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Property Market 2019

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    #4502
    JJJackal
    Registered Users Posts: 1,016 ✭✭✭JJJackal


    Sloppy_Joe wrote: »
    Do you know what caused the crash? Sub prime lending in the US - lending given to people who have no credit history and are going to fail to pay their loans back.

    We have a whole generation paying insane rents - well able to pay a mortgage.

    It's not like I'm claiming college grads should be getting 100% mortgages like they were!

    Whoever does have a mortgage, if they lose their job they won't be able to pay their mortgage either. So the result on the owner is the same whether its 5x or 3.5x

    It's funny that the US did nothing to prevent the same thing happening again over there, so is there going to be another crash???

    You just said the property marked didnt cause the crash. Now you agree that it did.

    Now you are criticizing insane lending and lending restrictions.

    You must have some unreal solutions up your sleeve?


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    #4503
    mariaalice
    Registered Users Posts: 12,370 ✭✭✭✭mariaalice


    Sloppy_Joe wrote: »
    Do you know what caused the crash? Sub prime lending in the US - lending given to people who have no credit history and are going to fail to pay their loans back.

    We have a whole generation paying insane rents - well able to pay a mortgage.

    It's not like I'm claiming college grads should be getting 100% mortgages like they were!

    Whoever does have a mortgage, if they lose their job they won't be able to pay their mortgage either. So the result on the owner is the same whether its 5x or 3.5x

    It's funny that the US did nothing to prevent the same thing happening again over there, so is there going to be another crash???

    You do have a point but around Dublin, a new house 300k in Dublin maybe 420k so if they cant get a 30 to 40k deposit together by saving even if it take a few years how are they going to pay a mortgage. The vast majority are going to have children, pay for child care, need to maintain the house, buy cars its not just the rent they are paying = the cost of a mortgage its not as simple as that.


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    #4504
    alwald
    Registered Users Posts: 1,283 ✭✭✭alwald


    Sloppy_Joe wrote: »
    It's funny that the US did nothing to prevent the same thing happening again over there, so is there going to be another crash???

    Any source(s) to check the accuracy of your statement?


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    #4505
    mariaalice
    Registered Users Posts: 12,370 ✭✭✭✭mariaalice


    https://extra.ie/2019/12/04/business/irish/central-bank-mortgage-lending-rules


    The Central Bank has decided against easing mortgage lending rules that limit the amount prospective homeowners can borrow when buying a house.


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    #4506
    Mic 1972
    Registered Users Posts: 3,213 ✭✭✭Mic 1972


    cruizer101 wrote: »
    So lets say you as a couple are earning 100k currently you can get a mortgage for 350k and purchase house for ~385k based on 10% deposit.
    CB change rules so now it is 4.5 multiple.
    You can now get mortgage for 450k and buy house for ~495k, assuming you have extra deposit amount.
    But so can everyone else, so that house that was priced at 380k has now risen to 490k and you are still in a bidding war with the same people as you would be if rules just stayed the same.
    When eveyones purchasing power goes up so does the value of the items they want to buy.

    perfectly explained


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    #4507
    Mic 1972
    Registered Users Posts: 3,213 ✭✭✭Mic 1972


    Sloppy_Joe wrote: »
    Do you know what caused the crash? Sub prime lending in the US - lending given to people who have no credit history and are going to fail to pay their loans back.

    We have a whole generation paying insane rents - well able to pay a mortgage.

    It's not like I'm claiming college grads should be getting 100% mortgages like they were!

    Whoever does have a mortgage, if they lose their job they won't be able to pay their mortgage either. So the result on the owner is the same whether its 5x or 3.5x

    It's funny that the US did nothing to prevent the same thing happening again over there, so is there going to be another crash???


    Lending more money is only going to increase house prices, it will do nothing to increase supply.


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    #4508
    Padre_Pio
    Registered Users Posts: 4,909 ✭✭✭Padre_Pio


    Mic 1972 wrote: »
    Lending more money is only going to increase house prices, it will do nothing to increase supply.

    Exactly.

    You can see yourself there's a lot of bunching at the 300-350k mark, the good, bad and ugly houses are all there because agents know that's the limit for most people.
    I'd that limit was raised, the same houses would move up with it.

    There's no breathing space, and that's simply down to lack of supply.


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    #4509
    Marius34
    Registered Users Posts: 1,173 ✭✭✭Marius34


    Mic 1972 wrote: »
    Lending more money is only going to increase house prices, it will do nothing to increase supply.

    That's not entirely true. Lending more money it would increase house price, but it would also increase supply. Price increase/decrease well correlate with a delayed supply increase/decrease.
    Same happened during the boom, property construction when the property price skyrocketed in 2005-2007 was massive.
    Back in previous bubble, the population grew even faster, but due to the high property price which caused massive construction, rents were reasonable.


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    #4510
    Interested Observer
    Registered Users Posts: 13,021 ✭✭✭✭Interested Observer


    Marius34 wrote: »
    That's not entirely true. Lending more money it would increase house price, but it would also increase supply. Price increase/decrease well correlate with a delayed supply increase/decrease.
    Same happened during the boom, property construction when the property price skyrocketed in 2005-2007 was massive.
    Back in previous bubble, the population grew even faster, but due to the high property price which caused massive construction, rents were reasonable.

    At a significant lag.


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    #4511
    Mic 1972
    Registered Users Posts: 3,213 ✭✭✭Mic 1972


    Marius34 wrote: »
    That's not entirely true. Lending more money it would increase house price, but it would also increase supply. Price increase/decrease well correlate with a delayed supply increase/decrease.
    Same happened during the boom, property construction when the property price skyrocketed in 2005-2007 was massive.
    Back in previous bubble, the population grew even faster, but due to the high property price which caused massive construction, rents were reasonable.


    That's right, property construction skyrocketed out of control inflated by borrowed money. Recipe for disaster. Nobody wants that, starting from builders and investors.
    People need to be patient, keep saving money and buy a house when you can afford it. Supply will be there


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    #4512
    dontparkhere
    Registered Users Posts: 71 ✭✭dontparkhere


    Mic 1972 wrote: »
    That's right, property construction skyrocketed out of control inflated by borrowed money. Recipe for disaster. Nobody wants that, starting from builders and investors.
    People need to be patient, keep saving money and buy a house when you can afford it. Supply will be there

    So would an increase in borrowing boost construction and supply?
    How do the Irish LTV rules compare to the rest of Europe. They seem quite stringent compared to the uk.

    Edit: typo meant to put Loan to income


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    #4513
    Mic 1972
    Registered Users Posts: 3,213 ✭✭✭Mic 1972


    dontparkhere wrote: »
    So would an increase in borrowing boost construction and supply?
    How do the Irish LTV rules compare to the rest of Europe. They seem quite stringent compared to the uk.

    Builders and investors went bankrupt 10 years ago, they are going to be very careful this time around before initiating mass construction to avoid the risk of unsold properties and ghost estates. All it takes is a little recession, few jobs lost, salary increase freeze and the whole system will come down.
    So many people borrowing 3.5 is already a lot of money that may or may not be recovered by the banks if anything happens to the economy


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    #4514
    aloooof
    Moderators, Sports Moderators Posts: 10,225 Mod ✭✭✭✭aloooof


    Sloppy_Joe wrote: »
    Whoever does have a mortgage, if they lose their job they won't be able to pay their mortgage either. So the result on the owner is the same whether its 5x or 3.5x

    This really isn't the same at all. Take a couple who earn a combined 100k, and one loses their job shortly after drawdown.

    - With 3.5x and LTV of 90% their debt is 350k on an asset worth 385k.
    - With 5x and a 100% mortgage their debt is 500k on as asset worth 500k.

    The former scenario is objectively better for both the couple AND the bank.


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    #4515
    Marius34
    Registered Users Posts: 1,173 ✭✭✭Marius34


    Mic 1972 wrote: »
    Lending more money is only going to increase house prices, it will do nothing to increase supply.
    Mic 1972 wrote: »
    That's right, property construction skyrocketed out of control inflated by borrowed money. Recipe for disaster. Nobody wants that, starting from builders and investors.
    People need to be patient, keep saving money and buy a house when you can afford it. Supply will be there

    You contradicting yourself.

    I would agree that lending rule should not be relaxed, and 3.5x rule should be kept for many reasons. But it just wrong to state that mortgage rule doesn't' have impact on the supply side. Ofcourse as previous mentioned with a lag.


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    #4516
    Blowfish
    Registered Users Posts: 5,112 ✭✭✭Blowfish


    aloooof wrote: »
    This really isn't the same at all. Take a couple who earn a combined 100k, and one loses their job shortly after drawdown.

    - With 3.5x and LTV of 90% their debt is 350k on an asset worth 385k.
    - With 5x and a 100% mortgage their debt is 500k on as asset worth 500k.

    The former scenario is objectively better for both the couple AND the bank.
    In addition to that, the multiple limitation is not just about job losses. During the recession, average incomes went down. This means that a huge number of people either took a paycut or lost their job and picked up another one which paid less. In a scenario where you lose 5-10% income, repayments on a 3.5x multiple could be survivable with a bit of belt tightening. A 5x multiple though would be much tougher to keep up payments with.


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    #4517
    aloooof
    Moderators, Sports Moderators Posts: 10,225 Mod ✭✭✭✭aloooof


    Blowfish wrote: »
    In addition to that, the multiple limitation is not just about job losses. During the recession, average incomes went down. This means that a huge number of people either took a paycut or lost their job and picked up another one which paid less. In a scenario where you lose 5-10% income, repayments on a 3.5x multiple could be survivable with a bit of belt tightening. A 5x multiple though would be much tougher to keep up payments with.

    Completely agree. The OP was effectively saying a 350k debt is the same as a 500k debt.


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    #4518
    Mickiemcfist
    Registered Users Posts: 1,585 ✭✭✭Mickiemcfist


    If this thread has taught me anything, it's that even with the knowledge of what happened in the recession, people still don't know what's best for them. Thankfully the Central bank has got a handle on things this time around. We could still have a recession & property crash, but as said above, I'd rather be exposed to that at 3.5x than 5x.


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    #4519
    JJJackal
    Registered Users Posts: 1,016 ✭✭✭JJJackal


    Mickiemcfist wrote: »
    If this thread has taught me anything, it's that even with the knowledge of what happened in the recession, people still don't know what's best for them. Thankfully the Central bank has got a handle on things this time around. We could still have a recession & property crash, but as said above, I'd rather be exposed to that at 3.5x than 5x.

    Also as said if there is a recession, it is likely that the 3.5X customer will have debt >3.5X due to decreased earnings...

    And the house will be worth the same or less than what was paid for it


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    #4520
    aloooof
    Moderators, Sports Moderators Posts: 10,225 Mod ✭✭✭✭aloooof


    JJJackal wrote: »
    Also as said if there is a recession, it is likely that the 3.5X customer will have debt >3.5X due to decreased earnings...

    And the house will be worth the same or less than what was paid for it

    The 90% LTV requirement insulates a little against this. It's certainly more beneficial than the 100% mortgages that were part of the property market in 2008, which would just further exacerbate the above scenario.


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    #4521
    Sloppy_Joe
    Site Banned Posts: 135 ✭✭Sloppy_Joe


    alwald wrote: »
    Any source(s) to check the accuracy of your statement?

    https://www.inc.com/dustin-mckissen/subprime-mortgages-are-back-will-that-mean-another-recession.html


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    #4522
    Sloppy_Joe
    Site Banned Posts: 135 ✭✭Sloppy_Joe


    Mic 1972 wrote: »
    Lending more money is only going to increase house prices, it will do nothing to increase supply.

    Builders are literally walking away from jobs because they can't make profit on it...

    The cost of building a house isn't a scale related to the cost of purchasing a house.


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    #4523
    Mic 1972
    Registered Users Posts: 3,213 ✭✭✭Mic 1972


    Sloppy_Joe wrote: »
    Builders are literally walking away from jobs because they can't make profit on it...


    says who?


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    #4524
    Bluefoam
    Registered Users Posts: 7,713 ✭✭✭Bluefoam


    Sloppy_Joe wrote: »
    https://www.inc.com/dustin-mckissen/subprime-mortgages-are-back-will-that-mean-another-recession.html
    Hi Kemil,
    they need to remain a tightly regulated tool

    From your own quoted article... you seem to be all over the place on this stuff.


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    #4525
    Sloppy_Joe
    Site Banned Posts: 135 ✭✭Sloppy_Joe


    Mic 1972 wrote: »
    says who?

    Says the figures that building numbers have dropped.


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    #4526
    Sloppy_Joe
    Site Banned Posts: 135 ✭✭Sloppy_Joe


    Bluefoam wrote: »
    From your own quoted article... you seem to be all over the place on this stuff.

    That's an opinion, not a policy.

    Tell me, did the US put a 3.5 times a salary limit on their borrowings?


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    #4527
    JJJackal
    Registered Users Posts: 1,016 ✭✭✭JJJackal


    Sloppy_Joe wrote: »
    That's an opinion, not a policy.

    Tell me, did the US put a 3.5 times a salary limit on their borrowings?

    What difference does it make to us if the us put a 3.5 times salary limit?

    If you cant pay for your home in the US they will take it off you


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    #4528
    Sloppy_Joe
    Site Banned Posts: 135 ✭✭Sloppy_Joe


    JJJackal wrote: »
    What difference does it make to us if the us put a 3.5 times salary limit?

    If you cant pay for your home in the US they will take it off you

    Were they not taken off people in 08?

    Are you saying they won't take your house off you here and thus the size of the mortgage doesn't matter and the banks only protecting itself with these rules?


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    #4529
    JJJackal
    Registered Users Posts: 1,016 ✭✭✭JJJackal


    Sloppy_Joe wrote: »
    Were they not taken off people in 08?

    Are you saying they won't take your house off you here and thus the size of the mortgage doesn't matter and the banks only protecting itself with these rules?

    Yes, I am saying they wont take your house of you here; and if they do it takes many many years. There is lots of evidence in the newspapers and repossession rates to support this.

    Banks are a business - they have to protect themselves. Do you think the banks should give everyone who comes in whatever amount of money they want? And yes banks should only lend to a person what they think the person can pay back


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    #4530
    Sheeps
    Registered Users Posts: 2,762 ✭✭✭Sheeps


    If builders can't turn a profit on houses during a housing crisis, they shouldn't be building. It's very simple. Lending rules stay, build for demand, profit.


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    #4531
    Kamili
    Registered Users Posts: 2,479 ✭✭✭Kamili


    JJJackal wrote: »
    Banks are a business - they have to protect themselves. Do you think the banks should give everyone who comes in whatever amount of money they want? And yes banks should only lend to a person what they think the person can pay back

    you post reminded me of an article I came across.
    The below quote stood out for me

    https://www.thejournal.ie/readme/lorraine-mulligan-remax-cellbridge-lucan-2-3829122-Feb2018/
    We were flying for a few years, but then the property crash came. The first sign I saw of it turning was when we had a big house in Celbridge and it went for €50,000 to €60,000 over the guide price.

    The bank said, “This is a crazy price you have achieved on this property and we cannot lend this money. This house is not worth the sale agreed price.” It just spiralled unbelievably after that.


    Banks have to protect their business - and thus doing so they need rules in place - otherwise we just end up with boom to bust and back to boom again.


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