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

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  • Registered Users Posts: 5,169 ✭✭✭Padre_Pio


    @dav010 Exactly. People can afford the extra few hundred a month, it's still cheaper than renting.

    The market is restricted by supply, not affordability.



  • Registered Users Posts: 544 ✭✭✭theboringfox


    That seems to be it. Interest rates rose but not by enough to reduce house prices.

    People should note that rising interest rates likely did impact prices. House price growth would like be much stronger if rates had not risen. Reality too in Ireland is main Irish banks did not pass on full impact of rate rises.

    I also think once it was clear from back end of last year rates had peaked that added lot of confidence to buyers. I went sale agreed May/June last year after a few months of price declines and real concern mortgage rates would go north of 5%. So I was bidding factoring in I did not know where mortgage cost would be by close. It was really unnerving and was keeping lid on price.



  • Registered Users Posts: 1,936 ✭✭✭PeadarCo


    Why? Interest rates rose to combat inflation not end it. So even if inflation reduces by 2/3% but stays positive and house prices track inflation, house prices will still rise just not as quickly as they did. That's assuming there are not other factors at play within the housing market. The Irish housing market has limited supply and the economy at close to full employment.

    There is no reason for house prices not to track the wider inflation rate. It also means that focusing on nominal prices can be very deceiving. If wages track inflation, prices can rise but it makes have no impact on their affordability. If wages rises exceed inflation houses/any asset/product/service may become more affordable even if the nominal cost increases.



  • Registered Users Posts: 7,050 ✭✭✭timmyntc


    One thing on wage inflation Vs house price inflation is that wage inflation is more pronounced at the upper end of the wage distribution - higher earners are more likely to get inflation beating wage increases and bring up the average. These people are also most likely to already own a house.

    So the affordability issue isn't as clear cut - wage inflation doesn't necessarily make it easier for average couple to get on the ladder, as their wages likely have been matching or lagging house prices inflation



  • Registered Users Posts: 3,512 ✭✭✭Timing belt


    property has always been a natural hedge against inflation so why would it not this time around.

    Simple fact is if wages keep pace to inflation or even slightly below it then property prices are going to go up. hence why it’s a natural hedge.

    The other big consideration on interest rate rises is the transmission mechanism….with so many on fixed rates it slowed transmission mechanism and effectiveness of cooling the economy. If anything it helped reduce supply and made situation worse because nobody will move if they have to give up a low fixed rate…

    The IMF issued a good paper on this a few weeks back if you wanted to fully understand the impact of rate rises on property.



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  • Registered Users Posts: 139 ✭✭SpoonyMcSpoon


    There is also dry powder in the property market to keep it juiced in the form of longer mortgages 40 years plus, potentially reducing the deposit requirement to 5% FTBs/15% STBs and/or increasing the borrowing limit to 4.5-5 times salary. All of these are examples of tweaks that a FF/FG government would happily introduce to keep the voterbase happy.



  • Registered Users Posts: 2,219 ✭✭✭combat14


    40 year mortgages yes

    hard to see 5% deposit for FTB and 4.5 - 5 times salary when ESRI are already flagging their concern with raise from 3.5 to 4 having an impact on house prices to date



  • Registered Users Posts: 1,187 ✭✭✭DataDude


    I’d agree this might be the case over the long term but doesn’t seem to have been the case over the last 5 years. IT workers have done well but after that the sectors with biggest pay increases are:

    Arts & Entertainment, Accommodation & Food, Construction.

    Finance & Real Estate is second last with far lower than average increases. Professional & technical is also below average.

    There has also been big increases in minimum wage (30%), far above average.

    So this time around it appears the wage inflation has been pretty broad based. Anecdotally I know my own company, and several others of friends, have been offering higher indexation (5-7% PA) to lower grade staff than higher (4-5%). Public service has done similar.



  • Registered Users Posts: 4,613 ✭✭✭Villa05


    40 year mortgages questionable as well given the increasing age of FTBers



  • Registered Users Posts: 544 ✭✭✭theboringfox


    Ya I hear about big pay rises but outside of a promotion or moving company, I have never worked in place where it was more than 3% and had plenty years of no increase. Seen no big compensation for inflation. Few small one off supports. But even smaller increases add up over few years and can significantly boost buying power. A first time buyer might be up against second buyer at 40 bringing in the wage and equity from first house. We did that. Our wages alone would not have put us in the house we got and some people we know are mistakingly thinking we are on big bucks but not the case



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  • Registered Users, Subscribers Posts: 5,982 ✭✭✭hometruths


    Wicklow Co Co are launching affordable houses in which the council takes an equity stake. Looks like a separate scheme to government shared equity. CAn't help thinking these schemes will be riddled with unintended consequences.

    The affordable housing scheme at St Ernan’s will consist of 44 homes in total which are available at a reduced price for first-time buyers and Fresh Start applicants, whose combined mortgage and deposit will not cover the market price of a newly built home.

    Through the scheme, Wicklow County Council takes a percentage equity stake in the home equal to the difference between the open market value of the property and the reduced price paid by the purchaser.

    https://m.independent.ie/regionals/wicklow/wicklow-district/new-wicklow-affordable-housing-scheme-prices-start-at-165000/a654179469.html



  • Registered Users Posts: 4,613 ✭✭✭Villa05


    An interesting read from the Journal on what the definition of affordable housing is according to political parties

    It would appear that Eoin o Broin has a different model to the one described by his party leader during the week, while to me it appears to be the best model (leasehold on state land, with the property remaining "affordable" when sold on). Some serous communication issues at SF



  • Registered Users, Subscribers Posts: 5,982 ✭✭✭hometruths


    If affordability can only be achieved by very hefty government subsidies, I'd agree that SF's leasehold on state land is the best model. There was a hell of a backlash to it when first mooted.

    I suspect most of the criticism of it is driven by politics rather than logic - if FFG had come up with this as government housing policy I think it would have been welcomed. It's actually a pretty good idea under the circumstances.



  • Registered Users Posts: 18,565 ✭✭✭✭Bass Reeves


    It has significant disadvantages for buyers long-term. If the homeowners ever wanted to move to a bigger house they would have a significant funding gap to make up. Who decides what is affordability. If a owner carried out improvements or an extension they probably could not recoup its value.

    Personally I prefer the First Home Scheme than the leasehold scheme

    Slava Ukrainii



  • Registered Users, Subscribers Posts: 5,982 ✭✭✭hometruths


    It has significant disadvantages for buyers long-term. If the homeowners ever wanted to move to a bigger house they would have a significant funding gap to make up

    Surely the First Home Scheme has exactly the same disadvantage?

    If government takes a 30% equity share in your €450k new build purchase, and you subsequently want to trade up, you need to find the guts of €150k (assuming market prices have stayed the same) + service charges to buy out the government before you can even think about trading up.

    In both cases there is a significant funding gap.

    Post edited by hometruths on


  • Registered Users Posts: 18,565 ✭✭✭✭Bass Reeves


    With the FHS the owner has the option of buying out the government's equity. You are charge nothing for tge first five years. This is excellent for younger buyers. Generally there wages climb significantly early in there career. This scheme will allow them to buy a house rather than renting and up there mortgage within five years and buy out the government equity. Even if they fail in the first five years the service charge in tge equity is only 1.75% for years 6-15. On 100k that is 1750/ year. You can buy back the equity in tranches of 5% a year. or as a lump sum.

    Again take a couple with 100k equity to buy back they could pay back 5k/ year. For many people especially self employed who struggle to satisfy mortgage conditions but have decent earnings it would allow them to buy houses.

    As I said it a much preferable scheme than the leasehold scheme which is basically a piece of sh!t

    Slava Ukrainii



  • Registered Users Posts: 1,457 ✭✭✭SharkMX


    And not only that, they can afford them with lending restrictions now in place too.

    I know a few couples who were waiting, but now hitting late 30s and seeing that interest rates have stopped rising, and they have got salary increases, so have decided that its now or never. Either you rent forever or you risk buying even if they think there will be a crash.



  • Registered Users, Subscribers Posts: 5,982 ✭✭✭hometruths


    This scheme will allow them to buy a house rather than renting and up there mortgage within five years and buy out the government equity.

    And the SF scheme will allow them to buy a house rather than renting and not have to up their mortgage to buy out the government equity.

    Hard to see why having a big chunk of equity to service or buy out is theoretically preferable.



  • Registered Users Posts: 2,219 ✭✭✭combat14


    looks like house prices have rocketed up 20% in the last few months - the coutry is a **** show surely this is absolutely unsustainable



  • Registered Users, Subscribers Posts: 5,982 ✭✭✭hometruths


    If that's the case anybody who has 100k of government equity in the First Home Scheme now has to find €120k to buy it out. Or face an increased service charge in a few years. Lucky them!



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  • Registered Users Posts: 4,613 ✭✭✭Villa05


    The first home scheme has helped bring 630,000euro 2 bed apartments to Limerick. All arguments for it should die on that alone

    Post edited by Villa05 on


  • Registered Users, Subscribers Posts: 5,982 ✭✭✭hometruths


    Really, where did you see that? That sounds very high to say the least!!

    I'm very anti the first home scheme, but if it is generating increased number of apartments that sounds like a good thing tbh.

    Edit - ignore that, I get you now, and wholeheartedly agree!



  • Registered Users Posts: 322 ✭✭chalky_ie


    Homes included in any of these schemes, just like council houses, should remain in a pool of affordability for the wage bracket they were designed for. They shouldn't be some vehicle for people to make money from the housing market to upgrade their home without doing anything for it. All this nonsense of buying houses off the council at cut rate prices etc. etc. is complete bullshit, you shouldn't be able to avail of these services and use them to try and rinse the next person in line.



  • Registered Users Posts: 3,512 ✭✭✭Timing belt


    that’s one way of preventing people from being socially mobile….or put another way Know your place in society!!!

    Much rather help people that want to help themselves.



  • Registered Users Posts: 4,613 ✭✭✭Villa05


    Housing affordability is often a temporary issue for the occupants of subsidised homes, therefore an affordable rental may help multiple families, while an affordable purchase is huge cash boost to one family from taxpayers.

    In addition posters here state they can do whatever they like with there property so that subsidised house can end up on Airbnb and out of public and private housing stock

    The mask is coming off the true political populists



  • Registered Users Posts: 4,613 ✭✭✭Villa05


    It was the main finding of the Housing Commission report and during the election, I could not find one political party adopting this approach

    Truly shocking political representation



  • Registered Users Posts: 7,050 ✭✭✭timmyntc


    What is the point of affordable housing on your view?

    Is it to give someone an affordable roof over their heads & security of tenure?

    Or is it to give them a financial asset and an investment?



  • Registered Users Posts: 14,524 ✭✭✭✭Dav010




  • Registered Users Posts: 4,613 ✭✭✭Villa05


    Its all well and good saying you'd rather help people who help themselves, we have a relatively free education system for that purpose. The reality is there is a limited number of jobs that will pay sufficiently to afford private rent or a home purchase. There will always be essential jobs employing real people that will never pay enough to afford a private home purchase or rent

    For this reason you need a mid tier market that allows security of tenure and rents that are affordable. The precence of such a market eases the pressure on the private rental and purchase markets, tames the inflation, helps address supply issues and can be a benefit rather than a burden to the taxpayer.

    Alot of winners in such a scenario. A well thought out scheme would bring stability to the property market. Stability is the friend of the investor. Instability is the friend of the speculator.

    Which should the taxpayer be supporting. The speculator path did not work out well last time



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  • Registered Users Posts: 2,219 ✭✭✭combat14


    hard to see how ordinary renters and would be home owners will have any money left to keep regular businesses in the economy going with the rapid rise of house prices this year and nose bleed rents



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