Central Bank to limit amount banks lend for home purchase

ffactj

P. Breathnach wrote: »

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.

Thats because asking prices have increased, along with the expectation of getting more for the property by the seller.

Asking prices mean nothing.

P. Breathnach

ffactj wrote: »

Thats because asking prices have increased, along with the expectation of getting more for the property by the seller.

Asking prices mean nothing.

There may be some truth in that, but I have been watching one particular segment of the market very closely (because I am hoping to purchase) and I have seen a softening in the past couple of months.

And, similar to Ixelles' experience, I have found EAs coming back to me in relation to properties I viewed some weeks previously and where I had not made an offer.

handlemaster

P. Breathnach wrote: »

There may be some truth in that, but I have been watching one particular segment of the market very closely (because I am hoping to purchase) and I have seen a softening in the past couple of months.

And, similar to Ixelles' experience, I have found EAs coming back to me in relation to properties I viewed some weeks previously and where I had not made an offer.

Where have you been looking?

matt-dublin

P. Breathnach wrote: »

There may be some truth in that, but I have been watching one particular segment of the market very closely (because I am hoping to purchase) and I have seen a softening in the past couple of months.

And, similar to Ixelles' experience, I have found EAs coming back to me in relation to properties I viewed some weeks previously and where I had not made an offer.

They do that anyway.

P. Breathnach

matt-dublin wrote: »

They do that anyway.

They should, and some are good that way. Others are less good. But the conversations recently have been different in tone. I have been looking for a couple of years now, and I have a sense that I didn't have before that it is moving closer to being a buyers' market.

P. Breathnach

handlemaster wrote: »

Where have you been looking?

I don't want to be too specific: Dublin, in what might be considered a "desirable" neighbourhood.

trackguy

I think the CBI measures will affect properties at certain price levels. I can see it having more of an effect on the €450k house in Rathfarnham/ Malahide than the €250k house in Blanchardstown/ Tallaght.

There are a significant amount of people that would qualify for a mortgage from the bank under the current criteria for a house of €250k.

The same can't be said for the house going for €450k.

I see these measures (20% deposit, 3.5 times earning) targeting mid/ high price properties to make them more affordable to more people.

As I mentioned in another thread, I've seen houses in North County Dublin going up by €15k since the CBI announcement - €240k up to €255k

chris85

trackguy wrote: »

I think the CBI measures will affect properties at certain price levels. I can see it having more of an effect on the €450k house in Rathfarnham/ Malahide than the €250k house in Blanchardstown/ Tallaght.

There are a significant amount of people that would qualify for a mortgage from the bank under the current criteria for a house of €250k.

The same can't be said for the house going for €450k.

I see these measures (20% deposit, 3.5 times earning) targeting mid/ high price properties to make them more affordable to more people.

As I mentioned in another thread, I've seen houses in North County Dublin going up by €15k since the CBI announcement - €240k up to €255k

Can understand some raising prices. Will probably be a push by some FTB to get deal done before new measures come in and they face a couple of years of a depressing rental market with high rents and poor properties out there.

P. Breathnach

chris85 wrote: »

Can understand some raising prices. Will probably be a push by some FTB to get deal done before new measures come in and they face a couple of years of a depressing rental market with high rents and poor properties out there.

It might be more than that: people who had been hoping to buy at €450k having to consider properties at €350k, and those looking at €350k properties now looking at €250 properties.

So the outcome might be some increase in prices at the cheaper end of the market, some decrease in the middle price range, and it's hard to guess what might happen in the higher price ranges.

handlemaster

P. Breathnach wrote: »

It might be more than that: people who had been hoping to buy at €450k having to consider properties at €350k, and those looking at €350k properties now looking at €250 properties.

So the outcome might be some increase in prices at the cheaper end of the market, some decrease in the middle price range, and it's hard to guess what might happen in the higher price ranges.

I think the lower end of the market will shoot up for houses in the Dublin area. Maybe no more under 200k three bed semis. Also flat prices for mid priced houses. This will change over time as ftb except the new order and just save longer. There also the fact renting might be seen as not a bad choice long term.

johnp001

P. Breathnach wrote: »

It might be more than that: people who had been hoping to buy at €450k having to consider properties at €350k, and those looking at €350k properties now looking at €250 properties.

So the outcome might be some increase in prices at the cheaper end of the market, some decrease in the middle price range, and it's hard to guess what might happen in the higher price ranges.

Houses are only worth what people are willing/able to pay for them. If the average buyer has access to less credit ultimately the effect will be that people hoping to sell at €450k will have to consider selling at €350k, people hoping to sell at €350k now looking at selling at €250k.
Also, everyone who is in the position to buy a non CGT-exempt PPR will have already done so or will do so by the end of the year due to expiry of the CGT exemption and the tightening of credit on investment properties (new LTV restrictions on investment are tighter than for PPR) so there will be less buyers in 2015 and less competition for properties.

P. Breathnach

johnp001 wrote: »

Houses are only worth what people are willing/able to pay for them.

Agreed. In this discussion, I think the emphasis should be on "able", as people seem willing to pay what I would consider to be excessive prices if they can borrow enough. The new measures are intended to reduce the ability of some people to pay such prices.

If the average buyer has access to less credit ultimately the effect will be that people hoping to sell at €450k will have to consider selling at €350k, people hoping to sell at €350k now looking at selling at €250k.

I really don't think the market will move that much. There will still be funded purchasers in the market at prices like €450k or €350k - just fewer of them. I don't expect falls of anything like €100k. My guess is that there will be price falls of <10% in that segment of the market.

Also, everyone who is in the position to buy a non CGT-exempt PPR will have already done so or will do so by the end of the year due to expiry of the CGT exemption and the tightening of credit on investment properties (new LTV restrictions on investment are tighter than for PPR) so there will be less buyers in 2015 and less competition for properties.

I'm not sure how much the ending of the CGT exemption might affect prices. It doesn't, to my eyes at leat, seem to have provoked a flurry of purchasing activity recently.

Brussels Sprout

People seem to be treating this as a fait accompli but are these recommendations actually binding? Can the retail banks just choose to ignore them or is it a condition of how they themselves get money from the Central Bank?

Is their a chance that there could be a bit of horse trading between the central bank and the reatail banks and this ends up at say 15% instead?

handlemaster

http://m.independent.ie/business/personal-finance/property-mortgages/home-economics-answering-your-property-questions-30670030.html

Michael D Not Higgins

Brussels Sprout wrote: »

People seem to be treating this as a fait accompli but are these recommendations actually binding? Can the retail banks just choose to ignore them or is it a condition of how they themselves get money from the Central Bank?

Is their a chance that there could be a bit of horse trading between the central bank and the reatail banks and this ends up at say 15% instead?

That's certainly possible and why the CB are taking suggestions on the measures they're planning to implement. Realistically though, they've taken these levels to ensure the credit bubble doesn't occur again and have based those levels on sound economic theory.

It's about time they brought some regulation in. They should have been regulating the industry all along and it's taken them 6 years to react to the crash.

P. Breathnach

Brussels Sprout wrote: »

...
Is their a chance that there could be a bit of horse trading between the central bank and the reatail banks and this ends up at say 15% instead?

Possible, but I don't think it very likely.

If the measures are softened to the point where they don't affect the capacity of at least people to pay very high prices, then they are not worth introducing.

Someone suggested recently that the CB should 'delay' this measure by six months or a year just to make it less of a shock for FTBs who had saved 10%.

That's understandable but there's no way the CB could go for it - there has to be a short lead-in time, even though it makes the 'consultation' look like a bit of a sham.

Imagine if they gave 12 months' grace. It would be an all-out frenzy for high LTV buyers (i.e. those with the smallest deposits) trying to buy in 2015. That would only make for a bigger surge in prices in 2015 and then a bigger dip in 2016 - leaving a new raft of negative equity buyers who paid top dollar with borrowed money.

More importantly, from the CB's point of view, it would give the banks a new problem just when they are trying to get on top of the arrears legacy of the last bubble.

Granted, there may be a bit of a frenzy for the next few weeks with people trying to get deals done but it's better than having one year of all-out mania followed by a proper bust.

The other thing is that the consultation ends in early December but there's really only two working weeks left to the Christmas break. So they'll have a very short window to go through all the submissions (okay, they can start now, but still...) and write some kind of response. The banks will need to be planning on the basis of this coming in as written in the 'consultation' document.

johnp001

P. Breathnach wrote: »

Agreed. In this discussion, I think the emphasis should be on "able", as people seem willing to pay what I would consider to be excessive prices if they can borrow enough. The new measures are intended to reduce the ability of some people to pay such prices.

I really don't think the market will move that much. There will still be funded purchasers in the market at prices like €450k or €350k - just fewer of them. I don't expect falls of anything like €100k. My guess is that there will be price falls of <10% in that segment of the market.

Those aren't my figures, they were an alternative to a scenario proposed in the previous post using those figures.

P. Breathnach wrote: »

I'm not sure how much the ending of the CGT exemption might affect prices. It doesn't, to my eyes at leat, seem to have provoked a flurry of purchasing activity recently.

PPR (for Dublin) shows large spikes in sales for Nov/Dec in previous years:
2012 - end of MIR
2013 - supposed end of CGT exemption

See: http://propertypriceregisterireland.com/graphs/?action=search&type=county&id=dublin

too early to know if there will be a corresponding spike in Nov/Dec this year

ffactj

So what if its not working on 6 months.
Then make it 30% I suppose.

Michael D Not Higgins

ffactj wrote: »

So what if its not working on 6 months.
Then make it 30% I suppose.

What if what's not working?

marco_polo

ffactj wrote: »

So what if its not working on 6 months.
Then make it 30% I suppose.

It is a measure to shape/control LTV ratios of the banks loan books so the only way it cannot work is if mortgage providers ignore it.

assetcolum

Roll on 2015


I am so close i can taste it

I have been approved 150 but will only borrow around 40k max

Can't wait

bluemartin

assetcolum wrote: »

Roll on 2015


I am so close i can taste it

I have been approved 150 but will only borrow around 40k max

Can't wait

You don't need a mortgage, you need a car loan!!

bluemartin

I read a lot about cash buyers accounting for about 40 to 50% of house sales particularly in the Dublin area. Is there any research into who exactly are these cash buyers, are they locals, are they ex pats moving back from the UK or are they foreigners????

One should look closely at what is happening across the pond. In London many first time buyers are close to their late thirties before they have the average deposit of £50 to£60,000 saved to enable them achieve home ownership. Average prices commanded for London properties are achieving astronomical levels and for many people it will mean they will never realize their dream of home ownership.
www.telegraph.co.uk/property/buyingsellingandmoving/9840135/Is-there-any-hope-for-first-time-buyers.html

Rich foreign cash buyers are often cited as to the reason for the persistent high prices in London and this has been going on for years now with no sign of abating.

I can't really see how the new policy changes introduced by the government will have much of an impact on house prices here particular in Dublin where there will always be a high demand due to better work opportunities and people migrating inwards. My guess is that the new year will probably start sluggish but come the spring it will take off again..... as is normal for that time of the year.

ffactj

Michael D Not Higgins wrote: »

What if what's not working?

See thread title

ffactj

bluemartin wrote: »

I read a lot about cash buyers accounting for about 40 to 50% of house sales particularly in the Dublin area. Is there any research into who exactly are these cash buyers, are they locals, are they ex pats moving back from the UK or are they foreigners????

One should look closely at what is happening across the pond. In London many first time buyers are close to their late thirties before they have the average deposit of £50 to£60,000 saved to enable them achieve home ownership. Average prices commanded for London properties are achieving astronomical levels and for many people it will mean they will never realize their dream of home ownership.
www.telegraph.co.uk/property/buyingsellingandmoving/9840135/Is-there-any-hope-for-first-time-buyers.html

Rich foreign buyers are often cited as to the reason for the persistent high prices in London and this has been going on for years now with no sign of abating.

I can't really see how the new policy changes introduced by the government will have much of an impact on house prices here particular in Dublin where there will always be a high demand due to better work opportunities and people migrating inwards. My guess is that the new year will probably start sluggish but come the spring it will take off again..... as is normal for that time of the year.

I think you are right.
Sure look at all the people who made predictions last year in this thread

http://www.boards.ie/vbulletin/showthread.php?t=2056898823

and go back and see how wrong they got it, even with hundreds of links to post.

Posting links doesnt make you psychic, as they found out.
Same people make the same predictions every year too.

http://www.boards.ie/vbulletin/showthread.php?t=2056898823

Michael D Not Higgins

ffactj wrote: »

See thread title

I don't know what you mean. Do you think banks will not follow the central banks prescribed limits?

Frank Lee Midere

ffactj wrote: »

I think you are right.
Sure look at all the people who made predictions last year in this thread

http://www.boards.ie/vbulletin/showthread.php?t=2056898823

and go back and see how wrong they got it, even with hundreds of links to post.

Posting links doesnt make you psychic, as they found out.
Same people make the same predictions every year too.

http://www.boards.ie/vbulletin/showthread.php?t=2056898823

You're just posting the same link twice. Your argument reminds me of the people who dismissed Kelly and McWilliams from 2004-2008.

bluemartin

After a bit of searching, I found the following info on cash buyers from an article in the Irish Independent dated 26-12-2013

Cash buyers have featured strongly in the Dublin property market in particular through 2013, with purchases coming from a number of buyer types.

These include individuals who saw the property crash coming, sold up at the top of the market and banked the cash to buy again when homes got cheaper.

There is also a group of mature professionals who are first-time buyers after renting and saving significant amounts.

Others are wealthy foreign-based but Irish-born buyers who have emigrated and made money.

There is also a large cadre of foreign investors -- there is evidence that some larger homes and the entire blocks already mentioned are being bought as investments largely by US interests.

Meanwhile, estate agents are also dealing with smaller scale foreign-born buyers -- Chinese nationals in particular have been buying smaller apartments with high amounts of cash savings.

If foreign investors carry on investing on the Irish property market, they will keep demand and prices high particularly at the higher end of the market. If what is happening in London is anything to go by, it may be a tough road ahead for many first time buyers.

Frank Lee Midere

bluemartin wrote: »

After a bit of searching, I found the following info on cash buyers from an article in the Irish Independent dated 26-12-2013




If foreign investors carry on investing on the Irish property market, they will keep demand and prices high particularly at the higher end of the market. If what is happening in London is anything to go by, it may be a tough road ahead for many first time buyers.

The proof of foreign investors is very slim ( with the exception of Irish born types). The few Chinese are parents of students here. Dublin isn't London. Most foreigners couldn't find it on a map. If foreign buyers are not targeting Bristol, Liverpool or Glasgow (etc.) why buy Dublin.