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

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Its also expected rates will go materially above 4.5% so tbf there's that to be factored in. Your assumption of family simply growing wages 9% in 2 years is generous. The property market prices are based on those buying. No idea why you are referring to people who bought in recent years. Their mortgages are done and houses bought. Mortgages likely fixed for good number of years. I absolutely don't think they have any impact on property prices. Noone is suggesting lots of defaults and houses coming onto market from it.

Mortgage payments are a mix of capital and interest with greater level of interest in earlier years. My point is on 350k debt that if you pay 2% more in a year that is factually costing you 7k pa more. 350k by 2% is 7k. Your mortgage repayment by lower simply by going for longer term... That lower repayment does not mean mortgage is cheaper. So you are the one who is being misleading here. I was being factual.

The reality is the easy to get 9% pay rise will not all magically reduce the pain of higher and higher mortgage interest rate payments instead it will be urgently needed by would be buyers to combat the rampant inflation so many regular consumers are facing day in day out down the shops, at the petrol pumps, paying inflated electricity, gas and oil heating bills as limited government supports now start to come to a rapid end. All the time hoping that both potential mortgage applicants retain both their jobs while waiting for tardy banks to process their mortgage application on their over priced dream house before the latest rate rise is applied once again

Except the scenario that was being talked about isn't "higher and higher mortgage interest rate payments", it is a specific increase to 4.5%. That is the point I was addressing, as the "7k per annum" increase suggestion was incorrect, and it's ridiculous for someone to suggest "prices will drop because mortgage repayments will jump 7k per annum", when they don't jump 7k per annum in the scenario outlined.

By the very same metric, I could just say "house prices will rise, because the average wage is 250k per annum, so there's loads of scope for increases". That would be a perfectly logical assumption to make....except for the fact that it is all based on a completely incorrect starting figure.

"All the time hoping....before the latest rate rise is applied once again". But that is a different scenario again. The scenario that was provided was an increase from 2.5% to 4.5%. Not further increases. If we are going to talk about latest rate rises being applied, then we should start with a 3.15% rate (current AIB 80+% LTV variable rate), which would then make the repayments look much more affordable.

Job loss is an issue regardless of interest rates. I've never met someone who after in the process of taking out a mortgage (or after taking one out) said "I hope I get sacked". In this scenario with rampant inflation, we are still talking about a scenario where the net income for our 2 * 50k couple is €6342 and the mortgage payment is €1656.40. This means they would have nearly €4700/month remaining after mortgage payments. Their mortgage payments would be just over 26% of their take home page. If they are spending €4700/month on childcare (for 2 kids), food, fuel, electricity, gas, oil, car insurance etc., there is definitely room to make savings if they are so inclined. There are many people paying for all of that stuff and their housing on less than €4700/month total.

Ultimately, because of our LTI rules, mortgages at 4.5% (or even up to about 6%) are "affordable" (i.e. less than about 1/3rd of income, assuming LTI of 3.5x). Nobody is going to be happy that they have to pay more than they would if rates were lower, naturally. As long as banks are willing to offer people 3.5x (or more) LTI, I'd be quite confident that people will continue to drawdown such mortgages. Irish people, for the most part, are quite happy to take as much as a bank is willing to offer them and will likely continue to do so.

What I believe would cause property prices to fall is not if prospective buyers decide they don't want to take out mortgages, but if the banks stop offering them at the same levels. People paying 2,500/month in rent are highly unlikely to baulk at mortgage payments of 1,800/month. But they won't buy if the bank won't actually give them the money. Banks not offering a large number of applicants 3.5x LTI (or above) is a scenario I can definitely see occurring, but not unless interest rates go higher than the 4.5% from the original scenario.

I'm hearing of significant Pay rises for front line, hands on staff this year in and around the stated inflation rate. Anyone else seeing/hearing this

That's pretty much what I'm seeing. It's the essential staff that are getting the higher increases. They would be staff, in general that would be priced out of buying a home.

Multinationals plus sectors that have a little bit of pricing power in inflationary environment

Short term

Up in price or soften any potential correction.

Interest rates dictated at EU level, Ireland is an anomaly in the EU in that its growth far exceeds the EU average, therefore rates would be too low for our economy. This was a risk that was prevalent in the celtic tiger boom also. Government policy of demand over supply side policies multiplies this effect creating a bubble that may well be worse than 08.

Best case scenario

What we are experiencing now is closer to the 01/03 tech bubble burst rather than the 08 crash. Government policy, however, will accelerate our journey to an 08 style crash.

Worst possible outcome would be 01 to 03 style correction followed closely by an 08 style crisis. The last 12 years has been described as the everything bubble, maybe everything pops in a domino action

Market pricing in a rise to 3.75% by Sept

It will take 2-3 years to filter into the system. As well it would be fairly easy to avoid for LL with 1-2 properties. It will never be applied to people house's who are in nursing homes.

If the house is in poor condition the house value could be minimal. It would probably not be applied either where houses were for sale ( first year anyway). If a house is being refurbished will it apply. It could take 2 years to refurbish a house.

He is also proposing 3% there is no way such a rate would be applied you would be lucky of 0.5% was the rate.

A carrot is usually much more effective than a stick. At present we need to encourage people with vacant properties to start letting them again. Present regulations are discouraging them. Mary Lou and Ivana are looking for a three year eviction moratorium. What will be the effect. As a substantial percentage of houses become vacant they will not be relet.

Just as an aside, recently HAP payment was stopped on a friend's place. They pay in arrears but only notified him 3-4 days before the payment was due. Is that fair

I'll listen to that later. But it is obvious that taxes for vacant land and properties should have been brought in years ago.

I would have an increasing tax over time. Not just a fixed 3%.

There is a vacant house tax as well now have listened to podcast so was he just referring to land.

I’m paraphrasing a lot, but the way McWilliams describes it, if you have a net worth of less than million then you lose from the system as it is now.

And if you have a very large net worth it is in your interest to hoard the land, make sure people can’t use it, and trickle it out for sale any time you want a few bob.

The Brits really did a number on us with that subdivision of land business - so much so that generations later it’s programmed into the Irish psyche that a city should be full of fenced off brownfield sites and derelict buildings and that commuting two hours a day to and from a ribbon development in Ballinasloe is more Irish than Oileann pipes and hurling.

In my experience its more parochial politics than some kind of learned behaviour from 'de Brits'

Local to me there is a hotel with a large brownfield site across the road, hotel owner would love to buy it and expand the business but instead a different businessman has bought the land and sat on it purely out of spite. This kind of behaviour is a lot more prominent in regional towns, someone who has 'enough' money already will be happy to buy land in strategic areas so that they have a grip on the development of the area, and become more important.

I hope the vacant site tax is enforced well on these kinds of people

With German inflation heading back towards double digits, there is a bit of heavy lifting ahead still

Out of interest, are those stats the median age of buyers in general, or FTB?

The line you quoted only says purchasers, not FTB