Central Bank lending restrictions review (title edited)

KevinCavan

https://www.rte.ie/news/2018/1128/1013802-mortgage_rules/

Assetbacked

They are working, the Central Bank needs to stay strong. Need more money for a mortgage? Save more.

L1011

As it stands the story does not back up the title you've given it

amcalester

Thread title has no relation to the article linked.

I'd be very surprised if the CB relaxed the lending limits, we're still not building enough houses so all it will do is drive up prices/mortgages.

Good for the banks, bad for the customers.

Assetbacked

amcalester wrote: »

Thread title has no relation to the article linked.

I'd be very surprised if the CB relaxed the lending limits, we're still not building enough houses so all it will do is drive up prices/mortgages.

Good for the banks, bad for the customers.

I think the article says bad for banks and brokers, good for economic stability.

KevinCavan

amcalester wrote: »

Thread title has no relation to the article linked.

I'd be very surprised if the CB relaxed the lending limits, we're still not building enough houses so all it will do is drive up prices/mortgages.

Good for the banks, bad for the customers.

The Central Bank will ease the lending limits, because people can’t get the same houses for the same money that they could when the limits were brought in. They will stagnate the Dublin market otherwise.

optogirl

Assetbacked wrote: »

They are working, the Central Bank needs to stay strong. Need more money for a mortgage? Save more.

I have a pretty large amount saved but don't earn enough to get a mortgage that can buy anything suitable for my family.

KevinCavan

optogirl wrote: »

I have a pretty large amount saved but don't earn enough to get a mortgage that can buy anything suitable for my family.

No need to worry they wouldn’t be announcing this, unless they were going to fuel the bubble.

amcalester

Assetbacked wrote: »

I think the article says bad for banks and brokers, good for economic stability.

It says some banks and brokers are frustrated, that’s not the same thing as it being bad for banks.

I’d imagine being kept on a leash is frustrating, doesn’t mean mean it’s not necessary.

Zenify

They have only made the rules stricter in the past with the reviews. I doubt they'd change tack unless the property market changes.

daheff

KevinCavan wrote: »

The Central Bank will ease the lending limits, because people can’t get the same houses for the same money that they could when the limits were brought in. They will stagnate the Dublin market otherwise.

no they wont.

Stagnating the Dublin market is a good thing. Ever increasing house prices is bad for everybody

Fol20

daheff wrote: »

no they wont.

Stagnating the Dublin market is a good thing. Ever increasing house prices is bad for everybody

Not good for the banks and developers.

If the market stagnates, builders will stop building. If a house costs 200k to build and they sell it for 150. Why would they build?

I do agree with the current rules, I just hope the market doesn’t stagnate

L1011

I have edited the title to reflect reality

Zenify

Fol20 wrote: »

daheff wrote: »

no they wont.

Stagnating the Dublin market is a good thing. Ever increasing house prices is bad for everybody

Not good for the banks and developers.

If the market stagnates, builders will stop building. If a house costs 200k to build and they sell it for 150. Why would they build?

I do agree with the current rules, I just hope the market doesn’t stagnate

Yes a house costs 200k to build but in Dublin they are selling for 450k. Builders will say: it's the costs of land. The land is only high because the developers are bidding against each other. If we stop land hoarding, and developers stop bidding against each other, land will get cheaper thus reducing the cost.

Amirani

KevinCavan wrote: »

The Central Bank will ease the lending limits, because people can’t get the same houses for the same money that they could when the limits were brought in. They will stagnate the Dublin market otherwise.

It's not in the Central Bank's remit to seek to influence property price growth in Dublin, and that's not why the rules were brought in. The rules are there to protect financial health of the banking system that it regulates. Significantly easing these rules with a view to increase price growth and credit growth does the opposite of this.

hanaimai

No change to the rules for 2019: https://www.centralbank.ie/financial-system/financial-stability/macro-prudential-policy/mortgage-measures

Fol20

Zenify wrote: »

Yes a house costs 200k to build but in Dublin they are selling for 450k. Builders will say: it's the costs of land. The land is only high because the developers are bidding against each other. If we stop land hoarding, and developers stop bidding against each other, land will get cheaper thus reducing the cost.

Correct me if im wrong but isnt the land cost at least a 3rd of the cost for completion. The developers have no options but to compete against themselves. location location location is causing the value of property in dublin to be substantially more. I dont know if there is any way of avoiding this bar building up when you get land instead of out.. At least then the cost of the land is born among more people instead of the standard semi d

Zenify

My argument is that they won't bid as high against each other if they will not get a high enough selling price for the final properties.

daheff

Fol20 wrote: »

Not good for the banks and developers.

If the market stagnates, builders will stop building. If a house costs 200k to build and they sell it for 150. Why would they build?

I do agree with the current rules, I just hope the market doesn’t stagnate

If prices keep going up we'll be left with nobody who can afford to buy a house. so builders won't build either if theres nobody to buy it.

At present builders can make a profit selling houses.

Assetbacked

optogirl wrote: »

I have a pretty large amount saved but don't earn enough to get a mortgage that can buy anything suitable for my family.

Well then house prices will just need to come down or this and the next generation will not be buying them. This is a good thing as people should not need to borrow so much money to buy their home.

LotharIngum

Houses will not be built en masse if the central bank doesn't relax the rules a bit. No point having all social houses. The people who get up in the morning cant get those.

Cuddlesworth

Fol20 wrote: »

Not good for the banks and developers.

If the market stagnates, builders will stop building. If a house costs 200k to build and they sell it for 150. Why would they build?

I do agree with the current rules, I just hope the market doesn’t stagnate

Its the exact opposite. They want a stagnant market so they can plan for a multi-year build, without financier having to factor in the high risk of loosing 50% value mid way through.

Fol20

Cuddlesworth wrote: »

Its the exact opposite. They want a stagnant market so they can plan for a multi-year build, without financier having to factor in the high risk of loosing 50% value mid way through.

The increases we saw over the past few years is not sustainable. I was under the impression that the margins developers have right now are not strong enough, I’m open to correction on that. You do bring up a valid point that is essential for planning long term objectives - stability.

Fol20

LotharIngum wrote: »

Houses will not be built en masse if the central bank doesn't relax the rules a bit. No point having all social houses. The people who get up in the morning cant get those.

Relaxing the rules will actually hurt the people that get up in the morning. The more it’s relaxed, the more prices will increase and the working people will have more debt. The 3.5 rule is fair imo. It forces people to save for a few years, people don’t have an absolute ton of debt unlike Celtic times when people couldn’t afford 10 times their salary however they still went ahead with the loan. It might be painful for some as they really want their own home but it might be one of these rules where your saving people from themself. Even the btl rule of min of 30pc makes it safer so we don’t have a massive fallout for ll when the bottom inevitably falls out again

lucast2007us

Doesn't really make sense when people can't afford to rent but can afford mortgage repayments

Zenify

lucast2007us wrote: »

Doesn't really make sense when people can't afford to rent but can afford mortgage repayments

What do you suggest?

Sarn

lucast2007us wrote: »

Doesn't really make sense when people can't afford to rent but can afford mortgage repayments

This comes up often enough. A lot of people are in this position. If the lending requirements are loosened, prices will jump and we will be back at square one. Those at the front of the pack will have a narrow window to get ahead, however, prices will just equilibrise at a higher level.

Cyrus

Much and all as it frustrates some of the posters here the rules are working and must be maintained, they are what are keeping prices in check over the past 12 months

tom1ie

Zenify wrote: »

What do you suggest?

Increase the supply of rental properties which will naturally reduce the cost of renting.
One way of increasing the supply of rental properties is to stop the witch hunt against landlords.
Landlords are leaving the market nd selling up, therefore constricting rental supply therefore pushing up the price of renting.
One answer to this is big multinational “vulture funds” coming in and buying up whole developments to rent out, a la cherrywood.

tom1ie

Cyrus wrote: »

Much and all as it frustrates some of the posters here the rules are working and must be maintained, they are what are keeping prices in check over the past 12 months

100% agree, if we relax the rules, that’ll just mean the builder gets paid more. It won’t mean houses become more accessible.
It’ll mean people will become more indebted, which will lead to a massive problem down the road, if and when interest rates start to rise.

SEPT 23 1989

You will thank them went it goes over a cliff again

bri007

The main problem is lack of supply of properties in the market, banks could give 4,5,6 times a salary, all it will do is push a house price up. Eg house in North co Dublin currently is €340,000, 3 bidders, similar-ish money to buy the house, house goes up and lose a bidder or two then the 3rd bidder gets it.

So all bidders have been approved based on central bank rules and their own savings etc, then take the relaxing of central bank rules..... the bidding would keep going and going, however it’s only one house so only one of these bidders will get the house, resulting in the other two looking elsewhere.

The problem now is, that house that would have sold for €340,000 ish went for a lot more.... now prices will automatically shoot up but yet still a huge lack of supply.

So my point is, only way is to increase supply.... simple right???? Nope doesn’t appear to be, until supply changes we will be in the same predicament, doesn’t matter what the central bank does or doesn’t do!

It would be good for some initially but means people will just be outbidding one another by a whole lot more!

daheff

tom1ie wrote: »

Increase the supply of rental properties which will naturally reduce the cost of renting.

You need to build properties to increase supply

tom1ie wrote: »

One way of increasing the supply of rental properties is to stop the witch hunt against landlords.
Landlords are leaving the market nd selling up, therefore constricting rental supply therefore pushing up the price of renting.

Nope- landlords leaving the market is not reducing the supply of properties. While it may reduce the number of rental properties available if sold to a private buyer, a private buyer would (in most cases) reduce the number of renters looking to rent. So selling of a property is nearly always not effect the amount of people looking to rent.

tom1ie wrote: »

One answer to this is big multinational “vulture funds” coming in and buying up whole developments to rent out, a la cherrywood.

Careful what you wish for. Companies like this cornering the market means consistent long term rent increases. They have no desire to keep the status quo. They are there for profit only...so squeeze the tenants as much as the market will allow.

tom1ie

daheff wrote: »

You need to build properties to increase supply



Nope- landlords leaving the market is not reducing the supply of properties. While it may reduce the number of rental properties available if sold to a private buyer, a private buyer would (in most cases) reduce the number of renters looking to rent. So selling of a property is nearly always not effect the amount of people looking to rent.


Careful what you wish for. Companies like this cornering the market means consistent long term rent increases. They have no desire to keep the status quo. They are there for profit only...so squeeze the tenants as much as the market will allow.

What about people that don’t want to buy a house? How are they going to rent unless they have landlords (or multinational vulture funds) to rent from?

Also I have said in previous posts (admittedly possibly not on this thread) the only way to increase supply is to build houses.

If we continue the witch hunt against landlords we will only be left with large multinationals in the rental sector. I am certainly not advocating this, nor am I a landlord. I am simply stating, if you drive landlords out of the market, people will have no option to rent, unless it’s from a large multinational. If people have no option but to buy, that increases the price of housing, as the people that would have rented, must buy.

JDD

CPO hoarded land.

Put the house building out to tender, making sure that its not just the cheapest bid that wins the tender but the best value bid. Sell the houses at a more affordable rate as the land has been CPO'd and the builder has had to compete on profit margin rather than compete on the land cost. Government gets the money back on the cost of the land. Builder gets to make a profit. Joe Soap gets a house at a reasonable price. Price of new house has knock on effect the price of second hand houses in the local area.

The only person who gets screwed over is the land hoarder. I'm okay with that.

daheff

tom1ie wrote: »

What about people that don’t want to buy a house? How are they going to rent unless they have landlords (or multinational vulture funds) to rent from?

I'm not advocating no rental sector, nor am I witch hunting against landlords.

I'm not sure how you picked that up from my post (Especially the part you highlighted??)

tom1ie

daheff wrote: »

I'm not advocating no rental sector, nor am I witch hunting against landlords.

I'm not sure how you picked that up from my post (Especially the part you highlighted??)

You said:
landlords leaving the market is not reducing the supply of properties.
I am saying you are wrong as this reduces the amount of properties to rent.
How do you not see this?

Gumbo

daheff wrote: »

Nope- landlords leaving the market is not reducing the supply of properties. While it may reduce the number of rental properties available if sold to a private buyer, a private buyer would (in most cases) reduce the number of renters looking to rent. So selling of a property is nearly always not effect the amount of people looking to rent.

I wouldn't be so stern in saying nope.
In some cases, its a first time buyer coming from their parents house buying the property. Therefore not helping rental supply at all.

One example of this is my mate, currently living with his parents and they've just bought in Glasnevin. That house is currently rented out to 4 people. They will be into the market looking for a new rental in February.

It would be fair to say, in the absence of any hard data that a Landlord selling his rental investment now has a 50/50 chance of reducing the rental supply.

daheff

tom1ie wrote: »

You said:
landlords leaving the market is not reducing the supply of properties.
I am saying you are wrong as this reduces the amount of properties to rent.
How do you not see this?

you are mistaking what i've said. we are both correct. A property being sold isnt reducing supply of properties. Property is still in circulation & use. It takes a prospective renter out of the demand side too.

You are only partially correct though, as a (albeit small) number of people who buy also let a room in the property.

also you havent said how this is advocating no rental sector or a witchhunt against landlords??

daheff

kceire wrote: »

I wouldn't be so stern in saying nope.
In some cases, its a first time buyer coming from their parents house buying the property. Therefore not helping rental supply at all.
.

It is though. People who are living with parents (to save a deposit) are also prospective renters. If rent were lower and they could also save while renting they would (in a lot of cases) rent a property. Just because they are not renting doesnt mean they are not part of the demand side (same as homeless people- a similar comparison would be people on hap. without hap they are possibly homeless... with hap they are active parts of the demand side).

daheff

kceire wrote: »

It would be fair to say, in the absence of any hard data that a Landlord selling his rental investment now has a 50/50 chance of reducing the rental supply.

I don't 100% disagree with this point. My point is that the market is really supply of property vs demand for property. The supply is segmented (stickily) to buy vs rent whereas demand is more flexible between buy vs rent(with majority preference to buy and 2nd preference to rent)

tom1ie

daheff wrote: »

you are mistaking what i've said. we are both correct. A property being sold isnt reducing supply of properties. Property is still in circulation & use. It takes a prospective renter out of the demand side too.

You are only partially correct though, as a (albeit small) number of people who buy also let a room in the property.

also you havent said how this is advocating no rental sector or a witchhunt against landlords??

I didn't actually say you were advocating a witch hunt I said there is a witch hunt against landlords. Sorry if I wasn't clear.