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

Jonnyc135

https://www.boards.ie/discussion/comment/119786045#Comment_119786045

I would agree, the changing of the LTI limits is a shambles an will just inflate everything to a higher baseline where people will be priced out again. It does absolutely nothing for anyone bar increase house prices for builders and developers, as well as any hedge funds that need to liquidate typically illiquid assets quickly by driving up demand so they can offload quickly.

I don't want to sound like a nut job but I honestly believe there's a lot more to this crazy changing of the LTI than meets the eye, big changes like this are never too benefit the normal joe.

spudrick

https://www.boards.ie/discussion/comment/119786075#Comment_119786075

This is all ignoring inflation too. You'll be very hard pushed finding someone who is working and who is actually earning a smaller number of euros now than they were 20+ years ago, even if they might be earning less than somebody 20 years younger than them today. The average salary has gone up by over 30% in that time.

Villa05

https://www.boards.ie/discussion/comment/119775173#Comment_119775173

For reference to the above post skip to 8 minutes. The graph at the end maps current stock price movements with 2008 and the correlation is fascinating. We'll worth 11 mins of your time to view the whole clip

https://youtu.be/AvNRUIwkON4

Villa05

https://www.boards.ie/discussion/comment/119786096#Comment_119786096

I thought the 2008 crash created a 2 tier employment contract scenario. Those employed after 08 were on significantly poorer terms and lower wages, maybe that's correcting a little now, but once you create a precedent and get away with it....

Bass Reeves

https://www.boards.ie/discussion/comment/119786096#Comment_119786096

Even inflation adjusted. In real terms IMO 2008-10 was the main cause of me having two peaks. From 2008-12 my earning dropped and tax increased. My Income in real terms started to climb again up until I retired.

quokula

https://www.boards.ie/discussion/comment/119786116#Comment_119786116

The yellow and white lines in the graph are on different scales to exaggerate the correlation. I clicked on his twitter link to see if there was any more detail and it was just a wall of alt-right talking points against climate science and Jewish globalists peppered with simplistic one-liner self help nonsense that sound profound if you don't engage your brain for more than 2 seconds.

These videos would be a better match for the conspiracy theories forum than Accommodation & Property.

Bass Reeves

https://www.boards.ie/discussion/comment/119786081#Comment_119786081

The problem is a house now costs a lot more to build due to regulations and due to the fit out standard compared to 20 years ago and that houses was at a completely different standard to houses build in the 70's.

While technology has dropped in price in real terms those commodities used in the building sector have got more expensive. While some efficiencies have come into the building sector it's still exceptionally labour intensive and that labour has got away more expensive. A trades person would have earned substantially less than teachers and Gardai back in the 70 and 80's. Now there earning are on par if not higher than those workers. General labour on a building site 40 years ago would have been very low wage now it's at or above the mean wage.

Add to that these workers would traditionally be directly employed on site. Now they work for a subcontractor who needs a margin on top of there wage.

Add in materials and government regulations and costs( planning was a gimmie 50 years ago not it's probably 2-5% of house costs

Villa05

https://www.boards.ie/discussion/comment/119786217#Comment_119786217

The yellow and white lines in the graph are on different scales to exaggerate the correlation

Of course they are, its from the S&p index 14 years apart.

It's to display trends and price actions only

Look at the max on below graph 08/09 looks like a blip. Comparing now to then is like comparing everest to macgillacuddy reeks

What major change occurred to justify such valuations only QE and zero interest rate policy both are reversing sharply

https://g.co/finance/.INX%3AINDEXSP?window=MAX

DownByTheGarden

https://www.boards.ie/discussion/comment/119786075#Comment_119786075

A lot of people where I work move to contract roles as they hit their 50s. Paying themselves less to manage tax as you say. Also paying their spouses and children and filling up their pensions. Thier take home is less but they get paid a hell of a lot more than when they were fulltime. Theres a name for it but i cant remember. Accountants arrange it for them.

Jonnyc135

https://www.boards.ie/discussion/comment/119786252#Comment_119786252

Would agree with what you have just stated, my problem is that the central bank that have just lifted the LTI rules, are now coming out saying that people will be in financial distress as they will be now paying nearly 40% of their income on a mortgage if they stretch to these new limits and the ECB follows suite with more rates hikes. There comes a price where things become too dear even with government (central bank) intervention.

I still see builders shutting up shop and stopping anymore house building phases going into early next year (this is the word from the builders themselves , I think this will be a world wide problem too but in the days of cheap electricity and energy the raw materials costs would drop, but sadly I cannot see them dropping (as the days of cheap electricity due to cheap gas is over) that much to make things anymore affordable.

Its extremely hard to know how this will play out, but one thing for sure supply can get a lot worse before it gets any better.

awec

https://www.boards.ie/discussion/comment/119786820#Comment_119786820

The 4x LTI limit does NOT mean people are paying 40% of their income on the mortgage.

Bass Reeves

https://www.boards.ie/discussion/comment/119786428#Comment_119786428

I semi retired. I have not accessed my pension yet. However my income would be better than in my twenties and as good as most of my thirties

Jonnyc135

https://www.boards.ie/discussion/comment/119786845#Comment_119786845

https://www.independent.ie/business/personal-finance/property-mortgages/home-buyers-warned-of-financial-distress-if-they-stretch-to-new-mortgage-limits-42089630.html

"But research done by the bank itself, and first reported in the Business Post, says a two or three point rise in mortgage interest rates could see buyers with “average” incomes spending up to 38pc of their take-home-pay on a home loan".

That's according to the independent, if rates go up a lot higher (which I don't think they will if anything I think they will be pivoting soon), and people are borrowing a larger principle sum due to the 4x limit, then I don't see how this article couldn't be correct if their wages remain the same.

awec

https://www.boards.ie/discussion/comment/119786880#Comment_119786880

Someone buying a house today, if they buy at the full 4x, would pay roughly 30% of their income on the mortgage if it was for a 30 year term.

Mortgage rates would need to hit 5% before they are paying 40% of their income.

Obviously, if all else is equal, the shorter the term the higher the percentage.

fliball123

https://www.boards.ie/discussion/comment/119786880#Comment_119786880

Are you serious of course interest rates are going higher , look at the rest of Europe we are pigeon holed with the rest of Europe and even do Ireland have not hit the recession yet Germany and the majority of Europe are in serious difficulty and they will be in a recession a lot sooner than we will, so lowering interest rates is not an option for them with their levels of inflation and unfortunately they don't give a flying phuck about our property market. The next rate increase is coming this week and it will be at least another .75%. This upping of lending limits should be seen for what it is a last throw of the dice by the dept of finance who put pressure on the central bank to up these limits for the construction companies to continue coining it as it makes zero sense at a time of high inflation and such low supply to implement this measure and it is going to force prices up at least with these interest rates going up banks will have to very prudent as there will never be another scenario where anyone in this country will put up with money going into banks to prop them up like before so they will have to stick to their repayments capacity measures for new customers coming in.

Jonnyc135

https://www.boards.ie/discussion/comment/119786895#Comment_119786895

And is that not what I stated in my first comment "40% of their income on a mortgage if they stretch to these new limits and the ECB follows suite with more rates hikes". Anyway rates may go that high who knows they are that high in a lot of other Western Countries at the minute, personally I cant see the ECB having rates that high or it would fundamentally change the whole Euro area.

Bass Reeves

https://www.boards.ie/discussion/comment/119786820#Comment_119786820

A couple on 100k between them have a monthly joint income of 6700 euro. Payments on 400k at present is approximately

1830/month over 25 years or 27% of income

1630 over 30 years or 24% of income.

Well within the thresholds

Jonnyc135

https://www.boards.ie/discussion/comment/119786936#Comment_119786936

I honestly believe they will hike rates globally till mid 2023, by that time we will see something fundamentally break in the financial system that will require them to do their only get out of jail card which is QE more QE and lower rates to 0.

Sadly when they do this inflation will still be at +8%, so just imagine where inflation may go to then. By right interest rates must be hiked to kill inflation no matter what the cost, they wont do this don't let them fool they'll pussy out, BOE already done it, ECB are doing it with their new Anti Fragmentation tool, only a matter of time before the Fed starts.

Jonnyc135

https://www.boards.ie/discussion/comment/119786965#Comment_119786965

I never disrupted any of that I merely echoed what the central bank of Ireland said regarding paying a higher principle due to 4x if the ECB lifts rates further.

fliball123

https://www.boards.ie/discussion/comment/119786994#Comment_119786994

They have no other way of trying to tame inflation and it will come down there are way too many necessities competing for a limited amount of peoples cash. Wages over the last 24 months have come nowhere near being enough to cover inflation and it will take another decade to get wages there. Germany and its basket case that its economy finds itself in will not want QE it does not suit them and if the Germans don't want it then it simply will not happen. Inflation will come down as people simply cant pay the prices so once the war is over and the supply chain issues corrected we may well see either a lot of companies offering these services/goods at cut prices or hit the wall and with a recession going in parallel I can see a lot of deflation in about 18/24 months time. As for BOE the UK have no other country to answer too. As for Europe interest rates rising is actually helping with inflation. The FED will continue their interest rates rising as well, the US are in a recession (they are calling it a technical one) and will be out of recession a lot quicker then the EU because they acted quickly. As a matter of curiosity what is it you see breaking in the financial system I cannot see QE returning for the remainder of the decade it has not worked and has only kicked issues down the road Globally and Locally at some point the bill has to be paid.

timmyntc

https://www.boards.ie/discussion/comment/119786965#Comment_119786965

This has been done to death in this thread already - a 100k household income is not average in this country. It is far beyond an average income by any metric.

CSO incomes 2020 (https://www.cso.ie/en/releasesandpublications/ep/p-silc/surveyonincomeandlivingconditionssilc2020/income/)

Mean: Total gross household income 73,698

Median: Total gross household income 55,259

Bass Reeves

https://www.boards.ie/discussion/comment/119787245#Comment_119787245

We are not the talking about median or average incomes. We are talking about LTI and the repayments on an LTI of 4 is below the affordability threshold no matter the income.

For instance the affordability on an LTI of 4@76k income is about 26% on a 25 year loan. That is borrowing 305k.

timmyntc

https://www.boards.ie/discussion/comment/119787306#Comment_119787306

Thats a fair point - I thought I read talk about % of discretionary income, the article actually references "take-home pay". My bad.

Jonnyc135

https://www.boards.ie/discussion/comment/119787111#Comment_119787111

I think what happened with England's pension funs/hedge funds a couple of weeks ago may end up becoming more than just England, I honestly firmly believe if something like that happens in the EU/US they will start QE and lower rates as they cannot let the fiancial system collapse they simply cannot, they done the same during the GFC, it is their only option. Sadly it will devalue the currency more and create greater wealth divides with already high inflation much puts us in a bad place in terms of social unrest especially if there is substantial job losses.

I hope I'm wrong but central banks are only one trick ponies.

FYI Germany have no bother bailing out their Energy sector at a cost of 200 billion, they will do the same with a fiancial crisis if it comes.

fliball123

https://www.boards.ie/discussion/comment/119787496#Comment_119787496

Well if it happens then I reckon we will see another Lehmans moment but this time around any government looking to prop up any financial institutions will be brought down and it wont happen again, they got away with it in '08 as it had never happened before and we were swindled into thinking this was the cheapest way to go about it as in it started at 2 billion and then doubled in size to 64 billion. They had to implement safeguards with things like the CBs limitations on borrowing were brought into stop it happening again. So now that they are relaxing these safe guards the publics appetite for getting taxed to cover other financial institutions at a time when everything has spiraled in cost will bring the government down. Inflation will be tackled by the oncoming recession and interest rates going up to 5%+ and renaming there for about half a decade. What your expecting them to do is throw a can of gasoline on the inflation fire but companies are feeling the pain even the MNCs are cutting back.

Germany had no other choice to bail out their energy sector after agreeing a deal with Putln for cheap gas and then trying to put sanctions on Russia that was always going to backfire on them. Also the Euro has to compete with the Dollar and it is taking an almighty kicking in the markets so QE I dont think there is a chance its going to happen any time soon not with inflation and a recession kicking in and the dollar strengthening by the day.. The recession that is about to hit is going to be horrendous for this country as our finances are too open with regards to other countries so if the UK , Germany or the US see something bad happen Ireland feels it more than most other countries would.

Jonnyc135

https://www.boards.ie/discussion/comment/119787609#Comment_119787609

That's exactly what I think they will do, is throw petrol onto the burning inflation, in order to ensure the global financial system does not fail. I would say the global economic system is equally as important as they energy sector that was already bailed out, so they will have to do it again. In terms of the ECB, you seem to think that they are not partaking in QE and are tightening, they are tightening but in order for them to allow themselves to tighten without causing an eruption in the PIGS bond yield they are actively using QE as we speak as part of their anti fragmentation tool in order to control the spreads.

If they are already doing this for the weaker nations of course they will do the same for the stronger nations when the going gets tough as Leslie Sebastian Charles AKA Billy Ocean once said.

fliball123

https://www.boards.ie/discussion/comment/119787693#Comment_119787693

So when do you think the magic money printers will be turned back on?

Jonnyc135

https://www.boards.ie/discussion/comment/119787791#Comment_119787791

Well in terms of England, Japan and the ECB it has been already on, but the more important one too watch is the FED, rumblings of Janet Yellen wanting to basically QE for yeild control there too but I think it will be Q2 2023 before we see that on on a large scale for most Western CBs. The problem with yeild control over a sustained period of high inflation is thst the only person that ends up buying the bonds is the government themselves as no one will buy government bonds at 4% and inflation running over double that. This is where it becomes an absolutes false economy and is destined to fail at sometime in the future.

Like you I hope I am wrong because this really would not be good for inflation, fine doing QE when we are in a deflationary death spiral like GFC, but reverting to this to bail out the system when Inflation is 8+% is not going to be good.

It will just lead to higher asset price inflation of houses and share prices whilst eroding the purchasing power of the ordinary joe to a detriment dare I say uprising level.

fliball123

https://www.boards.ie/discussion/comment/119788127#Comment_119788127

I cant see it already the levels of protest on the street is rising globally and we have yet to see the real impact of the global financial crisis. If this happened there would be bloodshed on the street, I just cant see how they can justify turning on the printing press to keep the financial system in place on the backs of those who are unable to afford the basics to live, politically more and more governments seem to diverging from the center and going left or right throughout Europe, we may well be looking at the end of the European Union.

Timing belt

https://www.boards.ie/discussion/comment/119786941#Comment_119786941

Europe could settle for a weaker currency rather than keep raising rates once inflation starts to slow down as they aren’t reliant on imports to the same extent as other countries . The only problem with this is that oil is priced in USD so if they opt for a weaker currency they will have imported inflation.

inflation figures will be crazy till next feb/march and then it will slow as it’s a year on year comparison.