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

31-08-2022 4:27pm

https://www.boards.ie/discussion/comment/119548768#Comment_119548768

I assume you are joking? You are trying to wind up people on here? When exactly should it be decided whether a couple on €100k can afford the repayments on a €1m mortgage? After they have bought the property? Imagine the mess the country would be in then. It's bad enough as it is.

31-08-2022 4:31pm

https://www.boards.ie/discussion/comment/119548560#Comment_119548560

I hear your point and understand it, but the market is cooling now. My siblings have a house advertised for sale in Dublin 7 the last 3 months, nice clean 3 bed semi, listed at 500k, latest offer of 450k on it, so people are being very cautious at the moment. If people start to lose their jobs if this so called global recession happens then houses prices cannot stay high you would imagine. Also what happens if some of the people who borrowed big amounts of money over the last 18 months lose their job as a result of this recession which is looming if you believe everything you read?

tom_murphy112 · 31-08-2022 4:40pm

https://www.boards.ie/discussion/comment/119548850#Comment_119548850

I am not joking, people are paying crazy amount in rent at the moment. If people can afford to borrow more money, we will see an influx of building as builders can make more money and hence we will see supply catchup quickly. It may even entice builders that left the trade to come back in (those that changed careers during the recession.)

Average rent is over 2k at the moment, which indicates people are willing and will pay more for housing.

timmyntc · 31-08-2022 4:41pm

https://www.boards.ie/discussion/comment/119548916#Comment_119548916

Do you think paying over 2k/month rent is sustainable?

tom_murphy112 · 31-08-2022 4:56pm

https://www.boards.ie/discussion/comment/119548922#Comment_119548922

I suppose I do agree that it isn’t sustainable.

Jonnyc135 · 31-08-2022 5:09pm

https://www.boards.ie/discussion/comment/119548996#Comment_119548996

Couple on 100,000 buy a house for 1m now. Say they are 30 years of age, 35year mortgage bring them to retirement age, a mortgage allowing for 10% deposit of 100,000 which is doubtful they would have would still leave you with a monthly repayment of €2,935 at an interest rate of 1.9% (very low you wouldn't get that with a 10x).

So add in all the extras mortgage protection and insurance you talking easily 3050 a month.

You are crazy think people can afford that on 100,000 even if both of them were on 100,000 each it's still crazy. Add in children school and creche. That mortgage is totally unsustainable. As you will be on a 35 year mortgage imagine what happens when you kids come to 18 and want to go to college. Where do you find more extra cash to pay for that all assuming your financially stable which with the tech sector in line for cuts here is not a good place to be in. There is absolutely no wiggle room.

You are a crazy person.

tom_murphy112 · 31-08-2022 5:22pm

https://www.boards.ie/discussion/comment/119549080#Comment_119549080

I am not crazy, but with the current rental market. How long before 3k or 4k rents become the norm ? At least if you borrow and pay the mortgage you get some liquidity.

Jonnyc135 · 31-08-2022 5:29pm

https://www.boards.ie/discussion/comment/119549151#Comment_119549151

Your letting yourself down now, if rents go to that I can guarantee you wages wont and therefore it is no longer financially viable to work so their will be a full meltdown (demand destruction). In fact it is borderline that as we speak.

I don't know how you are still justifying the scenario I stated above. It is absolutely nuts, you said rent over 2K was unsustainable but paying a mortgage for 3k is and baring in mind that calculation was based off an exceptionally low green mortgage rate of 1.9% for 4 years, Imagine the balloon mortgage payment it could be when you have to re fix after that 4 years when rates head upwards. I honestly cannot see your argument I fully believe you are deluded no offence.

awec · 31-08-2022 5:31pm

The only thing that will happen if the 3.5 limit goes is prices will go up a lot.

It is not going to result in more houses being built. It will make things worse, not better.

tom_murphy112 · 31-08-2022 5:41pm

https://www.boards.ie/discussion/comment/119549198#Comment_119549198

Anything that the government has done to combat the crisis hasn't worked. Hence I think central bank should back off the LTI. Builders are constantly stating that it is not financially viable to build lot of the times. So let's remove the hurdle and allow people to borrow more.

jj880 · 31-08-2022 7:09pm

I reckon it will be a 1% ECB rise next month. The main thing that would scare me is energy bills. Its madness. Can't be overlooked. It has to have some effect on prices. Are newer houses with air to water really going to save people money? Its great to be able to tell the Jones you are an eco warrior but when the bills come in is there a massive saving? I've heard they need gas and massive electric fans running to keep these systems operational. Another brain fart from the Greens.

Timing belt · 31-08-2022 7:19pm

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

Are you saying they will sell and not buy something else and instead go into rental market and pay more for accommodation and risk being turfed out at short notice.

The notion that rents are capped at 2% is a joke any new supply coming to the market will have significantly higher rents. People will still be impacted as landlord sellls and their CAP of 2% goes out the window and they will be forced into new properties with much higher rent.

drogon. · 31-08-2022 8:05pm

https://www.boards.ie/discussion/comment/119549708#Comment_119549708

Do you mean heat pumps when you say "air to water"? I think those are all electric and basically works on the reverse principal of an A/C and is quite efficient.

wassie · 31-08-2022 10:12pm

https://www.boards.ie/discussion/comment/119549151#Comment_119549151

If you borrow and get a mortgage you are probably not going to be very liquid. Perhaps you mean equity - yes - but only on the assumption that prices will stay the same or rise.

Given you keep repeating the same thing with out providing any rationale other than "they can afford it", I can only assume you have no understanding/awareness of what caused the last property crash nor why the lending controls were put in place.

jimmybobbyschweiz · 31-08-2022 10:14pm

https://www.boards.ie/discussion/comment/119548560#Comment_119548560

Only after they all start running for the exit will this illusion of strong demand dissipate as very quickly supply will be there but there won't be demand unless prices fall. Meanwhile, those trying to sell are being hit with higher mortgage rates so the price of the house is falling while the cost of the mortgage is rising!

To think this situation is not going to unwind and rapidly go into a spiral is to be naive. I read today that another TD, Stephen Donnelly, is also cashing in on the housing crisis. This is very symptomatic of the housing crisis being entirely manufactured by the small few to benefit at the expense of the vast majority. Institutionals and politicians are purposely keeping demand high and supply low with different policies; this is intentional in order to prop up the market. It is out of control however and I have revised my own prediction to declines in our residential property market or a material level. The tide of liquidity is going out on the State so the magic money tree cannot keep inflating the property bubble.

jimmybobbyschweiz · 31-08-2022 10:17pm

https://www.boards.ie/discussion/comment/119549747#Comment_119549747

No, I am saying they will try to sell as they think the market has turned with mortgage rates climbing at the same time. This fear will grip the market and, in order to not end up with a house that plummets in value or has a mortgage costing a few hundred extra per month, they will try to get ahead of it - they won't of course be successful in selling. The time to get ahead of this passed in 2020 and 2021, now it's about being defensive.

Bass Reeves · 31-08-2022 10:22pm

https://www.boards.ie/discussion/comment/119551142#Comment_119551142

But who will sell....owner occupiers, investors, people who completely own houses, people with mortgages. Where will owner occupiers move to

Please explain

And how.much will houses fall by.

Dav010 · 31-08-2022 11:11pm

https://www.boards.ie/discussion/comment/119551142#Comment_119551142

They will voluntarily try to make themselves homeless?

Timing belt · 01-09-2022 12:12am

https://www.boards.ie/discussion/comment/119551142#Comment_119551142

Why would they sell or try and get ahead of it? What your saying is crazy unless it is an investor or a holiday home being sold. No one in their right mind would sell and try and find a place to rent (which would be more expensive). Especially when they know that in the worst case scenario they won’t be evicted by the bank and made homeless.

after ‘ 08 there was a massive surplus of housing and specifically rental properties and because of this rent fell in price… we have a massive deficit supply of housing at the moment.

Villa05 · 01-09-2022 12:59am

https://www.boards.ie/discussion/comment/119549747#Comment_119549747

Whatever about owner occupiers, the current situation is flushing out those empty properties, plenty of examples around locally

jimmybobbyschweiz · 01-09-2022 7:15am

https://www.boards.ie/discussion/comment/119551169#Comment_119551169

Good question as the market in Ireland is very much a collection of micro-markets. That being said, I think there are likely to be thousands of individuals who have had their homes more than ten years that would've been contemplating selling the last few years anyway but held off for three main reasons; COVID, Brexit and FOMO (missing out on a higher price) - not an insignificant number of people. I also think maybe there are first time buyers that got in before COVID and their fixed mortgage rate period is ending while the house has obviously gone up a fair bit in value and they are thinking that maybe they should cash in if the house is going to fall in value while the mortgage will cost more, especially as they never planned on their first home being their forever home.

Mainly these two groups and, like I said, they will be thinking more about cashing in their home or else being defensive and not wanting to be stuck in a home they no longer want but cannot get out of as the mortgage payments are constantly going up every few months while the value is declining. The motivation primarily is fear, not foresight along the lines of "but where will I go". That is the key point and we have had the inflection so I can see this as a probably next course for the market.

How much to fall? While this should not be a big deal given the crazy rises the last ten years, it will be painted as such, but I think 30-40% in the next 4-6 years is not unreasonable. Starting with market data coming through in summer next year, then the following year being pretty bad all due to the economic conditions at play, then when the economic turmoil looks to be receding, unfortunately SF will come to power and that will have a further negative effect to the market.

jj880 · 01-09-2022 8:49am

https://www.boards.ie/discussion/comment/119550021#Comment_119550021

Yeah heat pumps. Don't want to get into too much detail on them here but as you say the actual gas / compressor / condenser process is quite efficient but the up front costs / maintenance / house air tightness costs / running costs are apparently nuts. Also if you live in any decent size of a house you need to combine with solar panels. I'm all for green energy but the tech just doesn't seem to be cost effective yet. So you are stuck between this really expensive green energy solution or crazy oil / gas / electric prices. This along with general inflation and rate rises should have buyers thinking twice about how high they are willing to go with offers.

timmyntc · 01-09-2022 9:00am

https://www.boards.ie/discussion/comment/119548996#Comment_119548996

Then why would a mortgage of the same amount be sustainable?

A mortgage is a longer term commitment with serious repercussions should not be able to pay. which is why banks stress test applicants regarding their ability to repay. The 3.5 rule is one such protection mechanism.

timmyntc · 01-09-2022 9:04am

The thing about rents is that rents are paid in cash (i.e. money you have) - houses are paid for by credit (money you borrow).

Rents will not rise past the affordable* region because nobody has the cash to pay. Houses can do that, because people can borrow more than they can reasonably afford. This is where the 3.5 income rule and other stress tests on mortgage applications come in.

*Obviously rents are not exactly affordable right now for a lot of people, but for some they are, and thats just a small supply market in action. However for rents to rise to 3-4k per month it would have to go well above what people can pay, which wont happen. House prices can rise well beyond peoples affordability due to loose lending criteria, we saw this in 2007.

awec · 01-09-2022 9:35am

https://www.boards.ie/discussion/comment/119552048#Comment_119552048

The motivation primarily is fear, not foresight along the lines of "but where will I go".

I'm sorry, but this is pure garbage.

"Where will I go" is probably the very first thing people consider when they are deciding to sell. These are families you are talking about here, the financial part is only one bit of the pie, you have all the other real life considerations that must be taken into account.

I can't imagine there are too many people in Ireland keen to increase their chances of homelessness.

mcsean2163 · 01-09-2022 9:44am

https://www.boards.ie/discussion/comment/119552048#Comment_119552048

Good points. With inflation and wages rising the market is due a 40% correction. Just like in the Weimar republic.

https://historydaily.org/germany-hyperinflation

No, I mean when money loses value house prices get cheaper, don't they?

In fairness, it's a tightrope

https://www.reuters.com/world/uk/last-orders-uk-pubs-brace-mass-closures-energy-costs-soar-2022-09-01/

If unemployment increases and and interest rates increase houses could drop in price but it's hardly a foregone conclusion yet especially if the gas situation worsens.

Bass Reeves · 01-09-2022 10:11am

https://www.boards.ie/discussion/comment/119552048#Comment_119552048

What a load of rubbish. It has the economic understanding of a six year old.

Yes many may have bought houses or apartments and hoped to move on, but you be the ultimate gambler to do what you suggest. If houses fall by 30-40% like 2010-16 there will be no new houses build. While if you're right and some non national workers return home yes rents may fall. However there will be no supply of houses to buy.

Where will they come from.

Yours is chicken and egg economics which came first the chicken or the egg.

So a person will sell there nice house which is costing maybe 1000-1300 in mortgage repayments to go and rent for 2+k a month. As I said six year old economics.

We have had this scary BS before on these threads. During the start of COVID, 2016- now about LL leaving in droves( they are but it's not effecting house prices) the latest one is pension. Funds will pull out and hey presto all these houses will be sold one by one when legislation says they have to be sold with tenants insitu.