Property Market 2019

JJJackal

Bob24 wrote: »

They were lending a lot less than previously, but they very much were lending.

Those times were hard for part of the population but not for everyone, and banks would have been happy to lend to anyone meeting the criteria.

But the number of people who met the banks criteria fell

Plus the criteria tightened

aloooof

PokeHerKing wrote: »

Think of it like a clothes shop going bust. It's not because they've no clothes to sell, it's because they've no customers buying the clothes. Maybe their clothes are no longer trendy, maybe it's because people are going to the new shop across the road to buy their clothes.

It's not a lack of lending its a lack of people to lend too.

By "source", I meant an actual facts and figures that show that it's "factually incorrect to say that banks stop lending in down cycles", rather than just you asserting it, followed by an analogy.

PokeHerKing

Graham wrote:

Irish banks particularly were watching the daily erosion of their collective capital bases as savers ran for cover elsewhere.

You're kind of proving my point. Public opinion drives lending. Not the other way around.

Bob24

JJJackal wrote: »

But the number of people who met the banks criteria fell

Plus the criteria tightened

Yes for sure, this is what I am saying. But it’s vastly incorrect to say banks weren’t lending at all.

See page 8 there: https://www.centralbank.ie/docs/default-source/financial-system/financial-stability/macroprudential-policy/policy-documents/2018-review-of-mortgage-market-measures.pdf

10000 drawdowns in 2011 (bottom) vs 30000 in 2017.

There is no arguing 3 times is a lot less. But is a far cry from the usual story being touted that no one or almost no one was able to get a mortgage.

PokeHerKing

aloooof wrote:

By "source", I meant an actual facts and figures that show that it's "factually incorrect to say that banks stop lending in down cycles", rather than just you asserting it, followed by an analogy.

A poster posted the figures a page or so back. Go check the price property register for the years of the "bust". They're not all cash purchased.

aloooof

PokeHerKing wrote: »

A poster posted the figures a page or so back. Go check the price property register for the years of the "bust". They're not all cash purchased.

Indeed, and the figures they posted suggest the opposite of what you're asserting.

Graham wrote: »

Loan approvals - Banks & Building Societies

2005 - 27,737
2011 - 2,415

*millions

Pretty much as close as you can get to stopped lending.

PokeHerKing

aloooof wrote:

Indeed, and the figures they posted suggest the opposite of what you're asserting.

No, they very much prove my assertion.

aloooof

PokeHerKing wrote: »

No, they very much prove my assertion.

How?

Graham

PokeHerKing wrote: »

You're kind of proving my point. Public opinion drives lending. Not the other way around.

Banks having no money to lend kinda plays a part too.

Regardless of commercial incentives to lend, banks also have to adhere to regulatory liquidity ratios which can dramatically limit (or stop) lending.

JDD

JJJackal wrote: »

But the number of people who met the banks criteria fell

Plus the criteria tightened

I agree with this. Banks looked for one years regular savings, in addition to any parental gift, when before the crash just the parental gift sufficed. Banks no longer gave out mortgages of over 90%. They no longer allowed bonuses to be used in income calculations. There were loads of ways they tightened their lending criteria which resulted in less mortgage approvals.

Of course some people who might have got approval were put off by the feeling that their application might be refused, and so held off on making any sort of application. And of course some people with rock-solid jobs and good deposits decided to wait to buy until they felt that the bottom of the market had hit. But it was certainly the case that banks had to hold larger capital margins post-crash, and found it more difficult and more expensive to source funds, which had a knock on effect of them HAVING to reduce lending in the first few years of the crash - much as maybe they might have wanted to lend in order to get their cashflow running again.

zreba

The bottom line is, if someone struggles to get mortgage approved in good times, he may forget about a mortgage in bad times.

Also, my bet is that most of mortgages given in the bottom of the market have been given out to high income individuals holding significant reserves of cash (high deposits). Just my bet, would need to be verified agains some reliable sources.

jam_mac_jam

Bad times also generally mean other changes then lending contracting. Jobs are lost, companies also are likely to contract if there is a recession.

Bob24

aloooof wrote: »

Indeed, and the figures they posted suggest the opposite of what you're asserting.

2011 was the bottom, and according the central bank report I linked to a few posts ago there were about 10000 mortgage drawdowns that year vs 30000 in 2017.

That’s significantly less for sure. But a far cry from banks not lending at all.

It is a legend that getting a mortgage was impossible. A decent chunk of the population was doing OK and well able to get a mortgage (I’m an IT professionals - the job market was not that bad during recession and many people in my cycle did get mortgages).

Interested Observer

zreba wrote: »

The bottom line is, if someone struggles to get mortgage approved in good times, he may forget about a mortgage in bad times.

Also, my bet is that most of mortgages given in the bottom of the market have been given out to high income individuals holding significant reserves of cash (high deposits). Just my bet, would need to be verified agains some reliable sources.

It's exactly this, people think it'll be great if prices drop but also seem convinced they'll be immune to the impacts of a recession.

zreba

PokeHerKing wrote: »

Think of it like a clothes shop going bust. It's not because they've no clothes to sell, it's because they've no customers buying the clothes. Maybe their clothes are no longer trendy, maybe it's because people are going to the new shop across the road to buy their clothes.

It's not a lack of lending its a lack of people to lend too.

You're like Erdogan who says Turkey needs to cut interest rates to make the currency stronger. In a direct oposition to a general economic knowledge

Bob24

Interested Observer wrote: »

It's exactly this, people think it'll be great if prices drop but also seem convinced they'll be immune to the impacts of a recession.

There is a fairly large chuck of the population which will still be able to borrow during a recession though.

Someone who is currently borderline to get a mortgage would be wrong to think a recession will help them to buy. But a senior civil servant with job security and a good salary might be right to think that.

JJJackal

Bob24 wrote: »

There is a fairly large chuck of the population which will still be able to borrow during a recession though.

Someone who is currently borderline to get a mortgage would be wrong to think a recession will help them to buy. But a senior civil servant with job security and a good salary might be right to think that.

In a bad recession a senior civil servant will get a pay cut - last time round I imagine they lost 10-20% of take home pay with USC, pay cut....

The_Conductor

JJJackal wrote: »

In a bad recession a senior civil servant will get a pay cut - last time round I imagine they lost 10-20% of take home pay with USC, pay cut....

And the enhanced pension contributions have been made permanent- so even with full pay restoration (due by the end of 2020)- they're still down 12-14% net on 2008 pay..........

JJJackal

The_Conductor wrote: »

And the enhanced pension contributions have been made permanent- so even with full pay restoration (due by the end of 2020)- they're still down 12-14% net on 2008 pay..........

in a recession house prices may go down but so does most peoples income

Graham

Bob24 wrote: »

A decent chunk of the population was doing OK and well able to get a mortgage

Some interesting statistics on loan demand which to me wouldn't suggest the 90%+ drop in lending was predominantly attributable to a corresponding drop in demand.

Changes in Loan Demand (Households - House Purchases)


2005Q1 3.00
2005Q2 3.25
2005Q3 3.25
2005Q4 3.50
2006Q1 3.75
2006Q2 3.50
2006Q3 3.00
2006Q4 2.25
2007Q1 2.00
2007Q2 2.00
2007Q3 2.00
2007Q4 2.00
2008Q1 2.00
2008Q2 1.80
2008Q3 1.80
2008Q4 2.00
2009Q1 2.50
2009Q2 2.25
2009Q3 2.75
2009Q4 2.75
2010Q1 2.50
2010Q2 2.75
2010Q3 2.75
2010Q4 2.75
2011Q1 3.20
2011Q2 3.20
2011Q3 2.80
2011Q4 2.80


1 Decreased Considerably
2 Decreased Somewhat
3 Remained Basically Unchanged
4 Increased Somewhat
5 Increased Considerably

PokeHerKing

zreba wrote:

You're like Erdogan who says Turkey needs to cut interest rates to make the currency stronger. In a direct oposition to a general economic knowledge

Believe me nothing I've said contradicts general economic knowledge. I didn't even realise it would be a contraversial opinion on here. But I'm happy to discuss it while leaving insults aside.

As I've said banks make their profit by lending. It is never going to be a banks policy not to lend. There was plenty of houses bought with lending right through the crash. I myself bought at the tail end of it.

Public opinion drives lending. During the mid 00s the Irish public wanted to borrow money and buy property. The banks facilitated it.

When the world economy crashed Ireland's inflated property bubble burst and public sentiment along with house prices went through the floor. The drop off in lending is merely a reflection of the drop off in borrowing.

It's not as completely black and white as that but it's more that, than anything else.

Graham

Loan demand appeared to remain relatively consistent yet lending fell off a cliff.

That doesn't support the hypothesis that banks facilitated much.

PokeHerKing

Graham wrote:

That doesn't support the hypothesis that banks facilitated much.

Im not absolving banks of their part in the madness. There was next to no controls on Irish lending pre crash. It was a free for all.

Putting decent lending criteria in place made sense, the drop in house prices came because the public stopped speculating anymore. That's NOT due to banks not lending.

Graham

PokeHerKing wrote: »

Putting decent lending criteria in place made sense, the drop in house prices came because the public stopped speculating anymore. That's NOT due to banks not lending.

That would be a stronger argument had demand dropped significantly.

PokeHerKing

Graham wrote:

That would be a stronger argument had demand dropped significantly.

Im on my phone so have no idea where or how the table you posted was put together. However I will say one thing on this.

A young couple wanting a home is not the same as a civil servant purchasing several investment properties.

One of these will always be a constant. The other will not.

Graham

PokeHerKing wrote: »

Im on my phone so have no idea where or how the table you posted was put together.

Central bank statistics.

Bob24

JJJackal wrote: »

In a bad recession a senior civil servant will get a pay cut - last time round I imagine they lost 10-20% of take home pay with USC, pay cut....

Let’s say our civil servant is in 75k, has been saving for a few years and had a 50k deposit. Spouse in similar situation.

They take their 10% pay cut.

Will that get a mortgage? Absolutely yes.

PokeHerKing

Graham wrote:

Central bank statistics.

How was it put together? What criteria was used? A comparison of Mortgage applications from the mid naughties and the bust years would be a much easier way to measure demand in my opinion.

aloooof

Bob24 wrote: »

Let’s say our civil servant is in 75k, has been saving for a few years and had a 50k deposit. Spouse in similar situation.

They take their 10% pay cut.

Will that get a mortgage? Absolutely yes.

I could be way off here but would that not be very much on the high side for a civil servants salary?

Bob24

Graham wrote: »

Some interesting statistics on loan demand which to me wouldn't suggest the 90%+ drop in lending was predominantly attributable to a corresponding drop in demand.

Changes in Loan Demand (Households - House Purchases)


2005Q1 3.00
2005Q2 3.25
2005Q3 3.25
2005Q4 3.50
2006Q1 3.75
2006Q2 3.50
2006Q3 3.00
2006Q4 2.25
2007Q1 2.00
2007Q2 2.00
2007Q3 2.00
2007Q4 2.00
2008Q1 2.00
2008Q2 1.80
2008Q3 1.80
2008Q4 2.00
2009Q1 2.50
2009Q2 2.25
2009Q3 2.75
2009Q4 2.75
2010Q1 2.50
2010Q2 2.75
2010Q3 2.75
2010Q4 2.75
2011Q1 3.20
2011Q2 3.20
2011Q3 2.80
2011Q4 2.80


1 Decreased Considerably
2 Decreased Somewhat
3 Remained Basically Unchanged
4 Increased Somewhat
5 Increased Considerably

To be clear, I think no one is saying mortgage drawdowns didn’t drop significantly or that it wasn’t harder to get one on average.

The simple point is more that a good chunk of the population was still able to get one (some people on this thread seem to believe it was nearly impossible).

Again see the central bank report I posted a fews posts back, the number of mortgage drawdowns in 2011 was 10000 vs 30000 in 2017.

That is a lot less for sure, but one third is still a chunky quantity and shows that the banks’ doors were still very much open for someone with a decent salary, a stable job - which was the case of large minority of the population.