Central Bank to limit amount banks lend for home purchase

Villa05

BoatMad wrote: »

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

The only thing banks learned is that they are too big to fail. Money is cheaper, being printed at the touch of a button,
Gov and Dept of finance have almost total control over supply through NAMA, and ownership of the banks. This suffocating supply of housing and Development Land and Developers. Normal market solutions on defaulting mortgages are being actively suppressed.

The article on the Times starts with concern for rising rents, The only concern displayed in that article is that the Central Bank have thrown a spanner in the works in the grand plan to get price up as quickly as possible.

Conditions are ripe for anther monumental Irish Own goal/screw up (or whatever you want to call it)

P. Breathnach

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

In theory, the cost of land should not drive prices up; the relationship works the other way around, that land prices should be driven by the price of housing.

It's not happening that way at the moment. That is because people who hold building land are not willing to sell at the sort of prices that the market might support. Why is that? In my opinion, because the owners believe that the price of building land will rise. Unless and until they become convinced that land prices will not rise in the short or medium term, they will keep their land out of the market.

A tax on unused development land might change the business model.

Cuddlesworth

Villa05 wrote: »

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

Yeah, I'm thinking the same thing.

It costs nothing to sit on land in this country. As long as you're not paying interest on a loan, its free money if development zones have reached it.

Estates can easily take 4 years to build. A yearly 25% price increase might seem great to some, but 4 years is a long time. If prices tank worse then before, you will lose your shirt. Most of the smart builders here dropped out of the market mid 2005-2006. And they most likely decided on doing that in 2003.

MysticalRain

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.

NE only effects a small proportion of sellers on the market.

Retirees also won’t have very much money left over to live on if they have to pay over the odds for the place the trade down to.


Regarding the builders won’t build argument: You keep repeating that mantra, so I will keep repeating why it is BS:

Spider argument #5: Builders won’t build houses if we don’t throw wads of cash at them
Builders are not some caricatures from an Ayn Rand novel where they will threaten go full John Galt and withdraw their services if they feel society isn't paying them enough.

The main blocker for builders at the moment is lack of credit and available land. If they refuse to work, it's either back to the dole queue or a one way trip to Australia or Canada.

Also, while NAMA may have been hoarding land for the last few years, they are still proceeding with their current strategy of getting rid of most of it by 2018.


Spider argument #6: Wage increases will match house price inflation
We know this won’t work for the simple reason that it didn’t work the last time we had a housing bubble. House prices soared far ahead of wages, even for people working in good well paying jobs. The same scenario is already happening now that house prices are becoming decoupled from the wages to support them.

The final point I will make is that you are going to make yourself look very foolish by appearing to wish for house prices to rise further in 2015 and the years beyond. Expect your posts to be quoted back to you verbatim in a few short years, much in the same way people who argued against the bubble bursting in 2006 had theirs quoted. So you may want to hedge your bets a little with those predictions of yours. You can start with those mass repossessions you told us would never happen.

Villa05

Greece seems to be able to get finance to its construction sector - wonder what is blocking same in Ireland <cough>

http://www.independent.ie/business/construction-sector-growing-faster-in-greece-than-ireland-31015934.html

In Ireland, the most recent figures for the third quarter of 2014 showed a 10pc increase in construction as the sector begins to emerge from half a decade of bust.

However, the pace of the Irish building recovery in the third quarter was overshadowed by Greece - which racked up a 61.4pc increase in output over the same period

by the seaside

Villa05 wrote: »

Greece seems to be able to get finance to its construction sector - wonder what is blocking same in Ireland <cough>

http://www.independent.ie/business/construction-sector-growing-faster-in-greece-than-ireland-31015934.html

Maybe that means that Greece built 1.614 homes in a quarter.

The Spider

MysticalRain wrote: »

NE only effects a small proportion of sellers on the market.

Retirees also won’t have very much money left over to live on if they have to pay over the odds for the place the trade down to.


Regarding the builders won’t build argument: You keep repeating that mantra, so I will keep repeating why it is BS:

Spider argument #5: Builders won’t build houses if we don’t throw wads of cash at them
Builders are not some caricatures from an Ayn Rand novel where they will threaten go full John Galt and withdraw their services if they feel society isn't paying them enough.

The main blocker for builders at the moment is lack of credit and available land. If they refuse to work, it's either back to the dole queue or a one way trip to Australia or Canada.

Also, while NAMA may have been hoarding land for the last few years, they are still proceeding with their current strategy of getting rid of most of it by 2018.


Spider argument #6: Wage increases will match house price inflation
We know this won’t work for the simple reason that it didn’t work the last time we had a housing bubble. House prices soared far ahead of wages, even for people working in good well paying jobs. The same scenario is already happening now that house prices are becoming decoupled from the wages to support them.

The final point I will make is that you are going to make yourself look very foolish by appearing to wish for house prices to rise further in 2015 and the years beyond. Expect your posts to be quoted back to you verbatim in a few short years, much in the same way people who argued against the bubble bursting in 2006 had theirs quoted. So you may want to hedge your bets a little with those predictions of yours. You can start with those mass repossessions you told us would never happen.

All I can say to any of the above is, look through my posts going back two years you'll see I've been bang on the money every time.

The reason? Because I look at reality rather than wish fulfilment, As for mass repossessions if you take the time to read through my posts, you'll see that I stated more than a year ago that repossessions would only happen when prices rose, because otherwise it didn't make sense for the banks, go on dig through it and quote me.

I stand by my assertion above, just looking at the facts.

ElizKenny

The Spider wrote: »

All I can say to any of the above is, look through my posts going back two years you'll see I've been bang on the money every time.

The reason? Because I look at reality rather than wish fulfilment, As for mass repossessions if you take the time to read through my posts, you'll see that I stated more than a year ago that repossessions would only happen when prices rose, because otherwise it didn't make sense for the banks, go on dig through it and quote me.

I stand by my assertion above, just looking at the facts.

I read through your posts a few weeks ago and i gotta say that you are the only person of the regular property poster who seems to be always right.
Quite striking actually how on the money you actually were.
Well done sir. Just thought id back you up there since I was being nosey at the time

Villa05

Spider is right because the Dublin property market is in a bubble and following the last one in almost identical trends.
So recent property market history is Spider mastermind topic

MysticalRain

The Spider wrote: »

All I can say to any of the above is, look through my posts going back two years you'll see I've been bang on the money every time.

The reason? Because I look at reality rather than wish fulfilment, As for mass repossessions if you take the time to read through my posts, you'll see that I stated more than a year ago that repossessions would only happen when prices rose, because otherwise it didn't make sense for the banks, go on dig through it and quote me.

I stand by my assertion above, just looking at the facts.

There's no shortage of wish fulfillment in your own posts - typically involving your own vested interest in rising prices.

Meanwhile, in the thread below, you are arguing mass repossessions would never happen, and mass dept write downs would occur instead (you got it arseways on both counts)
http://www.boards.ie/vbulletin/showpost.php?p=84270219&postcount=84

Furthermore, you were advising FTB'ers like myself to abandon finding a nice apartment in a good city center area, and look to the suburbs/commuter belt instead (I would be considerably worse off if I had taken that advise and lost out on buying a relatively cheap repossessed property instead).

MysticalRain

Villa05 wrote: »

Spider is right because the Dublin property market is in a bubble and following the last one in almost identical trends.
So recent property market history is Spider mastermind topic

and the sad thing is despite having lived through the last recent bubble, he still doesn't realise we are in the midst of a second one.

The Spider

MysticalRain wrote: »

There's no shortage of wish fulfillment in your own posts - typically involving your own vested interest in rising prices.

Meanwhile, in the thread below, you are arguing mass repossessions would never happen, and mass dept write downs would occur instead (you got it arseways on both counts)
http://www.boards.ie/vbulletin/showpost.php?p=84270219&postcount=84

Furthermore, you were advising FTB'ers like myself to abandon finding a nice apartment in a good city center area, and look to the suburbs/commuter belt instead (I would be considerably worse off if I had taken that advise and lost out on buying a relatively cheap repossessed property instead).

Nah, any advice was towards those looking to settle down with families as that's what the majority of posters were, and I still stand by it, better value to be had for an extra ten minutes in the car even now. Single people looking for somewhere to live? By all means buy an apartment, in fact I'd go so far as to say that closer to town the better, but I'd also say that sharing may be better.

As towards the masss write downs, I see you picked one post out of what is a speculative subject at best, I'm sure if you tried you could find posts where I said that the only way mass repos would happen is if property prices rose?

I personally am not going to dig out my old posts I know what I've said so I'll leave it up to you to trawl through old posts to win some one upmanship that's going on in your own head.

(I'll still be right)

The Spider

ElizKenny wrote: »

I read through your posts a few weeks ago and i gotta say that you are the only person of the regular property poster who seems to be always right.
Quite striking actually how on the money you actually were.
Well done sir. Just thought id back you up there since I was being nosey at the time

And thank you sir, I do my best!:)

MysticalRain

The Spider wrote: »

Nah, any advice was towards those looking to settle down with families as that's what the majority of posters were, and I still stand by it, better value to be had for an extra ten minutes in the car even now. Single people looking for somewhere to live? By all means buy an apartment, in fact I'd go so far as to say that closer to town the better, but I'd also say that sharing may be better.

As towards the masss write downs, I see you picked one post out of what is a speculative subject at best, I'm sure if you tried you could find posts where I said that the only way mass repos would happen is if property prices rose?

I personally am not going to dig out my old posts I know what I've said so I'll leave it up to you to trawl through old posts to win some one upmanship that's going on in your own head.

(I'll still be right)

You asked me to quote you, which I duly did. Now you're trying to move the goal posts. Funny how emphatically you stated your predictions given that it was a "speculative subject at best".

I have to laugh at the "extra ten minutes by car". Ask anyone who commutes from the suburbs or outer commuter belt how long ten minutes by car is in reality. Traffic in Dublin isn't going to improve anytime soon, so your own decision to buy a house outside Dublin county may not look so smart in due course.

The Spider

MysticalRain wrote: »

You asked me to quote you, which I duly did. Now you're trying to move the goal posts. Funny how emphatically you stated your predictions given that it was a "speculative subject at best".

I have to laugh at the "extra ten minutes by car". Ask anyone who commutes from the suburbs or outer commuter belt how long ten minutes by car is in reality. Traffic in Dublin isn't going to improve anytime soon, so your own decision to buy a house outside Dublin county may not look so smart in due course.

Ah I looked through that old thread, fair play for finding one piece of text that slightly backed you up when taken out of context of the rest of the thread, how long did it take you to find it?

Seriously though, yup Al, fine and peachy with me and the house, I don't exactly have to be in Dublin at 9 on the button every day, and as I'm not from Dublin I don't know what the issue is, saying that we still have property in Dublin so you know still skn in the game.

However I hope your apartment works out ok and Good work on buying the bank property!

Villa05

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.

Spider your point implies that the cure is to return prices to their bubble highs.
These were the highs that bankrupted the country. In going in to that crisis our state finances were healthy.
Currently we are one of the most indebted countries in the world. What do you think will happen to Ireland if we have a similar crisis again which would be inevitable with a return to normal interest rates.
Bear in mind that many of the problems from the last bust were swept under the carpet. Banks are very fragile and our decision makers in Government 0 backbone

The Spider

Villa05 wrote: »

Spider your point implies that the cure is to return prices to their bubble highs.
These were the highs that bankrupted the country. In going in to that crisis our state finances were healthy.
Currently we are one of the most indebted countries in the world. What do you think will happen to Ireland if we have a similar crisis again which would be inevitable with a return to normal interest rates.
Bear in mind that many of the problems from the last bust were swept under the carpet. Banks are very fragile and our decision makers in Government 0 backbone

Oh absolutely I know what it implies, and it's not great not by a long shot, but my other point about quantative easing, and devaluing the debt stands.

If you look solely at the property market, I honestly don't see any other way around it, like I say you'd hope that inflation would then eat it away.

by the seaside

The Spider wrote: »

Oh absolutely I know what it implies, and it's not great not by a long shot, but my other point about quantative easing, and devaluing the debt stands.

If you look solely at the property market, I honestly don't see any other way around it, like I say you'd hope that inflation would then eat it away.

The difficulty here is that this is an ideal, but not necessarily achievable scenario: 'the soft landing':

- QE causes inflation to erode the debt (national and domestic esp. mortgage)
- House prices slowly increase to erode NE
- Wage inflation goes alongside inflation to reduce house price to salary ratios and improve affordability
- The QE allows easy enough credit to keep the market moving.

In general terms the problem with this is that it is very hard for a government to control this with the levers it has. Look at years of emergency low base rates and QE here in the UK, Where is the inflation (currently 0.3%) and wage inflation? In some ways teh economy looks OK here but the growth in jobs is primarily zero hour contract and badly paid self-employment undertaken to get working tax credits from the state. And in fact, the devaluation of sterling has (among other factors) enabled a massive bubble in London house prices (before the last bubble was deflated), driven by overseas investment because with global QE, all that money must go somewhere...

So finding the sweet spot for a soft landing is very difficult.

Now consider how much harder it is is Ireland. Firstly, the carnage left by the last bubble (national debt and NE) is much bigger. And secondly, the government has fewer tools at its disposal. Interest rate and QE decisions are made for the Eurozone, of which Ireland has 1.3% of the population, and there are bigger concerns (Greece and contagion to Italy, Portugal, Spain) for the policy makers. So an overheating (or bursting) property market cannot expect a policy response from the ECB. Ireland is also very vulnerable to US or UK decisions to devalue currency (although that is not an immediate prospect - but it did hit Ireland a few years ago when the UK effectively devalued by 20-25%).

As it happens, I think the Central Bank has played this skillfully given its limited tools (although I have a lot of sympathy for individuals and couples who have been saving hard and find the rug pulled from under their feet), but the tools are limited.

What I don't understand, and maybe someone who gets economics better than I do can explain is:

Where a central bank controls base rates, it can put those rates up (e.g. by 0.5%) if the market is overheating.

Where the central bank does not control base rates (due to Euro membership) why can't it put a 0.5% tax on all mortgages except existing fixed rates. Wouldn't that have the same effect economically? It might be politically unpalatable, but the state income could be hypothecated to pay down the national debt, or even to build housing in areas of high demand (Dublin commuter towns, perhaps build a 'garden city' in partnership with private sector builders on a decent train line 30 to 40 minutes from Dublin. http://en.wikipedia.org/wiki/Welwyn_Garden_City )

So I'm sure that's all amateur economics and politics, but why?

gaius c

MysticalRain wrote: »

and the sad thing is despite having lived through the last recent bubble, he still doesn't realise we are in the midst of a second one.

It could well be over actually. The average property transaction value in Dublin (on PPR) is down 26% since last July.

by the seaside

gaius c wrote: »

It could well be over actually. The average property transaction value in Dublin (on PPR) is down 26% since last July.

What is it on the same quarter last year (good to compare like with like to adjust for seasonal variations)?

johnp001

by the seaside wrote: »

What is it on the same quarter last year (good to compare like with like to adjust for seasonal variations)?

3% increase in avg Dublin prices on PPR from July 13 to Jan 14
24% decrease in avg Dublin prices on PPR from July 14 to Jan 15

by the seaside

johnp001 wrote: »

3% increase in avg Dublin prices on PPR from July 13 to Jan 14
24% decrease in avg Dublin prices on PPR from July 14 to Jan 15

What's the change from Jan 14 to Jan 15?

gaius c

by the seaside wrote: »

What's the change from Jan 14 to Jan 15?

Jan-14 € 307,843.49


Jan-15 € 331,392.58


Note that the end of the year is something of an outlier (nationally) and probably includes sales that actually closed in Dec, i.e. last of CGTE sales.

Nov-14 € 368,138.44
Dec-14 € 331,093.26
Jan-15 € 331,392.58
Feb-15 € 319,668.03


I'll post full figures later.

gaius c

gaius c

gaius c

The Spider

According to that Q1 2015 s up significantly on Q1 2014? Or am I reading it right?

gaius c

Obviously more recent figures need to be treated with some caution as PPR is still updating. On occasion, I still find new entries for 2010!

gaius c

The Spider wrote: »

According to that Q1 2015 s up significantly on Q1 2014? Or am I reading it right?

You read whatever you want to read!:P

by the seaside

The Spider wrote: »

According to that Q1 2015 s up significantly on Q1 2014? Or am I reading it right?

That's how I read it.

Thanks for all this, Gaius.

I think what is really needed is to compare 1 quarter of data with the same quarter from the previous year.