2021 Irish Property Market chat - *mod warnings post 1*

hometruths

Hubertj wrote: »

Or find your keys, or your phone, or where the kids are hiding

Or the kids could not find where you are hiding. Sounds blissful to be honest.

Balluba

schmittel wrote: »

Or the kids could not find where you are hiding. Sounds blissful to be honest.

I love the corner bar

PropQueries

schmittel wrote: »

Completely agree the capital requirements is the reason our interest rates are higher. But why do you think our banks have capital requirements so much greater than other eurozone countries?

Well, the then president of the ECB, back in 2018, stated that the "Irish market is overstretched and vulnerable to repricing".

He also said that "rising prices in the Republic, both residential and commercial, were in part being fuelled by cross-border financing and non-banks, and that it would be important to investigate whether new macro-prudential instruments should be introduced for non-banks, especially in relation to their commercial real estate exposures."

He also said the same logic could apply to a few other EU countries.

However, when you look at the fact that the international funds purchased c. €200 billion in Irish distressed assets between 2012 and 2016, one could come to the conclusion that the funds activity in the Irish housing market may be having a bigger influence than in many other EU countries given the small size of our domestic economy i.e. we still have less than 5 million people.

Also, as reported in The Currency the last day, these long-term leases etc. may be adding fuel to the fire.

If the ECB president thought that Irish property prices were "overstretched and vulnerable to repricing" back in 2018, what would their analysis be today?

Link to article in Irish Times here: https://www.irishtimes.com/business/economy/draghi-links-rise-in-irish-property-prices-to-international-investors-1.3560140

hometruths

PropQueries wrote: »

Well, the then president of the ECB, back in 2018, stated that the "Irish market is overstretched and vulnerable to repricing".

He also said that "rising prices in the Republic, both residential and commercial, were in part being fuelled by cross-border financing and non-banks, and that it would be important to investigate whether new macro-prudential instruments should be introduced for non-banks, especially in relation to their commercial real estate exposures."

He also said the same logic could apply to a few other EU countries.

However, when you look at the fact that the international funds purchased c. €200 billion in Irish distressed assets between 2012 and 2016, one could come to the conclusion that the funds activity in the Irish housing market may be having a bigger influence than in many other EU countries given the small size of our domestic economy i.e. we still have less than 5 million people.

Also, as reported in The Currency the last day, these long-term leases etc. may be adding fuel to the fire.

If the ECB president thought that Irish property prices were "overstretched and vulnerable to repricing" back in 2018, what would their analysis be today?

Link to article in Irish Times here: https://www.irishtimes.com/business/economy/draghi-links-rise-in-irish-property-prices-to-international-investors-1.3560140

Mr Draghi said the real estate market in the Republic and several other EU states was “overstretched” and vulnerable to “repricing”.

How many of these several other EU states' banks are subject to higher capital requirements like the Irish banks? And if none, why not?

PommieBast

Balluba wrote: »

An auctioneer told me this week that many house sales are falling through. I don’t know how widespread this is though.

Rampant I suspect. Even pre-Covid Sale Agreed falling thru was something EAs would often conceal.

PropQueries

schmittel wrote: »

How many of these several other EU states' banks are subject to higher capital requirements like the Irish banks? And if none, why not?

I would think that they look at Ireland (an island off an island off europe) with a population below 5 million people and think that our economic future isn't as bright as many here would assume.

In an era of EU/Biden tax reforms, our high debt levels, underfunded pensions, possibly rising interest rates etc. etc., we don't really have much going for us to justify existing house prices in the medium term IMO

We don't have a domestic economy to speak of relative to most other EU countries to take up the shortfall if the global trading/tax environment turns against us.

For our housing minister to put a figure of c. €450k on his definition of affordable housing in Dublin, I'm sure a few in the ECB would raise an eyebrow

That €450k figure alone would justify higher capital requirements if I was involved in such decision making at the ECB

hometruths

SmokyMo wrote: »

I answered previously that mortgage arrears are under 5% of total mortgage accounts. So cannot be a leading factor in mortgage rates.

https://www.centralbank.ie/docs/default-source/statistics/data-and-analysis/credit-and-banking-statistics/mortgage-arrears/residential-mortgage-arrears-and-repossession-statistics-december-2020.pdf?sfvrsn=4

The only 5% nothing to see here argument is naive, again because it ignores the restructures but also the value of the arrears.

Total outstanding PDH mortgages have a capital value of about 98 billion.

Total outstanding PDH mortgages in arrears over 90 days (38,785 accounts) have a capital value of about 9 billion.

Cannot find figure for outstanding value of 72,866 restructured accounts but if we assume that the average account is worth same as arrears over 90 days (232k) we get a figure of 16.9 billion.

Which means that almost 26 billion worth of mortgages in a total market of 98 billion is in significant default.

That's 26.5% of the mortgage market.

It's nuts to believe that this volume of capital in default has no effect on mortgage rates.

PropQueries

schmittel wrote: »

The only 5% nothing to see here argument is naive, again because it ignores the restructures but also the value of the arrears.

Total outstanding PDH mortgages have a capital value of about 98 billion.

Total outstanding PDH mortgages in arrears over 90 days (38,785 accounts) have a capital value of about 9 billion.

Cannot find figure for outstanding value of 72,866 restructured accounts but if we assume that the average account is worth same as arrears over 90 days (232k) we get a figure of 16.9 billion.

Which means that almost 26 billion worth of mortgages in a total market of 98 billion is in significant default.

That's 26.5% of the mortgage market.

It's nuts to believe that this volume of capital in default has no effect on mortgage rates.

But can the banks and their customers win in either scenario? If the difficulties in repossessions are partly responsible for our higher capital requirements and higher mortgage rates, if repossessions were made easier (and I do agree they should be), what would that do the value of property on the banks books?

How many would be right back in negative equity? Especially the people who purchased over the past 4 years.

Wouldn't it just end up justifying the higher capital requirements all along?

The only winners I see are the funds who have purchased many of these non-performing mortgages already or a cash buyer seeking a nice pad in a good suburb in Dublin

Cyrus

SmokyMo wrote: »

I said that in hope of that you might ask someone who is more knowledge than yourself this topic. But I guess your opinion is made no matter what information is presented to you.

A hardly qualified form filler is going to educate me on this ? I doubt it.

timmyntc

PropQueries wrote: »

But can the banks and their customers win in either scenario? If the difficulties in repossessions are partly responsible for our higher capital requirements and higher mortgage rates, if repossessions were made easier (and I do agree they should be), what would that do the value of property on the banks books?

How many would be right back in negative equity? Especially the people who purchased over the past 4 years.

Wouldn't it just end up justifying the higher capital requirements all along?

The only winners I see are the funds who have purchased many of these non-performing mortgages already or a cash buyer seeking a nice pad in a good suburb in Dublin

Why would repossessions lower the value of property?
If anything the impact of repossessions and a possible decrease in rates would actually push prices up not down

Marcusm

schmittel wrote: »

How many of these several other EU states' banks are subject to higher capital requirements like the Irish banks? And if none, why not?

There is an element which is related to the systemic relevance of Ireland but, as under Basel II and 3, the capital requires are pro cyclical in that there is a heavy reliance on historic loan performance in determining the amount of capital set aside for new loan assets. The experience of Ireland from 2008-2014 (or so) is one of the biggest facts. This is a disincentive to foreign
Lenders operating in the Irish market as they have to consider the higher probabilities of default and losses given default which were experienced over that period. (Although not their default experience, their internal models will have to suck up the market data). Few other Western European countries suffered the same issues.

PropQueries

timmyntc wrote: »

Why would repossessions lower the value of property?
If anything the impact of repossessions and a possible decrease in rates would actually push prices up not down

It depend on how many of the non-performing mortgages are owned by the funds. I would assume they purchased many of them for a fraction of current market value.

Given the chance to repossess and flood the market with such properties and take their profits, I think they will.

It could go either way, but my guess would be that the funds wouldn't wait around for a possible SF government in a few years rolling back on this once (second?) in a lifetime gift or the impact of the EU/Biden tax reforms IMO

MacronvFrugals

I'll be the first to admit i know very little about this area but the repossession debate reminds me of the insurance premium debate ie "just do this and you'll have lower premiums" when the UK brought in set payouts the premiums never dropped because of course they didnt!

hometruths

Marcusm wrote: »

There is an element which is related to the systemic relevance of Ireland but, as under Basel II and 3, the capital requires are pro cyclical in that there is a heavy reliance on historic loan performance in determining the amount of capital set aside for new loan assets. The experience of Ireland from 2008-2014 (or so) is one of the biggest facts. This is a disincentive to foreign
Lenders operating in the Irish market as they have to consider the higher probabilities of default and losses given default which were experienced over that period. (Although not their default experience, their internal models will have to suck up the market data). Few other Western European countries suffered the same issues.

Exactly, it leads back to the conclusion that lack of repos are the cuse of our capital requirements being higher than others.

hometruths

PropQueries wrote: »

But can the banks and their customers win in either scenario? If the difficulties in repossessions are partly responsible for our higher capital requirements and higher mortgage rates, if repossessions were made easier (and I do agree they should be), what would that do the value of property on the banks books?

Probably lower it, so what?

PropQueries wrote: »

How many would be right back in negative equity? Especially the people who purchased over the past 4 years.

No idea, but lending practices of last few years should ensure not a huge amount. In any case, so what if some people end up in negative equity?

PropQueries wrote: »

Wouldn't it just end up justifying the higher capital requirements all along?

It would be the first step to justify lower capital requirements in the future.

PropQueries wrote: »

The only winners I see are the funds who have purchased many of these non-performing mortgages already or a cash buyer seeking a nice pad in a good suburb in Dublin

If the funds make a profit or a cash buyer gets a good deal, what's the problem? It's about taking steps to ensure we get a functioning property market for all long term, not cutting our noses off to spite our faces so that foreign investment funds don't make any money.

Hubertj

MacronvFrugals wrote: »

I'll be the first to admit i know very little about this area but the repossession debate reminds me of the insurance premium debate ie "just do this and you'll have lower premiums" when the UK brought in set payouts the premiums never dropped because of course they didnt!

Avant has entered the market offering lower rates by targeting “lower risk” applicants through LTV requirements. I think that shows entities will enter the market if risk is mitigated. Having said that there are some real geniuses in this thread who might shoot down my opinion.

SmokyMo

Cyrus wrote: »

A hardly qualified form filler is going to educate me on this ? I doubt it.

I am afraid then, you do not understand the limit of your knowledge.

Cyrus

SmokyMo wrote: »

I am afraid then, you do not understand the limit of your knowledge.

If you were making any sense it might provoke some introspection but you aren’t .

woejus

SmokyMo wrote: »

I am afraid then, you do not understand the limit of your knowledge.

Limitless was on telly last night... good flick.

Mic 1972

I just had a viewing with SherryFitz on zoom, 6 participants, all private buyers, not a single DCC or private investors

optogirl

I'm walking away from trying to buy a house I think. It's just not possible at the moment. Getting outbid on everything and houses going for 50-100k over asking. Too rich for my bank balance.

combat14

timmyntc wrote: »

Why would repossessions lower the value of property?
If anything the impact of repossessions and a possible decrease in rates would actually push prices up not down

mass repossessions during a cyclical recession leading to a natural firesale of houses like the US and other countries would surely lead to increased to supply and subsequent drop in prices unless properties were snapped up on en masse once again straight away by poorly regulated and inadequately taxed vulture funds

tobsey

schmittel wrote: »

As with most stats relating to our housing market, if you look at them with an open mind, rather than a confirmation bis picked up from the papers, they paint quite a different story.

Sure the headlines are mortgage arrears are falling, no doubt thanks to CB release highlighting as the first Key Point:



A "decline in longer term arrears"? Sounds like we are moving in the right direction, but if you look at Table 1 the figure that jumps out is that the longest term arrears, over 10 years, have jumped by 1,371 or about 25%.

It is worth reading beyond Table 1 to have a look at restructurings. Most people think declining arrears figures mean that more people are paying off what they owe and catching up, but actually the decline is because accounts that were previously classified as arrears are now classified as restructured.



So we have a massive jump in 10 year arrears, and even by reclassifying 4,203 accounts as not in arrears, the total number of accounts in arrears only fell by 462 in the same period!

It does not sound like it is improving much to me!

On page 4 of the CB report it says that of the almost 55k mortgages in arrears at Dec 2020, almost 14k were classified as Restructured. So they aren't been reclassified as Restructured and therefore removed from the total in arrears. The Restructured ones are a subset of the overall in arrears.

Further on you mentioned something about 70k+ restructuring arrangements being in place but I'm not sure where you got that figure from.

Amadan Dubh

Mic 1972 wrote: »

I just had a viewing with SherryFitz on zoom, 6 participants, all private buyers, not a single DCC or private investors

Does anyone know if this is normal or if DCC or private investors do typically join these viewings with Joe Public?

Galwayhurl

Just saw this on Crazy Prices twitter. Mullen Park phases 2, 3 and 4 ALL sold to a REIT, Round Hill Capital.

That's dozens if not hundreds of houses off the market for FTBs now. When is this going to stop? Is it legally possible to stop REITS from buying up the whole country? It was done in Germany, was it not?

https://twitter.com/crazyhouseprice/status/1387790404163096576?s=20

SmokyMo

Galwayhurl wrote: »

Just saw this on Crazy Prices twitter. Mullen Park phases 2, 3 and 4 ALL sold to a REIT, Round Hill Capital.

That's dozens if not hundreds of houses off the market for FTBs now. When is this going to stop? Is it legally possible to stop REITS from buying up the whole country? It was done in Germany, was it not?

https://twitter.com/crazyhouseprice/status/1387790404163096576?s=20

https://www.newstalk.com/news/varadkar-rejects-call-to-ban-cuckoo-funds-from-buying-up-irish-homes-1184903

Cyrus

So we have gone from there are no professional land lords in Ireland look at the way things are in Germany where you can rent for life to

There are too many professional landlords this is an outrage

In the space of about 2 years

hometruths

tobsey wrote: »

On page 4 of the CB report it says that of the almost 55k mortgages in arrears at Dec 2020, almost 14k were classified as Restructured. So they aren't been reclassified as Restructured and therefore removed from the total in arrears. The Restructured ones are a subset of the overall in arrears.

Further on you mentioned something about 70k+ restructuring arrangements being in place but I'm not sure where you got that figure from.

Restructures are not a subset. They are reclassified and removed from arrears figures. Then if borrower falls behind payment terms of restructuring arrangement they are classified as arrears once again, being both arrears and restructured.

The 70k figure comes from the accompanying spreadsheet of the data from the CB release linked earlier.

cnocbui

SmokyMo wrote: »

https://www.newstalk.com/news/varadkar-rejects-call-to-ban-cuckoo-funds-from-buying-up-irish-homes-1184903

Perhaps SF will have a more reasonable policy, when they get in.

MacronvFrugals

cnocbui wrote: »

Perhaps SF will have a more reasonable policy, when they get in.

Are you in New Zealand yet?