20% mortgage deposits, house price dip?

koheim

superman28 wrote: »

There is nothing short of sheer panic buying at the moment (in Dublin),, so I would certainly hold off a purchase until the next year or two..
Everyone owning their own property is an Irish pipe dream,, simply put,, their are plenty of people who will have no choice but to rent for the rest of their lives,, not such a bad thing if the rental market had serious reforms..


In terms of house prices,,
Consider these facts

1. With cash buyers (investors) making up 40-50% of the market, most of this demand will go before the CGT exemption runs out in December. (reduce demand)
2. The central bank will introduce stricter lending with 20% deposits needed,, (reduce demand)
3. Contruction has started (slowly) but picked up in Dublin (increased supply)
4. As house prices start to slow down, more potential sellers will put their properties on the market. (increase supply)

I don't think their will be a crash,, but a good slow down in the crazy house price hikes we have seen this year.. I would say next year and the year after would be a better time to buy than now..

If point 2 is implemented as proposed, I do not think point 3 is very valid. Construction the last 6 years is non existent, mortgage lending is at early 1970 level so no credit bubble at the moment..
Would be interesting to see what the cost of developing houses and apartments really are, because some people think that they can by below cost price. I agree: it is not for everyone to own a house

Shedite27

Does anyone think this will drive up interest rates? Smaller mortgage principles (80%) will mean less revenue for he banks unless they compensate.

gaius c

Shedite27 wrote: »

Does anyone think this will drive up interest rates? Smaller mortgage principles (80%) will mean less revenue for he banks unless they compensate.

Doubt it. Higher margin is much more important to banks than higher turnover.

Rates could well go up but I doubt that turnover will be the reason.

womandriver

helimachoptor wrote: »

Completely agree, myself and the OH have been saving for nigh on 10 years, to have the rug pulled from under you is pretty tough to swallow

You've both been saving for 10 years and you'll struggle with a 20% deposit?

gaius c

Read his/her post. They have the deposit (6 figures). He/she is talking about others having the rug pulled out from under them.

womandriver

gaius c wrote: »

Read his/her post. They have the deposit (6 figures). He/she is talking about others having the rug pulled out from under them.

And fair play to him, don't see how it's having the rug pulled out from under you if you've been saving for a reasonable period of time.

moxin

People getting upset about the deposit just have to save harder, give up those yearly foreign holidays, have less nights out in the pub, cut back on restaurant meals, cut back your spending on non-necessities. Its called short term sacrifice for long term gain and thats what the previous generation did.

helimachoptor

womandriver wrote: »

You've both been saving for 10 years and you'll struggle with a 20% deposit?

No, we'll have more than enough for a 20% deposit, the last part was in reference to the post i had quoted about the guy saving 3/4 years.

wally79

I know I am probably wrong here but would love someone to explain it to me.

Isn't this just pushing the price rises down the line?

If as an example it takes 4 years to save 20% then

couple 1 with 10% now will need two years to get up to 20%.
couple 2 just starting to save have 0% now will take 4 years

So in 2 years couple 1 will be ready to buy and couple 2 will be 2 years away. This is the same position they are in now with 10% deposit required.

This will delay demand for 2 years but shouldn't it get back to normal then?

So due to decreased competition speculators have 2 years to buy up housing stock at reduced rates with almost a guarantee that demand will be back to current level after those 2 years.

physioman

I'm glad this rule has come. My oh and I started to save in 2009 and have managed to save up the 20%. As a previous poster stated it took a lot of sacrifice (haven't changed car since 2008, decrease in foreign holidays, less nights out etc). When we started looking a couple of months ago prices were shooting up and we thought we missed the boat. Hopefully this new rule will reduce house prices and reward us for our diligence. Lesson here is keep on saving and what's for you won't go by you

Mr.McLovin

wally79 wrote: »

I know I am probably wrong here but would love someone to explain it to me.

Isn't this just pushing the price rises down the line?

If as an example it takes 4 years to save 20% then

couple 1 with 10% now will need two years to get up to 20%.
couple 2 just starting to save have 0% now will take 4 years

So in 2 years couple 1 will be ready to buy and couple 2 will be 2 years away. This is the same position they are in now with 10% deposit required.

This will delay demand for 2 years but shouldn't it get back to normal then?

So due to decreased competition speculators have 2 years to buy up housing stock at reduced rates with almost a guarantee that demand will be back to current level after those 2 years.

unless more houses are built which they should be or could be if the political will was there to make it happen.

wally79

Mr.McLovin wrote: »

unless more houses are built which they should be or could be if the political will was there to make it happen.

Well, political will can make social housing happen but are developers really going to build more houses to meet demand.

Surely a restricted supply is in their best interests.

Mr.McLovin

wally79 wrote: »

Well, political will can make social housing happen but are developers really going to build more houses to meet demand.

Surely a restricted supply is in their best interests.

why not if there is money to be made?

the government can make it feasible if they choose to by lending/guaranteeing and incentivising, all within reason of course.

also if you start building social housing it takes the heat out of the rental sector.

wally79

Mr.McLovin wrote: »

why not if there is money to be made?

the government can make it feasible if they choose to by lending/guaranteeing and incentivising, all within reason of course.

also if you start building social housing it takes the heat out of the rental sector.

I take your point and ideally developers will build enough to meet supply but if I can use another simple example to explain what I meant about developers limiting supply.

If I have land with room for 2 houses and I know there are 2 people willing to buy do I

Build 2 houses and sell at market rate

or

Build one house and put the 2 buyers into competition which pushes price up to market rate + whatever. Then at a later date build the second house and sell for the new "market rate"

Same land same houses but higher profit.

It seems to me that if I was a developer slowing down supply would be the right business decision.

By the way the simplification of my points is for me and not for you. I don't know enough about this and am trying to understand.

wrt40

yoshiktk wrote: »

As a future buyer I can't understand logic behind it. With the new rules I'll have to wait another year or two to save money. Instead of spending money on something else im stuck with higher rent. At least they should introduce max rent cap as well.

Eh no, it means you will get the same property for cheaper. Sorry love I can only afford €200K, take it or leave it. Watch them snap your hand off...

Mr.McLovin

wally79 wrote: »

I take your point and ideally developers will build enough to meet supply but if I can use another simple example to explain what I meant about developers limiting supply.

If I have land with room for 2 houses and I know there are 2 people willing to buy do I

Build 2 houses and sell at market rate

or

Build one house and put the 2 buyers into competition which pushes price up to market rate + whatever. Then at a later date build the second house and sell for the new "market rate"

Same land same houses but higher profit.

It seems to me that if I was a developer slowing down supply would be the right business decision.

By the way the simplification of my points is for me and not for you. I don't know enough about this and am trying to understand.

I get what you're saying. Its a gamble. I don't think anybody is too confident with these price rises we've seen but it would be down to the developer I suppose.

Michael D Not Higgins

wrt40 wrote: »

Eh no, it means you will get the same property for cheaper. Sorry love I can only afford €200K, take it or leave it. Watch them snap your hand off...

The people saving for the 300k house will suddenly be in your bracket and will snap it up at asking price. What you'll see is a small drop in the mid to high range properties but under 300k will have higher demand than before and will keep the prices up.

Brussels Sprout

wally79 wrote: »

Isn't this just pushing the price rises down the line?

If as an example it takes 4 years to save 20% then

couple 1 with 10% now will need two years to get up to 20%.
couple 2 just starting to save have 0% now will take 4 years

So in 2 years couple 1 will be ready to buy and couple 2 will be 2 years away. This is the same position they are in now with 10% deposit required.

This will delay demand for 2 years but shouldn't it get back to normal then?

So due to decreased competition speculators have 2 years to buy up housing stock at reduced rates with almost a guarantee that demand will be back to current level after those 2 years.

The above scenario would be based on a couple of assumptions:

1) Everybody will be able to save 20%. Some people may have got to 10% with help from donations from relatives. With potential rent hikes and cost of living increases the additional 10% could genuinely be beyond them

2) All Sellers are willing to sit and wait without lowering their asking prices in the hope that someone will eventually be able to reach their asking price.


In reality some people will be able to save the 20% and some sellers will try and wait around but a lot won't in both camps and that combination will lead to lower prices.

Frank Lee Midere

mr_seer wrote: »

The measures will lead to a fall in prices. Supply has increased hugely in recent months. There is nothing depressing about that. Just wait

Supply has increased but it's chancers looking for crazy money. DAFT does have about 3,400 on sale in Dublin now, as opposed to 2,300 at it's lowest. That tends to be a leading indicator. However, it would have to go to 5,000 before it convinced me that things will change. And after all the spoofers trying to sell 500k+ flats are not being pressurised too heavily by their banks, so they can withdraw.

El_Dangeroso

wally79 wrote: »

I know I am probably wrong here but would love someone to explain it to me.

Isn't this just pushing the price rises down the line?

If as an example it takes 4 years to save 20% then

couple 1 with 10% now will need two years to get up to 20%.
couple 2 just starting to save have 0% now will take 4 years

So in 2 years couple 1 will be ready to buy and couple 2 will be 2 years away. This is the same position they are in now with 10% deposit required.

This will delay demand for 2 years but shouldn't it get back to normal then?

So due to decreased competition speculators have 2 years to buy up housing stock at reduced rates with almost a guarantee that demand will be back to current level after those 2 years.

That's the idea behind the multiple on salary cap, even if you have a huge deposit, you can't borrow more than the salary multiple. Now if we all get jobs that pay 100K that could be an issue, but as it stands it puts a cap on what a FTB can bid, and rightly so.

gaius c

moxin wrote: »

People getting upset about the deposit just have to save harder, give up those yearly foreign holidays, have less nights out in the pub, cut back on restaurant meals, cut back your spending on non-necessities. Its called short term sacrifice for long term gain and thats what the previous generation did.

Or house prices can drop to what they can afford...

The Spider

Who knows what will happen but one things for sure if you're in your mid thirties now and it took you five or six years to save 10% you're looking at longer to save the next 10%, if you haven't got kids but want them you'll have to get a move on house or no house, and believe me that's going to hit your ability to save. On top of that it'll push you into your forties when applying for a mortgage and we all know the kind of term the bank will offer then or may not offer a term at all. And then this may have zero effect on house prices, even if it knocked 10% off that's still too little.

Safe to say a lot of people will be permanently priced out of buying a house now. Anyone in their mid twenties now needs to start saving immediately.

Greyian

The Spider wrote: »

Who knows what will happen but one things for sure if you're in your mid thirties now and it took you five or six years to save 10% you're looking at longer to save the next 10%, if you haven't got kids but want them you'll have to get a move on house or no house, and believe me that's going to hit your ability to save. On top of that it'll push you into your forties when applying for a mortgage and we all know the kind of term the bank will offer then or may not offer a term at all. And then this may have zero effect on house prices, even if it knocked 10% off that's still too little.

Safe to say a lot of people will be permanently priced out of buying a house now. Anyone in their mid twenties now needs to start saving immediately.

If you're in your mid 30s, have no kids and have only managed to save 10% so far, you probably couldn't afford to pay a mortgage and have kids anyway.

Frank Lee Midere

mr_seer wrote: »

The measures will lead to a fall in prices. Supply has increased hugely in recent months. There is nothing depressing about that. Just wait

wally79 wrote: »

Well, political will can make social housing happen but are developers really going to build more houses to meet demand.

Surely a restricted supply is in their best interests.

In a normal capitalist market, somebody should come in a try and make money in volumes. Ireland'd developers are a cartel.

Frank Lee Midere

BTW, it shouldn't be a deposit per say, as "ability to save". So if you get 80K from the folks, you should not get a house. Banks won't do that unless forced.

Michael D Not Higgins

Frank Lee Midere wrote: »

BTW, it shouldn't be a deposit per say, as "ability to save". So if you get 80K from the folks, you should not get a house. Banks won't do that unless forced.

I agree with that but when I looked into it, from the bank's point if view it's more to do with the invested amount from the owner into the property which ensures it's less likely for it to run into negative equity and fall into arrears.

For example, on 20% deposit, if prices drop 10%, the bank has no issues. Same situation with 8% deposits, the banks have big problems.

Edit: what I'm not sure of is how a gift of a deposit affects your risk profile from the bank's side, i.e. would you get a better rate from saving 20% v receiving a gift.

yoshiktk

wrt40 wrote: »

Eh no, it means you will get the same property for cheaper. Sorry love I can only afford €200K, take it or leave it. Watch them snap your hand off...

If that were so easy. The demand for houses under €200K or €300K will probably rise, so even thou the prices will drop, it could affect only the ones over the €300K/€400K mark.
I'm aware that getting a house shouldn't be easy but raising the deposit required with the new 4 x salary rule put that into luxury zone for some people.

Michael D Not Higgins wrote: »

The people saving for the 300k house will suddenly be in your bracket and will snap it up at asking price. What you'll see is a small drop in the mid to high range properties but under 300k will have higher demand than before and will keep the prices up.

That's the problem. People are facing now again situation whether to buy or not.
As we can see through threads on A&P it only makes the market worse.
Houses worth €350K going over €500K or more.
I would say that even if the market corrects itself from this bubble it wont be in
near future.
The problem could be solved by building more apartments but for that people would need to understand that eweryone cannot have a house.

Frank Lee Midere

yoshiktk wrote: »

If that were so easy. The demand for houses under €200K or €300K will probably rise, so even thou the prices will drop, it could affect only the ones over the €300K/€400K mark.
I'm aware that getting a house shouldn't be easy but raising the deposit required with the new 4 x salary rule put that into luxury zone for some people.


That's the problem. People are facing now again situation whether to buy or not.
As we can see through threads on A&P it only makes the market worse.
Houses worth €350K going over €500K or more.
I would say that even if the market corrects itself from this bubble it wont be in
near future.
The problem could be solved by building more apartments but for that people would need to understand that eweryone cannot have a house.

I don't agree. Firstly you can't judge this policy until it comes into affect. If houses worth 350k are selling for 500k then that's happening now not next year.

Secondly houses now worth 200k are in bad areas or are apartments. I can't see demand increasing as it's mostly couples looking for a good house with a garden etc.

Glenbhoy

Michael D Not Higgins wrote: »

I agree with that but when I looked into it, from the bank's point if view it's more to do with the invested amount from the owner into the property which ensures it's less likely for it to run into negative equity and fall into arrears.

For example, on 20% deposit, if prices drop 10%, the bank has no issues. Same situation with 8% deposits, the banks have big problems.

Edit: what I'm not sure of is how a gift of a deposit affects your risk profile from the bank's side, i.e. would you get a better rate from saving 20% v receiving a gift.

As in interest rate? If so, no difference, as you rightly say, this is all about reducing bank exposure, if you get a gift and have proof that this is in fact a gift and that the donor has no beneficial entitlement to the property being purchased, the bank will give you the same rate as for anyone else on the LTV.
What they do look at though is whether or not you have the capacity to make the repayments, they look at the repayments on your desired loan (+1.5% stress tested) and check that your rental payments or rental and savings are at least equal to that stress tested repayment for at least the last 6 months.

MagicMarker

physioman wrote: »

As a previous poster stated it took a lot of sacrifice (haven't changed car since 2008, decrease in foreign holidays, less nights out etc).

LOL. Good lord, using the same car for 6 years and not going on as many foreign holidays. How have you survived during such trying times?