Central Bank to limit amount banks lend for home purchase

Bob24

gaius c wrote: »

You read whatever you want to read!:P

But he is reading it right?

First table, Q1 2015, YOY: +12%. Meaning to date the average proce fro Q1 2015 is 12% higher than Q1 2014?

gaius c

by the seaside wrote: »

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.

There is something of a lag with the PPR figures, approx 1-2 months.
Sale agreed & contracts signed in December but deal doesn't close until Jan, therefore it turns up in Jan figures. That assumes an exceptionally quick closing.

Greyian

gaius c wrote: »

What is this, an image for ants?

Great work though. 16% growth in 1 quarter is absolutely ridiculous.

gaius c

Try clicking on it. I used a thumbnail so as not to break the margins.

16% in one quarter? Try 20% in one month!

There are wild swings because very big (or small) transactions can throw the averages out due to the very low transaction volume. A bigger sample size would reduce the effect of outlying data points.

by the seaside

gaius c wrote: »

Try clicking on it. I used a thumbnail so as not to break the margins.

There are wild swings because very big (or small) transactions can throw the averages out due to the very low transaction volume. A bigger sample size would reduce the effect of outlying data points.

Which is why looking at quarterly figure is more useful for trend spotting, I think.

gaius c

Agreed. Let me see if I can rustle up regional figures by quarter.
File is over 16 megs now btw and is a bit heavy on processor use.

gaius c

Only trouble with quarter figures is that they can mask stuff like the lag. A "big" December will end up showing in Q1 rather than the Q4 the sales actually happened in and this could lead to misunderstanding of cause & effect. Or alternatively a "big" December could end up being masked by a "small" Q1.

Revised figures by quarter.

The Spider

gaius c wrote: »

Only trouble with quarter figures is that they can mask stuff like the lag. A "big" December will end up showing in Q1 rather than the Q4 the sales actually happened in and this could lead to misunderstanding of cause & effect. Or alternatively a "big" December could end up being masked by a "small" Q1.

Revised figures by quarter.

True, but this applies to every year and every quarter, so you can still extrapolate a direction of price.

gaius c

The Spider wrote: »

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

On a national level, yes but it's the first YOY drop in Dublin in 2 years.
We're barely half way into Q1 2015 so very early days yet.

The_Conductor

Cuddlesworth wrote: »

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.

There was a bill introduced this week which would make all development land taxable. The suggestion was a 1% tax in year 1 of the land remaining undeveloped, 2% in year 2, 3% in year 3, 4% in year 4- and so on, ad infinitum, until such time as they develop the land.

In all honesty- its a good idea- it makes sitting on the land expensive- and it might be the stick that might work to get developments underway (providing the other bottlenecks in the system- such as finance for developers- are also dealt with).

kippy

The_Conductor wrote: »

There was a bill introduced this week which would make all development land taxable. The suggestion was a 1% tax in year 1 of the land remaining undeveloped, 2% in year 2, 3% in year 3, 4% in year 4- and so on, ad infinitum, until such time as they develop the land.

In all honesty- its a good idea- it makes sitting on the land expensive- and it might be the stick that might work to get developments underway (providing the other bottlenecks in the system- such as finance for developers- are also dealt with).

It would be interesting to see who owns all this land (that has been zoned residential)
I suspect a lot of it would be sat on by NAMA or the Banks.

The Spider

kippy wrote: »

It would be interesting to see who owns all this land (that has been zoned residential)
I suspect a lot of it would be sat on by NAMA or the Banks.

I agree, and are NAMA going to be taxed for sitting on the land?

MAJJ

The_Conductor wrote: »

There was a bill introduced this week which would make all development land taxable. The suggestion was a 1% tax in year 1 of the land remaining undeveloped, 2% in year 2, 3% in year 3, 4% in year 4- and so on, ad infinitum, until such time as they develop the land.

In all honesty- its a good idea- it makes sitting on the land expensive- and it might be the stick that might work to get developments underway (providing the other bottlenecks in the system- such as finance for developers- are also dealt with).

Thanks for the info. Do you know who introduced the bill, party or indepedent? Wonder how likely it is to through given who owns NAMA, banks and wanted high prices.

kippy

The Spider wrote: »

I agree, and are NAMA going to be taxed for sitting on the land?

I've mentioned it earlier in the post, but because of the major involvement of NAMA in all things property in this country, there are huge knock on effects of any of these rule/law changes for the state via NAMA.

I suppose without figures and indeed knowing where these landbanks are, it is hard to know whether the land that NAMA is sitting on is the land that is in the right areas for development.

Dublin house prices down around 2% in January. No doubt Central Bank will be blamed for upsetting 'progress'.

Or maybe tomorrow's headlines will say 'Relief for hard-pressed house-hunters as amount needed for deposit begins to fall'. We live in hope.

dr.fuzzenstein

Deleted User wrote: »

Dublin house prices down around 2% in January. No doubt Central Bank will be blamed for upsetting 'progress'.

Or maybe tomorrow's headlines will say 'Relief for hard-pressed house-hunters as amount needed for deposit begins to fall'. We live in hope.

Not with the "Meeja" in this (or any) country.
If house prices rise:
MASSIVE HOUSEPRICE RUNAWAY BUBBLE SHOCKER!
If houseprices fall:
BUILDING INDUSTRY IN CRISIS AS HOUSING MARKET COLLAPSES AGAIN!
If it stays the same:
HOUSING MARKET STAGNANT AMIDST GOVERNMENT INACTION!

by the seaside

dr.fuzzenstein wrote: »

Not with the "Meeja" in this (or any) country.
If house prices rise:
MASSIVE HOUSEPRICE RUNAWAY BUBBLE SHOCKER!
If houseprices fall:
BUILDING INDUSTRY IN CRISIS AS HOUSING MARKET COLLAPSES AGAIN!
If it stays the same:
HOUSING MARKET STAGNANT AMIDST GOVERNMENT INACTION!

HARD WORKING FAMILY MISERY AS SPECULATORS SNAP UP BARGAIN HOMES

dr.fuzzenstein

by the seaside wrote: »

HARD WORKING FAMILY MISERY AS SPECULATORS SNAP UP BARGAIN HOMES

I do agree with the sentiment though. We're putting more homes out of the reach of people in average incomes, we have no protection in place against rip-off rent increases, so the market will be attractive to foreign speculators whose sole motivation is profit and fcuk everything else. Investors will be able to splash a lot of cash on houses, not needing to go cap in hand to greedy, rip-off, thieving Irish bankers (with mortgage interest rates 3-4 times inflated beyond what they should be), so then starts the feeding frenzy. Think rents are bad now? Enjoy double digit increases per year for years to come.
If the Irish government will do anything, it will be to jack up taxes, because that is the single solution to ANY problem in Ireland, no though is even wasted on other solutions.
So in the end we won't be happy till we ruined it for everyone, because that's the way we do it. See someone getting on? Blast them with tax until they don't.

Deco99

dr.fuzzenstein wrote: »

I do agree with the sentiment though. We're putting more homes out of the reach of people in average incomes, we have no protection in place against rip-off rent increases, so the market will be attractive to foreign speculators whose sole motivation is profit and fcuk everything else. Investors will be able to splash a lot of cash on houses, not needing to go cap in hand to greedy, rip-off, thieving Irish bankers (with mortgage interest rates 3-4 times inflated beyond what they should be), so then starts the feeding frenzy. Think rents are bad now? Enjoy double digit increases per year for years to come.
If the Irish government will do anything, it will be to jack up taxes, because that is the single solution to ANY problem in Ireland, no though is even wasted on other solutions.
So in the end we won't be happy till we ruined it for everyone, because that's the way we do it. See someone getting on? Blast them with tax until they don't.

You've solved it and you may not realise it.

The_Conductor

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.

Big time. Take Lucan- one of the suburbs- 10 minutes won't get you from one end of the village to the other- much less out onto the N4- which can take 30-40 minutes to get as far as the M50- or if you go inbound on St. John's Road (a regular trip for many commuters)- to reach O'Connell Street Bridge- inclusive of the North quays- can take you over 2 hours (as I discovered to my cost last Wednesday when I was bringing my wife to an interview).

10 minutes my arse.

handlemaster

when prices go up people say they cant afford it.
when prices go down people say they might fall further
when prices rise they sit by and do nothing

paralyses of analyses. If the numbers work for you buy.


Prices will drop and rise as they have always done

keane2097

handlemaster wrote: »

when prices go up people say they cant afford it.
when prices go down people say they might fall further
when prices rise they sit by and do nothing

paralyses of analyses. If the numbers work for you buy.


Prices will drop and rise as they have always done

Deep stuff.

The Spider

The_Conductor wrote: »

Big time. Take Lucan- one of the suburbs- 10 minutes won't get you from one end of the village to the other- much less out onto the N4- which can take 30-40 minutes to get as far as the M50- or if you go inbound on St. John's Road (a regular trip for many commuters)- to reach O'Connell Street Bridge- inclusive of the North quays- can take you over 2 hours (as I discovered to my cost last Wednesday when I was bringing my wife to an interview).

10 minutes my arse.

Well it depends on where you have to get to, I live in Gorey and work in South Dublin, I left the house at 8.16 and was at my desk at 9.18, this morning and that's including passing the roadworks on the N11, I'd expect this travel time to decrease when the roadworks are complete.

Coming in from the Northside granted is more problematic, however if you work in the city centre, you can choose to live either north or south, if you work in the south of the city, there's definitely better value outside, and yes it is an extra ten minutes in the car.

If you work in the North of the city, the same applies, one caveat I will give is that if you move job you may be more limited in your choices, for instance I'd find it difficult to work close to the airport, it would be doable but the m50 can turn into a snail race.

molloyjh

handlemaster wrote: »

when prices go up people say they cant afford it.
when prices go down people say they might fall further
when prices rise they sit by and do nothing

paralyses of analyses. If the numbers work for you buy.


Prices will drop and rise as they have always done

We should be looking to move away from this though. We should be able to have a property market that's relatively stable and not subject to wild fluctuations. Which I think is what these rules are trying to achieve. My only issue is that I think they could have achieved it with a 90% LTI rather than 80%.

Take for example a couple with good earnings of €110k a year who have been looking to buy a 3 bed home in South Dublin (not South County Dublin) and have been saving towards that end. Let's assume a house price of €350k is what they are looking at, which is fairly modest by South Dublin standards for a 3 bed. They currently own a home so are not first time buyers. For the record all of this is loosely based on my own situation.

Combined Salary|

€110,000

|
House Price|

€350,000

|
Old LTV|

92%

Old LTI|

N/A

|
Old Deposit Required|

€28,000

Old Mortgage Required|

€322,000

|
To Buy Under The New Rules
|
New LTV|

80%

New LTI|

3.5

|
New Mortgage Allowed|

€280,000

New Deposit Required|

€70,000

Additional Savings Required|

€42,000

|
What Is Available Under The New Rules
|
Possible Mortgage Allowed|

€140,000

Possble Deposit Required|

€28,000

Possible House Price|

€168,000

|


What is forcing people into saving so much extra really going to achieve? Bringing it to 90% would have meant an extra €7k savings for the deposit and a very manageable mortgage. Prices would naturally come down based on the LTI rules anyway and the mortgages would still be affordable.

molloyjh

The Spider wrote: »

Well it depends on where you have to get to, I live in Gorey and work in South Dublin, I left the house at 8.16 and was at my desk at 9.18, this morning and that's including passing the roadworks on the N11, I'd expect this travel time to decrease when the roadworks are complete.

Coming in from the Northside granted is more problematic, however if you work in the city centre, you can choose to live either north or south, if you work in the south of the city, there's definitely better value outside, and yes it is an extra ten minutes in the car.

If you work in the North of the city, the same applies, one caveat I will give is that if you move job you may be more limited in your choices, for instance I'd find it difficult to work close to the airport, it would be doable but the m50 can turn into a snail race.

It's a lot more complicated than that though. If you work in the city and buy on the Northside for affordability reasons and then your work moves location (which happened to my wife) you're screwed. She now has to drive from D15 to Sandyford every day, through the toll bridge and pay for parking. It's about an hour when the schools are in, less during the summer etc. But the cost is ridiculous. Petrol + tolls + parking make it really expensive, never mind the commute times.

The Spider

molloyjh wrote: »

It's a lot more complicated than that though. If you work in the city and buy on the Northside for affordability reasons and then your work moves location (which happened to my wife) you're screwed. She now has to drive from D15 to Sandyford every day, through the toll bridge and pay for parking. It's about an hour when the schools are in, less during the summer etc. But the cost is ridiculous. Petrol + tolls + parking make it really expensive, never mind the commute times.

I agree, but that's the case with buying anywhere, if your job moves to a different location unless you're renting and even then it'd be difficult to up sticks if you have kids in school etc.

You may have to look for another job, but then another job mightn't pay enough, you're generally ok on a mid-level salary most people in that situation can move around. Problem arises when you're salary goes up and you find yourself in a golden handcuffs situation where it's very difficult to move without taking a hit in the pocket. Not to mention the uncertainty of probation again etc. adding family members to healthcare and all that.

But like I say these are all problems that could occur to anyone and you can't put plans on hold because of what if's.

johnp001

molloyjh wrote: »

We should be looking to move away from this though. We should be able to have a property market that's relatively stable and not subject to wild fluctuations. Which I think is what these rules are trying to achieve. My only issue is that I think they could have achieved it with a 90% LTI rather than 80%.

Take for example a couple with good earnings of €110k a year who have been looking to buy a 3 bed home in South Dublin (not South County Dublin) and have been saving towards that end. Let's assume a house price of €350k is what they are looking at, which is fairly modest by South Dublin standards for a 3 bed. They currently own a home so are not first time buyers. For the record all of this is loosely based on my own situation.

Combined Salary|

€110,000

|
House Price|

€350,000

|
Old LTV|

92%

Old LTI|

N/A

|
Old Deposit Required|

€28,000

Old Mortgage Required|

€322,000

|
To Buy Under The New Rules
|
New LTV|

80%

New LTI|

3.5

|
New Mortgage Allowed|

€280,000

New Deposit Required|

€70,000

Additional Savings Required|

€42,000

|
What Is Available Under The New Rules
|
Possible Mortgage Allowed|

€140,000

Possble Deposit Required|

€28,000

Possible House Price|

€168,000

|


What is forcing people into saving so much extra really going to achieve? Bringing it to 90% would have meant an extra €7k savings for the deposit and a very manageable mortgage. Prices would naturally come down based on the LTI rules anyway and the mortgages would still be affordable.

But the price level of the house is set at €350k because that is what banks will allow buyers to borrow to pay for it.
If the couple in the example above were the top bidders on the house and €168k is all they are able to afford then that becomes the price level of the house.
Obviously not all sellers will accept that price initially but an executor sale or divorce or emigration situation or similar where a seller needs to sell for the maximum price available at the time will cause a sale to be made at a price below what lending at 92% LTV and no real LTI restriction allowed. This then becomes the market price for equivalent properties and the market finds it's level for the new reality of prudential lending.

molloyjh

The Spider wrote: »

I agree, but that's the case with buying anywhere, if your job moves to a different location unless you're renting and even then it'd be difficult to up sticks if you have kids in school etc.

You may have to look for another job, but then another job mightn't pay enough, you're generally ok on a mid-level salary most people in that situation can move around. Problem arises when you're salary goes up and you find yourself in a golden handcuffs situation where it's very difficult to move without taking a hit in the pocket. Not to mention the uncertainty of probation again etc. adding family members to healthcare and all that.

But like I say these are all problems that could occur to anyone and you can't put plans on hold because of what if's.

Absolutely agree that future potential moves like that shouldn't impact decision making here and now. The point I was more making was the moves like that that have happened can have a major impact on the here and now. And people in reasonably specialist areas don't have the same luxury when it comes to changing jobs. For example the move that my wife had to make saw her go from using public transport to get into work at an approximate cost of €80 a month a few years ago to €300+ now between petrol, tolls and parking. Once you factor in car loans, tax and insurance etc our travel costs are pretty much the same as our mortgage.

molloyjh

johnp001 wrote: »

But the price level of the house is set at €350k because that is what banks will allow buyers to borrow to pay for it.
If the couple in the example above were the top bidders on the house and €168k is all they are able to afford then that becomes the price level of the house.
Obviously not all sellers will accept that price initially but an executor sale or divorce or emigration situation or similar where a seller needs to sell for the maximum price available at the time will cause a sale to be made at a price below what lending at 92% LTV and no real LTI restriction allowed. This then becomes the market price for equivalent properties and the market finds it's level for the new reality of prudential lending.

That's incredibly optimistic. Given the level of cash buys that have been happening lately and the number of people who bought long before the boom there are still going to be plenty of people willing to pay the higher prices for homes. And the thought of someone with a €350k house selling for less than €200k is laughable. How are they going to buy another home with that kind of negative equity to deal with? And what about houses that were/are €400k+? The rental market is not the place to turn at the moment as that is out of control. So where would they live and how would they manage the debt?

It really and truly isn't that simple. If that's the direction they want it to go it makes far more sense to make gradual changes to the rules over a period of time to allow the drop in house price to be gradual and better enable people to absorb the reductions in their existing properties.

johnp001

molloyjh wrote: »

That's incredibly optimistic. Given the level of cash buys that have been happening lately and the number of people who bought long before the boom there are still going to be plenty of people willing to pay the higher prices for homes. And the thought of someone with a €350k house selling for less than €200k is laughable. How are they going to buy another home with that kind of negative equity to deal with? And what about houses that were/are €400k+? The rental market is not the place to turn at the moment as that is out of control. So where would they live and how would they manage the debt?

It really and truly isn't that simple. If that's the direction they want it to go it makes far more sense to make gradual changes to the rules over a period of time to allow the drop in house price to be gradual and better enable people to absorb the reductions in their existing properties.

But they didn't make gradual changes to the rules.
The situation I outlined does not apply instantaneously in all cases. It isn't that simple as you say. It also isn't as simple as everybody saving an extra €42k and prices remaining exactly the same.
Many sellers who can do so will sit on their asset rather than sell on it for less than they feel it is worth based on bubble prices.
Sellers who aren't in a position to sit on their asset will sell it for what the market will bear and if a couple on good wages can only borrow less than half the price of a €350k house (according to your figures above) then there is a limited amount of buyers with the resources to pay the original price.
The sellers sitting on their asset are then hoping on a price even further away from the market price which will be decreasing as motivated sellers sell at prices which set the market price lower.

molloyjh wrote: »

And the thought of someone with a €350k house selling for less than €200k is laughable.

Houses that were worth €350k in 2006 were sold for €200k and less shortly afterwards.