Property Market 2018

adriaaaan

Will the CB stop LTI exemptions in 2019? Seems like with prices moderating it wouldn’t be a great idea to boost the market with false stimulus for three months. Exemptions were stopped pretty quickly in Q1 last year, and prices are moderating in q3. Also it seems like market interference...why sell a house in H2 of one year, just wait for January when the money supply is increased above normal

tigger123

adriaaaan wrote: »

Will the CB stop LTI exemptions in 2019? Seems like with prices moderating it wouldn’t be a great idea to boost the market with false stimulus for three months. Exemptions were stopped pretty quickly in Q1 last year, and prices are moderating in q3. Also it seems like market interference...why sell a house in H2 of one year, just wait for January when the money supply is increased above normal

If the CB do believe that the exemptions (and consequent price increases) were being frontloaded to the first half of the year, an easy fix would be to ration them out over the full 12 month period.

Bob24

adriaaaan wrote: »

Will the CB stop LTI exemptions in 2019? Seems like with prices moderating it wouldn’t be a great idea to boost the market with false stimulus for three months. Exemptions were stopped pretty quickly in Q1 last year, and prices are moderating in q3. Also it seems like market interference...why sell a house in H2 of one year, just wait for January when the money supply is increased above normal

I could not be exactly right, but as far as I understand the idea is that exemptions are defined as a yearly percentage of the bank's loan book. So there is never any active decision on the CBI's part to say "exemption are now over for the rest of the year". It is more a soft approach whereby banks know the rule and have to self regulate and follow it. So technically if they have super high demand a bank could decide to blow all their exemption quota in Jan/Feb and not give anymore for the rest of the year, and another bank in the exact same situation could decide to only give a few in Jan/Feb in spite of demand and to continuously restrain itself throughout the year so that they still have some available up to December.

adriaaaan

Bob24 wrote: »

As far as I understand, the exemptions are defined as a yearly percentage of the bank's loan book. So there is never any active decision on the CBI's part to say "exemption are now over for the rest of the year". It is more a soft approach whereby banks know the rule and have to self regulate and follow it. So technically if they have super high demand a bank could decide to blow all their exemption quota in Jan/Feb and not give anymore for the rest of the year, and another bank in the exact same situation could decide to only give a few in Jan/Feb in spite of demand and to continuously restrain itself throughout the year so that they still have some available up to December.

That is certainly a prudent approach, and the fairest approach to stabilise prices over a year. But the reality this year was that BOI and AIB used up all their exemptions, or exemptions were ended by the CB by March/April. The answer we got was wait until January when exemptions come back. If everyone is in that boat and exemptions come back there will be price spikes again in 2019.

Bob24

adriaaaan wrote: »

That is certainly a prudent approach, and the fairest approach to stabilise prices over a year. But the reality this year was that BOI and AIB used up all their exemptions, or exemptions were ended by the CB by March/April. The answer we got was wait until January when exemptions come back. If everyone is in that boat and exemptions come back there will be price spikes again in 2019.

Yeah ... if this is what's happening I agree it's not optimal and is actually giving an advantage to buyers who don't require an exception and penalising those who need one.

I guess the CBI doesn't see it as a too big an issue as from their point of view the goal of that measure is to allow for a bit of leeway with the prudential rules' LTV/LTI ratios while keeping regulatory control over the risk exposure of the banks. And as long as the banks remain within the maximum exceptions figures, when they use those exceptions and whether it has an impact on the property market doesn't impact their risk exposure.

alwald

I just want to add that the LTI limits imposed by the ECB on lending aren't there to decrease the house prices but rather to enhance the resilience of borrowers and the banking sector.

I hope that they won't change as another crash can happen quickly based on the current lack of supply and the housing crisis.

M.Cribben

drunkmonkey wrote: »

On a long enough time line demand will drop, supply will increase. It's a good few years out yet though.

Supply should increase steadily over the long term yes but you're wrong about demand dropping over the long term.
CSO are predicting our population will grow to 6.7 million by 2051. That's nearly another 2 million people who will need somewhere to live. The lower end of their estimate is 5.6 million by 2051 which would still be nearly another million people. Either way the demand is only going up over long term. It would take famine levels of emigration to change that.

https://www.irishtimes.com/news/ireland/irish-news/population-could-grow-to-6-7m-by-2051-says-cso-1.3537977

Rew

adriaaaan wrote: »

That is certainly a prudent approach, and the fairest approach to stabilise prices over a year. But the reality this year was that BOI and AIB used up all their exemptions, or exemptions were ended by the CB by March/April. The answer we got was wait until January when exemptions come back. If everyone is in that boat and exemptions come back there will be price spikes again in 2019.

Got AIP for exemption from 3 banks with no issues between April and May inc AIB with draw down from 1 by July.

Bob24

Rew wrote: »

Got AIP for exemption from 3 banks with no issues between April and May inc AIB with draw down from 1 by July.

Actually there’s one thing I am not 100% clear about related to exemptions.

I am assuming the upper figures for exemptions apply to mortgages actually drown down rather than to loan offers? So am I right that in theory a bank could offer as many exemptions as it wants in terms of approvals? (and thus that a person who got approval based on an exemption could at least in theory see their draw down refused as the bank has ran out of exemptions in the few months between the mortgage approval and the draw down request?)

My point being that if the above is correct, a mortgage approval based on an exemption doesn’t seem as solid as another one.

Pussyhands

Mickiemcfist wrote: »

Soooo....they are the worst off then?

Are they?

Did you live in the 80's?

TSQ

Mickiemcfist wrote: »

Yea even charting median mortgage repayment/house prices vs median salaries over time doesn't paint the whole picture. Particularly when you look at the below:

Two stats I've just googled -
Median rent in Dublin = €1875 per month
Median income = 45k per year (€2832 per month)

Saving a deposit of any kind when the average rent is 66% of an average wage is nuts. *I know there's usually two earners per house, but numbers like that have never been seen before.

You can rent a single room in a house share in the likes of Raheny for €450 a month, a double for around €700, that's a far cry from 66% of average income. The median rent includes 4 bedroom houses and luxury gaffs in the Docklands, and is rent for an entire property, not per person or per room.

Mickiemcfist

TSQ wrote: »

You can rent a single room in a house share in the likes of Raheny for €450 a month, a double for around €700, that's a far cry from 66% of average income. The median rent includes 4 bedroom houses and luxury gaffs in the Docklands, and is rent for an entire property, not per person or per room.

You know how medians & averages work right? The counter argument for your point re: 4 bed luxury gaffs is that the median salary includes Michael O'Leary on €1m a year...

Regarding the single room in Raheny, presumably those that rent there are living on less than the median salary. If we were all to try to move there it wouldn't be so cheap. There's a finite amount of rooms at that price.

TSQ

Mickiemcfist wrote: »

You know how medians & averages work right? The counter argument for your point re: 4 bed luxury gaffs is that the median salary includes Michael O'Leary on €1m a year...

Regarding the single room in Raheny, presumably those that rent there are living on less than the median salary. If we were all to try to move there it wouldn't be so cheap. There's a finite amount of rooms at that price.

Well, the median you quote refers to median price, and includes all home sizes and all locations, from 5 bed family homes to shoe box apartments. It doesn't include house shares. Your median price would imply that every working man and woman is living alone and solely responsible for paying the rent on a one/two/three/four etc bedroom home. And I don't see any reason why a young singleton on the median wage working in the city centre would have any problem living in a shared house on good bus routes 30 minutes from the city. We can't all live in the Docklands.

Marius34

Bob24 wrote: »

Actually there’s one thing I am not 100% clear about related to exemptions.

I am assuming the upper figures for exemptions apply to mortgages actually drown down rather than to loan offers? So am I right that in theory a bank could offer as many exemptions as it wants in terms of approvals? (and thus that a person who got approval based on an exemption could at least in theory see their draw down refused as the bank has ran out of exemptions in the few months between the mortgage approval and the draw down request?)

My point being that if the above is correct, a mortgage approval based on an exemption doesn’t seem as solid as another one.

Yes, it applies to drawn down, and not approvals. And that's why banks complaining that they can not plan how many they can approve.
"Mortgage broker Michael Dowling of Dowling Financial says he expects that exemptions will run out by April, driven by so many approvals not yet drawn down from last year."
"“It’s very hard for lender to plan,” she says, adding that there should be some mechanism for the lender to exceed the agreed limits in one year and cut back the next."
https://www.irishtimes.com/life-and-style/homes-and-property/mortgage-exemptions-could-dry-up-as-soon-as-april-1.3432517

In reality I believe there where around 25% of approved LTI exemptions for FTB in 2017, while only 15% or less for 2018. The balance should be cleaner for 2019, and thus I'll say there should around 20% of approved LTI exemptions for FTB next year. There might be rush in the beginning of the year for LTI exemption, and in some extent increase in demands.

Bob24

Marius34 wrote: »

Yes, it applies to drawn down, and not approvals. And that's why banks complaining that they can not plan how many they can approve.
"Mortgage broker Michael Dowling of Dowling Financial says he expects that exemptions will run out by April, driven by so many approvals not yet drawn down from last year."
"“It’s very hard for lender to plan,” she says, adding that there should be some mechanism for the lender to exceed the agreed limits in one year and cut back the next."
https://www.irishtimes.com/life-and-style/homes-and-property/mortgage-exemptions-could-dry-up-as-soon-as-april-1.3432517

In reality I believe there where around 25% of approved LTI exemptions for FTB in 2017, while only 15% or less for 2018. The balance should be cleaner for 2019, and thus I'll say there should around 20% of approved LTI exemptions for FTB next year. There might be rush in the beginning of the year for LTI exemption, and in some extent increase in demands.

And does it happen in practice that someone gets approved based on an exception but gets declined at drawn dawn stage because the bank hadn’t planned well and ran out of exceptions in the meantime?

Marius34

Bob24 wrote: »

And does it happen in practice that someone gets approved based on an exception but gets declined at drawn dawn stage because the bank hadn’t planned well and ran out of exceptions in the meantime?

I don't know. But approval is typically valid for 6 month, I don't think that any bank would cancel it, it just that it might not extend after 6 month term, if they runs out of exemptions.

zl1whqvjs75cdy

I don't understand this mad rush to indebt yourself to the hilt. People are competing for exemptions like they're some kind of prize.

Brussels Sprout

donkeyoaty0099 wrote: »

I don't understand this mad rush to indebt yourself to the hilt. People are competing for exemptions like they're some kind of prize.

All the more reason to keep the Central Bank Rules in place. There's zero chance that we woudn't have another manic credit fueled property bubble. I'm not even sure why these exemptions exist either. It seems totally unfair and in contravention of the Central Bank rules.

Topgear on Dave

donkeyoaty0099 wrote: »

I don't understand this mad rush to indebt yourself to the hilt. People are competing for exemptions like they're some kind of prize.

Listen to the media and people being interviewed, its all about the "property ladder" and how to get people on to it.

It sickens me how people are encouraged to get over their heads in debt by banks and estate agents..


Its not a "ladder", its a risky highly leveraged investment.

M.Cribben

donkeyoaty0099 wrote: »

I don't understand this mad rush to indebt yourself to the hilt. People are competing for exemptions like they're some kind of prize.

The same people are probably paying €2,000 / month rent and need to borrow a little more than 3.5x to take out a mortgage on their forever home.
In a lot of cases even borrowing 4.5x - 5x salary would still result in a mortgage with lower monthly repayments than current rents (in the urban centres anyway).

M.Cribben

Topgear on Dave wrote: »

Its not a "ladder", its a risky highly leveraged investment.

It's also a necessity for every person in the country, which differentiates it from other investments.

Graham

Topgear on Dave wrote: »

Its not a "ladder", its a risky highly leveraged investment.

Others call it a home.

NIMAN

Topgear on Dave wrote: »

Listen to the media and people being interviewed, its all about the "property ladder" and how to get people on to it.

It sickens me how people are encouraged to get over their heads in debt by banks and estate agents..


Its not a "ladder", its a risky highly leveraged investment.

Yeah, it sounds worryingly like 2006/2007 all over again.

There was a show I seen a couple of times on telly, about buying and renting, showing estate agents out and about around Dublin.

When I tuned into it by accident one night, I hadn't seen any promos for it, and I thought maybe it was a show from a decade ago.

We are doing the same stupid things all over again. Paying half a million euro for a terraced house in Dublin is madness. A lifetime of debt.

KingCong

Bob24 wrote: »

And does it happen in practice that someone gets approved based on an exception but gets declined at drawn dawn stage because the bank hadn’t planned well and ran out of exceptions in the meantime?

BOI pulled approved exemption from a colleague of mine a few months ago after they were sale agreed, created lot of stress for them. BOI claimed they had hit their yearly limit.

KingCong

M.Cribben wrote: »

The same people are probably paying €2,000 / month rent and need to borrow a little more than 3.5x to take out a mortgage on their forever home.
In a lot of cases even borrowing 4.5x - 5x salary would still result in a mortgage with lower monthly repayments than current rents (in the urban centres anyway).

Fair point, a 5x mortgage may be viable right now, but interest rates are are at a historic low, the danger is what happens when they start to go back up to normal levels. Saying that I'm not against a limited percentage of LTI exemptions, especially for cases where there is a high probability of salary growth in the short/medium term future (eg newly qualified doctor etc).

sightband

donkeyoaty0099 wrote: »

I don't understand this mad rush to indebt yourself to the hilt. People are competing for exemptions like they're some kind of prize.

Brussels Sprout wrote: »

All the more reason to keep the Central Bank Rules in place. There's zero chance that we woudn't have another manic credit fueled property bubble. I'm not even sure why these exemptions exist either. It seems totally unfair and in contravention of the Central Bank rules.

You make it sound like getting an exemption is getting people in way over their heads and massively in debt which they cannot afford. Our exemption was the difference between a €1200 a month mortgage and a €1400 mortgage. We were previously paying €1850 a month rent for a number of years, it puts things into perspective.

Shedite27

Topgear on Dave wrote: »

Listen to the media and people being interviewed, its all about the "property ladder" and how to get people on to it.

It sickens me how people are encouraged to get over their heads in debt by banks and estate agents..

Its not a "ladder", its a risky highly leveraged investment.

First time buyer here 2 years ago. I've read and listened to absolutely everything I could about it and nobody is talking about a "ladder". Among my generation of buyers it's all about getting a house that will do you for life.

Carlos Orange

Brussels Sprout wrote: »

All the more reason to keep the Central Bank Rules in place. There's zero chance that we woudn't have another manic credit fueled property bubble. I'm not even sure why these exemptions exist either. It seems totally unfair and in contravention of the Central Bank rules.

Are exemptions not part of the central bank rules? Don't see how they can be a contravention of something they are part of.

Not sure how they work in practice but it seems like a good idea to give banks scope to reflect on the financial behaviour of the person looking for the loan. I was able to get one but didn't take it up in the end. I had 3X my income in savings so I'm probably a slightly more financially prudent person and better able to cope with a higher mortgage than someone who only had the bare minimum deposit.

Shedite27

NIMAN wrote: »

Yeah, it sounds worryingly like 2006/2007 all over again.

There was a show I seen a couple of times on telly, about buying and renting, showing estate agents out and about around Dublin.

When I tuned into it by accident one night, I hadn't seen any promos for it, and I thought maybe it was a show from a decade ago.

We are doing the same stupid things all over again. Paying half a million euro for a terraced house in Dublin is madness. A lifetime of debt.

Where should they live?

Mickiemcfist

Shedite27 wrote: »

First time buyer here 2 years ago. I've read and listened to absolutely everything I could about it and nobody is talking about a "ladder". Among my generation of buyers it's all about getting a house that will do you for life.

I'm of the opinion that if we had a market that functioned steadily, a ladder should be the exact way we should be looking at buying houses. I've friends (a 28 year old couple) who've just bought a 5 bed in Rathfarnham as they want children in the medium term. Realistically their needs would be met by an apartment until they are planning kids & need the 5 bed, so there's 4 bedrooms in Dublin not utilised as they're afraid they won't be able to afford it if they were to hold off until they need it. They're also paying compound interest on the 4 beds they're not using, where they could be saving/investing it for the next 5-10 years while they don't need it. It's very inefficient.