Central Bank to limit amount banks lend for home purchase

RecordStraight

MarkAnthony wrote: »

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.

Apartment prices are lagging as there were so many built. House prices are bubbling away.

Inflation would certainly be <10%, maybe less - we've had deflation for three or four of the last 8 years.

flintash

MarkAnthony wrote: »

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

my feeling that aproval is meaningles anyway. an atempt to increase numbers of people looking to buy aka " demand"??

RecordStraight

MarkAnthony wrote: »

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.

What do you expect an average small family to live in? A hole in the ground?

Dublin is a capital alright - the capital of a country that just went bust due to a property bubble a few years ago. How quickly people want us to forget.

MarkAnthony

RecordStraight wrote: »

Apartment prices are lagging as there were so many built. House prices are bubbling away.

Inflation would certainly be <10%, maybe less - we've had deflation for three or four of the last 8 years.

Bubbling away is not a quantifiable term. They are at 77% of 2005 prices.

Compared to earnings they are under the 3.5 times multiplier on that seems to be fairly traditional in terms of affordability and certainly backed up by the CB's new limits.

Compared to other cities in the UK prices seem cheap enough to me, again outside one could, admittedly, exclude D6, D4 and SCD from that statement.

Inflation by my reckoning has been around >5% over the last 8/9 years, not insignificant IMHO.

MarkAnthony

flintash wrote: »

my feeling that aproval is meaningles anyway. an atempt to increase numbers of people looking to buy aka " demand"??

It's a step in the right direction IMHO - the market needs to be controlled, no one want's a return to the boom. But there needs to be a combination of steady increases in house prices and a reduction in the cost of building to properly stabilise (even stagnate prices) in Dublin with supply. Everything else is nibbling around the edges.

MarkAnthony

RecordStraight wrote: »

What do you expect an average small family to live in? A hole in the ground?

Dublin is a capital alright - the capital of a country that just went bust due to a property bubble a few years ago. How quickly people want us to forget.

Ah man quit the hyperbole.

There are plenty of suburban Dublin that is very affordable, Meath and Kildare are commutable to Dublin as is Louth. People working in London don't think they've been wronged because they're commuting in from Oxfordshire. In fact look at a crappy town like Bicester and compare the prices even to some of the desirable areas in Dublin for prices.

MarkAnthony

I forgot Wicklow, but then I've been trying to do that for years!

Cuddlesworth

MarkAnthony wrote: »

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.

Its hard to find the statistics, especially volumes of sales per region but I believe the market tanked mid 2006. So I normally base my high point on the late 2005, early 2006 prices. Not the outlier 2007/2008 prices(paid by people who had their heads in the sand), championed by the papers as the high point. Especially when looking at Dublin where there was always a battle between supply and demand, rather than the country where supply far outstripped demand.

You can see builders began bailing hard mid 2006(page 14), which I assume is where house sales started to tank. And most areas of Dublin I see are now at that 2005 point. We have been static on inflation, if not a little on the deflation side.

RecordStraight

MarkAnthony wrote: »

Compared to earnings they are under the 3.5 times multiplier on that seems to be fairly traditional in terms of affordability and certainly backed up by the CB's new limits.

If you look up thread, you will see that SCD prices are 19 times the 2012 average Dublin household income + 20%. 3.5 times my arse.

RecordStraight

MarkAnthony wrote: »

Ah man quit the hyperbole.

There are plenty of suburban Dublin that is very affordable, Meath and Kildare are commutable to Dublin as is Louth. People working in London don't think they've been wronged because they're commuting in from Oxfordshire. In fact look at a crappy town like Bicester and compare the prices even to some of the desirable areas in Dublin for prices.

LOL - Dublin = London.

Welcome back to 2006 everybody.

MarkAnthony

RecordStraight wrote: »

If you look up thread, you will see that SCD prices are 22 times the 2012 average Dublin household income + 20%. 3.5 times my arse.

Again you must have missed the point where I agreed on SCD. That said are you suggesting that someone working in the Tesco in Ballsbridge should be able to live up the road?

Dublin in general is not overpriced although admittedly there are some pockets of mentalism but then every major city has that.

by the seaside

RecordStraight wrote: »

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?

I'm not convinced by just looking at the expensive end of the city. I think you have to look at the city as a whole. And you've got some of your salary sums wrong.

RecordStraight

MarkAnthony wrote: »

Again you must have missed the point where I agreed on SCD. That said are you suggesting that someone working in the Tesco in Ballsbridge should be able to live up the road?

Whereas you are suggesting that someone working in Tesco in Ballsbridge should be commuting from Kildare or Wicklow?

The numbers I cited are average numbers for earnings and for property prices. So they include all the high-earners, the middle earners and indeed the lowly low-earners who should apparently live 50 miles away from their crummy jobs.

RecordStraight

by the seaside wrote: »

I'm not convinced by just looking at the expensive end of the city. I think you have to look at the city as a whole. And you've got some of your salary sums wrong.

I'm looking at a whole half of Dublin outside the canals. The numbers for the Northside are lower, but still quite a stretch. If the numbers for household income (note, not salaries) are wrong, then we'll take it up with the Examiner - that's where I got them (and I added 20% to them too to come up with a conservative multiple - I doubt incomes are up 20% in the last 2 years).

by the seaside

MarkAnthony wrote: »

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.

I've always lived in England and I agree that Dublin is not comparable with London or Manchester.

But if we accept that cheap and available credit is what has driven affordability at high prices, despite high price to salary ratios... then what will happen when credit becomes less available and/or more expensive? Dublin is in a credit bubble but it could remain so for a long time. One complicating factor is that interest rates are made in Frankfurt.

Sala

You say average household income is 24k and boost it to 21k?is that backwards? Can you link article?

RecordStraight

Sala wrote: »

You say average household income is 24k and boost it to 21k?is that backwards? Can you link article?

Sala, you are right: the numbers are SNAFUed. That's what comes of trying to post while putting a baby to bed.

It turns out I ended up using the 2012 Dublin numbers, without a 20% increase. My bad. I'm pretty confident incomes in that time are not up by nearly as much as that, but still the fcuk-up stands. So treat the multiples as multiples of 2012 household income.

Figures came from here: http://www.irishexaminer.com/ireland/dublin-3k-ahead-of-average-income-181644.html

Can't believe I didn't supply the link either. Pulled in too many directions.

Sala

No problem, just curious as even 24k plus 20% seems low given there was a thread here not too long ago about disposable income of 790 quid a week!! Will read it now thank s

Sala

Ok I read it. That's disposable income and I don't think it's per household. 24k disposable is 2k a month into your hand. An average couple would get 4k. I think that's about 30k a year or 60k for a couple - so 3.5 times income is 210k. Plus 10% deposit brings it to 233k ish.

RecordStraight

Sala wrote: »

Ok I read it. That's disposable income and I don't think it's per household. 24k disposable is 2k a month into your hand. An average couple would get 4k. I think that's about 30k a year or 60k for a couple - so 3.5 times income is 210k. Plus 10% deposit brings it to 233k ish.

Bear in mind that it's average household income - so that will include a mixture of singles and couples. I'd be rather surprised if the average person in Dublin gets 2k free and clear every month after living costs. You should see a recent thread where I described saving 1k per month on an after tax income of about 2.8k (so about 50k p.a. gross income) - there was complete disbelief that it could be done from certain quarters!

Sala

RecordStraight wrote: »

Bear in mind that it's average household income - so that will include a mixture of singles and couples. I'd be rather surprised if the average person in Dublin gets 2k free and clear every month after living costs. You should see a recent thread where I described saving 1k per month on an after tax income of about 2.8k (so about 50k p.a. gross income) - there was complete disbelief that it could be done from certain quarters!

Does it say household income though? I thought it said average income. And disposable is after tax, not after living costs. Sorry I can't search text - was on phone! But reading it I assume it's average disposable income per person - ie average after tax income

Edit: if it's simply average after tax income person that is circa 30k

dr.fuzzenstein

by the seaside wrote: »

I've always lived in England and I agree that Dublin is not comparable with London or Manchester.

But if we accept that cheap and available credit is what has driven affordability at high prices, despite high price to salary ratios... then what will happen when credit becomes less available and/or more expensive? Dublin is in a credit bubble but it could remain so for a long time. One complicating factor is that interest rates are made in Frankfurt.

Actually I spoke to a bank employee in Germany and the fact that every time interest rates go down, flexible mortgages here go up. He was shocked! The fact that banks here could simply say "This month you'll be paying us oohh, errrm, lemme see 4, no, let's say 5 percent, because we're worth it!". In Germany banks cannot simply pull mortgage interest rates out of their hole because they fancy it, there's some regulation and proper competition. Mortgages over there can be had with fixed rates of under 3% and they can be fixed for 10 years!
Ireland is an utter Mickey Mouse show when it comes to banking. You'd get better results having Mr Bean run our banks. They are fundamentally untrustworthy and I wouldn't trust them with my money if I could help it. In a proper market the regulator would say "listen here, sunshine, you cannot have mortgage interest rates that bear no relation to reality, so fix it, chop, chop!" Won't happen as long as regulator, state and banks are in bed together.

RecordStraight

Yeah, this isn't at all clear. Looks like we need better data:

Comparisons of disposable income across all counties found the top rates in Dublin, with an average of €24,316, and the lowest in Donegal, where the average is €17,708.

So it's not clear if it is individual or household...

Also:

The figures relate to 2009 and show disposable income fell by an average of €1,883 or 8.1% from 2008 with the greatest drop in the Mid-East and South-East where incomes decreased by 9.5% and the least pain felt in the West, where incomes fell by 6.1%.

Bob24

dr.fuzzenstein wrote: »

. In Germany banks cannot simply pull mortgage interest rates out of their hole because they fancy it, there's some regulation and proper competition. Mortgages over there can be had with fixed rates of under 3% and they can be fixed for 10 years!

It must be even better than that. My brother just bough property in Paris, he is getting 2.2% fixed for the whole duration of the mortgage. Not sure how long his mortgage is, but somewhere between 20 and 30 years.

by the seaside

There's a well balanced article here: http://www.davy.ie/private-clients/insights/investing-insights/2014/housing-the-past-the-present-the-future.html

mr_seer

When comparing house prices to income it is important to remember that we are comparing to gross income. Income tax, USC, property tax and stealth taxes (VHI etc) have combined to decimate net disposable incomes - the money that actually matters when it comes to servicing your mortgage. Gross incomes are down marginally since 2006-2008 period but net disposal income is down considerably more. When you add in the fact that variable mortgage interest rates are about 1.5% higher than they were and the fact that you no longer get tax relief at source, the real cost of servicing a mortgage on a random Dublin house is now HIGHER than it was for the same house in real terms during the last bubble

Villa05

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"

The last bubble was caused by cheap money from eu flooding into irish banks and being lent out to people to outbid each other to buy property in the most sparsely populated country in the eu All encouraged by the establishment

Current climate
money extremly cheap
ecb ramping up the printing presses
Irish people falling over each other to outbid on property in the most sparsely populated country in the eu all encouraged by the establishment.

Count yourself fortunate to have at least one functioning brain with a bit of power and influence at the irish central bank

Bob24

Villa05 wrote: »

Count yourself fortunate to have at least one functioning brain with a bit of power and influence at the irish central bank

Not to mention someone with a bit more courage than our politicians ...

Greyian

dr.fuzzenstein wrote: »

Actually I spoke to a bank employee in Germany and the fact that every time interest rates go down, flexible mortgages here go up. He was shocked! The fact that banks here could simply say "This month you'll be paying us oohh, errrm, lemme see 4, no, let's say 5 percent, because we're worth it!". In Germany banks cannot simply pull mortgage interest rates out of their hole because they fancy it, there's some regulation and proper competition. Mortgages over there can be had with fixed rates of under 3% and they can be fixed for 10 years!
Ireland is an utter Mickey Mouse show when it comes to banking. You'd get better results having Mr Bean run our banks. They are fundamentally untrustworthy and I wouldn't trust them with my money if I could help it. In a proper market the regulator would say "listen here, sunshine, you cannot have mortgage interest rates that bear no relation to reality, so fix it, chop, chop!" Won't happen as long as regulator, state and banks are in bed together.

It's interesting that you cite Germany as an example of a proper run banking system, yet you are so opposed to the 20% deposit requirement, when that is the norm in Germany.

TodayFM wrote:

Mortgage deposits
German banks are rarely permitted to lend more than 80 percent of the value of a property, therefore buyers need to accumulate a deposit of at least 20 percent.

Link: http://www.todayfm.com/mobile/index.php?id=12296

Expatica wrote:

Funding purchase: deposits and mortgages
You should expect to put down a significant deposit when you buy a home in Germany. A minimum deposit of 20 percent is standard...

Link: http://www.expatica.com/de/housing/buying/Buying-a-German-property_100945.html

Bob24

Greyian wrote: »

It's interesting that you cite Germany as an example of a proper run banking system, yet you are so opposed to the 20% deposit requirement, when that is the norm in Germany.

Sure, there is no magic: higher deposits (and lower LTI ratios) -> Less chances of mortgage defaults -> Less risk for the bank -> Cheaper interest rates

Now I am waiting for Irish banks to reduce their rates ... but not holding my breath :-)