Irish Property Market chat II - *read mod note post #1 before posting*

Marius34

Villa05 wrote: »

Are they not seperate statements?

The rule has been static since inception in 2015. If parts of our market have there price dictated by bodies not impacted by that rule, then that rule becomes irrelevant in establishing price in that particular market

They are separate statements, but contradicting each other.
In one you stating that removing 3.5 income limit has impact on the property price, thus is relevant, in another that income limit rules are irrelevant.

JDD

Ace2007 wrote: »

But correct me if i'm wrong, you can only get an exemption until you have a property in many cases, so there are people viewing houses, and potentially bidding on houses that in fact not get an exemption, so while it's capped from the bank's point of view, some FTB don't know that they might not get it.

Before you start bidding on houses you get your approval in principle. That usually means that you have "approval in principle" for the exemption, but it's caveated that it will ultimately depend on your economic situation not changing and the house you end up wanting to buy. This gives the bank an out if they think you have bid massively over the market value for house.

I haven't heard yet of a buyer being rejected for the exemption because the house went for above the bank's risk appetite for price. I have heard of it being withdrawn if someone has had a pay cut or if the bank's risk appetite changes.

So I don't think there's lots of people out there bidding on houses who haven't got the exemption already in their Approval in Principle letter.

timmyntc

Marius34 wrote: »

They are separate statements, but contradicting each other.
In one you stating that removing 3.5 income limit has impact on the property price, thus is relevant, in another that income limit rules are irrelevant.

The 3.5 limit stops prices rising faster - but price rises are still possible from cash buyers to whom the mortgage rules dont apply (e.g. investment funds)

The 3.5 rule doesnt set the market price, but it works to slow the growth of it.

If people had no restriction on borrowing they would borrow as much as they need to get the home they want, but then the price of that home would rise, so the next buyers borrow more, and so on. A vicious cycle.

Amadan Dubh

timmyntc wrote: »

The 3.5 limit stops prices rising faster - but price rises are still possible from cash buyers to whom the mortgage rules dont apply (e.g. investment funds)

The 3.5 rule doesnt set the market price, but it works to slow the growth of it.

If people had no restriction on borrowing they would borrow as much as they need to get the home they want, but then the price of that home would rise, so the next buyers borrow more, and so on. A vicious cycle.

The Central Bank agrees with you on this; it has recently stated that the mortgage lending rules were working and did not need to be amended as they were keeping house prices from growing further. I know they are doing a deep dive review soon but I don't expect their conclusion to change on the operation of those rules.

timmyntc

Amadan Dubh wrote: »

The Central Bank agrees with you on this; it has recently stated that the mortgage lending rules were working and did not need to be amended as they were keeping house prices from growing further. I know they are doing a deep dive review soon but I don't expect their conclusion to change on the operation of those rules.

It's the single biggest factor keeping our prices "in check" if you can call it that.
Were they removed prices would shoot up. Fair play to the central bank for putting it in place - hopefully it stays until the supply improves.

Marius34

timmyntc wrote: »

The 3.5 limit stops prices rising faster - but price rises are still possible from cash buyers to whom the mortgage rules dont apply (e.g. investment funds)

The 3.5 rule doesnt set the market price, but it works to slow the growth of it.

If people had no restriction on borrowing they would borrow as much as they need to get the home they want, but then the price of that home would rise, so the next buyers borrow more, and so on. A vicious cycle.

Yeap, mostly I agree with everything you saying. As is my point, that income limit rules plays a significant part in the property price.

combat14

timmyntc wrote: »

The 3.5 limit stops prices rising faster - but price rises are still possible from cash buyers to whom the mortgage rules dont apply (e.g. investment funds)

The 3.5 rule doesnt set the market price, but it works to slow the growth of it.

If people had no restriction on borrowing they would borrow as much as they need to get the home they want, but then the price of that home would rise, so the next buyers borrow more, and so on. A vicious cycle.

perhaps even a need to increase deposit requirements to slow down rampant house price rises

Ace2007

combat14 wrote: »

perhaps even a need to increase deposit requirements to slow down rampant house price rises

Instead of increasing the deposit requirement, changing them to show how the deposit has been accumulated, i.e. not from the bank of Mam and Dad. if you have a deposit of 50k, but only regular savings of 800 a month - it's obvious that you haven't saved the deposit yourself. Is it fair to the couples who parents can't help them out?

M_Murphy57

Ace2007 wrote: »

But that's why i said it's an opportunity to develop rent controls and tightening tenant rights. I came up with the idea in 2mins. Every idea is going to have pro's and con's.

At the moment there are people paying more for rent than a mortgage, so if a system was set up that rent in an investment fund type property or family house, was capped at rate lower than a mortgage, it would make the homes more attractive, as people would get what they want at a price lower than they are paying at the moment. They would also not have a noose over their heads for the next 30 odd years. There may be issues to iron out at retirement, but lets face it - since when have the majority of Irish people cared about their needs at retirement - given majority have no provision in place except the state pension.

I can see what you are saying but the problem is....

No small time private investor in their right mind would get involved as a landlord under those terms (I offloaded my own single rental for a variety of reasons including a fear that rent control and life time tenancies would eventually come in)

Which means only large investors like REITS and cuckoo funds come in and offer it and people lose their minds over them buying houses (though a non negotiable 30 year term with limited uplift isnt probably that attractive to them)

Leaving social housing for all the answer? Many people wouldnt want that either.

And as you say, paying rent in retirement is another massive ticking time bomb

Ace2007

M_Murphy57 wrote: »

I can see what you are saying but the problem is....

No small time private investor in their right mind would get involved as a landlord under those terms (I offloaded my own single rental for a variety of reasons including a fear that rent control and life time tenancies would eventually come in)

Which means only large investors like REITS and cuckoo funds come in and offer it and people lose their minds over them buying houses (though a non negotiable 30 year term with limited uplift isnt probably that attractive to them)

Leaving social housing for all the answer? Many people wouldnt want that either.

And as you say, paying rent in retirement is another massive ticking time bomb

Say the way markets are at the moment for instance, the upside to a stable income that kept in line with even just inflation would be that it would beat cash, which is running on negative, so a stable income from a rent like fund, should achieve returns over bond fund of similar duration.

Blowfish

JDD wrote: »

Before you start bidding on houses you get your approval in principle. That usually means that you have "approval in principle" for the exemption, but it's caveated that it will ultimately depend on your economic situation not changing and the house you end up wanting to buy. This gives the bank an out if they think you have bid massively over the market value for house.

I haven't heard yet of a buyer being rejected for the exemption because the house went for above the bank's risk appetite for price. I have heard of it being withdrawn if someone has had a pay cut or if the bank's risk appetite changes.

So I don't think there's lots of people out there bidding on houses who haven't got the exemption already in their Approval in Principle letter.

Not true these days unfortunately. AIB/Haven/EBS and BOI explicitly won't let you apply for an exception until you are sale agreed and will only AIP you for 3.5 until you are. A couple of the others cap the exception at 4x income and require you to provide the property address of where you want to buy (even if you aren't quite at sale agreed yet) and the exception is tied solely to that property.

Villa05

Marius34 wrote:

Yeap, mostly I agree with everything you saying. As is my point, that income limit rules plays a significant part in the property price.

Must stick to rule
I'm loosing whem I'm explaining

Yes prices would be far higher were the rule not in place. Must take off one of my blinkers

Scary prospect when the investment funds were lobbying for shared ownership. There intentions appear clear.
Drive up the price as high as possible and off load before the inevitable crash

Survey this morning showing 58% of FTBs were in favour shared ownership scheme. Desperation aplenty out there

Cal4567

https://www.bbc.com/news/uk-wales-57245851

Homes in Wales bought before viewing in 'mad' housing market

We are not alone and it reminds us of an important point. Many housing issues are very similar across western cities and towns.

Beanybabog

I have just see a flood of houses go back on the market that’s were sale agreed over the last few months in my area. Any thoughts on why this is? I’ve been keeping an eye on them for friends looking to buy they haven’t reduced the asking, but the sales have obviously all fallen through at the same time

Ace2007

Beanybabog wrote: »

I have just see a flood of houses go back on the market that’s were sale agreed over the last few months in my area. Any thoughts on why this is? I’ve been keeping an eye on them for friends looking to buy they haven’t reduced the asking, but the sales have obviously all fallen through at the same time

Ha where to start:

People bidding on houses over lockdown without seeing them in person and then going sake agreed and having a look to see camera angles distorting what the place really looks like.

People bidding on houses without checking with bank post lockdown 1/2 if their funds are still in place and find out they aren’t as their work was on some pup scheme or they lost some income

People thinking they have the 4.5 exemption and then they don’t

People in a chain and one side falls through so they have to pull out of their deals

Change of mind of the seller as they now believe they can get more money for the house because of the heat in the market.

Some people think that they have saved more over lockdown and can afford better and pull out

Some people think that they need bigger or different type of house if home office needed.

Some employers and companies have offered wth full time or majority of time and some people prefer to get more for their money and move to countryside and commute to dublin maybe 1/2 days a week.

Etc

jill_valentine

Beanybabog wrote: »

I have just see a flood of houses go back on the market that’s were sale agreed over the last few months in my area. Any thoughts on why this is? I’ve been keeping an eye on them for friends looking to buy they haven’t reduced the asking, but the sales have obviously all fallen through at the same time

I don't know if I'm raving, but an awful lot of houses seem to have showed up yesterday around Limerick and Cork in particular.

Marius34

Villa05 wrote: »

Must stick to rule
I'm loosing whem I'm explaining

Yes prices would be far higher were the rule not in place. Must take off one of my blinkers

Scary prospect when the investment funds were lobbying for shared ownership. There intentions appear clear.
Drive up the price as high as possible and off load before the inevitable crash

Survey this morning showing 58% of FTBs were in favour shared ownership scheme. Desperation aplenty out there

I didn't know investment funds are aware when the crash is coming.

snow_bunny

Marius34 wrote: »

I didn't know investment funds are aware when the crash is coming.

You're misunderstanding his point. His point is that funds are hoovering up property, then lobbying the government to roll out shared ownership, which will increase prices another 30%. They can then start selling off their stock and make a killing. They don't have to wait for a crash, they can orchestrate one to their own advantage.

JimmyVik

snow_bunny wrote: »

You're misunderstanding his point. His point is that funds are hoovering up property, then lobbying the government to roll out shared ownership, which will increase prices another 30%. They can then start selling off their stock and make a killing. They don't have to wait for a crash, they can orchestrate one to their own advantage.

Inst it amazing that this is happening in plain sight and they have manipulated the situation that people are basically begging to be fcuked over.

Balluba

JimmyVik wrote: »

Inst it amazing that this is happening in plain sight and they have manipulated the situation that people are basically begging to be fcuked over.

In my opinion Irish people enjoy buying and selling houses to each other at inflated prices

Marius34

snow_bunny wrote: »

You're misunderstanding his point. His point is that funds are hoovering up property, then lobbying the government to roll out shared ownership, which will increase prices another 30%. They can then start selling off their stock and make a killing. They don't have to wait for a crash, they can orchestrate one to their own advantage.

So we are heading to steep price increase in coming years... I though he was expecting prices to go down soon. It's difficult to follow up on the points.

yagan

JimmyVik wrote: »

Inst it amazing that this is happening in plain sight and they have manipulated the situation that people are basically begging to be fcuked over.

The majority who are low or no mortgaged only see their house value increase so they don't really care.

It was the same back in 08, the comfortable majority didn't care until they saw their own house price value drop.

JDD

We're only heading to that steep price uplift if shared ownership comes in. That's still not a given.

I can understand FTB'ers being so desperate that they'd be happy to do shared ownership. At this stage, they'd only be thinking of themselves and their needs in the short to medium term, and not on the macro effect to the economy of shared ownership.

You would hope that if a slew of houses were coming back on the market there might be a slight downward push on prices.

An interesting point on the exemptions - 20% of the book value of FTB mortgages in any one year can be lent out with an exemption. At first glance that looks like one in five people. But it's 20% of the entire book value of the mortgages, not 20% of applicants. So say you lend out 100m in a year - two mortgages of 20 million each and 12 mortgages of 3m each - you can allow 20m lent to be given to exemption customers. That means you could be giving exemptions to six of 14 customers, half of your lower/middle borrowers. It may be that the income exemptions are having more of an effect on the lower/middle area of the market and not so much at the upper end.

coolshannagh28

Marius34 wrote: »

So we are heading to steep price increase in coming years... I though he was expecting prices to go down soon. It's difficult to follow up on the points.

Steep curves are a factor of Irish governance, we generated the greatest housing crash in 08 and then a phenomenal recovery to the same point where a steep crash can and will do immense damage again . <MOD SNIP>

C14N

Reversal wrote: »

https://m.independent.ie/business/personal-finance/property-mortgages/new-blow-for-first-time-buyers-as-two-banks-close-off-mortgage-exemptions-40465567.html

Not sure why this is being reported as bad news for FTBs. Less fuel on the fire at the moment can only be a good thing.

Reversal wrote: »

But if people can afford less, what's happens to prices...

I could see this being true if everyone buying was a FTB looking for an exemption, but FTBs are also competing with people who are selling a house and are able to fund a larger portion of their purchase using their existing wealth. In general, the people who need the exemptions are FTBs who don't have much more than a deposit in terms of their own contribution, and those people will have less access to capital as a result of this.

Blowfish wrote: »

Not true these days unfortunately. AIB/Haven/EBS and BOI explicitly won't let you apply for an exception until you are sale agreed and will only AIP you for 3.5 until you are. A couple of the others cap the exception at 4x income and require you to provide the property address of where you want to buy (even if you aren't quite at sale agreed yet) and the exception is tied solely to that property.

I have mortgage approval from both KBC and AIB. KBC would not give an exemption without at least having a property address, but AIB gave us approval in priciple with an exception unconditionally. KBC gave the sale agreed line to us too, initially, but honestly don't understand the logic of needing to go sale agreed before getting it. How do you go sale agreed on a property that you don't have mortgage approval for?

I don't even really understand the logic of needing an address. The bank requires you to pay for them to have it assessed before the deal is closed, you would think that would be a more appropriate time to decide whether or not to grant it. I can imagine that these days when deals are getting closed pretty quickly, you will have a hard time convincing a seller to wait for you to go back tot he bank to possibly get an exception so that you can meet their price when they will usually have other buyers lined up ready to go.

wassie

Not sure what you dont understand. You are under no obligation to tell the seller you need an exemption to go sale agreed. Agents may ask for a copy of your approval in principle (not mortgage approval), but you don't need to disclose for how much. In fact you would be bonkers if you did. Make an offer, if its accepted go sale agreed then do the exemption dance with the bank.

C14N

wassie wrote: »

Not sure what you dont understand. You are under no obligation to tell the seller you need an exemption to go sale agreed. Agents may ask for a copy of your approval in principle (not mortgage approval), but you don't need to disclose for how much. In fact you would be bonkers if you did. Make an offer, if its accepted go sale agreed then do the exemption dance with the bank.

Both AIP letters I have been given say the amount I am approved for. I don't see how I could demonstrate I have the approval without showing the amount I am approved for. And why would a seller agree to go sale agreed in the first place without even having evidence that you have the funds to pay what you say you will?

wassie

Simply redact the AIP letter to hide the amount.
Make offer - go sale agreed.
Provide deposit.
Go back to bank cap in hand.
Simples.

Ace2007

wassie wrote: »

Simply redact the AIP letter to hide the amount.
Make offer - go sale agreed.
Provide deposit.
Go back to bank cap in hand.
Simples.

But if you hide the amount, how do they know you can afford the house?

wassie

Because sale agreed is essentially bargaining in good faith. Agents may insist on more evidence but you are under no obligation to provide it and likewise they are under no obligation to sell it to you.

Sale Agreed does not mean you have entered into any contractually binding arrangement. This only happens when you exchange contacts.