have to own the house they live in? Time for people to learn that property ownership is not a God given right.

Electric Sheep

dr.fuzzenstein wrote: »

How long does it take to save €50k?. People will have to put off marriage and kids till their 50's.

I think most people could save at least 5K a year. Start with your first job. Two people saving, twice that. It IS doable, but you have to work really hard at it. That's the way it's always been, it is just this generation who think they are entitled to walk into a fully furnished house in Dublin 6 without putting any effort into it.

Greyian

matt-dublin wrote: »

Problem with your information Grayian is that a lot of people don't have equity on their old property. This is where the new rules will destroy the market. The people with apartments looking to move to a house and start a family.

Also those figures sound like they're for a 2 bed bungalow in Saggart, not Dublin.

They're not first time buyers if they already have a property though, and it seems that most of the complaints seem to be about how hard it is to get on the property ladder in the first place.


You can also seem from this, that prices (at least in Dublin) aren't all that far off peak prices at this point. The only people who would be negative equity at this stage would be people who have been paying interest only (is that even still possible?) or who bought right at the peak, and at current prices they'd be close to getting rid of negative equity at this point.
Over the next few years, which would be the equivalent of saving for a deposit for most people, they'll continue to pay off their mortgage, which should then put them in a good spot equity wise. Many of these people would also have trackers, so they should be able to make savings alongside their mortgage repayments, thereby having part of their deposit in savings, and part in equity in their current property.

http://www.daft.ie/sales/148-glasmore-park-swords-dublin/1006370/
http://www.daft.ie/sales/apartment-2-block-e-smithfield-market-queen-street-smithfield-dublin/1021764/
http://www.daft.ie/sales/no161-the-oval-tullyvale-cabinteely-dublin/1005705/

Those are just some of the examples from a (very) quick look on Daft, which wouldn't be unreasonable homes for first time buyers to target.

dr.fuzzenstein wrote: »

The bottom line is, to get into the property market you need €40k if you do indeed manage to buy one of the finest Celtic tiger cardboard and plasterboard kips. Its all well and good saying "oh, but your mortgage is only 160k (leaving aside the outrageous interest rates at around 5% from robbing bastard Irish banks), first time byers do not have that kind of money. With the rents they way they are going (I guarantee you double digit increases for the foreseeable future), that kind of savings can only be achieved by not spending any money whatsoever and not having kids.
I'm all for sensible but 20% deposit is silly.

No, you don't. Roughly 15% of the properties sold in Dublin in October to December 2014 were sold for less than (or equal to) €150,000. So you'd need a deposit of €30,000 and a combined salary of €34,285 to purchase one of these properties. Those aren't exactly outrageous expectations for people who want to own a property.

Interest rates aren't at 5% either on mortgages, AIB and KBC (at the very least) have mortgage offerings under 4% currently.

All of these figures are easily found online, yet to keep ignoring them, and throwing out figures you've made up off the top of your head. Why?

Electric Sheep

Greyian wrote: »

They're not first time buyers if they already have a property though, and it seems that most of the complaints seem to be about how hard it is to get on the property ladder in the first place.


You can also seem from this, that prices (at least in Dublin) aren't all that far off peak prices at this point. The only people who would be negative equity at this stage would be people who have been paying interest only (is that even still possible?) or who bought right at the peak, and at current prices they'd be close to getting rid of negative equity at this point.
Over the next few years, which would be the equivalent of saving for a deposit for most people, they'll continue to pay off their mortgage, which should then put them in a good spot equity wise. Many of these people would also have trackers, so they should be able to make savings alongside their mortgage repayments, thereby having part of their deposit in savings, and part in equity in their current property.

http://www.daft.ie/sales/148-glasmore-park-swords-dublin/1006370/
http://www.daft.ie/sales/apartment-2-block-e-smithfield-market-queen-street-smithfield-dublin/1021764/
http://www.daft.ie/sales/no161-the-oval-tullyvale-cabinteely-dublin/1005705/

Those are just some of the examples from a (very) quick look on Daft, which wouldn't be unreasonable homes for first time buyers to target.



No, you don't. Roughly 15% of the properties sold in Dublin in October to December 2014 were sold for less than (or equal to) €150,000. So you'd need a deposit of €30,000 and a combined salary of €34,285 to purchase one of these properties. Those aren't exactly outrageous expectations for people who want to own a property.

Interest rates aren't at 5% either on mortgages, AIB and KBC (at the very least) have mortgage offerings under 4% currently.

All of these figures are easily found online, yet to keep ignoring them, and throwing out figures you've made up off the top of your head. Why?

I suspect because he has inflated ideas of the home and neighborhood he is "entitled" to.