Income Multiple Limits on Mortgages

dlouth15

Overall it is a good idea provided supply-side problems are also addressed.

Halloween Jack

dlouth15 wrote: »

Overall it is a good idea provided supply-side problems are also addressed.

I would agree, but given the nature of the market, fixing the supply side will take time, I reckon the next 2 years or so are going to be tight for anybody renting in the city who doesn't have an income well over the average...

womandriver

Sheldons Brain wrote: »

The Central Bank also need to get at the auditors. In 2008 it seemed that there was no problem with any auditor. Rules are needed to ensure that the auditors determine if the bank employees are acting the maggot. If auditors don't do their job then it should be made clear that they will end up like Arthur Anderson.

I think you'll find it's not the auditor's job to determine if "bank employees are acting the maggot".

Godge

The other thing about this is that we will be back to the 80s and 90s where it was very handy if your dad golfed with the local bank manager.

mariaalice

Godge wrote: »

The other thing about this is that we will be back to the 80s and 90s where it was very handy if your dad golfed with the local bank manager.

Do banks have actual mangers who any more? who live in and are known in the community? I haven't been in my bank in two years they have this thing called internet banking. The days of a bank manager making decisions are long gone.

draiochtanois

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Godge

mariaalice wrote: »

Do banks have actual mangers who any more? who live in and are known in the community? I haven't been in my bank in two years they have this thing called internet banking. The days of a bank manager making decisions are long gone.

They still have people who make decisions on loans. It is more formulaic these days but to get an exception to the guidelines in the future, you will have to be in the know.

Halloween Jack

http://www.irishtimes.com/news/politics/european-investment-bank-to-fund-irish-social-housing-1.1956789

Seems like there are moves afoot to help with the supply side of the equation...

Dannyboy83

This seems like a good idea, but at the wrong time.

To be successful, it requires house prices to fall, through increased supply, and alleviate the huge rent bubble in Dublin/Cork.

http://www.independent.ie/irish-news/news/four-in-five-country-estates-go-to-foreign-buyers-30658658.html
INTERNATIONAL property buyers now account for around 80pc of purchases in the Irish country homes and estates market - with Irish-based buyers now making up just one in five purchases, mostly at the lower end.

But I don't really see how prices can fall to make the 20% figure workable for citizenry, if foreign investment funds are driving up the cost of property?

My guess is that this will continue to inflate the rent bubble, which will further entice the various investment funds (Allianz/IPUT etc.) who have been buying up property. Similar to London/Australia on a smaller scale.

Scofflaw

Dannyboy83 wrote: »

This seems like a good idea, but at the wrong time.

To be successful, it requires house prices to fall, through increased supply, and alleviate the huge rent bubble in Dublin/Cork.


But I don't really see how prices can fall to make the 20% figure workable for citizenry, if foreign investment funds are driving up the cost of property?

My guess is that this will continue to inflate the rent bubble, which will further entice the various investment funds (Allianz/IPUT etc.) who have been buying up property. Similar to London/Australia on a smaller scale.

I don't see this being as much of a problem as is suggested. The "foreign investors" (what proportion of buyers are these?) certainly haven't successfully kept the property market at bubble prices to date, so I can't see why they should do so once this rule is in effect.

Cash buyers constituted 54% of the market in 2013, but the market in 2013 looks nothing like the market in, say, 2005 - in 2005, €35bn in mortgages were drawn down, compared to about €2.5bn in 2013. "Normalised" lending in the Irish market should be around €8-10bn, which would make cash buyers once again a small fraction of the market, and by no means the market-makers.

https://www.investec.ie/content/dam/investec/investec.ie/documents/Research/irish-economy/Irish%20Housing%20February%202014.pdf

cordially,
Scofflaw

Frank Lee Midere

Scofflaw wrote: »

I don't see this being as much of a problem as is suggested. The "foreign investors" (what proportion of buyers are these?) certainly haven't successfully kept the property market at bubble prices to date, so I can't see why they should do so once this rule is in effect.

Cash buyers constituted 54% of the market in 2013, but the market in 2013 looks nothing like the market in, say, 2005 - in 2005, €35bn in mortgages were drawn down, compared to about €2.5bn in 2013. "Normalised" lending in the Irish market should be around €8-10bn, which would make cash buyers once again a small fraction of the market, and by no means the market-makers.

https://www.investec.ie/content/dam/investec/investec.ie/documents/Research/irish-economy/Irish%20Housing%20February%202014.pdf

cordially,
Scofflaw

In any case he is referencing country estates. Mansions around the country. 19th century big houses. For that sector of the "super rich" who can't buy a pad in the Cotswolds.

That's a symptom of the bust not the boom.

Relatively these places are in fact cheap. I know if I won the lottery and the choice was between a 2 down 3 up semi-d in BlackRock or a country estate in Offaly I'd do the latter. Id rent in Dublin. Can't go crazy on just a million or two.

Frank Lee Midere

Interesting though that this is the first time since 1990 that Irish buyers of country pads have been such a low percentage? But where then does the infinite cash in Dublin come from.

Halloween Jack

Scofflaw wrote: »

I don't see this being as much of a problem as is suggested. The "foreign investors" (what proportion of buyers are these?) certainly haven't successfully kept the property market at bubble prices to date, so I can't see why they should do so once this rule is in effect.

Cash buyers constituted 54% of the market in 2013, but the market in 2013 looks nothing like the market in, say, 2005 - in 2005, €35bn in mortgages were drawn down, compared to about €2.5bn in 2013. "Normalised" lending in the Irish market should be around €8-10bn, which would make cash buyers once again a small fraction of the market, and by no means the market-makers.

https://www.investec.ie/content/dam/investec/investec.ie/documents/Research/irish-economy/Irish%20Housing%20February%202014.pdf

cordially,
Scofflaw

The poster was talking about the rental market in terms of a bubble prices, which from experience, seem to be at least similar to what I was paying in '06ish.

With mortgage lending at the very low levels you've pointed out, and these new measures likely to see lending levels actually decline, surely cash buyers/ investors will become an even bigger part of the market?

Saipanne

Dannyboy83 wrote: »

This seems like a good idea, but at the wrong time.

To be successful, it requires house prices to fall, through increased supply, and alleviate the huge rent bubble in Dublin/Cork.


But I don't really see how prices can fall to make the 20% figure workable for citizenry, if foreign investment funds are driving up the cost of property?

My guess is that this will continue to inflate the rent bubble, which will further entice the various investment funds (Allianz/IPUT etc.) who have been buying up property. Similar to London/Australia on a smaller scale.

You do realise that prices are affected by supply AND demand?

Scofflaw

Frank Lee Midere wrote: »

Interesting though that this is the first time since 1990 that Irish buyers of country pads have been such a low percentage? But where then does the infinite cash in Dublin come from.

The suggestion - and it comes from David McWilliams, which means it should be treated as basically anecdotal - is that you're looking at older Irish people who bought their houses in the 70s-90s and who are now mortgage-free and looking at investments for their old age.

If you had, say, a 3-bed family house in Shankill which is mortgage-free, having been bought in the 70s-90s, and you were retired, with grown-up children, then you have a huge opportunity to downsize your own accommodation, release a big pile of cash, and buy rental properties for income.

It's a temporary opportunity, and there's a limited (but quite large, I imagine) supply of such buyers.

cordially,
Scofflaw

Scofflaw

Halloween Jack wrote: »

The poster was talking about the rental market in terms of a bubble prices, which from experience, seem to be at least similar to what I was paying in '06ish.

With mortgage lending at the very low levels you've pointed out, and these new measures likely to see lending levels actually decline, surely cash buyers/ investors will become an even bigger part of the market?

I don't see that lending levels will decline. I think they'll rise from the current lows more slowly under these rules than they would have otherwise - because there's a big difference between a rule set that makes it clear a house is a long-term investment that has to be worked for, as against a rule set where as long as the banks feel daring, you can gamble in the property casino with next to no cash stake - but I don't see that as a bad thing.

I think using mortgage lending in itself as some kind of metric of success is very wrong-headed. We could do with a normalised house market, not a speculative casino flush with credit.

cordially,
Scofflaw

Halloween Jack

Scofflaw wrote: »

I don't see that lending levels will decline. I think they'll rise from the current lows more slowly under these rules than they would have otherwise - because there's a big difference between a rule set that makes it clear a house is a long-term investment that has to be worked for, as against a rule set where as long as the banks feel daring, you can gamble in the property casino with next to no cash stake - but I don't see that as a bad thing.

I think using mortgage lending in itself as some kind of metric of success is very wrong-headed. We could do with a normalised house market, not a speculative casino flush with credit.

cordially,
Scofflaw

I'd agree with most of that, but logic would dictate that if lending is well below the standard level, and new measures are introduced to limit lending to first time buyers especially, it's optimistic to say lending will grow at all?

The measures in isolation are sound, I don't think many people would argue with the central bank trying to prohibit the banks from the rash lending practices of tha past. I also agree that notion that a growing housing market is a universally positive barometer of economic well being has been debunked.

But it does seem to me that this measure will put further pressure on an already high price rental market. With rents going up and people needing to save even more money if they hope to buy, a lot of well paid young people are going to have quite a lot less disposable income to spend in the wider economy. I'd imagine we'd want to be encouraging these guys to spend as much as possible for growth/jobs etc?

Frank Lee Midere

Halloween Jack wrote: »

I'd agree with most of that, but logic would dictate that if lending is well below the standard level, and new measures are introduced to limit lending to first time buyers especially, it's optimistic to say lending will grow at all?

The measures in isolation are sound, I don't think many people would argue with the central bank trying to prohibit the banks from the rash lending practices of tha past. I also agree that notion that a growing housing market is a universally positive barometer of economic well being has been debunked.

But it does seem to me that this measure will put further pressure on an already high price rental market. With rents going up and people needing to save even more money if they hope to buy, a lot of well paid young people are going to have quite a lot less disposable income to spend in the wider economy. I'd imagine we'd want to be encouraging these guys to spend as much as possible for growth/jobs etc?

You are right. The solution to all of this is supply. Not new credit.

Frank Lee Midere

Scofflaw wrote: »

The suggestion - and it comes from David McWilliams, which means it should be treated as basically anecdotal - is that you're looking at older Irish people who bought their houses in the 70s-90s and who are now mortgage-free and looking at investments for their old age.

If you had, say, a 3-bed family house in Shankill which is mortgage-free, having been bought in the 70s-90s, and you were retired, with grown-up children, then you have a huge opportunity to downsize your own accommodation, release a big pile of cash, and buy rental properties for income.

It's a temporary opportunity, and there's a limited (but quite large, I imagine) supply of such buyers.

cordially,
Scofflaw

Despite what you said about low mortgage drawdowns ( which was correct early 2014) I can't imagine cash can continue to chase an ever increasing market. Savings run out, banks have a near infinite supply. And with houses selling(or asking) for near boom time prices money can't keep being released from old timers property into other houses of near similar value. Anecdotally it's panicky 30+ year olds bidding it up. A guy on another thread said he knew a couple ( already in negative equity) who were given a 600k mortgage with 60k down and now that's all ruined.

Saipanne

Frank Lee Midere wrote: »

Despite what you said about low mortgage drawdowns ( which was correct early 2014) I can't imagine cash can continue to chase an ever increasing market. Savings run out, banks have a near infinite supply. And with houses selling(or asking) for near boom time prices money can't keep being released from old timers property into other houses of near similar value. Anecdotally it's panicky 30+ year olds bidding it up. A guy on another thread said he knew a couple ( already in negative equity) who were given a 600k mortgage with 60k down and now that's all ruined.

Why, the mortgage is already approved?

Permabear

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Saipanne

Permabear wrote: »

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Why should they be the same? Are both markets identical?

Frank Lee Midere

Saipanne wrote: »

Why should they be the same? Are both markets identical?

Good catch. If it's bad for boom time buyers in negative equity it can only be because prices fall. Which would be good for FTBs.

Permabear

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Saipanne

Permabear wrote: »

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I dunno. There may well be compelling economic reasons for the difference. But I'm too vegitated to look into the reasons now.

Frank Lee Midere

Permabear wrote: »

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And tax. The actual metric should be "percentage of take home pay after taxes and property related charges." The top uk tax rate is 40% and comes in at a higher rate than here. The much abused Irish civil servant is paying 60% marginal. I think the UK has mortgage interest relief.

Frank Lee Midere

Saipanne wrote: »

Why, the mortgage is already approved?

True. It was probably an online estimate. He wasn't clear. In any case they have a few months to screw themselves for 35 years.

Larry Wildman

Frank Lee Midere wrote: »

And tax. The actual metric should be "percentage of take home pay after taxes and property related charges." The top uk tax rate is 40% and comes in at a higher rate than here. The much abused Irish civil servant is paying 60% marginal. I think the UK has mortgage interest relief.

How is he/she paying 60% marginal?!

Frank Lee Midere

Larry Wildman wrote: »

How is he/she paying 60% marginal?!

Pension levy. Details here.

http://m.rte.ie/news/2009/0203/113483-economy/

Up to 9%. So the marginal can be as high as 42% + USC + PRSI + LEVY.

For me, in the private sector, it's 52%.

Larry Wildman

Frank Lee Midere wrote: »

Pension levy. Details here.

http://m.rte.ie/news/2009/0203/113483-economy/

Up to 9%. So the marginal can be as high as 42% + USC + PRSI + LEVY.

For me, in the private sector, it's 52%.

You cannot classify the pension levy as a tax. They're getting something major in return.