Central Bank to limit amount banks lend for home purchase

gaius c

mortimer33 wrote: »

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?

No. They are having their kids now. The current baby boom is tailing off and they won't form new households for another 15-20 years. Current households will look to upgrade but they won't (for the most part) form new households.

The next decade could see "demand" be curbed dramatically.

sapper

Apologies if this has been covered in one of the other 184 pages on this thread (!) but has there been any suggestion that the LTI limits would apply to cumulative mortgage borrowing rather than individual mortgages?

I have a buy-to-let and a residential mortgage and am looking to trade up my principal home and keep my BTL untouched. My income multiplied by 3.5 is comfortably over the amount I want to borrow for my new home, but is well below my hoped-for loan amount + the borrowing outstanding on my buy-to-let.

I had assumed from all the coverage that the 3.5 limit is only on the amount you borrow for your home, but just been talking to a mortgage advisor at a bank and he was suggesting that I might have a problem because this issue hasnt been clarified yet? Really?

mortimer33

Bob24 wrote: »

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

Yep, but its a pity those empty houses are nowhere near where people want to live

MarkAnthony

sapper wrote: »

Apologies if this has been covered in one of the other 184 pages on this thread (!) but has there been any suggestion that the LTI limits would apply to cumulative mortgage borrowing rather than individual mortgages?

I have a buy-to-let and a residential mortgage and am looking to trade up my principal home and keep my BTL untouched. My income multiplied by 3.5 is comfortably over the amount I want to borrow for my new home, but is well below my hoped-for loan amount + the borrowing outstanding on my buy-to-let.

I had assumed from all the coverage that the 3.5 limit is only on the amount you borrow for your home, but just been talking to a mortgage advisor at a bank and he was suggesting that I might have a problem because this issue hasnt been clarified yet? Really?

Yep, but depends on the bank and your circumstances etc.

The 3.5 LTI can be waived in some cases. That said your rental income is still income so if you earn €50,000 a year and are getting €20,000 in rent you're essentially on €70,000.

It still seems a bit of a grey area.

MarkAnthony

by the seaside wrote: »

Will you find the bursting of the bubble entertaining?

In all honesty yes, the things people keep ****eing on about... You're a moron if you didn't know house prices were cyclical when you threw down €750K for a three bed semi in Dundrum.

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:

Rubbish, again why do people think the first house should be the forever house. Of course the boom has resulted in a dysfunctional market but the process of trading up has been going on for decades with horrible busts in the UK.

The fact that we saw an explosion in house prices last year (which rightly needed to be cooled) blows the argument that cheap credit is the only factor out of the water, there were plenty of cash transactions last year.

Again it's fine comparing us to Germany etc. then bleating on that we're not the UK but in reality the UK is the closest comparable market, with very similar monetary policy and demographics. Why is it people always cite Berlin, one of the most underpriced cities in Europe? A cursory glance at property there see's a mixture of cheap and expensive property just like in Dublin.

Why is it that anyone who espouses a contrary view to the fact that not everyone should live in SCD in a >1000sq ft semi is some mad property speculator. Begrudgery at it's finest as always!

It's simple; prices need to steadily rise costs of building need to be brought down. The market needs to stabilise and supply needs to increase. Thankfully that the policy being pursued, the bubble are being created by supply and demand in certain areas of Dublin. If you can't afford to buy in an area, look to another.

handlemaster

http://www.irishtimes.com/life-and-style/homes-and-property/central-bank-lending-rules-will-not-curb-rising-prices-report-1.2108255

investors to push prices up !

Bob24

mortimer33 wrote: »

Yep, but its a pity those empty houses are nowhere near where people want to live

Indeed.

And when house are being built in places where no one wants to live, it means that? ;-)

Villa05

Bob24 wrote: »

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

i assume The graphs are adjusted for general inflation? Ie prices in Germany did rise but only in line with general inflation

Bob24

Villa05 wrote: »

i assume The graphs are adjusted for general inflation? Ie prices in Germany did rise but only in line with general inflation

I assume so as well as otherwise it would actually mean it is cheaper for someone to buy a house in Germany than it was 20 years ago, but to be honest I didn't look into the details of how the ECB are compiling the data.

mortimer33

gaius c wrote: »

No. They are having their kids now. The current baby boom is tailing off and they won't form new households for another 15-20 years.
The next decade could see "demand" be curbed dramatically.

2012/2013 was the peak for baby births in Ireland.Surely demand (both rental and purchase) for decent 3 bed semi's will increase in the coming years as these kids get older and the couples move on to have a second/third ..

dubrov

The number of births peaked in 2009.

http://www.cso.ie/en/statistics/birthsdeathsandmarriages/numberofbirthsdeathsandmarriages/

It now seems to be dropping off rapidly in line with the last baby boom around 1980.

seamus

Yeah, demand for 3/4 beds is going to increase, the question is where these properties will come from and whether people will look to rent or buy and whether they'll move into the commuter belt rather than pay €2k/month+ for a 100sq.m. house in Sandyford.

Anyone in a 2 or 3 bed - especially apartments - will be able to cope up to the age of 5 or 6, but beyond that people will be looking for more space and will be on the market for 3 and 4 bed houses with a back garden and a shed. This is primarily where the SCD demand has come from, but it's a problem that's going to get worse - all of those babies born in 2009 are hitting six years of age now, plus their slightly younger siblings coming up behind them.

gaius c

mortimer33 wrote: »

Yep, but its a pity those empty houses are nowhere near where people want to live

8% of Dublin properties were empty in the same census and the rate was 5% in the impossibly sought after SCD.

By way of comparison the vacancy rate was 2.5% for much of the 90's.

mortimer33 wrote: »

2012/2013 was the peak for baby births in Ireland.Surely demand (both rental and purchase) for decent 3 bed semi's will increase in the coming years as these kids get older and the couples move on to have a second/third ..

They will need to upgrade their existing accommodation. However, they won't form new households, unless of course pre-schoolers become the latest FTB's.

Also, you're wrong about the peak by about 4 years.

handlemaster wrote: »

http://www.irishtimes.com/life-and-style/homes-and-property/central-bank-lending-rules-will-not-curb-rising-prices-report-1.2108255

investors to push prices up !

Company that spent huge money on myhome.ie see bright future in property market shocker.

The_Conductor

mariaalice wrote: »

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.

Maria- lenders are loathe to lend to people in their 40s- because of their age- nothing more, nothing less. The max a person in their 40s will get, on a term length for a mortgage- is whatever the difference is between their current age and 68- the OAP age (and this is due to rise to 70 shortly).

Presumably a couple in their 40s trading up to a pad in Portmarnock (or whereever) will have significant equity from a previous dwelling- or the means to make the requisite repayments.

House prices in the likes of Portmarnock etc- have seen the highest percentage correction of all house prices in the country- with many recent sales currently up to 80% below their peak values. It is far from unusual for a property in the area which made 8-10 million 10 years ago- to change hands for pocket change over a million these days. Certainly- its still expensive- but compared to property elsewhere- it has already corrected far more than any other sector of the market........

Bob24

handlemaster wrote: »

http://www.irishtimes.com/life-and-style/homes-and-property/central-bank-lending-rules-will-not-curb-rising-prices-report-1.2108255

investors to push prices up !

There is some truth in this, but most people making this point are turning the issue around to push there own agenda.

Avoiding the consequences the article mentions would be easy: introduce additional taxation on investment property and these investors who are pushing prices up will go away. This could possibly be a more responsible way to address the issue than pushing Irish households into more debt so that they can keep competing with investors which have more cash than them.

Unless we really like our top of the league position here:

mortimer33

gaius c wrote: »

you're wrong about the peak by about 4 years.
.

Yes I was... I couldn't edit my post !

Many couples are willing to rent apartments/small houses when they only have 1 kid. Its makes financial sense..The problem is when kids start getting older and couples move on to they're 2nd/3rd kids.

gaius c

mortimer33 wrote: »

Yes I was... I couldn't edit my post !

Many couples are willing to rent apartments/small houses when they only have 1 kid. Its makes financial sense..The problem is when kids start getting older and couples move on to they're 2nd/3rd kids.

That's fine. They then leave the apartment or small house they are in and move to a bigger house if they have the finances in place.

Net new property units required = 0

Villa05

Ronan Lyons analysis from 2011 would suggest (as a few here believe) that at least the Dublin and Galway property market is in a bubble currently i.e. he accurately predicted the bottom of the market +/- 6 months. The bottom based on multiple valuation methods, and rises from there should be in line with inflation.

Some here believe that property values undershot on the way down this is clearly untrue. In fact it is questionable if they ever reached fair value on the way down.
So rises of 30/40% since the artificial bottom are clearly bubble territory and show that not only are the central Bank correct in bringing in these measures, they should have been in earlier.

So the graph above suggests that Ireland’s property market adjustment is about three quarters complete. How much longer will all this uncertainty and falling prices take? Clearly, that’s not just unknown, it’s unknowable right now. All prospective sellers and buyers could in theory read this post today and go off and make sure their ask or offer at 60% below the peak tomorrow. Would that solve things? Probably not without an easing of credit conditions, as would-be buyers find it very difficult to get credit at the moment.

http://www.ronanlyons.com/2011/07/05/are-we-nearly-there-yet-finding-the-new-floor-for-property-prices/

The Spider

And there ya go!

http://www.irishtimes.com/news/consumer/central-bank-lending-rules-will-drive-up-rent-1.2114453

El_Dangeroso

The Spider wrote: »

And there ya go!

http://www.irishtimes.com/news/consumer/central-bank-lending-rules-will-drive-up-rent-1.2114453

This is from Micheal 'we need to get prices up a bit more' Noonan. Yawn, not saying you will be wrong, but this isn't even a news story.

fret_wimp2

“Bringing in the rules too soon could result in proper prices stalling. This would be undesirable because the upturn in the prices is bringing many people out of negative equity,” the official wrote.

Perhaps my view is far too simplistic, but the way i see it is that house prices were high during the boom times. People bought and the bubble burst/market dropped. These people are now in negative equity.

For them to get out of negative equity, doesnt the market need to go back up to the crazy levels at the height of the boom. Dont we want to avoid that?

gaius c

fret_wimp2 wrote: »

“Bringing in the rules too soon could result in proper prices stalling. This would be undesirable because the upturn in the prices is bringing many people out of negative equity,” the official wrote.

Perhaps my view is far too simplistic, but the way i see it is that house prices were high during the boom times. People bought and the bubble burst/market dropped. These people are now in negative equity.

For them to get out of negative equity, doesnt the market need to go back up to the crazy levels at the height of the boom. Dont we want to avoid that??

Hey. Don't be upsetting the taxi driver economics narrative.

Villa05

That article is very worrying. It shows that group think is back and the clowns in govt and department of finance believe that returning property prices to there 07 highs appears to be there priority. They dont seem to realise that those highs were from the biggest property bubble recorded anywhere in the world.
Dangerous times ahead

Idioteque

fret_wimp2 wrote: »

For them to get out of negative equity, doesnt the market need to go back up to the crazy levels at the height of the boom.

...or they could take the hit and continue to pay off the debt every month, do a deal with the bank, have house repossessed, Gov/Banks do a nationwide write-down, trade down etc. etc.

If that "Senior Official in the departments economic division" idea is for us to go back to boom time prices just to get people out of negative equity...well....actually never-mind, it's too depressing to think that's the type of senior officials we have running the show.

Mr.McLovin

In addition, the falling incidence of negative equity is helping to restore banks’ balance sheets.”

sigh*

I've paid enough taxes to help them fcukers now they want us to pay more indirectly.

by the seaside

Villa05 wrote: »

That article is very worrying. It shows that group think is back and the clowns in govt and department of finance believe that returning property prices to there 07 highs appears to be there priority. They dont seem to realise that those highs were from the biggest property bubble recorded anywhere in the world.
Dangerous times ahead

I'm sure it will be different this time.

BoatMad

Villa05 wrote: »

That article is very worrying. It shows that group think is back and the clowns in govt and department of finance believe that returning property prices to there 07 highs appears to be there priority. They dont seem to realise that those highs were from the biggest property bubble recorded anywhere in the world.
Dangerous times ahead

can't see it happening, banks are in a different place and money will not be as readily available or as cheap

The Spider

There's no other option and I say that as an observational point nothing else. If prices don't rise people in negative equity won't sell they'll stay where they are and pay the mortgage. People who would've sold second properties will hold onto them and rent them out at high rents instead.

Retirees who were looking to trade down won't bother because the amount of money left to live on won't be sufficient.

The banks can't write off the portions owed by those in negative equity, the taxpayer will foot the bill.

As has been mentioned many times before, without rising prices developers won't build, the risk is too great to make the gamble.

I don't know where any tax on unused land would leave the likes of NAMA which is certainly hording land until prices rise, I'm sure if there was a tax on an individual for doing the same it would leave it open to being challenged in court.

The only hope is inflation really, with QE the value of the euro drops prices increase, wages increase to meet the cost of living, but debts are now a lot less.

In that scenario house price increases wouldn't be so bad with rising wages.

However there's no perfect answer.

fret_wimp2

The Spider wrote: »

There's no other option and I say that as an observational point nothing else. If prices don't rise people in negative equity won't sell they'll stay where they are and pay the mortgage. People who would've sold second properties will hold onto them and rent them out at high rents instead.

Retirees who were looking to trade down won't bother because the amount of money left to live on won't be sufficient.

The banks can't write off the portions owed by those in negative equity, the taxpayer will foot the bill.

As has been mentioned many times before, without rising prices developers won't build, the risk is too great to make the gamble.

I don't know where any tax on unused land would leave the likes of NAMA which is certainly hording land until prices rise, I'm sure if there was a tax on an individual for doing the same it would leave it open to being challenged in court.

The only hope is inflation really, with QE the value of the euro drops prices increase, wages increase to meet the cost of living, but debts are now a lot less.

In that scenario house price increases wouldn't be so bad with rising wages.

However there's no perfect answer.

Genuine question - is it the cost of land driving up prices of builds,causing developers to be wary? Or is it greed, i.e they could make x per house 7 years ago and they just dont want to do it for half that, even if theres still profit to be made

Villa05

fret_wimp2 wrote: »

Genuine question - is it the cost of land driving up prices of builds,causing developers to be wary? Or is it greed, i.e they could make x per house 7 years ago and they just dont want to do it for half that, even if theres still profit to be made

Guessing
Volatility - Prices could fall by 20% as quickly as they rose
Credit - Still scarce for developers or lack of credit worthy developers
Land Banking - If the land is going up in value as is, why take a risk

All issues that something can be done about by Gov