Property Market 2020

Glory83

Just my 2 cents most jobs affected are in the low to below middle salaries level around $25K a year max 30%. So, those will not have a huge affect on the prices of 300K + decent house. Here in Cork, decent houses go sale agreed in no time. Simply the supply of decent houses is way below the demand esp in Cork. Hence, I don't think we will see much drop in prices there if at all.

Assetbacked

Glory83 wrote: »

Just my 2 cents most jobs affected are in the low to below middle salaries level around $25K a year max 30%. So, those will not have a huge affect on the prices of 300K + decent house. Here in Cork, decent houses go sale agreed in no time. Simply the supply of decent houses is way below the demand esp in Cork. Hence, I don't think we will see much drop in prices there if at all.

I don't really see the FTB market price range too impacted in line with your post. However, a lot of high salaries and bonuses are likely to be affected which could have a sizeable impact on the more expensive houses which were already declining in price pre-covid.

For example (someone correct if wrong), €160k salary cut by 20% as well as their 7% bonus usually paid and factored into mortgage borrowing allowance also cut means over 100k less which can be borrowed. That could reduce the price of a €1m house by 10%.

Zenify

Glory83 wrote: »

Just my 2 cents most jobs affected are in the low to below middle salaries level around $25K a year max 30%. So, those will not have a huge affect on the prices of 300K + decent house. Here in Cork, decent houses go sale agreed in no time. Simply the supply of decent houses is way below the demand esp in Cork. Hence, I don't think we will see much drop in prices there if at all.

So are we all agreed that the coming recessiom will only affect the low paid?

Villa05

Nijmegen wrote:

Re the “inappropriate†talk of people doing well, in the context of discussing the property market it’s pretty pertinent! Anyway, we can see it in the data: Despite hundreds of thousands losing income and unemployment up near 30%, income taxes were only down 7.5% in May. There’s lots of people doing ok at the moment.

Nijmegen wrote:

Had a viewing on my own property today with several folks interested. One couple have their own house for sale in the past week and got an offer at asking from FTBs, the other viewers were themselves FTBs. EA noticeably more chipper - had been on reduced hours and feeling very glum a few weeks ago, naturally enough. Also spoke with the sales manager for the developer we’re looking to buy off of, about another nearby development of theirs and noticeably more upbeat than a few weeks ago. All anecdotal but alongside the data, gives one hope.

We had a number of posters last night discussing leaving Ireland to escape High taxes. With property prices so high and wages so low in many sectors. I'm not sure what hope you are seeing. Of course there are people doing well.
Extorting the maximum out of them for a roof over their heads is hardly a sensible proposition when those very same people will be taxed more to subsidise the accommodation for those that are priced out of the market

Do people not see the relationship between high taxes and high property prices and the high cost of nesecarry resources and services

Economic suicide in action

Are people who highlight it doom merchants.

Glory83

Assetbacked wrote: »

I don't really see the FTB market price range too impacted in line with your post. However, a lot of high salaries and bonuses are likely to be affected which could have a sizeable impact on the more expensive houses which were already declining in price pre-covid.

For example (someone correct if wrong), €160k salary cut by 20% as well as their 7% bonus usually paid and factored into mortgage borrowing allowance also cut means over 100k less which can be borrowed. That could reduce the price of a €1m house by 10%.

I should specify it is more about decent 3+ bedroom houses in the range between 270K and 400k which will not be affected that much in Cork as I understand Dublin is different story . Because:
1- Supply is low (again of decent houses not rubbish ones that will cost another 40 or 50K in renovations)
2- Demand is high as these prices fall within the reach of large amount of people's income esp couples.

For €1m houses, you need to have extremely high income to get an AIP for it. You need to have a combined income of around 270K to get it. Which means not many people can afford that. Ultimately, that will lead houses' prices at that range to fall sooner or later. My wife and I are on 70K basic + 30K commission with very good account management and the max AIP we are being quoted is €280K. PTSB even declined to give us AIP.

Zenify wrote: »

So are we all agreed that the coming recessiom will only affect the low paid?

Well, I am not an FTB. But I was 5 years ago on low income and could snatch a good deal for a 2 bedroom flat. So, if you are on low income job let's say at €25K and you have good saving, you can get a not too bad 2 bedroom flat or house here in Cork esp if the prices drop further with time. But you can forget about 3+ bedroom unless you are talking about an area of 60 sqm.

Pivot Eoin

Oliver Fisher wrote: »

"20 per cent of mortgages drawn down in 2018 breached the loan-to-income or the loan-to-value ceilings set by the regulator, close to the maximum permitted." Source: irishtimes.com/business/financial-services/fifth-of-all-mortgages-in-2018-availed-of-rule-exemptions-study-finds-1.3968337

Does anyone have the figure for 2019?

With people in the "Saving/Applying for a mortgage 2020 Edition" thread saying that their exemptions got cancelled overnight, if this is an actual trend, how is this not going to impact the (new) housing market?

Here is my reasoning:

Before COVID:

Income of 80k x 3.5 = 280,000 maximum borrowing capacity. This fake couple (or a single person with a high income) gets a 3.9 exemption (nothing unrealistic pre-COVID). They now can borrow up to 312,000. With a deposit of 71.5k, they can buy a house worth 383,500.

Let's say they want to buy a new build worth 400k. They can get the HTB grant and get an extra 20k towards their deposit. Happy days, they "only" have to borrow 308,500. Their loan to value ratio is 76.82%, so well above the minimum 70% required to qualify for the HTB scheme.


Today (exemptions are gone):

Income of 80k x 3.5 = 280,00 maximum borrowing capacity. With a deposit of 71.5k, they can buy a house worth a maximum of 351,500.
With the HTB scheme, they can get another 18k so a total of 370k for a new home. Their loan to value ratio is now 74.46%.

That's a difference of 30k.


My couple says f*ck it, let's save more and ask the family for few grands (after all we keep hearing that people saved so much money during the lock down...). They get another 30k for their deposit so a total of 101.5k. They are happy as larry, thinking they are good to go for their dreamed property worth 400k. Yet, their loan to value ratio is now 63.55%, they don't qualify to the HTP grant anymore. 20k gone.

Even with 30k more toward their deposit, they will only be able to get a place worth a maximum of ±380k. Still a difference of 20k pre-COVID.

Thoughts?

It's a fair point, and one I hadn't thought of. Like a lot of other things, it's fair to say COVID-19 hasn't been necessarily fair or flexible for the Average FTBer.

19233974

Its actually more than that, I had an exemption with BOI for 4.5x my salary which has been pulled. A friend had got 4.9 x salary with BOI, for me in real terms it has meant the difference of 80k so a huge range of properties eliminated for me.Not to mention they are making it a lot tougher to even get the 3.5x salary.

So it is definitely going to have an impact, once the current crop of people with approval/ exemptions complete. i think there will be a decent drop off due to people not having mortgages. What we are seeing now and the next few months will be pent up demand/ approvals getting used up.

If it will make a difference to supply vs demand we wont know until next year.

Edit: I also think its extremely naive to think only low paid workers will be effected, a bad recession effects everyone. Thats head in the sand stuff

wassie

Zenify wrote: »

So are we all agreed that the coming recession will only affect the low paid?

Thats right! Life carrys on as normal for the middle & upper class.

Oh wait - what happens when the lower & lower middle class, who typically spend all of their earnings in trying to get by in daily life suddenly stop and now are on unemployment benefits.....

q85dw7osi4lebg

19233974 wrote: »

Its actually more than that, I had an exemption with BOI for 4.5x my salary which has been pulled. A friend had got 4.9 x salary with BOI, for me in real terms it has meant the difference of 80k so a huge range of properties eliminated for me.Not to mention they are making it a lot tougher to even get the 3.5x salary.

So it is definitely going to have an impact, once the current crop of people with approval/ exemptions complete. i think there will be a decent drop off due to people not having mortgages. What we are seeing now and the next few months will be pent up demand/ approvals getting used up.

If it will make a difference to supply vs demand we wont know until next year.

Edit: I also think its extremely naive to think only low paid workers will be effected, a bad recession effects everyone. Thats head in the sand stuff

4.5 & 4.9 are very much not the norm when you look at the drawdown stats. Most / the average borrow less than 3.5 per household, so I'd imagine it will have less than an effect as some imagine.

19233974

Julissa Bitter Jeep wrote: »

4.5 & 4.9 are very much not the norm when you look at the drawdown stats. Most / the average borrow less than 3.5 per household, so I'd imagine it will have less than an effect as some imagine.

I am only commenting on my personal situation, but regardless of average there is still 20% of people borrowing more than the 3.5 times, be it 3.6 or 4.9.

Its going to have an impact as even 20 - 30k opens up so many more properties i have found in dublin. But only time will tell

Padre_Pio

Glory83 wrote: »

Just my 2 cents most jobs affected are in the low to below middle salaries level around $25K a year max 30%. So, those will not have a huge affect on the prices of 300K + decent house. Here in Cork, decent houses go sale agreed in no time. Simply the supply of decent houses is way below the demand esp in Cork. Hence, I don't think we will see much drop in prices there if at all.

I don't think there's sound evidence for this. COVID has disproportionately affected retail, services, tourism and construction. I suppose you could generalise this as low paid, but there are plenty in the 30-50+k range who are out of work.

If you're a couple and one is put on PUP, chances are neither can get a mortgage, so that's another group out of the market for another year.

We're going to see a swathe of business closures over the next 30 days, there's not a pub or restaurant that will be profitable with these social distancing rules.

hometruths

Padre_Pio wrote: »

We're going to see a swathe of business closures over the next 30 days, there's not a pub or restaurant that will be profitable with these social distancing rules.

Exactly. During lockdown, businesses that are closed can survive on fumes, govt subsidising wages, long fingering rents, rates, taxes etc.

As soon as they open and incurring greater costs they'll start hemorrhaging cash and heaps of them will be overwhelmed.

TM2015

19233974 wrote: »

Its actually more than that, I had an exemption with BOI for 4.5x my salary which has been pulled. A friend had got 4.9 x salary with BOI,

Can I ask, what salaries were these exemptions based on? We have a combined of just over 130k and are hoping for a 4x LTI.

guyfawkes5

The limit for an LTI exemption is 4.5 times your salary - where is the 4.9 coming from?

wassie

TM2015 wrote: »

Can I ask, what salaries were these exemptions based on? We have a combined of just over 130k and are hoping for a 4x LTI.

If you haven't got an exemption already your unlikely to get one in the near future.

Ray Palmer

Villa05 wrote: »

Demand greater than supply creates a bubble in price and requires government intervention to house an increasing number of people at ever increasing cost because of sourcing solutions from the private sector. This is unsustainable for a state that is highly indebted. At some point the state will have to look at solutions that house people at half the cost of the private market.
Continuing on the current trajectory will result on a much greater crash when it happens

No that is not what creates a bubble. It maybe the start of some bubbles but not cause and effect. There is no requirement for the government to intervene. You may want them to but they don't have to and when they have it didn't help. Don't confuse your desires with what the government must do and what they will do. We have a massive undersupply of housing and there is no magic socialist solution. There also isn't public desire to do it so unlikely any major changes such as massive social housing builds.

Wait and see what happens in Coolock when they build all the housing planned. It will turn into the worst socially disadvantaged area in the country. That is with private building. Mass social housing has a proven track record of creating social disadvantaged areas. To create more is maddness that we will deal with for decades

TM2015

wassie wrote: »

If you haven't got an exemption already your unlikely to get one in the near future.

Bank told us to wait 6 months which is fine with us.

Hubertj

schmittel wrote: »

Exactly. During lockdown, businesses that are closed can survive on fumes, govt subsidising wages, long fingering rents, rates, taxes etc.

As soon as they open and incurring greater costs they'll start hemorrhaging cash and heaps of them will be overwhelmed.

Agree with this. Social distancing requirements is already a challenge for smaller spaces. A few delis/lunch spots up the road from me have queues out door every lunchtime and most offices still closed. People won’t stand around in cold or wet winter...

ebayissues

TM2015 wrote: »

Can I ask, what salaries were these exemptions based on? We have a combined of just over 130k and are hoping for a 4x LTI.

I got between 4.9/5.2 with KBC at the start of the year.

Springy Turf

ebayissues wrote: »

I got between 4.9/5.2 with KBC at the start of the year.

I also thought 4.5 was the max.

Is there any chance they are considering your bonus / overtime income?

Marius34

Oliver Fisher wrote: »

"20 per cent of mortgages drawn down in 2018 breached the loan-to-income or the loan-to-value ceilings set by the regulator, close to the maximum permitted." Source: irishtimes.com/business/financial-services/fifth-of-all-mortgages-in-2018-availed-of-rule-exemptions-study-finds-1.3968337

Does anyone have the figure for 2019?

According to Central Bank:
"In 2019, about 1 in 8 new mortgage
loans, accounting for 17 per cent of the value of new mortgage lending, received an allowance of
some sort."

Springy Turf

Shelga wrote: »

Shouldn't the same rules apply to everyone? Especially when they change the criteria for eligibility as often as the weather changes. Easier to just say no exemptions for anyone, and then ultimately prices wouldn't be as high.

That would be a little inflexible. You can have 2 people on the same salary with a very different ability to repay due do no. of dependants, cost of lifestyle etc.

Anyway, the rules are for the banks, not the customers!

Ray Palmer

Shelga wrote: »

Although I was a bit disappointed when I was told back in February that I wouldn't get an exemption, I'm actually ok with it now, especially if they're being pulled back for everyone.

I know it's so disappointing to have the rug pulled from under you if you were told you could borrow 5 times your salary and now you can't, but why should some people get this, and others not?

It's much better than in boom times, where they were giving money to anyone who would ask, but even 20% of applicants getting exemptions is distorting the market for the rest of us.

Shouldn't the same rules apply to everyone? Especially when they change the criteria for eligibility as often as the weather changes. Easier to just say no exemptions for anyone, and then ultimately prices wouldn't be as high.

It is based on job/skills security. Some people simply have better jobs that will likely get higher salaries going forward. It is right they consider this information.

They aren't distorting the market for the rest of people as they aren't even in the same race.

Were you actually applying for a mortgage in the boom times? I was and I can tell you the hearsay about everyone getting a mortgage way above 3.5 rate of salary is not true. Yes it was more than 20% but it wasn't above 40%. It also involved a lot of lying. People saying they would rent out rooms in the property. Lots and lots of people providing false pay slips. Large deposits from families etc... all played their part.

When people blame the banks for it all they conveniently ignored all of this. Don't be fooled by the popular narrative about what went on. The people insisted on large mortgages while often lying. I was told how I could get more money by the estate agent and broker. I didn't do what they suggested, friends did and some got it and others didn't.

TheSheriff

Shelga wrote: »

Although I was a bit disappointed when I was told back in February that I wouldn't get an exemption, I'm actually ok with it now, especially if they're being pulled back for everyone.

I know it's so disappointing to have the rug pulled from under you if you were told you could borrow 5 times your salary and now you can't, but why should some people get this, and others not?

It's much better than in boom times, where they were giving money to anyone who would ask, but even 20% of applicants getting exemptions is distorting the market for the rest of us.

Shouldn't the same rules apply to everyone? Especially when they change the criteria for eligibility as often as the weather changes. Easier to just say no exemptions for anyone, and then ultimately prices wouldn't be as high.

Let's also hope they don't increase the limits at some point in the near future.

Wasn't this idea being put about by some political parties last year.

Maddness.

Ozark707

TheSheriff wrote: »

Let's also hope they don't increase the limits at some point in the near future.

Wasn't this idea being put about by some political parties last year.

Maddness.

Fortunately this is not a call the government can make. The CB would have to do this and the ECB are hardly going to give them the green light I would have thought given our history.

Oliver Fisher

TheSheriff wrote: »

Let's also hope they don't increase the limits at some point in the near future.

Wasn't this idea being put about by some political parties last year.

Maddness.

Let's hope not. People having to borrow more is not a good answer to this housing crisis...

Ray Palmer

Shelga wrote: »

I agree with you to a point, but there is no transparency around how they apply these criteria at the moment. As I said before, my friend received an exemption 2 years ago when she was on less money than I am now, and we are both in secure public sector jobs.

I suppose my opinion is really that they should make the process much more clear- why do some get it and others don't? At the moment, it is not fair and see-through.

There is absolutely no reason why it should be transparent. They have a limited number each month to allocate. The best cases put forward at that time. So your friend probably didn't compete against the people you did.

I really don't know why you are saying it is not fair. Why you expect it to be fair and transparent seems a little childish to me. Life is unfair and there is nothing saying everything must be fair and the same for 2 years. The banks don't have to lend you anything.

What level are you in the civil service (EO, HEO, AP)? How long for? When is your next increment? If you have been an EO for a number of years longer than your friend from the banks point of view you don't look likely to getting a promotion. All factors that change with time.

Springy Turf

Already the amount needed to be borrowed by most to buy a house in Dublin is pretty staggering. The issue is that borrowers are in direct competition with cash buyers looking for investment properties - who are not limited by mortgage lending rules. Lower the ability to borrow too much, and it will make it harder for people to own their own home.

Nijmegen

Indeed, the rules the CB introduced are credited with keeping a lid on prices. Which is probably also why we're not seeing the arse fall out of the market so far. It's almost like they learned from the last crisis and changed the game, while a lot of the doom mongers are basing their assessment on the idea that this war is the same as the last war. It isn't, at all.

cnocbui

Rent is a large part of the problem in Dublin, I think. It is disproportionately high in comparison to house/apartment prices, compared with other cities in the EU.

This has made it an extremely attractive proposition for investment, given such high returns, evidenced by Vulture REITs buying over 90% of all new built apartments in Dublin last year. This sort of thing has a significant impact on supply.

With rents so high compared to the cost of mortgage repayments, there is a significant incentive for renters to purchase, but supply is limited, in part because supply has been reduced by corporations chasing the high rental returns.