Irish Property Market 2020 Part 3

BryanMartin21

schmittel wrote: »

Apart from the fact the cost per unit is artificially high I don't have a problem with taxpayers money being spent on social housing/HAP. Quite the opposite, I think it is a necessary spend.

The problem I have is that the cost is too high because the government is forced into paying high market prices driven by the private housing market.

This new scheme is going to add fuel to the private housing market fire, further increasing the cost of social housing.

It is utter madness.

Is it though? Average rent of 2k per month is 200k in 8 years. I think if we say the ceiling for FTBs is 600k then that is the maximum cost per person to take a 30% stake.

However, whoever is in social housing now is going to be unable to borrow anywhere near that. Therefore, let's say the State needed to give 100k - 150k to a purchaser to borrow for a house, that's only 4 - 6 years of rental assistance. Not a big cost at all in this context (also noting the State has a 30% ownership stake in the house too).

hometruths

Whatever about people who cannot afford to buy the houses, will it be open to people who can?! The Minister says:

We are looking at a shared equity type arrangement. There will be no arbitrary salary caps, that’s what’s really important.

SO if you're an FTB with a good salary and the state will buy 30% of your house for you with no strings, you'd be mad not to take it.

There is more, it may not just be limited to first time buyers!

“What we’re basically looking at is up to 30 per cent of a home that the State will take equity in. Is this open to singles and couples? Absolutely, it is. It’ll be open to predominantly first-time buyers initially [and] there would be some exceptions.

“In some instances people won’t want the full 30 per cent State equity, maybe the affordability gap is smaller so they might go for 10 per cent or 15 per cent equity.”

I'd love to know what instances he is imagining that people might not want the full 30%.

I'd be a bit miffed if I'd just stretched myself to the max to buy a 400k house and closed last week!

I suspect the eligibility info on this, once published, will make for fascinating reading.

hometruths

BryanMartin21 wrote: »

Is it though? Average rent of 2k per month is 200k in 8 years. I think if we say the ceiling for FTBs is 600k then that is the maximum cost per person to take a 30% stake.

However, whoever is in social housing now is going to be unable to borrow anywhere near that. Therefore, let's say the State needed to give 100k - 150k to a purchaser to borrow for a house, that's only 4 - 6 years of rental assistance. Not a big cost at all in this context (also noting the State has a 30% ownership stake in the house too).

I'd rather see the state focussing on ways to bring rents down than using high rents as a justification to waste money.

JimmyVik

Are they going to charge 30% of full market rate, reviewed regularly, for their (I mean the tax payers) 30% then?
Otherwise its a gift of nearly a third of a house.
What could possibly go wrong.

JimmyVik

schmittel wrote: »

I'd rather see the state focussing on ways to bring rents down than using high rents as a justification to waste money.

Everything the state touches with regard to property just makes things worse. Absolutely every single time.

hometruths

JimmyVik wrote: »

Are they going to charge 30% of full market rate, reviewed regularly, for their (I mean the tax payers) 30% then?
Otherwise its a gift of nearly a third of a house.
What could possibly go wrong.

Karl Deeter was talking about this too. Is it shared equity or is it a loan.

If it is shared equity then cannot ask homeowner to service the debt, it's simply capital cost and risk shared.

If it is a loan, then you must ask homeowner to repay it. But at what rates/timescale/penalty for non payment? And it is thus unreasonable for state to take/share capital risk on up or downside.

If state offers the option of either shared equity or loan repayment then as sure as night follows day everbody will want to repay the loan if the property market is booming because interest rates remain low or will want to have shared equity if property market collapses and interest rates rise!

Apart from a boost to short term new build supply, which is not entirely necessary anyway, there is only downside for the state in this deal.

hometruths

JimmyVik wrote: »

Everything the state touches with regard to property just makes things worse. Absolutely every single time.

Yep. Out of interest, was your recent purchase a new build sub 400k?

BryanMartin21

schmittel wrote: »

I'd rather see the state focussing on ways to bring rents down than using high rents as a justification to waste money.

So would I but this is the best FF and FG can do.

They just won't do anything which would bring down the cost of housing (to rent or buy) in a meaningful way as too many would kick up stink.

hometruths

BryanMartin21 wrote: »

So would I but this is the best FF and FG can do.

They just won't do anything which would bring down the cost of housing (to rent or buy) in a meaningful way as too many would kick up stink.

And therein lies the problem. What is even more maddening is they have wasted a golden opportunity to take the necessary steps to fix things properly, and could have blamed Covid for the negative impact on property prices.

BryanMartin21

schmittel wrote: »

And therein lies the problem. What is even more maddening is they have wasted a golden opportunity to take the necessary steps to fix things properly, and could have blamed Covid for the negative impact on property prices.

Yea, but I suppose there's another way of looking at that;

2/3 of people own their homes and they would be the ones paying (with the drop in their house price) for the other 1/3 who rent who would benefit from cheaper housing.

hometruths

BryanMartin21 wrote: »

Yea, but I suppose there's another way of looking at that;

2/3 of people own their homes and they would be the ones paying (with the drop in their house price) for the other 1/3 who rent who would benefit from cheaper housing.

And so what?

As the situation stands everybody is paying too much for the shambles of a housing market, whether it is through higher taxes, higher interest rates, or higher rents.

If you're a homeowner in your forever home what do you car about the fluctuation in prices. If you're planning on trading up a fall in prices is good news. If you're trading down it is not great news, but it is only really, really bad news if you're trading down from a trophy home to a tiny apartment.

People are valuing some sort of notional wealth on paper whilst failing to realise they are shelling out real cash now to pay for everybody else anyway.

TheSheriff

One thing is for sure, if this goes through we can likely put to bed the theory that property will be worth 70% in a manner of years. It's like to be worth alot more, on paper at least.

BryanMartin21

schmittel wrote: »

And so what?

As the situation stands everybody is paying too much for the shambles of a housing market, whether it is through higher taxes, higher interest rates, or higher rents.

If you're a homeowner in your forever home what do you car about the fluctuation in prices. If you're planning on trading up a fall in prices is good news. If you're trading down it is not great news, but it is only really, really bad news if you're trading down from a trophy home to a tiny apartment.

People are valuing some sort of notional wealth on paper whilst failing to realise they are shelling out real cash now to pay for everybody else anyway.

It's all well and good saying "so what if they have to pay?" but where is the political appetite going to come from in FF or FG? I even bet if you polled voters they would reject measures to significantly bring down house prices.

This State equity proposal won't solve the bigger issue of the crazy house prices in Ireland but it will at least give respite to those caught renting for the stupid money it costs to rent in Ireland.

combat14

apparently supply of property is at a 15 year low - who wants to move out of their house at present or have strangers view their house during winter in a global pandemic

no wonder asking prices have gone up

but this is very much temporary till covid resolves it self next year

we are still facing a bad brexit economically next month, rents are high (hard for many to save for a deposit), large segments of the econony are still reeling from covid, looking at more lockdowns next year and central bank lending limits are still firmly in place so all of the above will surely keep true property prices in check till supply reemerges...

Timing belt

BryanMartin21 wrote: »

Is it though? Average rent of 2k per month is 200k in 8 years. I think if we say the ceiling for FTBs is 600k then that is the maximum cost per person to take a 30% stake.

However, whoever is in social housing now is going to be unable to borrow anywhere near that. Therefore, let's say the State needed to give 100k - 150k to a purchaser to borrow for a house, that's only 4 - 6 years of rental assistance. Not a big cost at all in this context (also noting the State has a 30% ownership stake in the house too).

I would expect that there will be a cap around 425k.

BryanMartin21

Timing belt wrote: »

I would expect that there will be a cap around 425k.

That wouldn't buy much would it, especially among new builds. Surely not?

Smouse156

BryanMartin21 wrote: »

You are misinterpreting what "can't afford them" means.

Remember, it is only aimed at FTBs so there is still a ceiling on affordability based on the 3.5 borrowing limit (perhaps 600k price limit for joint applicants?). Mortgage repayments on 550k borrowing would be around 2k per month.

Compare the house you can get for 600k versus the rental you can get for 2k per month. It is night and day.

I’m not misrepresenting anything! Just because people pay unaffordable rents (by most metrics) isn’t a justification for stating paying the same for a house makes it affordable.

Rent is also year to year however you could be locked into the mortgage for 30 plus years. When interest rates do eventually rise these people will be well and truly screwed.

BryanMartin21

Smouse156 wrote: »

I’m not misrepresenting anything! Just because people pay unaffordable rents (by most metrics) isn’t a justification for stating paying the same for a house makes it affordable.

Rent is also year to year however you could be locked into the mortgage for 30 plus years. When interest rates do eventually rise these people will be well and truly screwed.

You could say that about any mortgage holder.

If renters can pay current market rent, they can afford to pay a mortgage for the maximum they are able to borrow.

Timing belt

BryanMartin21 wrote: »

That wouldn't buy much would it, especially among new builds. Surely not?

it's close to the average price of a house in Dublin and the reference affordable housing so it may even be lower than this. It is designed for FTB's that would not get on the housing ladder without it and would be stuck renting otherwise. I can't see many houses in Dun Laoghaire/ Rathdown benefiting from this scheme and think you will find that when it is rolled out it will be target parts of Dublin where housing is cheaper. It will be interesting to see the detail...

Smouse156

schmittel wrote: »

And so what?

As the situation stands everybody is paying too much for the shambles of a housing market, whether it is through higher taxes, higher interest rates, or higher rents.

If you're a homeowner in your forever home what do you car about the fluctuation in prices. If you're planning on trading up a fall in prices is good news. If you're trading down it is not great news, but it is only really, really bad news if you're trading down from a trophy home to a tiny apartment.

People are valuing some sort of notional wealth on paper whilst failing to realise they are shelling out real cash now to pay for everybody else anyway.

Totally agree! People obsessed with paper wealth that will never be realised unless they trade down is crazy. No one seems to understand the concept of value for money in this country. Keep inflating the overpriced shoebox so one will feel happier about paying through the nose for ****e.

TheSheriff

Timing belt wrote: »

it's close to the average price of a house in Dublin and the reference affordable housing so it may even be lower than this. It is designed for FTB's that would not get on the housing ladder without it and would be stuck renting otherwise. I can't see many houses in Dun Laoghaire/ Rathdown benefiting from this scheme and think you will find that when it is rolled out it will be target parts of Dublin where housing is cheaper. It will be interesting to see the detail...

This will impact all homes, in all areas either directly or by secondary impact.

It will increase the prices of houses in 'cheaper' areas, which will likely increase the price of those in more expensive areas.

This is a really terrible idea (I feel confident in that without knowing the detail).

Another thought, what happens if another government ends this in a few years (SF), who'll pick up the negative equity when prices falls.

Smouse156

BryanMartin21 wrote: »

You could say that about any mortgage holder.

If renters can pay current market rent, they can afford to pay a mortgage for the maximum they are able to borrow.

But all current mortgage holders don’t have shared equity in their homes.

All this new Brickie scheme does is inflate overpriced property.

I suppose given that the landlord party (FG) and the builders party (FF) are in power we shouldn’t expect any useful policies such as increased taxation of development land and a use it or lose it for planning to spur development. Why not provide cheap finance for builders? Did anyone in Govt even consider that?

They’re the architects of their own downfall when houses become even more unaffordable and Sinn Féin clean them out in the next election.

Smouse156

TheSheriff wrote: »

This will impact all homes, in all areas either directly or by secondary impact.

It will increase the prices of houses in 'cheaper' areas, which will likely increase the price of those in more expensive areas.

This is a really terrible idea (I feel confident in that without knowing the detail).

Another thought, what happens if another government ends this in a few years (SF), who'll pick up the negative equity when prices falls.

Agreed! It’s one of the worst possible ideas they could have come up with. It basically circumvents the Central Bank LTV ratios...will go from 3.5x to 5x (3.5/0.7 = 5).

Villa05

brisan wrote:

House prices would rise House prices are pitched at the max people can afford ,not their true cost The 3.5 LTI limit is the only thing keeping house prices down

BryanMartin21 wrote:

Where is the billion euro rental assistance money coming from each year? Who will pay for the mass social housing building programme? And are FTBs not also taxpayers?

5+ wrongs don't make a right

Smouse156 wrote:

Agreed! It’s one of the worst possible ideas they could have come up with. It basically circumvents the Central Bank LTV ratios...will go from 3.5x to 5x (3.5/0.7 = 5).

Holy fcuk.

Would it be possible to put up a fight against this with the EU

It is an obscene bubble blowing measure. I'm sure they would take negatively to it given the proposering parties history

hometruths

Villa05 wrote: »

5+ wrongs don't make a right



Holy fcuk.

Would it be possible to put up a fight against this with the EU

It is an obscene bubble blowing measure. I'm sure they would take negatively to it given the proposering parties history

Maybe the EU will put up the fight themselves. According to Darragh O'Brien:

“The heads of the Bill are going to be with Cabinet next Tuesday and then we have a little bit of work to do with the European Commission in January. There are some state aid rules we need to deal with,” he told The Irish Times.

https://www.irishtimes.com/news/politics/affordable-housing-plan-will-see-state-take-up-to-30-equity-with-first-time-buyers-1.4440041

Timing belt

If it follows the Uk scheme then they will be paying rent on the equity owned by the gov

Timing belt

schmittel wrote: »

Maybe the EU will put up the fight themselves. According to Darragh O'Brien:



https://www.irishtimes.com/news/politics/affordable-housing-plan-will-see-state-take-up-to-30-equity-with-first-time-buyers-1.4440041

Highly unlikely seeing as Europe is giving state aid to every sector of the economy

hometruths

Timing belt wrote: »

If it follows the Uk scheme then they will be paying rent on the equity owned by the gov

Will they be paying 30% of the rental value of the property on top of their mortgage?

Can't see that going over well with the rent is dead money crowd.

Hubertj

Will be interesting to see what provisions are included around if a mortgagee holder falls into arrears. Repossession / sale of property will surely have to be included in the contract.

Villa05

Timing belt wrote:

Highly unlikely seeing as Europe is giving state aid to every sector of the economy

It might be timely for an Irish citizen to highlight the dangers of a overheating property market and an attempt by politicians to circumvent prudent lending policy