Medium & Long Term Property Market Chat

awec

schmittel wrote: »

I didn't know that. I presume it is capped at some level?

Is this UK or have you seen this idea floated from an Irish source?

Sorry, this is entirely UK. I have no idea what the Irish scheme is, only that the snippet you posted sounded pretty similar to what the UK does.

On the interest rate, I don't mean it goes up by a whole 1% every year, so it's not going to go from 1.75%->2.75% between year 6 and 7, otherwise the interest would be insane.

If the RPI is like 3%, then your interest rate will increase by 4%. So the 1.75% becomes 1.82% (104% of the previous).

There is no cap, as far as I know.

Browney7

awec wrote: »

Almost identical to the UK scheme.

If the state buys a percentage of the house, then as the value of the house changes so does the amount you need to pay to buy them out. So after 5 years you could end up paying back more than you borrowed if the value of the property increases.

Seems a very pro cyclical scheme to me and stores up a world of hurt in the event that property prices drop and a borrower gets into financial difficulty.

If a borrower gets a loan of 400k, and a state share of 100k on a property worth 500k (not clear how any existing help to buy or customer deposit interacts with the overall scheme), what happens if property drops by 30% to 350k and the bank have to enforce security and repossess?

Does the government write off the 150k owed by Mary and Jim the hard pressed young couple who fell on hard times who couldn't pay for their dream house in portmarnock? Is the working assumption that the buyer will get a mortgage top up at year 5 to buy out the government?

This looks like a tax payer slush fund for underwriting frothy property values and making bank LTV ratios look good too (they have a loan of 400k on a 500k property)

awec

Browney7 wrote: »

Seems a very pro cyclical scheme to me and stores up a world of hurt in the event that property prices drop and a borrower gets into financial difficulty.

If a borrower gets a loan of 400k, and a state share of 100k on a property worth 500k (not clear how any existing help to buy or customer deposit interacts with the overall scheme), what happens if property drops by 30% to 350k and the bank have to enforce security and repossess?

Does the government write off the 150k owed by Mary and Jim the hard pressed young couple who fell on hard times who couldn't pay for their dream house in portmarnock? Is the working assumption that the buyer will get a mortgage top up at year 5 to buy out the government?

This looks like a tax payer slush fund for underwriting frothy property values and making bank LTV ratios look good too (they have a loan of 400k on a 500k property)

Mary and Jim don't owe 150k.

The government own 20% of the property, so if it falls in value by 30% then the government's portion is worth 30% less. In such a scenario, the government owned portion would be worth 105k.

In the case of a repossession and forced sale the government will get their 30% cut of whatever is available after the bank get whatever they're owed. If that's nothing, then that's nothing. Exact same as Mary and Jim.

Browney7

awec wrote: »

Mary and Jim don't owe 150k. They owe 20% of the value.

Sorry, meant 100k.

Not expecting you to know by the way, I'm more thinking through how this scheme would work! So in a stress scenario, does the bank get the full proceeds of the property sale to cover their outstanding loan or a pro rata share?

If the sale proceeds are less than the bank loan plus the government loan, who eats the loss?

If they owe 20% of the value, it's 70 grand that they can't pay, plus the 30 grand loss (the 100k advanced originally) that the taxpayer has to eat on top. Do the government hold a debt over "the hard pressed homebuyer who was doing their best?" I can't see this being a good look for the government of the day

awec

Browney7 wrote: »

Sorry, meant 100k.

Not expecting you to know by the way, I'm more thinking through how this scheme would work! So in a stress scenario, does the bank get the full proceeds of the property sale to cover their outstanding loan or a pro rata share?

If the sale proceeds are less than the bank loan plus the government loan, who eats the loss?

If they owe 20% of the value, it's 70 grand that they can't pay, plus the 30 grand loss (the 100k advanced originally) that the taxpayer has to eat on top. Do the government hold a debt over "the hard pressed homebuyer who was doing their best?" I can't see this being a good look for the government of the day

Yea I don't know the specifics but I am pretty sure you owe your 20% either way. If that is obtained via the sale after repossession then you are in the clear, if not then you still have a debt to the government.

What level of enforcement they'd impose I do not know.

Browney7

awec wrote: »

Yea I don't know the specifics but I am pretty sure you owe your 20% either way. If that is obtained via the sale after repossession then you are in the clear, if not then you still have a debt to the government.

What level of enforcement they'd impose I do not know.

So in Ireland the debtor (who is a normal Joe) will go to media and say how awful it all is, being put out on their ear by the government who is supposed to look after the vulnerable and huge hullabaloo ensues. Or else they lobby their own TD etc.

This scheme is grand if everything keeps going gangbusters. Launching it near the top of a property price cycle (in my opinion) looks quite risky to me. This really seems like a ruse to keep new build property prices inflated

hometruths

Browney7 wrote: »

Sorry, meant 100k.

Not expecting you to know by the way, I'm more thinking through how this scheme would work! So in a stress scenario, does the bank get the full proceeds of the property sale to cover their outstanding loan or a pro rata share?

If the sale proceeds are less than the bank loan plus the government loan, who eats the loss?

If they owe 20% of the value, it's 70 grand that they can't pay, plus the 30 grand loss (the 100k advanced originally) that the taxpayer has to eat on top. Do the government hold a debt over "the hard pressed homebuyer who was doing their best?" I can't see this being a good look for the government of the day

I agree - it might garner a few good headlines in the short term, but in reality it is a no win situation for the government.

Prices tank, forced sale - homeowner will wail government is just as bad as the nasty banks, they're no different Joe.

Prices tank, homeowner wishes to sell due to change in circumstances, homeowner will wail they can't afford to move because they have to pay back the big bad government, the government has me trapped in a living hell Joe.

If prices fall they'll write it off, at which stage people will not bother paying it and everyone will just expect it to be written off.

Prices rocket, homeowner wishes to trade up because their 300 grand house is now worth 600 grand, but then they realise the government is taking 120k of their equity meaning they can't actually afford to trade up after al. Homeowner will wail this is unfair - what I owed the bank went down, but my debt to the government doubled, they're like bleedin' loan sharks Joe, and now they have me trapped in a house that is too small etc etc

People who don't qualify for it will complain it is unfair etc etc etc.

There are so many different pitfalls for this, I cannot see it ending well.

hometruths

Having said all that if the governments objective is to increase prices by 20% it is actually a certain win for the government!

PropQueries

From the Irish Times in July 2019:

“How big is our national debt? It’s just over €200 billion. On a per capita basis that’s the third highest in the world, eclipsed only by the US and Japan. It equates to €42,000 for every man, woman and child in the State or nearly €90,000 for every worker in the economy.”

Link to Irish Times article here: https://www.irishtimes.com/business/economy/ireland-s-200bn-debt-burden-how-did-we-get-here-1.3943085

Timing belt

PropQueries wrote: »

From the Irish Times in July 2019:

“How big is our national debt? It’s just over €200 billion. On a per capita basis that’s the third highest in the world, eclipsed only by the US and Japan. It equates to €42,000 for every man, woman and child in the State or nearly €90,000 for every worker in the economy.”

Link to Irish Times article here: https://www.irishtimes.com/business/economy/ireland-s-200bn-debt-burden-how-did-we-get-here-1.3943085

Debt to GDP 57% 2019

source: https://www.ntma.ie/business-areas/funding-and-debt-management/investor-relations

Its worth having a read of the investors presentation as it highlights the risks to the economy and 7 slides specifically on the property market

Cyrus

PropQueries wrote: »

I suppose this is where we disagree with the data on future demand:

Total increase in population 2011 – 2016 was 173,613 as per Census 2016:

0 - 34 Years: -72,493 (yes, minus)
35 - 64 Years: +143,932
65 - 85+ Years: +102,174

Central Bank report in December 2019 based their housing demand projections on net migration remaining at c. 30,000 per annum out until 2030:

https://centralbank.ie/news-media/press-releases/press-release-economic-letter-population-change-and-housing-demand-in-ireland-10-december-2019#:~:text=Today%20the%20Central%20Bank%20of,Thomas%20Conefrey%20and%20David%20Staunton.&text=Assuming%20a%20lower%20level%20of,per%20annum%20out%20to%202030

how many more times are you going to post this?

average age of a FTB is 34 so looks like there will be plenty demand.

mcsean2163

I've been looking for a small industrial unit, reasonably priced in South side Dublin.

Despite all the doom and gloom, only one competitively priced. Does anyone know if that will ever change?

PropQueries

Cyrus wrote: »

how many more times are you going to post this?

average age of a FTB is 34 so looks like there will be plenty demand.

Well, we've also built c. 70,000 new residential units since then which at an average of 2 per unit would house 140,000 persons.

That doesn't include at least c. 10k - 15k probate homes re-entering the market per annum, so that would be another minimum of c. 40,000 units entering supply over the past 4 years or enough to house an additional 80,000 persons. Never mind the thousands of student accommodation beds. And, I won't mention the existing vacant properties.

beauf

PropQueries wrote: »

...so that would be another minimum of c. 40,000 units entering supply over the past 4 years ....

Many estimate we'd need at least that a year for many years to overcome the shortfall that has built up since before last crash.

To put that into perspective...

Over the period 2002 to 2006, the number of house completions rose each year to a peak of 88,200 in 2006.
The number of houses completed in 2007 decreased by 12% to 78,000.

I'm sure it will all work out though.

PropQueries

beauf wrote: »

Many estimate we'd need at least that a year for many years to overcome the shortfall that has built up since before last crash.

To put that into perspective...



I'm sure it will all work out though.

What's interesting is that a near enough same argument is taking place today regarding the supply/demand issue as took place back in 2005.

Back in 2005, Davy issued a report that stated:

"more than 40% of houses built in the past two years are lying vacant as second homes, holiday homes or unlet investment properties, adding that this rate must fall to nearer 10%."

However, in the same article, Hooke & MacDonald used the same excuse we're using today that we need plenty of more houses because of net migration:

"With net inward migration now averaging close to 50,000 per annum, it is critical the appropriate physical and social infrastructure is in place to accommodate the growth in population,' comments Geoff Tucker, Economist with Hooke & MacDonald.".

Link to RTE article on Davy report here: https://www.rte.ie/news/business/2005/0524/63495-construction/

beauf

If you can get a time machine and go back 2005 you're all sorted then.

enricoh

I heard mairead mc guinness on rte news there that she is in favour of tax harmonisation across the eu! Bring back phil hogan , we can do without her 'fighting' our corner. It really is the only show in town for us.

With the government buying up every second new house I reckon that'll be the get out of jail card for the builders this time around. Won't be as many foundations poured next year or the finance to pay for them.

With the hospitality industry in tatters there'll be more people looking for the government to pay the rent. Surely the government will cut the hap levels next year, hap is keeping rents artificially high as it is imo.
Eviction ban to be extended again , anyone thinking of becoming a landlord will be sent for medical assessment!!