Central Bank to limit amount banks lend for home purchase

Greyian

Bob24 wrote: »

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 :-)

Don't get me wrong, I'm not criticising the German system, it's far, far superior to ours, in pretty much every regard.



Just to put this in perspective, there are people in Germany concerned at what they view as a property bubble generating in Germany.

CNBC wrote:

However, it is the capital that is showing the highest growth in values. Prices of apartments in the trendiest part of Berlin have seen a 40 percent increase since 2007, while they have grown by an equally impressive 25-30 percent in popular cities like Munich, Hamburg and Frankfurt.

Link: http://www.cnbc.com/id/101926645#.

This was written in 2014, so over the course of 7 years, they're talking about 40% growth (in Berlin, which is exceeding the other examples). This works out at 4.9% growth per annum. People in the media here, in Ireland, would probably consider those sorts of increases as disappointing, or a sign of economic under-performance.

CNBC wrote:

According to research from B+D, the most expensive properties in Germany are found in Munich (an average 4,800 euros ($6,427) per square meter). Berlin is relatively cheap, as a square meter there only costs 2,930 euros, while Frankfurt properties will set you back an average of 3,400 euros per square meter.

Compare that with an average square meter price of 8,900 pounds (around 11,120 euros) in London's Westminster and you'll think Germany is a bargain.

Under €3,000/sqm, in Berlin. Under €3,500/sqm in Frankfurt. There are properties in the likes of Rathfarnham, Leopardstown (http://www.myhome.ie/residential/brochure/7-mount-eagle-court-leopardstown-heights-leopardstown-dublin-18/2989023) or Bray (http://www.myhome.ie/residential/brochure/19-rathclaren-killarney-road-bray-co-wicklow/2986944) that exceed those figures...Bray for God's sake.


What Irish people should want is a functional property market, with a steady, reliable banking system, which offers competitive mortgage rates, as well as the option to fix long-term (why don't we offer fixed for the full duration of the mortgage?).
Limits based on LTI/LTV serve to assist in that regard, reducing bank risk (allowing them to offer more competitve rates, due to lower default rates, as you've mentioned), as well as reducing people's mortgage payments (lower principles at lower interest rates), improving people's quality of life massively.

Bob24

Greyian wrote: »

Don't get me wrong, I'm not criticising the German system, it's far, far superior to ours, in pretty much every regard.

Yes got you :-) ... the comment was more addressed to previous posters who don't see the points if stricter lending rules.

Greyian wrote: »

Just to put this in perspective, there are people in Germany concerned at what they view as a property bubble generating in Germany.

I hadn't seen this before ... very visual way to put the madness of the Irish property marker in perspective!

dr.fuzzenstein

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.

I still think 20% is a bit steep, but I'm talking about everything else. Savings for houses are properly structured. You get a Bausparvertrag to save for a house. It is supported by the state. Your employer will actually pay into that as well. In Ireland it's "pay up you bastard" and then the sate says "what? You have money? We'll take a third of the interest!, pay up you bastard!".
Also, German banks offering proper interest rates, not ones they pulled out of their arse that morning. They are not allowed to say "Oh by the way, ECB rates went down, so we'll jack up your rate by half a percent because we fancy a champagne party for Christmas.
You get a feeling that it's all joined up and deliberately designed that way.
In Ireland every man plows his own lonely furrow when it comes to planning. The result looks more like a trifle that landed on the floor and is now being sold as a work of modern art.

Every single time anyone has tried to regulate the Irish property market, it has only made things worse.

RecordStraight

Greyian wrote: »

Under €3,000/sqm, in Berlin. Under €3,500/sqm in Frankfurt. There are properties in the likes of Rathfarnham, Leopardstown (http://www.myhome.ie/residential/brochure/7-mount-eagle-court-leopardstown-heights-leopardstown-dublin-18/2989023) or Bray (http://www.myhome.ie/residential/brochure/19-rathclaren-killarney-road-bray-co-wicklow/2986944) that exceed those figures...Bray for God's sake.

Yeah, but you don't understand..Dublin is a CAPITAL CITY! Frankfurt isn't. And builders won't make a profit at under €3000 per square metre because...well, bricks are very expensive in Dublin. VERY EXPENSIVE! Also, property isn't expensive, as all of the richest people in Ireland live in South Dublin, regardless of where they work. And the peasants can commute from Cavan to work in McDonald's or whatever. IT'S LOGICAL! Also Irish people have nothing else to spend their money on other than property. All disposable income must be spent on property. IF YOU CAN PAY THE INTEREST WITH ALL OF YOUR MONEY, IT'S AFFORDABLE!

Oh, and rent is dead money and property only goes up.

HTH

Slick50

the kelt wrote: »

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

The biggest difference being, house prices outside Dublin are lower, so the impact on the market outside Dublin will be less.

the kelt wrote: »

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.

It is not the banks job to govern/assist the supply of houses. It is their job to make sure they operate in a sustainable, prudent manner. ie. if they lend someone money, it should be an ammount they can be reasonably expected to be able to pay back. The deposit side of these measures gives them some leverage, in the event the borrower fails to do so.

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!

These measures are designed to make it less likely the banks will get into a position were they have no hope of recuperating what they have lent out. Making it easier for builders to obtain credit is worrying alright, I hope they secure proper collateral this time.

Villa05

Bob24 wrote: »

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

Politicians are the enemy in all this. There purpose is to create problems not solve them.

NAMA,
bank guarantee,
make house building as expensive as possible,
block the natural process of debt resolution,
no tax on wasted resources such as derelict sites,
housing shortage in some key areas yet builders on the dole praying for work.
National agencies withholding building sites,
raw materials for building all around us and falling in price.

This is not a complicated problem, it is an orchestrated problem.

Villa05

dr.fuzzenstein wrote: »

I still think 20% is a bit steep.

we live in a country where house prices have fluctuated up to +/- 20% per annum since 1996 that would make it one of the most high risk assets in the world.
In Ireland one is led to believe that houses are sacred free from the normal course of action used for non payment of an asset. If this is so an extra premium must be added to the price

20% deposit is too low being honest

Susandublin

Lucy B wrote: »

Wouldn't that lead to something else though? As in all the house prices dropping? More people again would be looking to buy as prices would be cheaper, but people who own homes would be less likely to put their homes on the market as they wouldn't get the price they want for it??
Which would lead to more lack of supply? Vicious circle. Why can't they just leave things be? Finish off ghost estates, lend to builders/developers? Something positive?

I think people not selling over the past few years was mainly out of their lack of ability to get a mortgage and move to a new home and the potential negative equity which would have been left.
The new rules shouldn't do this. It will become the norm so the expectation of what a house is worth will reduce and people will be in a better position to move house. The new rules are a bit annoying but to be honest, I thought this already existed - would much rather have these rules than another recession in 4 years and be forced to leave my country for work. Finally some forward thinking from the powers that be.

Greyian

Greyian wrote: »

Don't get me wrong, I'm not criticising the German system, it's far, far superior to ours, in pretty much every regard.



Just to put this in perspective, there are people in Germany concerned at what they view as a property bubble generating in Germany.

Anyone have a graph comparing Ireland all houses prices to the German one rather than picking Dublin new houses and calling it Ireland.

MarkAnthony

RecordStraight wrote: »

Yeah, but you don't understand..Dublin is a CAPITAL CITY! Frankfurt isn't. And builders won't make a profit at under €3000 per square metre because...well, bricks are very expensive in Dublin. VERY EXPENSIVE! Also, property isn't expensive, as all of the richest people in Ireland live in South Dublin, regardless of where they work. And the peasants can commute from Cavan to work in McDonald's or whatever. IT'S LOGICAL! Also Irish people have nothing else to spend their money on other than property. All disposable income must be spent on property. IF YOU CAN PAY THE INTEREST WITH ALL OF YOUR MONEY, IT'S AFFORDABLE!

Oh, and rent is dead money and property only goes up.

HTH

You do realise this entitlement attitude is a guilty of feeding the bubbles as all the politicians, bankers and EU bureaucrats you seem to have such an issue with. This failure to see outside of SCD is exactly what's fueling the bubble there it's simple supply and demand and the market functioning exactly as it should.

Dublin, on the whole is still very affordable. The fact that you don't want to live in Finglas in entirely your own business; but if more successful people than you can afford to pay more for the houses there's no point in whining about it.

Snobbery in Dublin is rewarded by the vast majority of your wages being taken off you and I find that somewhat entertaining to be honest.

Bob24

Deleted User wrote: »

Anyone have a graph comparing Ireland all houses prices to the German one rather than picking Dublin new houses and calling it Ireland.

Also with the eurozone average:



Source article here - they are referring to an ECB page where you can extract the data the ECB is gathering about property prices in Europe.

gaius c

the kelt wrote: »

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"

You're forgetting that transaction volumes are abnormally low (approx half what it should be) and that over half the market last year was cash.

The housing turnover rate is something like 65 years at present. That means, not only do people live in their first house for life. They continue to live there for part of the afterlife too! It's clearly ridiculous and I expect the next census to reveal that far from there being a shortage of supply, there's actually a shadow inventory building up.

Now take that same amount of credit as last year, then reduce it as per the new CB rules and then spread it over a doubling of market volume. What do you reckon that will do to the average transaction price?

Also, there's LOTS of credit available. It's just not being made available to buyers. It's being made available to people who have already bought so they can avail of 0% (or even -%) finance, i.e. arrears. This is also distorting the market. It's called foreclosure stuffing in the US.

kippy

Bob24 wrote: »

Also with the eurozone average:



Source article here - they are referring to an ECB page where you can extract the data the ECB is gathering about property prices in Europe.

These graphs are all well and good but in the time periods specified Ireland did go through somewhat of a population explosion where as the german population declined.
There were issues with housing in that demand wasnt met by supply....and the supply ended up coming on line where it wasnt needed.
Im not saying things werent handled well however one has to look deeper sometimes to see why prices rocketed. There was a genuine supply issue and there still is to an extent in the right areas. This has to be remedied for a stable market.

gaius c

Bob24 wrote: »

Also with the eurozone average:



Source article here - they are referring to an ECB page where you can extract the data the ECB is gathering about property prices in Europe.

What I'd love to see is the PPR backdated to the 90's. Could have some fun with those graphs...

gaius c

kippy wrote: »

These graphs are all well and good but in the time periods specified Ireland did go through somewhat of a population explosion where as the german population declined.
There were issues with housing in that demand wasnt met by supply....and the supply ended up coming on line where it wasnt needed.
Im not saying things werent handled well however one has to look deeper sometimes to see why prices rocketed. There was a genuine supply issue and there still is to an extent in the right areas. This has to be remedied for a stable market.

The population argument is a complete red herring. How are population prices doing in sub-Saharan Africa?

mariaalice

My daughter is tentatively thinking of buying a house at the moment, not in Dublin.

I do think the new rules will moderate prices a little, but to have a real effect what he central bank would have need to do is to have brought in regulations requiring any non first time buyers taking our a mortgage of over 500k to have a 40% deposit, the reason I think this is that its often couples in their forties buying their second house, trying to get in to areas like Portmarnock or Blackrock or any sort after area who are willing to stretch themselves with large mortgages to get in to the area they want, If that section of the market was pulled back a little it really would moderate house prices. It would also stop anyone taking our a huge mortgage in their forties.

Just a thought.

kippy

gaius c wrote: »

The population argument is a complete red herring. How are population prices doing in sub-Saharan Africa?

Supply and demand is the concept. Demand is driven by a number of factors (cheap credit and population growth being two)as is supply(cost to build,availability of credit etc) but you need to strike a balance in order to have a stable market..
Depending on your starting point, an increase in the adult population is going to result in demand for rental properties.

gaius c

kippy wrote: »

Supply and demand is the concept. Demand is driven by a number of factors (cheap credit and population growth being two)as is supply(cost to build,availability of credit etc) but you need to strike a balance in order to have a stable market..
Depending on your starting point, an increase in the adult population is going to result in demand for rental properties.

What increase in the adult population?





The 70/80's baby boom are all housed. The generation behind them are considerably smaller and are the ones most affected by unemployment & emigration.

fret_wimp2

Bob24 wrote: »

Yes got you :-) ... the comment was more addressed to previous posters who don't see the points if stricter lending rules.



I hadn't seen this before ... very visual way to put the madness of the Irish property marker in perspective!

apologies if this is obvious to some people but i have a few questions on this:

- is it comparing similar houses, i.e 3 bed semi ?
-is it actually saying that said house is on average 100k to buy in germany? I ask this as i Imagine that if a construction firm built some houses in dublin, with the cost of land there wouldnt be a whole lot of (if any) profit and so no incentive to build.

Im not questioning the data, i just want to be sure i understand it.

Bob24

fret_wimp2 wrote: »

apologies if this is obvious to some people but i have a few questions on this:

- is it comparing similar houses, i.e 3 bed semi ?
-is it actually saying that said house is on average 100k to buy in germany? I ask this as i Imagine that if a construction firm built some houses in dublin, with the cost of land there wouldnt be a whole lot of (if any) profit and so no incentive to build.

Im not questioning the data, i just want to be sure i understand it.

The data is not about comparing the price of similar properties in both countries, but more about comparing how the price of property in general is increasing in the long term in both countries.

100 is not the cost in euros - it is an index of the average property price in the country in 1996.

What the graph is saying is that the average cost to buy a property in Germany in 2010 was roughly the same as it was in 1996 (about 100%) while in Ireland it was 2.5 times higher (250%).

The numbers for Germany are an average of all house prices, while the Ireland ones only includes new houses in Dublin.

The graph I posted at a latter stage is similar but includes all properties for Ireland rather that just new ones in Dublin.

dearg lady

Okay, those graphs have completely put me off buying!! :eek: I also don't want to pay 900 a month to live in a tiny one bed, what to do, what to do.

ec18

dearg lady wrote: »

Okay, those graphs have completely put me off buying!! :eek: I also don't want to pay 900 a month to live in a tiny one bed, what to do, what to do.

Be realistic in your expectations, look at whats available based on 3.5 times your salary vs what you want to pay in rent and see if thats better.

For me personally a mortgage would out significantly cheaper than renting. But the locations don't compare so I decided to keep renting.

mortimer33

Greyian wrote: »

Just to put this in perspective, there are people in Germany concerned at what they view as a property bubble generating in Germany.

Regarding your graph comparing German/Irish house price increases between 1996 and 2014.

You must consider that during that period Ireland's population grew by 25%. Germany's population remained stagnant..

Bob24

mortimer33 wrote: »

Regarding your graph comparing German/Irish house price increases between 1996 and 2014.

You must consider that during that period Ireland's population grew by 25%. Germany's population remained stagnant..

Yet, at the time of the 2011 census 14.5% of dwellings in Ireland were vacant...

mortimer33

gaius c wrote: »

What increase in the adult population?

The 70/80's baby boom are all housed. The generation behind them are considerably smaller and are the ones most affected by unemployment & emigration.

Good point.. It looks they'll all at the "having kids" stage over the next 10-15 years.. Reckon demand (to rent and buy) for 3 bed semi's will increase?

RecordStraight

dearg lady wrote: »

Okay, those graphs have completely put me off buying!! :eek: I also don't want to pay 900 a month to live in a tiny one bed, what to do, what to do.

I emigrated. There's a big world out there.

by the seaside

MarkAnthony wrote: »

You do realise this entitlement attitude is a guilty of feeding the bubbles as all the politicians, bankers and EU bureaucrats you seem to have such an issue with. This failure to see outside of SCD is exactly what's fueling the bubble there it's simple supply and demand and the market functioning exactly as it should.

Dublin, on the whole is still very affordable. The fact that you don't want to live in Finglas in entirely your own business; but if more successful people than you can afford to pay more for the houses there's no point in whining about it.

Snobbery in Dublin is rewarded by the vast majority of your wages being taken off you and I find that somewhat entertaining to be honest.

Will you find the bursting of the bubble entertaining?

RecordStraight

MarkAnthony wrote: »

but if more successful people than you can afford to pay more

Or, to be more accurate, if more reckless people than you are willing to borrow more.

Then spend the next 8 years bleating about how they were tricked by banks. :rolleyes:

Bob24

RecordStraight wrote: »

Or, to be more accurate, if more reckless people than you are willing to borrow more.

Then spend the next 8 years bleating about how they were tricked by banks. :rolleyes:

That is the issue yes :-/

dearg lady

ec18 wrote: »

Be realistic in your expectations, look at whats available based on 3.5 times your salary vs what you want to pay in rent and see if thats better.

For me personally a mortgage would out significantly cheaper than renting. But the locations don't compare so I decided to keep renting.

Based on calculations it would work out cheaper getting a mortgage. But having seen that prices are still significantly above historic averages it leaves a bitter taste in the mouth ya know? I've said it before, I'll say it again, I wish buying a place to live wasn't a gamble

RecordStraight wrote: »

I emigrated. There's a big world out there.

I did consider it last year, and applied for a job in Germany, which unfortuantely I didn't get. It would have been temporary though, I don't think I'd like to leave Ireland permantantly. I have a good job, great social life, my friends and family are here.