Central Bank to limit amount banks lend for home purchase

the kelt

Apparently the amount of Mortgage draw downs last year totalled €3.8 bn.

That is a significant increase on the year before to be expected, however more than a third of that was in the last 3 months due to the rush with the incoming new rules on deposits. Chances are without that it would have been a lot less.

Heres the thing. Apparently the new rules were brought in because we were facing into another "bubble" when in fact €3.8bn represents less than half of what should be drawn down in normal economic circumstances. Basically when the country is performing normally, trotting along not in boom circumstances we should be drawing down over double that amount.

So the question is where is this "bubble" that we all needed protecting from? Yes prices had risen but we had a situation where we went from house prices being vastly over priced to them being vastly underpriced.

Wheres the "bubble"

Mr.McLovin

the kelt wrote: »

So the question is where is this "bubble" that we all needed protecting from? Yes prices had risen but we had a situation where we went from house prices being vastly over priced to them being vastly underpriced.

Wheres the "bubble"

so what your saying is we should bring these rules in when it is clearly a bubble?

So basically when its too late, when you look back at people 2006ish that were been told we're different, its not a bubble it was a shortage of supply according to Berite at the time (where have we heard that again btw!)

RecordStraight

the kelt wrote: »

So the question is where is this "bubble" that we all needed protecting from? Yes prices had risen but we had a situation where we went from house prices being vastly over priced to them being vastly underpriced.

Wheres the "bubble"

Prices - in Dublin at least - only ever got close to 'fair value'; they were never underpriced by any measure (except comparison to fantasy land bubble values, which is a tad...unscientific).

MarkAnthony

RecordStraight wrote: »

Prices - in Dublin at least - only ever got close to 'fair value'; they were never underpriced by any measure (except comparison to fantasy land bubble values, which is a tad...unscientific).

Eh? What backs up this statement?

There were 4 bed houses in D8 going for €100K at one point.

RecordStraight

MarkAnthony wrote: »

Eh? What backs up this statement?

There were 4 bed houses in D8 going for €100K at one point.

What backs up this statement is the historic average transaction prices compared to earnings. There are 4-bed houses for sale for 15k in the country today - they are not indicative of typical prices.

May I ask evidence of these (presumably good condition) four-bed houses in D8 going for €100k?

the kelt

Mr.McLovin wrote: »

so what your saying is we should bring these rules in when it is clearly a bubble?

So basically when its too late, when you look back at people 2006ish that were been told we're different, its not a bubble it was a shortage of supply according to Berite at the time (where have we heard that again btw!)

Thats not what i said at all! Please point out where i have said such a thing.

I would suggest that maybe when we reach levels of something close to normality might be a better time, something we are well short off!

We werent close to it being a bubble, not even remotely close to getting back to normality, never mind a bubble.

Bob24

the kelt wrote: »

Thats not what i said at all! Please point out where i have said such a thing.

I would suggest that maybe when we reach levels of something close to normality might be a better time, something we are well short off!

We werent close to it being a bubble, not even remotely close to getting back to normality, never mind a bubble.

How do you define normality?

As mentioned by a previous poster, current prices related to average earnings are still are still historically very high.

RecordStraight

the kelt wrote: »

I would suggest that maybe when we reach levels of something close to normality might be a better time, something we are well short off!

Levels of what approaching normality? Please don't tell me you think fantasy land infinite credit bubble prices were the 'norm', as opposed to the entirety of the century before that?

the kelt

RecordStraight wrote: »

Levels of what approaching normality? Please don't tell me you think fantasy land infinite credit bubble prices were the 'norm', as opposed to the entirety of the century before that?

€3.8bn represents less than half of what should be drawn down in normal economic circumstances for this country. It was discussed this evening on the Radio.

Obviously no one wants the situation we were in previously, that was never the norm. The problem as i see it is its a very Dublin centred move which affect the entirety of the country.

Dealing with the Dublin property market and the rest of the country is almost like dealing with 2 different countries yet the same approach is adopted.

Like i said, we didnt have a bubble to deal with, not even close.

RecordStraight

the kelt wrote: »

€3.8bn represents less than half of what should be drawn down in normal economic circumstances for this country. It was discussed this evening on the Radio.

Obviously no one wants the situation we were in previously, that was never the norm. The problem as i see it is its a very Dublin centred move which affect the entirety of the country.

Dealing with the Dublin property market and the rest of the country is almost like dealing with 2 different countries yet the same approach is adopted.

Like i said, we didnt have a bubble to deal with, not even close.

In Dublin, we do. The problem is shortage of supply: unrestrained credit and short supply would lead to what?

And you forget that nearly half of purchases are made with cash - so drawdowns don't represent the true picture at all.

Mr.McLovin

the kelt wrote: »

Thats not what i said at all! Please point out where i have said such a thing.

I would suggest that maybe when we reach levels of something close to normality might be a better time, something we are well short off!

We werent close to it being a bubble, not even remotely close to getting back to normality, never mind a bubble.

So who decides what is normal? Every news paper banker politician and Joe on the street was telling us ever inflating prices were the norm not 10 years ago.

Property growing the fastest in Europe last year, people borrowing 5 times their salary Charlie over at the indo talking bout war chests and surges again, that was normal enough for me to think let's stop this before that cheap money comes into the system again

There is nobody trust worthy enough to make a call for what's normal on this island look at our media on the run up to the new lending restrictions

MarkAnthony

RecordStraight wrote: »

What backs up this statement is the historic average transaction prices compared to earnings. There are 4-bed houses for sale for 15k in the country today - they are not indicative of typical prices.

May I ask evidence of these (presumably good condition) four-bed houses in D8 going for €100k?

There is this constant myth that Dublin is overpriced, it's not. It was during the boom, it then went the other way and is now approaching something reasonable for the capital of a small European country.

People look at a 3 bed property in SCD at 400K and say 'Dublin' is over priced, it's simply not. There are plenty of houses in the affordable range around Dublin.

RecordStraight

MarkAnthony wrote: »

There is this constant myth that Dublin is overpriced, it's not. It was during the boom, it then went the other way and is now approaching something reasonable for the capital of a small European country.

People look at a 3 bed property in SCD at 400K and say 'Dublin' is over priced, it's simply not. There are plenty of houses in the affordable range around Dublin.

What is the average income in Dublin and what is the average price for a 3 bed house?

These numbers will be teliing.

by the seaside

What's the median house price to salary ratio in Dublin?

MarkAnthony

RecordStraight wrote: »

What is the average income in Dublin and what is the average price for a 3 bed house?

These numbers will be teliing.

Not really, it comes down to affordability.

the kelt

RecordStraight wrote: »

In Dublin, we do. The problem is shortage of supply: unrestrained credit and short supply would lead to what?

And you forget that nearly half of purchases are made with cash - so drawdowns don't represent the true picture at all.

Thats the problem, Dublin is a different country practically speaking, the housing market is worlds apart from the rest of the country.

I dont see how these new rules will help supply, quite the opposite in my opinion. And i dont believe the last couple of years have seen unrestrained credit. Previous crazy years of the boom had but not since.

And yes mortgage drawdowns dont represent the full picture, yet the only measures that have been taken concern mortgages. I mean we had word this week that easier credit is going to be made available to builders and developers.

So on one hand we are making it harder for the ordinary joe soap to attain credit to purchase a house but have plans to make credit easier for developers and builders to obtain. Something not right there!

RecordStraight

MarkAnthony wrote: »

Not really, it comes down to affordability.

So prices and income have nothing to do with affordability?

Wow, the property bulls are on the rampage again. "This time it's different".

the kelt

Mr.McLovin wrote: »

So who decides what is normal? Every news paper banker politician and Joe on the street was telling us ever inflating prices were the norm not 10 years ago.

Property growing the fastest in Europe last year, people borrowing 5 times their salary Charlie over at the indo talking bout war chests and surges again, that was normal enough for me to think let's stop this before that cheap money comes into the system again

There is nobody trust worthy enough to make a call for what's normal on this island look at our media on the run up to the new lending restrictions

Maybe your right, maybe nobody is trustworthy enough to make the proper decisions. Not even Mr Honohan maybe.

MarkAnthony

RecordStraight wrote: »

So prices and income have nothing to do with affordability?

You tell me.

That wasn't the question you posed.

RecordStraight

the kelt wrote: »

So on one hand we are making it harder for the ordinary joe soap to attain credit to purchase a house but have plans to make credit easier for developers and builders to obtain. Something not right there!

Easier credit to builders means more building of property > more supply.
Less credit to buyers means they won't be able to bid each other ever higher on the same property > lower prices.

MarkAnthony

RecordStraight wrote: »

Wow, the property bulls are on the rampage again. "This time it's different".

Did I not make the point above that the height of the boom was too high? We're still in the trough of the bust. As for the property bulls the bears make about as much sense and are right and wrong just as often.

by the seaside

MarkAnthony wrote: »

Not really, it comes down to affordability.

And affordability is largely driven by the cost and availability of credit, isn't it? Might we be in a credit boom?

the kelt

RecordStraight wrote: »

Easier credit to builders means more building of property > more supply.
Less credit to buyers means they won't be able to bid each other ever higher on the same property > lower prices.

But the problem is the price of building is still quite high. So builders arent going to build if house prices are dropping, even with easier credit.

Builders as far back as last October put projects on hold on foot of these new rules being introduced.

Its a delicate balancing act at the moment but i feel we have gone too far with these new measures. The new measures restricting mortgage amounts to 3.5 times income were a good measure. The 20% deposit was too punitive too soon.

flintash

sorry to interupt your heated conversation just wanted to share todays conversation with my banks rep regarding mortgage. its twice yearly conversation i have with them so no big surprise that they rang and offered what it is called "house hunter mortgage". one little confusing detail was this, while "reduction in qualification " mentioned but was followed by "havent put in practice yet". And" its good time to apply" cause it wil last six month.So... whos beeing messer now? or is it just standard bank practise ??

MarkAnthony

flintash wrote: »

sorry to interupt your heated conversation just wanted to share todays conversation with my banks rep regarding mortgage. its twice yearly conversation i have with them so no big surprise that they rang and offered what it is called "house hunter mortgage". one little confusing detail was this, while "reduction in qualification " mentioned but was followed by "havent put in practice yet". And" its good time to apply" cause it wil last six month.So... whos beeing messer now? or is it just standard bank practise ??

Just trying to circumvent the new rules. Nothing to lose by having the approval I guess.

RecordStraight

Average 3-bed asking price in SCD was €469k in Q4 of 2014.
Average 3-bed asking price in South Dublin City was €343k.

Household income is trickier to find, but in 2012 average household income in Dublin was €24,316. Let's boost that by 20% to allow for rising incomes in the last two years - that takes it up to 21,179.

The average 3-bed in South Dublin City is about 14 times average Dublin earnings.

The average 3-bed in SCD is about 19 times average Dublin earnings.

Not expensive, eh?

Cuddlesworth

MarkAnthony wrote: »

There is this constant myth that Dublin is overpriced, it's not. It was during the boom, it then went the other way and is now approaching something reasonable for the capital of a small European country.

People look at a 3 bed property in SCD at 400K and say 'Dublin' is over priced, it's simply not. There are plenty of houses in the affordable range around Dublin.

We care coming back into boom time prices, with zero inflation between then and now. So besides 8-9 years, what's the difference between then and now?

RecordStraight

the kelt wrote: »

But the problem is the price of building is still quite high. So builders arent going to build if house prices are dropping, even with easier credit.

The cost of building in Dublin is more-or-less the same cost as building in Cavan or Mayo. The only difference is the price of the land under the house. If the government starts taxing land banks, it will become a lot cheaper to develop them rather than sitting on them as they are now.

MarkAnthony

by the seaside wrote: »

And affordability is largely driven by the cost and availability of credit, isn't it? Might we be in a credit boom?

Kind of, it's cheap credit. The point is that it's not as simple as saying:

Average wage = 35K
Couple buy houses therefore 2*35K = 70K*3.5 = 245K * 1.2 (20% deposit) = 294K - which incidentally is under the average Dublin price.

There are a myriad of other factors to consider, chief of which in my view would be why, in Ireland, people expect to live in a 3 bedroom semi in a good area on an average wage. I know Dublin can't be compared to London but neither can it be compared to a market-town in the south of England or an industrial town in the North of England, it's a capital city.

MarkAnthony

Cuddlesworth wrote: »

We care coming back into boom time prices, with zero inflation between then and now. So besides 8-9 years, what's the difference between then and now?

Sorry how do you figure that? A one bed apartment in D8 in the boom would have cost over 250K, you'd be lucky to get 150K today. I'd also question the zero inflation remark.