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

Article in a newspaper today which i won’t post a link to for personal reasons (Liverpool supporter) but interesting snippet here:

And according to MyHome.ie statistics released to the (newspaper name), the homes taking longest to sell are in rural West Cork which take longer than a year to find a buyer.

While house prices have reached a record high in Ireland – at €359,000 up an astonishing 130 per cent in a decade – they are finally beginning to stabilise after years of record growth, with experts citing soaring mortgage costs as a big reason.

Karl Deeter from yes.ie said that as mortgage interest rates continue to rise and demand falls, house prices will have to adjust.

He told us: “Demand for homes is definitely down, in the last quarter of 2022 there would have been a 25 per cent drop in mortgage applications apart from switching.

“And there are no real safe havens for mortgages, Bank of Ireland jacked their rates up recently and we know there are more hikes coming to keep up with Europe.

“So it’s no surprise that house prices are moving accordingly.”

Darragh Cassidy from Bonkers.ie added: "Not so long ago, it was possible to get a fixed rate of just 1.90 per cent.

"By this time next year the cheapest rate is likely to be over 4 per cent. It’s a big turnaround in a short space of time.

This!

You just have to look at the other markets to see the effect of an increase in rates as had (and how we have been relatively unaffected thus far due to the banks absorbing a lot of the rise for a while).

These 63 houses featured on today with pat Kenny are still empty, ready for occupation from the day purchased.

Originally built as a retirement village, council are saying usage cannot change from original planning.

Ireland is different because were previously constrained in what they lent by the LTI limits, not their own internal risk tolerances.

All things being equal interest rates up = amount they’ll lend down. But the artificial limits in Ireland which has now been raised makes it less obvious what will happen.

The BPFI data in February/March time will very quickly show if average loan to income multiples jump up due to rule change, or drift down due to interest rates.

Worth noting average loan approval values for FTBs jumped nearly 3% in November (when interest rate rises were very much known) back to near their all time highs after dropping a bit from the summer peak.

I could be wrong but I could see a lot of people trying to get their loan approval before having to pay over an extra grand a year on interest due to the rate increases I mean it was flagged a long time ago that rate rises were going to continue right through till the end of Q2 2023. I know if I was buying I would of been going gung ho into getting my approval before the rate rises kicked in and that will translate into a bit of skirmish for buying in Q1 2023 but once those who got the approvals who will be in for a shock when the approvals run out of date as its normally only valid for 3 months and unfortunately the buying process is anywhere from 3 months to a year as the cogs for buying a house move very slowly in this country and a iot of those houses that were sale agreed in Q4 2022 and Q1 2023 in a lot of cases will be coming back onto the market. There are straightened times ahead for our would be buyers.

True but those tests are usually stressed at a few % higher than the current interest rate offered by the bank and as rates go up so do the interest rates that the tests are run at. At all times there will be people on the edge of approval but on top of that people who would of realistically thought they could afford to get a mortgage will either be cut from demand by their own finances or by the banks stress tests.

Thanks for this. I sincerely hope that a correction is on the way. I myself bought last year, but I'd take the hit financially gladly to see the stuffing knocked out of the housing market.

Is it not reviewed prior to drawdown given the pace of rises. There could be 2% difference between application and drawdown almost doubling of the rate

Wages have come no where near inflation over the last 18/24 months and its not just what you pay for a mortgage or rent. This is where the drops will come people are struggling to live day to day and that's the tune coming from a lot of people who have a mortgage/house on a low fixed rate. At some point this country was going to face a reckoning with its stupidly over priced nature. So in your scenario out of your 200 here demand will not drop 200 will still want a house the question will be about foldability. How severely will this be impacted and the only way to address this imbalance is a drop in property prices.

It will be interesting to see alright but just at a high level

Two individuals earning 50k take home 6350 a month after tax. Roughly the profile of an average FTB household in Dublin in 2022.

They can borrow 4x100k= 400k under the new rules.

At 4% interest on a 35 year mortgage the repayments would be 1771. 28% of their net income (I.E. very affordable). Even if stress tested to 6% it would be 35% of their income. Still manageable. It will probably have a bigger impact on older people who can’t borrow for as long who are more sensitive to the affordability tests.

Essentially, 4x income at 4% interest rates still looks reasonable so I’m not sure how much banks will pull back. Time will tell though.

Sounds like they'd be grand as long as they postpone having kids for the 35 years and don't lose their jobs at any point along the way......or get separated or divorced.

I mean, yeah sure. But that’s why mortgages aren’t at the risk free rate. If we started stress testing people for losing their jobs then nobody could ever take a mortgage out.

In reality, for most, their income will rise 2-3% per year over the 35 years and the mortgage repayments will continuously reduce in real terms.

For some, it’ll go belly up as has always been the case.