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

DownByTheGarden

https://www.boards.ie/discussion/comment/119725709#Comment_119725709

He had the latest bid of €560k today and he said they are going to accept it if there are no more bids by ext Friday because they are under pressure from the vendor they are buying off to sh1t or get off the pot.

awec

https://www.boards.ie/discussion/comment/119744526#Comment_119744526

https://www.boards.ie/discussion/comment/119743453#Comment_119743453

As Cyrus says, stress testing is based on current rates. If you apply for a 2.5% mortgage they will test you up to about 4.5%. Not every bank uses the exact same method.

Obviously, paying the mortgage at the stressed rate cannot mean you're spending most of your income on the mortgage, you'd get rejected in this case.

I believe if you run the numbers, you will find that most people who bought since the lending rules came in are paying 30-ish% of their income or less on the mortgage.

Which is to say, rate hikes are unlikely to lead to mortgage difficulties unless they are combined with income losses, but they will affect things like discretionary spending.

drogon.

https://www.boards.ie/discussion/comment/119743940#Comment_119743940

Did they not come out and say they won't be be increasing rates last month ? Also people on this thread assured us it wouldn't happen considering banks have loads of deposit.

ittakestwo

The stress test is the 3.5x income limit. This limit takes away the need for interest rate stress testing. It was a great rule introduced by the Central Bank after the last crash. Unfortunately the likes of FF want it destroyed as it retains prices going up in booms and thus developers profits but thankfully after the last crash nobody listens to those pigs.

The piont of the 3.5x rule was to stabilise housing market from interest rates movements. Ie borrowers are limited to the same mortgage whether the interest rates are 3 or 6%. Nobody should default on a morgage provided they kept their job if they have just borowed 3.5× income. In the last boom there was no regulation on how much you could borrow. Some subrime companies like start morgages were leanding 6× income. It was absolutely nuts and destined for morgages defaults when the ECB raised the base rates from 2% to 4.25% between end of 2005 and mid 2008.

This time in two years some people may ask themselves why hasn't property crashed despite all the interest rates rises and it will be do to fact of the 3.5× income rule.

Sierra Oscar

https://www.boards.ie/discussion/comment/119745006#Comment_119745006

Did anyone actually say this? We've seen ECB interest rates rise by 1.75% so far this year, with a chorus in this thread proclaiming that the banks would have to pass on each and every interest rate rise. They haven't to date, and they won't either. I don't think there is a single comment anywhere in this thread from someone claiming that interest rate rises would not occur whatsoever.

Also worth pointing out - we're probably over half way through this interest rate rise cycle. The markets are pricing in declines in interest rates from next year. They expect interest rate declines to be well underway by this time next year.

drogon.

https://www.boards.ie/discussion/comment/119745223#Comment_119745223

LOL - you just have to go back few weeks back. Boards search is pretty **** now and I can't even find the post I replied to few weeks back. But people on here saying Irish banks have huge deposit and they don't rely ECB for funding etc.

Sierra Oscar

https://www.boards.ie/discussion/comment/119745293#Comment_119745293

No one said the deposits would mean the banks would not pass on interest rate rises whatsoever. It was pointed out as an explanation as to why the banks did not immediately increase interest rates and how they had some flexibility when it comes to absorbing the initial round of rate rises - unlike other lenders in the market who were forced to immediately pass on the interest rate rises. Which has been spot on when you consider the likes of AIB have only increased rates by 0.5% when the ECB rate has risen by 1.75% to date.

There was a chorus of comments when the first ECB rate rise was announced that the banks would immediately increase their rates. They didn't. We can see now that AIB has been willing to absorb 1.25% of the ECB interest rate rises to date.

https://www.permanenttsb.ie/about-us/notices/2022/july/permanent-tsb-confirms-that-it-has-no-plans-to-pass-on-todays-ecb-rate-increase-to-personal-fixed-and-variable-rate-mortgage-customers/

drogon.

https://www.boards.ie/discussion/comment/119745309#Comment_119745309

LOL your own comment.

https://www.boards.ie/discussion/comment/119689893#Comment_119689893

Funny how the goal post has changed in two weeks since you made that comment.. But it was months away....

We can see now that AIB has been willing to absorb 1.25% of the ECB interest rate rises to date.

Cause the first interest hike was to get it from -0.5% to 0%, the second interest hike made interest rates at 0.75% A month later AIB has increased it by 0.5%, so they are absorbing 0.25%!

Timing belt

https://www.boards.ie/discussion/comment/119745189#Comment_119745189

Banks still stress test applications as everyone will have different financial commitments…it’s as relevant today as it was 20 years ago.. And is totally different to LTI limits

The LTI rule have nothing to do with rates. It’s a macro prudential rule to reduce risk in the banking sector so we don’t end up having to bailout banks again.

At the moment LTI is limiting how much someone can borrow but if rates keep rising it will be the stress test on the applicants ability to repay which will start limiting the amount being borrowed.

Galwayhurl

https://www.boards.ie/discussion/comment/119744675#Comment_119744675

I spoke with AIB last week about this.

Up to then at least and not taking into account today's increase obviously, they were stress testing at 5.15%.

A single applicant must have €1495 remaining after the mortgage repayment at the stress test interest rate is paid.

WhiteWalls

https://www.boards.ie/discussion/comment/119739928#Comment_119739928

I've lived in Clonee, grand area to be fair but nothing in it bar housing estates. The price for that is outrageous

dontmindme

https://www.boards.ie/discussion/comment/119743453#Comment_119743453

https://www.boards.ie/discussion/comment/119743660#Comment_119743660

Surely his point was, when mortgages were stressed to higher levels only a few years ago it did nothing to dampen demand.

SwimClub

There is a very interesting dynamic with the mortgage rate increases, the banks obviously have the upper hand now and have the opportunity to squeeze the non-banks out of the market near term on rates, because their rates are funed by deposits and aren't directly market driven. Being strategic (unscrupulous?) they should keep rates lower in the near term on the shorter end fixes, kill off the competition and then raise variable in a few years when the competition has been driven out of the market and they have their monopoly back.

Bass Reeves

https://www.boards.ie/discussion/comment/119750209#Comment_119750209

That part of the equation seem to slip the Chicken Lickens by.

Ozark707

https://www.boards.ie/discussion/comment/119750985#Comment_119750985

Are you equating a stress test when prices were considerably lower a few years ago with one now?

Villa05

The Village idiot rides to the rescue again, unless this is the stock they have already long term leased this is a disaster for the taxpayer, but I suspect the funds will be keeping them as they are the cash cow

https://twitter.com/IrishMailSunday/status/1581409923212025856?s=20&t=VoclfIVw25q9-KrVUpLGkA

Bass Reeves

https://www.boards.ie/discussion/comment/119751419#Comment_119751419

We have to he Chicken Lickens on about increased interest rates which are still at or below rates 3-4 years ago

AIB's rate increase is 20 euro a month/100k on a 30 year loan. IMO they would have been waited until after the next ECB change over but they saw the problem with the FI increase so now they are being proactive on rate increases and will trickle these through the system in as all as possible increases as they can manage giving buyers as much notice as possible to complete existing drawdowns.

Banks are more interested in the 3.5X or 4.5X limits than by stress tests. The stress test is usually not the deciding amount you can borrow but the lending limits.

So sorry I cannot see the sky falling in next year. I can see the top being take off prices and they stabilizing at 10ish% below the present peak for how long I am not sure.

Unless we see a fundamental change in parameters ( house building materials drop substantially, labour prices drop or a collapse in demand by mass emigration ) we will not see the sky fall in.

If it dose it's the Chicken Lickens that loose anyway

MacronvFrugals

Not often you see new builds in Dublin cutting price

Bass Reeves

https://www.boards.ie/discussion/comment/119754914#Comment_119754914

That is an invitation to negotiate.

jimmybobbyschweiz

https://www.boards.ie/discussion/comment/119751693#Comment_119751693

"This time it's different".

It is but the Irish taxpayer will still be left holding the bag once the charade is revealed in the Irish housing market. What is dismaying is that, once again, no accountability will happen for the waste of taxpayer's money during the so-called good times. One way it is not different is that the younger generations will be foisted with a tax burden to cover liabilities that they had no hand in creating.

jimmybobbyschweiz

More nonsense from FFG with the rental market. A full on moratorium on evictions, once again, for the winter is being proposed. I really don't get it; either the economy is booming or it isn't but this type of measure is an extreme invasion by the State into the private market. Believing this is a one off is naïve as COVID was apparently a one off. It's a slippery left leaning slope the country is going down.

Somehow it's breaking news that evictions can still happen if a tenant wilfully destroys the place or disrupts the peace. Okay then, that's I'm sure good to know for the few small landlords left in the market.

https://m.independent.ie/irish-news/politics/tenants-who-wilfully-refuse-to-pay-rent-or-damage-property-can-still-be-evicted-under-any-winter-eviction-ban-42073098.html

Dav010

https://www.boards.ie/discussion/comment/119757574#Comment_119757574

I notice the word “wilfully” in the article, this suggests the LL would have to prove that the tenant can afford to pay rent, but is choosing not to in order to evict. That will be impossible to do as it would require the tenant to hand over their bank account/pay details for scrutiny by the LL. In effect, if this legislation is introduced, what prevents tenants from immediately stopping rent payment and claiming they are unable to pay?

drogon.

https://www.boards.ie/discussion/comment/119757574#Comment_119757574

The Tánaiste said property rights of landlords are not “absolute” when asked if the ban would breach the constitutional rights of property owners who want to sell up their houses and have to evict tenants to do so.

“When it comes to constitutional issues, it’s always been the case in Ireland that property rights are subject to the common good, they’re not absolute.

So what you have is not yours, but hey lets have REIT keep their apartment empty so they can continue to keep rents high.

Source: - https://www.newstalk.com/news/leaving-dublin-luxury-apartments-vacant-doesnt-break-competition-rules-review-finds-1188114

jimmybobbyschweiz

https://www.boards.ie/discussion/comment/119757757#Comment_119757757

In my view the rental market is being prevented from crashing with repeated supply-quenching measures from the government from eviction bans, shuttering construction sites, social housing leases and purchases to take properties out of the private rental market, no efforts to introduce vacancy taxes etc. Whilst not the obvious intention to quench supply, each of these measures has directly reduced supply of rentals to the private rental market.

If the rental market crashes the whole property market crashes for reasons I've stated before. It is a charade that the property market is sustainable and reflects a booming, successful economy and I think the government needs constant new schemes to reduce the supply of rentals in order to prop up the whole property market. However, that doesn't seem to be possible in my view so when it does start to unwind, and I think it already has started that process, it will be quite a substantial reversal in the rental market - thinking of €2.5k pm rent for basic, small two bed apartments becoming €1.8-2k pm representing a 20-30% decline in rents type of a correction from the headline averages, with the more ridiculous rents taking much larger haircuts.

drogon.

https://www.boards.ie/discussion/comment/119757877#Comment_119757877

I would agree with you there 100%. I bet if you lived in REIT owned property and don’t pay rent. They would no doubt find some way to kick you out and then drag any case against them till you give up and move on. Ordinary citizens\Land Lords are the ones that are going to struggle.

mcsean2163

https://www.boards.ie/discussion/comment/119757757#Comment_119757757

The CCPC found that there are many vacant high-end properties around Dublin. It referenced a report from Goodbody stockbrokers, which estimated that vacancy rates in some new luxury developments are at “about 30%”.

Seems insane the government are allowing this to persist. That's what lobbyists are for I suppose....

Jonnyc135

https://www.boards.ie/discussion/comment/119758033#Comment_119758033

That's the disgusting thing, there is no government we are ran by NGOs and lobbyists for big buisness. Likewise at EU level too.

jimmybobbyschweiz

I just had a search on the rental section of daft. If you strip out studios, one beds and places costing more than €3k pm, there are 110 ads for rentals in Dublin city, with what I can tell as around €2.5k pm average for a 2 bed apartment.

When the average rent for the bare minimum sized place to have a small (IE one child) family requires a household income of at least €150k pa in order to pay maybe 25-30% on rent, something is seriously wrong. If you had two kids and maybe wanted a third bedroom as a renting family, you will pay on average €3k rent per month for something basic, which would be a household income of €200k pa to only pay 25-30% of income on rent.

The net effect of this catastrophic, generational devastation being inflicted via the rental market means that the country will need to keep importing the future pension pot contributors as there is no sustainability being created for young people and young families in particular to build a future in the country so long as they are renting. Ireland is definitely unique in this regard and do not believe that other countries have such a dearth in available housing as it is utter bollox.

mcsean2163

https://www.boards.ie/discussion/comment/119758118#Comment_119758118

missed the date on it.

30 APR 2021

I think we're in a different position now and maybe the vacancy rate is not so high.

drogon.

https://www.boards.ie/discussion/comment/119758788#Comment_119758788

it was brought up (Funds leaving apartments empty to keep rents high) during a recent episode of The crazy house prices podcast that Darragh O'Brien was on. All he said was, I don’t think it happens at the levels it happened before. But without any data who can guess how valid of a statement it is.