Are we heading for another property bubble?

mickman

The_Conductor wrote: »

From personal experience- the costs and the manner in which your income is rapidly diminished with a second child- are broadly accurate. The figures look startling- but they are by and large a good yard stick to go by. Anyone who disbelieves this- have 2 children and see what happens.......

I am interested in this. Why does two children affect your income so much ?

The_Conductor

mickman wrote: »

I am interested in this. Why does two children affect your income so much ?

Childcare costs come out of your net disposable income- and are not tax deductible etc. A second child- depending on your income- can have a disproportionate effect on your Net income. Its not as simple as saying that a second child costs twice as much as one child- the effect on your net income after all other bills- can be disproportionately large.

Unfortunately we have the most expensive childcare in the world here. Its far from unusual (in the Dublin area) for childcare to come to ~ 1000 a month in the Dublin area, for a young child....... (this falls as they get older- because of lower staff ratios for older children). This second child will have a disproportionate hit on disposable income (ok- the first child does too- however, a second child may totally deplete disposable income to next to nothing).

gaius c

mickman wrote: »

why would you pay this ? you can avoid it just by having 3k in your account. If you move to aib then you only need 2500 -- unless you are talking about a business account ?

You can't avoid the BoI charges no matter how much you have in your account. It's why I switched my business to AIB.

mickman

gaius c wrote: »

You can't avoid the BoI charges no matter how much you have in your account. It's why I switched my business to AIB.

yeah even with 3k in the account you need to pay 20 euro a year mgt fees.

https://personalbanking.bankofireland.com/fs/doc/wysiwyg/tip-sheet-how-to-avoid-or-minimise-fees.pdf

I pay nothing with AIB

mickman

The_Conductor wrote: »

Childcare costs come out of your net disposable income- and are not tax deductible etc. A second child- depending on your income- can have a disproportionate effect on your Net income. Its not as simple as saying that a second child costs twice as much as one child- the effect on your net income after all other bills- can be disproportionately large.

Unfortunately we have the most expensive childcare in the world here. Its far from unusual (in the Dublin area) for childcare to come to ~ 1000 a month in the Dublin area, for a young child....... (this falls as they get older- because of lower staff ratios for older children). This second child will have a disproportionate hit on disposable income (ok- the first child does too- however, a second child may totally deplete disposable income to next to nothing).

Its far from the most expensive. Its around 2500 a month in switzerland

Michael D Not Higgins

The_Conductor wrote: »

Childcare costs come out of your net disposable income- and are not tax deductible etc. A second child- depending on your income- can have a disproportionate effect on your Net income. Its not as simple as saying that a second child costs twice as much as one child- the effect on your net income after all other bills- can be disproportionately large.

Unfortunately we have the most expensive childcare in the world here. Its far from unusual (in the Dublin area) for childcare to come to ~ 1000 a month in the Dublin area, for a young child....... (this falls as they get older- because of lower staff ratios for older children). This second child will have a disproportionate hit on disposable income (ok- the first child does too- however, a second child may totally deplete disposable income to next to nothing).

This is the problem. It was Deeter's point to show that the banks are prudent because those with kids have significantly reduced disposible income and this is taken into consideration as part of the bank's underwriting criteria.

He took an example that overexaggerates the effect and doesn't represent the norm. The same family making the household average of 50k can't afford any mortgage, at all, according to the figures from the article.

Perhaps the focus should be on lowering creche fees.

johnp001

bingowings2015 wrote: »

Are we heading for another property bubble?

http://waterfordwhispersnews.com/2015/04/15/property-bubble-now-7-6km-in-circumference/

“...” explained independent property expert and owner of IMakeMyMoneyFromProperty.ie

The_Conductor

johnp001 wrote: »

http://waterfordwhispersnews.com/2015/04/15/property-bubble-now-7-6km-in-circumference/

John- it may have escaped your attention- but this is not Comedy Central.

Regards,

The_Conductor

gaius c

Michael D Not Higgins wrote: »

This is the problem. It was Deeter's point to show that the banks are prudent because those with kids have significantly reduced disposible income and this is taken into consideration as part of the bank's underwriting criteria.

He took an example that overexaggerates the effect and doesn't represent the norm. The same family making the household average of 50k can't afford any mortgage, at all, according to the figures from the article.

Perhaps the focus should be on lowering creche fees.

It's not a household average figure. It's a mean. Basically his point is that 50% of households can't afford that mortgage and allied to the fact that rents are spiraling, they probably can't afford those either.

Something has to give.

Michael D Not Higgins

gaius c wrote: »

It's not a household average figure. It's a mean. Basically his point is that 50% of households can't afford that mortgage and allied to the fact that rents are spiraling, they probably can't afford those either.

Something has to give.

I think you mean median.

Deeter uses a household income of around 70k for his example (4200 net a month). His example was to demonstrate normal underwriting prevents irresponsible lending. This is obviously a vested interest for him and he fails to explain how this underwriting led to our crisis.

gaius c

I did. It's been a long day!

The Spider

And the rises continue, all looking like a lack of supply.

http://m.independent.ie/business/personal-finance/property-mortgages/irish-house-prices-growing-at-15-times-average-eu-rate-31144646.html

I'd be very surprised if this loses momentum, especially on the back of improved economic conditions (have you seen the traffic in Dublin lately?)

One caveat I will give is that if the UK pull out of the euro zone, it's hard to know what impact that would have.

On a side note does anyone think bringing in the new mortgage rules was actually a genius move, to bring up the price of property in the commuter belt and force people to move out of Dublin?

Maybe I'm giving them too much credit.

The_Conductor

The Spider wrote: »

I'd be very surprised if this loses momentum, especially on the back of improved economic conditions (have you seen the traffic in Dublin lately?)

Thats just it though- it has lost momentum in Dublin- its now the rest of the country that is dragging the dog by the tail.

As for Dublin traffic- there is no more vehicles on the road in the capital than there ever was at the peak of the boom. Its more an inditement of the lack of a coherent public transport plan- that a reflection of the strength of the recovery in Dublin (where by the acknowledgement even of the employers groups- most of the recovery in employment has been in the main at the lower end- with a preponderance of minimum wage and low hour contracts- rather than high end jobs.)

Malta has now overtaken the Irish property market as the most superheated in the EU- a bad crown for any country to carry. It isn't in anyone's interest for increases to race so far ahead of fundamentals.

Theboinkmaster

The Spider wrote: »

And the rises continue, all looking like a lack of supply.

Where in that article does it say rises are continuing. Prices in Dublin are dropping.

The Spider

Theboinkmaster wrote: »

Where in that article does it say rises are continuing. Prices in Dublin are dropping.

In the below, it says prices are rising at a lower rate in Dublin not falling!

Recent data from property website Daft.ie shows that spiralling prices have continued into 2015, but that prices nationally are now rising faster than in the capital.

House prices rose 4.6pc in the first quarter of this year, but growth in Dublin prices was lower than the rest of the State.

But my point wasn't about Dublin, that's why I mentioned the central bank rule changes, are having the effect that prices outside the capital are rising, and thus bringing them out of negative equity, they'll more than likely do it quicker too as the prices outside Dublin didn't reach the heights of the capital.

ionapaul

The Spider wrote: »

In the below, it says prices are rising at a lower rate in Dublin not falling!

Recent data from property website Daft.ie shows that spiralling prices have continued into 2015, but that prices nationally are now rising faster than in the capital.

House prices rose 4.6pc in the first quarter of this year, but growth in Dublin prices was lower than the rest of the State.

But my point wasn't about Dublin, that's why I mentioned the central bank rule changes, are having the effect that prices outside the capital are rising, and thus bringing them out of negative equity, they'll more than likely do it quicker too as the prices outside Dublin didn't reach the heights of the capital.

I think (could be wrong) that Daft.ie's figures are for rising asking prices in Dublin, while the CSO figures are for falling selling prices in Dublin, at least in Jan and Feb - the figures for March will be out next week I guess?

gaius c

ionapaul wrote: »

I think (could be wrong) that Daft.ie's figures are for rising asking prices in Dublin, while the CSO figures are for falling selling prices in Dublin, at least in Jan and Feb - the figures for March will be out next week I guess?

You're not wrong. You are in fact completely right. The daft report is based on asking prices. I could put my car up on sale for €100 million and by the logic above, average car prices will jump in Ireland.

The only thing that matters is actual transactions and both CSO & PPR show downward trends since last summer.

Bob24

The Spider wrote: »

In the below, it says prices are rising at a lower rate in Dublin not falling!

Recent data from property website Daft.ie shows that spiralling prices have continued into 2015, but that prices nationally are now rising faster than in the capital.

House prices rose 4.6pc in the first quarter of this year, but growth in Dublin prices was lower than the rest of the State.

Daft is talking about asking prices (more a view of seller's expectations than actual value). The last 2 CSO monthly reports are saying actual selling prices have been falling in Jan and Feb.

The Spider

Bob24 wrote: »

Daft is talking about asking prices (more a view of seller's expectations than actual value). The last 2 CSO monthly reports are saying actual selling prices have been falling in Jan and Feb.

I understand the difference :rolleyes: CSO only takes into account mortgages and not cash buyers.

However as said before PPR is probably a more accurate measure, but the only way I can see it being of any use is by the sales achieved of similar houses on a quarterly basis.

ie. House A sold for 400'000 on street A in q1 House B sold for 350'000 on street A in q2. Then you can say prices are dropping.

Just because a house sold for below the asking doesn't mean prices are down, they could still be up on the last quarter the vendor just didn't achieve the price they wanted, or maybe they knew they were aiming high, but had a price they'd settle on in their heads.

stevedublin

Bob24 wrote: »

The last 2 CSO monthly reports are saying actual selling prices have been falling in Jan and Feb.

prices normally fall in Jan and Feb. They fell last year in Jan and Feb (even though prices rose 21% in Dublin in the subsequent year

Bob24

The Spider wrote: »

I understand the difference :rolleyes: CSO only takes into account mortgages and not cash buyers.

However as said before PPR is probably a more accurate measure, but the only way I can see it being any way accurate is by the sales achieved of similar houses on a quarterly basis.

Just because a house sold for below the asking doesn't mean prices are down, they could still be up on the last quarter the vendor just didn't achieve the price they wanted, or maybe they knew they were aiming high, but had a price they'd settle on in their heads.

Agreed PPR is the best source (but the problem is as apposed to what the CSO is using it doesn't let you separate different types of properties) - and gaius c is also posting a detailed PPR analysis on another thread showing prices are down.

I never said house selling below asking price means prices are down (obviously it doesn't).
I said for 2 months in a row average prices have been down compared to the previous month (widely agreed fact seen on both the CSO and PPR figures) indicating a decrease in average achieve selling prices.

What has been happening in 2015 in Dublin so far is that sellers have been asking for higher prices than at the end of 2014, but have achieved lower selling prices than the end of 2014.

Bob24

stevedublin wrote: »

prices normally fall in Jan and Feb. They fell last year in Jan and Feb (even though prices rose 21% in Dublin in the subsequent year

I know - I am not saying this is indicative of a long term trend (or that it isn't) - I was just pointing out that saying Dublin prices have increased since the start of 2015 is factually incorrect.

johnp001

Bob24 wrote: »

Daft is talking about asking prices (more a view of seller's expectations than actual value). The last 2 CSO monthly reports are saying actual selling prices have been falling in Jan and Feb.

And the last two quarters' Daft reports have shown a falling rate of house price growth expectations.

Expectations about house prices continue to cool
Having steadily increased from December 2011 to September 2014, the moderation in house price expectations that started in late 2014 continued into early 2015. In Dublin, the expected 1-year change in house prices has fallen from 12% in mid-2014 to 4% now.

Barely Hedged

Villa05 wrote: »

The banks cost of funding is very close to the average mortgage tracker rate.

Short term funding is, but you dont finance your operations on short term funding alone. The netting out would lead to an effective interest rate thats much higher than the 3mth or 6mth EURIBOR rates.

Villa05 wrote: »

It is now believed that that trackers are breaking even.

Believed by who and they base their belief on what?

Villa05 wrote: »

Banks rising profits are due the gouging of variable rate customers

Disagree - from above.

Villa05 wrote: »

no competition

Cant argue with that

Villa05 wrote: »

writing back losses due to the rise in property values

A legitimate accounting practice

dubrov

Barely Hedged wrote: »

Short term funding is, but you dont finance your operations on short term funding alone. The netting out would lead to an effective interest rate thats much higher than the 3mth or 6mth EURIBOR rates.

True but Euribor is almost zero at the moment.
http://www.euribor-rates.eu/euribor-rate-12-months.asp


BOI had a cost of funding of 1.09% in 2014 while they were receiving 1.12% on trackers (see slide 36 of their 2014 results)

http://www.bankofireland.com/fs/doc/wysiwyg/boi-results-pres-dec-2014.pdf

The spread would be much higher in 2015 (probably more like 0.3-0.4%).

Politically, it is currently unacceptable for the government to recapitalize the banks any more. So it is easier to turn a blind eye and let them bolster their profits by running fat profit margins instead.

gaius c

Brendan Burgess on AAM crunched the numbers.
http://www.askaboutmoney.com/threads/are-the-lenders-losing-money-on-tracker-mortgages.193149/