Central Bank to limit amount banks lend for home purchase

K.Flyer

Cuddlesworth wrote: »

With land included, sure. Without land, not a chance.

Maybe 7 - 8 years ago, but not today.

Larry Wildman

makeorbrake wrote: »

You have a link to support that?

Take a look at the extensive work undertaken by Harvard academics Reinhart and Sbrancia.

Essentially, when the world has had too much debt in the past, two things have happened:

- Defaults, e.g. after WWI which caused mayhem.

- Financial Represssion, e.g. 1945 to 1980.

The level of debt (governement and personal) is so high now that Financial Repression is the only viable option.

It essentially means keeping interest rates below inflation for a very long time.

The average annual real return from cash from 1945 to 1980 was -1.6%!

Interest rates cannot tick up because the world would collapse because debt levels are so high. We are looking at low interest rates for a generation.

Saipanne

Larry Wildman wrote: »

Take a look at the extensive work undertaken by Harvard academics Reinhart and Sbrancia.

Essentially, when the world has had too much debt in the past, two things have happened:

- Defaults, e.g. after WWI which caused mayhem.

- Financial Represssion, e.g. 1945 to 1980.

The level of debt (governement and personal) is so high now that Financial Repression is the only viable option.

It essentially means keeping interest rates below inflation for a very long time.

The average annual real return from cash from 1945 to 1980 was -1.6%!

Interest rates cannot tick up because the world would collapse because debt levels are so high. We are looking at low interest rates for a generation.

Bit of a harsh term, financial repression. Considering that 1945 to 1973 is considered the golden age of western economic growth.

gaius c

Geuze wrote: »

Quote:

"A one bed apartment costs a developer €200,000 excluding VAT to build in Dublin, excluding site costs and cost of funding. It needs to sell for €270,000 for the economics to stack up for a developer. Based on the new Central Bank guidelines, a city centre worker earning €45,000 per year will only be able to borrow €157,500. Topped up with a 20pc contract deposit, the potential buyer will only be able to spend €211,500 under the new rules."



Could this be true?

200k to build a 1-bed apt, excl land costs, financing costs and 13.5% VAT?

Or he could drop the price to what buyers will now be able to afford.

The costs bit of his argument is total bollocks. If you ever want to catch a builder out, ask him what it cost to build his own house using the same materials and labour he uses to build estates for sale.

Frank Lee Midere

Larry Wildman wrote: »

Take a look at the extensive work undertaken by Harvard academics Reinhart and Sbrancia.

Essentially, when the world has had too much debt in the past, two things have happened:

- Defaults, e.g. after WWI which caused mayhem.

- Financial Represssion, e.g. 1945 to 1980.

The level of debt (governement and personal) is so high now that Financial Repression is the only viable option.

It essentially means keeping interest rates below inflation for a very long time.

The average annual real return from cash from 1945 to 1980 was -1.6%!

Interest rates cannot tick up because the world would collapse because debt levels are so high. We are looking at low interest rates for a generation.

I did a quick search and while interest rates were negative in real terms half the time in that period, it was because of high inflation, which is *the* mechanism to play down debt for sovereigns.

If you think that is going to happen here you are talking about inflation of 5% and interest rates of 4.5%. What they didn't have was zero nominal interest rates. If inflation goes up here, so too will interest rates. And it is inflation, not low interest rates which reduced the real debt. Thats nearly always the case for sovereign nations.

OMD wrote: »

The average worker does not work 31 hours a week. The average worker is full time.
The average number of hours worked per employee each week is 31 hours but that is very different.

I find your tone very condescending when it is you who do not understand statistics. The average worker in this country is full time. Your interpretation of the figures is the wrong one. It is common sense for Gid's sake. What kind of idiot thinks the average worker in this country is part time.

By your logic the average person in this country has less than 2 legs.

This is pretty basic stuff. I suggest you get to grips with it before you comment on others.

I am afraid the average person does not have 2 legs.

Frank Lee Midere

Larry Wildman wrote: »

Real life as opposed to intellectual masturbation by the clowns who caused our economy the collapse (the Central Bank, the Civil Service and the Government).

My heart goes out to you.

These rules are a joke.

The banks kind of helped, though. The funny thing about that argument is that clearly the CB was partially responsible for the last excessive boom, exactly by not doing what the new management is doing. Not limiting credit.

decco1981

I don't see how this will help the economy. Instead of people spending, they'll be saving for a mortgage and make any recovery that bit more difficult. That being said I think something needs to happen to prevent another bubble.
Think a bit more effort could have been put into getting a slightly smarter solution!

Eric Cartman

gaius c wrote: »

If you ever want to catch a builder out, ask him what it cost to build his own house using the same materials and labour he uses to build estates for sale.

Any builders I know who built houses during the boom all built them as a collective

mate who's a brick layer, mate who's an electrician, mate who's a plasterer , mate who's a painter all got together and each did their bit on each others houses, end result was each of them only paying for land and materials, labour costs are the majority of the cost of building a house. When you take that out you can get a pretty good deal.

Frank Lee Midere

Mongfinder General wrote: »

I borrowed 8 times my salary. 350k on a salary of 45k. I've never missed a payment. The real damage is done in the choice of lifestyle people lead.

Anecdote. Not a statistic. Most defaulters borrowed at that level. And you are lucky that ECB rates have gone low.

OMD

Frank Lee Midere wrote: »

I


I am afraid the average person does not have 2 legs.

I know I shouldn't let this type of thing bother me but it really does. I'm like those people who get upset about misplaced apostrophies.

The average person has 2 legs.
The average number of legs per person is less than two.

There is a big difference between those two statements yet both are correct. There seems to be a basic failure to understand this concept on this site yet it is as fundamental to understanding statistics as knowing the difference between mean and median.

Frank Lee Midere

OMD wrote: »

I know I shouldn't let this type of thing bother me but it really does. I'm like those people who get upset about misplaced apostrophies.

The average person has 2 legs.
The average number of legs per person is less than two.

There is a big difference between those two statements yet both are correct. There seems to be a basic failure to understand this concept on this site yet it is as fundamental to understanding statistics as knowing the difference between mean and median.

No it isn't. The average person means average. Not median, regardless of colloquial usage. That's the way it's been used here.

Average family. 2.1 kids. Average household size. 2.4.

And so on.

Frank Lee Midere

That said we should be comparing median wages with median house prices.

assetcolum

Michael D Not Higgins wrote: »

Which is why I think the gifting of deposits shouldn't be allowed. Sure if it's just the parents topping up a deposit that's ok, but you hear about people getting the full deposit from their parents after not saving anything themselves.

I like to think those people will end up in Hell

Eldarion

assetcolum wrote: »

I like to think those people will end up in Hell

Haha I wouldn't get too worked up about it. They'll be the same people who re-mortgage or "release equity" in a few years anyway to buy themselves something shiny or go on holidays.

Larry Wildman

Frank Lee Midere wrote: »

I did a quick search and while interest rates were negative in real terms half the time in that period, it was because of high inflation, which is *the* mechanism to play down debt for sovereigns.

If you think that is going to happen here you are talking about inflation of 5% and interest rates of 4.5%. What they didn't have was zero nominal interest rates. If inflation goes up here, so too will interest rates. And it is inflation, not low interest rates which reduced the real debt. Thats nearly always the case for sovereign nations.




I am afraid the average person does not have 2 legs.

Except the Central banks are targeting inflation of 2%.

That means interest rates lagging that.

Low rates for a generation.

chris85

Eldarion wrote: »

Haha I wouldn't get too worked up about it. They'll be the same people who re-mortgage or "release equity" in a few years anyway to buy themselves something shiny or go on holidays.

Some are out of desperation with rental prices too I would think. Some parents dont like to see their offspring renting in the situation we are in with rentals rising. Not a good idea but sure just as I see it possibly happening.

Greyian

Larry Wildman wrote: »

Except the Central banks are targeting inflation of 2%.

That means interest rates lagging that.

Low rates for a generation.

Interest rates don't have to be below the rate of inflation...

Larry Wildman

Greyian wrote: »

Interest rates don't have to be below the rate of inflation...

They do because debt levels are unsustainable otherwise.

The only way to deal with the huge levels of debts is inflation...keep interest levels close to zero and run inflation at 2%.

It's what the Americans are doing, what the Japanese are trying to do and what Europe need to do.

Frank Lee Midere

Larry Wildman wrote: »

Except the Central banks are targeting inflation of 2%.

That means interest rates lagging that.

Low rates for a generation.

Central banks can target what they want but inflation creeps in anyhoo. Then they react. And it's your claim that interest rates will lag inflation. That was true only half the time from 1945-1975. Back then inflation was high. If governments wanted to reduce debt they would target higher inflation. That's how you reduce a debt burden.

Cuddlesworth

K.Flyer wrote: »

Maybe 7 - 8 years ago, but not today.

Your aware that we have had no inflation in the last 6 years?

You don't compare a small time builders house to a proper estate with a mix of high density houses and apartments. Some serious economy of scale comes into it. You don't head down to the local builders providers for a couple of plaster boards and some 2*4. Your logistics department go to straight to the manufacturers and put orders for truckloads of their product, which to you would be at super low prices. They deliver in batches at scheduled times so you don't need large storage facility's.

During the boom, wages got stupid. Labor costs become excessive. Company's were being paid so much for jobs, they were outsourced two to three times with everybody skimming off the top. It was fine though, since the year on year price increases were more then covering the waste and letting everybody make off like a bandit. I would hope at this stage that things have changed, costs are actually managed and a bricky isn't being paid 100k a year.

And even with all that, at the very height of the boom there was no way that a single 1 bedroom unit in a large multi-unit development cost 200k in build cost alone.

mr_seer

Cuddlesworth wrote: »

Your aware that we have had no inflation in the last 6 years?

You don't compare a small time builders house to a proper estate with a mix of high density houses and apartments. Some serious economy of scale comes into it. You don't head down to the local builders providers for a couple of plaster boards and some 2*4. Your logistics department go to straight to the manufacturers and put orders for truckloads of their product, which to you would be at super low prices. They deliver in batches at scheduled times so you don't need large storage facility's.

During the boom, wages got stupid. Labor costs become excessive. Company's were being paid so much for jobs, they were outsourced two to three times with everybody skimming off the top. It was fine though, since the year on year price increases were more then covering the waste and letting everybody make off like a bandit. I would hope at this stage that things have changed, costs are actually managed and a bricky isn't being paid 100k a year.

And even with all that, at the very height of the boom there was no way that a single 1 bedroom unit in a large multi-unit development cost 200k in build cost alone.

The costs being mentioned by builders, the CIF and all of the other vested interests are complete nonsense. 200k can build a 170sq m palace including everything except the site cost. The main issue is that sites are too expensive

K.Flyer

mr_seer wrote: »

The costs being mentioned by builders, the CIF and all of the other vested interests are complete nonsense. 200k can build a 170sq m palace including everything except the site cost. The main issue is that sites are too expensive

Sites WERE too expensive, prices have tumbled dramatically over the recent years and some canny sellers managed to buy back the parcels of land for a fraction of what they sold them for during the boom time.
But I totally agree, even with land purchase, site development, planning, labour and development there is no way it would cost 200k to build an average sized 1 bed apartment.
Those type of comments are from people who want to start getting prices up by coming out with misleading figures like that.

assetcolum

Do you lads really predict the prices to go down much in the next couple of months, especially in Dublin??

Looking to buy but need somewhere that i can rent out for atleast 2-3 years before i move into it

handlemaster

assetcolum wrote: »

Do you lads really predict the prices to go down much in the next couple of months, especially in Dublin??

Looking to buy but need somewhere that i can rent out for atleast 2-3 years before i move into it

if you can afford to buy then do so as when you take the rental income that you will get for the next 2/3 years from the price the houses/aptartments are not expensive

If prices fell it would suit me - so that's an up-front health warning. I know I'm always in danger of finding evidence to suit what I want to happen

But when these measures came out, I would have argued that the impact would be mild and it would cause a welcome easing of price rises. I wasn't so sure about price drops.

In the week that has followed, I have come around to the idea that actual price drops are a genuine possibility next year, before things reset to a normal pace of growth. It's crystal ball stuff but..

• I have agents ringing me this week about houses I called them about two months ago. They are 'checking if I'm still interested'. That hasn't happened in a long time.
• We were very close to being sale agreed on a house two months ago but backed out due to second thoughts about the estate. That house is still for sale; a neighbouring house dropped its price by 40k (about 12%) two days after the Central Bank announcement.
• I'm mid-30s so have plenty of friends looking for a house. Those who have larger deposits all say they are now content to wait; those with less than 20% say if they can't find anything very very soon they are locked out for years trying to save again.

On the other hand, the economy is clearly on the up generally. I believe the property market rebounded at a much more dramatic rate than the real economy and will have to give some of those gains 'back'.

My prediction: years from now when we look back at the period from 2012 to 2020, house prices will have grown more or less in line with inflation. There will be a big bump from early 2013 to mid/late-2014; a dip in 2015 but then a leveling out.

assetcolum

handlemaster wrote: »

if you can afford to buy then do so as when you take the rental income that you will get for the next 2/3 years from the price the houses/aptartments are not expensive

I'm just waiting to find somewhere i would live in myself as i will rent it out at the start but plan to move in after i finish working overseas ( 2-4 years time)


Think i may wait until the new year though ,fingers crossed they go down

ffactj

assetcolum wrote: »

Do you lads really predict the prices to go down much in the next couple of months, especially in Dublin??

Looking to buy but need somewhere that i can rent out for atleast 2-3 years before i move into it

Sure theyve predicting that every year for the last 15 years or so. Why change now

Paddy1234

[Deleted User] wrote: »

If prices fell it would suit me - so that's an up-front health warning. I know I'm always in danger of finding evidence to suit what I want to happen

But when these measures came out, I would have argued that the impact would be mild and it would cause a welcome easing of price rises. I wasn't so sure about price drops.

In the week that has followed, I have come around to the idea that actual price drops are a genuine possibility next year, before things reset to a normal pace of growth. It's crystal ball stuff but..

• I have agents ringing me this week about houses I called them about two months ago. They are 'checking if I'm still interested'. That hasn't happened in a long time.
• We were very close to being sale agreed on a house two months ago but backed out due to second thoughts about the estate. That house is still for sale; a neighbouring house dropped its price by 40k (about 12%) two days after the Central Bank announcement.
• I'm mid-30s so have plenty of friends looking for a house. Those who have larger deposits all say they are now content to wait; those with less than 20% say if they can't find anything very very soon they are locked out for years trying to save again.

On the other hand, the economy is clearly on the up generally. I believe the property market rebounded at a much more dramatic rate than the real economy and will have to give some of those gains 'back'.

My prediction: years from now when we look back at the period from 2012 to 2020, house prices will have grown more or less in line with inflation. There will be a big bump from early 2013 to mid/late-2014; a dip in 2015 but then a leveling out.

I agree with most of your points. The amount of alerts that I am getting with house price reductions is on the up.

I've been looking for the last year or so. I think things were cooling even before the CB announcement.

I think things were going to turn anyway but the CB intervention will mean it will happen quicker than I thought.

My prediction is for house prices to fall in Dublin in 2015.

assetcolum

Paddy1234 wrote: »

I agree with most of your points. The amount of alerts that I am getting with house price reductions is on the up.

I've been looking for the last year or so. I think things were cooling even before the CB announcement.

I think things were going to turn anyway but the CB intervention will mean it will happen quicker than I thought.

My prediction is for house prices to fall in Dublin in 2015.

Fingers crossed

Hopefully 2015 is a good year for the sensible saving FTB with big deposit's

We are all going to make it

P. Breathnach

Deleted User wrote: »

...
My prediction: years from now when we look back at the period from 2012 to 2020, house prices will have grown more or less in line with inflation. There will be a big bump from early 2013 to mid/late-2014; a dip in 2015 but then a leveling out.

Paddy1234 wrote: »

...
I've been looking for the last year or so. I think things were cooling even before the CB announcement.

I think things were going to turn anyway but the CB intervention will mean it will happen quicker than I thought.

My prediction is for house prices to fall in Dublin in 2015.

I concur. It looks to me as if the adjustment has already started. Six months ago in the high-demand areas of Dublin, an offer of 90% of asking price would not even be considered or, it it was considered, it was likely to be outbid very quickly. It has not been happening to the same extent recently.