Irish Property Market chat II - *read mod note post #1 before posting*

amacca

https://www.boards.ie/discussion/comment/119545044#Comment_119545044

I think I agree...I doubt there will be a property price collapse for quite some time....

Still low supply....Still high demand (due to more than just the factors you mentioned)

Even if we see emigration, wage reduction, more and more rises in the costs of borrowing....owners that can sit on stuff will....I'd reckon there would be a limited amount forced onto market (executor sales etc)....or at least there would be more willing to sit it out than let it go in a depressed market

Could take and I believe will take years and years of sustained conditions like above to see enough come to market to reach a point where stock for sale satisfies demand or market saturated with stuff to buy

If the objective was to reduce house prices fast a large program of building (subsidised) houses is the only way to get there in short term imo

The squeeze will reduce output too...developers wont build too many if afraid they will have to be sold at a loss or greatly reduced profit when they do get to market

awec

https://www.boards.ie/discussion/comment/119545150#Comment_119545150

On the emigration point, there was recent CSO figures that showed for the past few years Irish immigration has exceeded emigration.

That is to say, more Irish people have moved back to Ireland the past few years, than Irish people have left.

While this I suspect is heavily distorted by covid, it remains a reality that there has been an influx of people here to stay.

Timing belt

https://www.boards.ie/discussion/comment/119544958#Comment_119544958

You fail to mention that it moves from 26% to 32%…..And BOI provision is only 47m….with AIB expected to book similar….It doesn’t sound as sensational when it’s put like this….It’s also interesting that the pain is felt by lower income and that higher income have more capacity to absorb financial pressure…can’t remember who was arguing saying that this won’t be the case…but there you go

combat14

https://www.boards.ie/discussion/comment/119545367#Comment_119545367

good to know the banks are making adequate provisions like last time so ..

sometimes its the straw that breaks the camel's back

Timing belt

https://www.boards.ie/discussion/comment/119545451#Comment_119545451

comparing now to 2008 and expecting the same situation to unfold for the same reasons just shows that people don’t understand the regulatory changes that were implemented after ‘08. Banks are well capitalised this time around so any market stress won’t be coming from this sector in Europe……you will need to find a different piece of straw

combat14

https://www.boards.ie/discussion/comment/119545546#Comment_119545546

this time its not the banks its ordinary people's backs that will break this winter unless of course you are already a wealthy property owner, landlord or TD/minister with multiple undeclared properties

tom_murphy112

https://www.boards.ie/discussion/comment/119545044#Comment_119545044

Yup - I totally agree here.

I really think it shouldn't be up to the central government to say how much one can borrow, this should be up to the banks. The 3.5X times limit is stifling the amount of houses that can be built and needs to be removed asap.

Jonnyc135

https://www.boards.ie/discussion/comment/119546189#Comment_119546189

Jesus just as well they don't listen too you or we would have a bigger bubble than the last

tom_murphy112

https://www.boards.ie/discussion/comment/119546223#Comment_119546223

People need houses and people are willing to spend money if they can borrow.

My own house still hasn't peaked compared to what I paid back in 2007, so I know for a fact people's ability to borrow is what is holding back prices.

Deub

https://www.boards.ie/discussion/comment/119546234#Comment_119546234

You need to put more thoughts into your plan. People had no problem to borrow up to 2007/8. It is when the recession came that the struggle started.

You want to do it again now. Why would the results by any different if we have a recession?

tom_murphy112

https://www.boards.ie/discussion/comment/119546268#Comment_119546268

People have the cash this time around, average rent is over 2K. If they can pay that much rent a month, surely they can afford to pay that amount or more in a mortgage payment.

Bass Reeves

https://www.boards.ie/discussion/comment/119546268#Comment_119546268

Because there is no 110% mortgage's. There is no buy to lets with 110% mortgage's that were bought with projected 1-2% projected rental returns

If you cannot see the difference then you need to start doing basic economics classes

Bass Reeves

https://www.boards.ie/discussion/comment/119546189#Comment_119546189

The real limit is 4.5 times salary as there is a lot of these mortgage given out. As well you have the 30% government equity. I would be slow I creasing lending limits

Deub

https://www.boards.ie/discussion/comment/119546321#Comment_119546321

With 54% of renters being helped by the State to pay rent?

https://www.boards.ie/discussion/comment/119546335#Comment_119546335

So you don’t see any issue with people borrowing 8, 9 times or more their combined salary to buy a property?

tom_murphy112

https://www.boards.ie/discussion/comment/119546403#Comment_119546403

The only way I see us fixing this mess is by borrowing more and spending more on houses. This way it incentivise builders to build as they can make money too with a decent margin. Also government shouldn’t be subsiding any of this.

awec

https://www.boards.ie/discussion/comment/119546189#Comment_119546189

The 3.5 limit is the only thing keeping a lid on house prices. Without it, prices would be a lot higher than they are now.

tom_murphy112

https://www.boards.ie/discussion/comment/119546452#Comment_119546452

Which inevitably causes low supply as there is little incentive to build. Developers need to make a decent margin too.

awec

https://www.boards.ie/discussion/comment/119546528#Comment_119546528

It is unlikely that there is any scope for increasing housing output. We don't exactly have developers and tradesmen sitting at home right now looking for work.

We are building a lot already.

Villa05

https://www.boards.ie/discussion/comment/119546335#Comment_119546335

Do you think current rents are sustainable going into a long period of stagflation alternating into recession

In the 00's mortgage rates were well over 6% and fell to 2.5%. Now the trend would appear to be going in the opposite direction

Shared ownership is a 120% mortgage substitute product

tom_murphy112

https://www.boards.ie/discussion/comment/119546635#Comment_119546635

Well as someone stated above, 54% of all renters are subsidised by the state. Do you think the government will stop those subsidies ? I say No. I would actually see them increasing rental subsidies.

wassie

https://www.boards.ie/discussion/comment/119546234#Comment_119546234

Clearly you have a bias in the lifting of LTIs limits in order to faciliate higher price growth.

LTIs are not a factor in limiting housing supply. The reasons for such have been discussed endlessly in this thread and I dont recall LTI limits being consistantly argued as one of the reasons.

tom_murphy112

https://www.boards.ie/discussion/comment/119547198#Comment_119547198

Maybe I do, maybe I don't. But why isn't there no lending limit on how much you can get for a car loan or a personal loan that is tied to how much you earn, rather than how much you can afford ?

If car loans was limited, it certainly will have a knock on effect on new car ownership in turn on the second hand market.

jimmybobbyschweiz

https://www.boards.ie/discussion/comment/119545044#Comment_119545044

You are catching a falling knife getting onto the property ladder at the moment and for the foreseeable future. In fact, the rental market is quite stable for now as tenants cannot really be evicted and rents can only go up a maximum of 2% per year. In the meantime, mortgage costs will start to close the gap with renting as rents have naturally reached their affordability ceiling it is safe to say when 50% of the rental market is socialised.

The reason supply will pick up is due to sellers running for the exit doors as they can see mortgage payments climbing while their house price looks to be starting to decline. There are thousands of people who held off selling since pre-Brexit (the actual event, not the referendum) and covid that would've sold but for these events and the increasing of their house price.

Jonnyc135

https://www.boards.ie/discussion/comment/119546408#Comment_119546408

I honestly think this is a crazy approach. Turn on the compressor full bore and blow the housing bubble to smithereens. Wait till this recession starts and unemployment goes above 10% in order to tame inflation. Then use the newly created QE which the ECB will do as will every other CB in the world in order to keep the circus going and use that to build new houses as well as lower tax rates for small time landlords.

awec

https://www.boards.ie/discussion/comment/119547368#Comment_119547368

Your post still makes no sense whatsoever.

Sellers running for exit doors? Where are these sellers going to go? Into the rental market? Vanish into thin air?

The rental market is not "quite stable now". A statement that indicates just how out of touch with reality you are.

wassie

https://www.boards.ie/discussion/comment/119547245#Comment_119547245

Because a mortgage is significantly larger than a car loan for the individual and for a longer term.

Also total mortgage lending can directly affect the economy as a whole hence why it is subject to macro-prudential controls.

The Central Bank introduced LTIs and LTVs with the "key objective...to increase the resilience of the banking and household sectors to the property market and to reduce the risk of bank credit and house price spirals from developing in the future..." and "The Central Bank does not wish to regulate or directly control housing prices" [Souce: CB]

Also worth noting LTIs do not apply to buy-to-lets i.e. investors.

jimmybobbyschweiz

https://www.boards.ie/discussion/comment/119547437#Comment_119547437

Other than stating how relatively speaking the rental market is not stable, you have offered no counter argument so I don't know what to say to you now. Can you elaborate?

"Where are sellers going to go?" The herd does not rationalise their running for the exit in a way which we can explain, but the point is that sellers who think the market will turn (it already has and the next few years will show that this is the case - current data is of course lagging the actual current state of affairs as is normal with property) will start to sell up as they think they are getting ahead of any crash. Where will they go? Well, to put it to you; if you thought your house was going to begin a decline in its value and you were sensitive to the 2008 onwards crash, with potentially that in mind as a barometer for what could happen, would you try to sell before it plummets in value or would you care whether it plummets in value as apparently there is no where to go?

It's kind of funny that the energy crisis will get blamed when, next year, the poo is hitting the fan. Never will the sustainability of the growth be put as a reason why the market turned.

awec

https://www.boards.ie/discussion/comment/119548528#Comment_119548528

You can only sell your house if you have somewhere better to go. It's not like offloading stocks or some other investment, you still need somewhere to live. On top of this, you need to find a buyer.

If you "run for the exit", then you're either running into the rental market (good luck), or you're running to buy again.

As you are under the impression that nobody would possibly buy, this means you must believe there is going to be a massive exodus of people into the rental market. I will give you 1 guess as to what will happen if you combine a huge influx of rental demand and a shrinking rental supply.

You said earlier, and I quote:

now we will see people paying more for houses declining in value; who would sign up for that?

In your head, how are all these people going to run for the exit if there are no buyers?

flexcon

https://www.boards.ie/discussion/comment/119546189#Comment_119546189

As someone who is capped by this 3.5times, It would be insanity to remove it.

tom_murphy112

https://www.boards.ie/discussion/comment/119548664#Comment_119548664

But why not. It’s either we believe in the free market or not. We don’t need government agencies micromanaging the lending percentage.

Honestly I don’t see why a couple earning 100K should be limited to 350K, this figure should up to a 1m. If they can afford the repayment.