Irish Economy at risk of overheating.

31-05-2018 8:45am #1

The Irish Economy is at risk of overheating according to many news reports today. It is true the place has the feel of a boom, everywhere is busy, a lot more money around. What I can't get my head around is it is clear we have a housing shortage and I think the OECD are blaming housing, but how is that when we have a shortage of housing ? So how does overheating correlate to housing ?

Geuze · 31-05-2018 11:00am

6541 wrote: »

The Irish Economy is at risk of overheating according to many news reports today. It is true the place has the feel of a boom, everywhere is busy, a lot more money around. What I can't get my head around is it is clear we have a housing shortage and I think the OECD are blaming housing, but how is that when we have a shortage of housing ? So how does overheating correlate to housing ?

There is a shortage of housing as way too few units have been built since 2008.

Ans still output is way below where it should be.

The housing shortage leads to escalating rents and house prices, which may lead to higher wage demands.

Fr Tod Umptious · 01-06-2018 8:28am

I'm really not sure where I see the overheating, but then again I'm not an ecomonist nor do I have the facts.

What exactly is driving this economy ?
You could really see the last time that it was domestic demand.
Houses where being built and that involved construction workers, materials, fuel, finincial services, legal services etc etc which employed a whole lot of people in a whole lot of areas.

And the same easy credit regime that was used to build the houses was also available to the people employed directly or indirectly, to buy cars, holiday, social life, etc etc.

But there is no sense of that booming domestic economy this time, so where is it coming from ?

One good point in the article was the mention of increased interest rates, many people still on trackers are keeping the head above water because of the low rates this decade, if they increase the squeezed middle will certainly get squeezed some more, including this poster.

Wanderer78 · 01-06-2018 8:38am

Oh there's no question, another crash is on the way, the only problem is, nobody knows the details of what, when, where and how it's gonna happen. The fundamentals that caused the crash in 2008 have not changed, so we await... Disturbingly, I suspect the changes that are required could take years if not decades to occur, so maybe we ll have to experience a few more serious crashes before we realise, something is seriously wrong

James Brown · 01-06-2018 3:15pm

Wanderer78 wrote: »

Oh there's no question, another crash is on the way, the only problem is, nobody knows the details of what, when, where and how it's gonna happen. The fundamentals that caused the crash in 2008 have not changed, so we await... Disturbingly, I suspect the changes that are required could take years if not decades to occur, so maybe we ll have to experience a few more serious crashes before we realise, something is seriously wrong

It's a choice. The state could change it's ways, but chooses to make hay and as much hay as possible before the clouds gather. That's my impression. Parties seem to have an idea of what they want, they go for it and the management of the broader day to day is given passing attention or more if it's so bothersome it may effect seats.

We seem to be overly concerned about the welfare of the building industry. This leads us to boom and bust. We know this since the FF government of the late 1980's.

NIMAN · 01-06-2018 3:24pm

Didn't David McWilliams say that he doesn't think there is another bust coming?

As for the conditions, well back in 08 we were all rich based on selling houses to each other, nothing else. Wealth and spending wasn't based on producing stuff, just selling property.

Not the same this time around. Many people in the country are still struggling and not spending foolishly.

Perhaps maybe Dublin is about to burst, but not the rest of the country? Can that happen?

James Brown · 01-06-2018 4:33pm

NIMAN wrote: »

Didn't David McWilliams say that he doesn't think there is another bust coming?

As for the conditions, well back in 08 we were all rich based on selling houses to each other, nothing else. Wealth and spending wasn't based on producing stuff, just selling property.

Not the same this time around. Many people in the country are still struggling and not spending foolishly.

Perhaps maybe Dublin is about to burst, but not the rest of the country? Can that happen?

I don't personally know anybody who over stretched themselves during the last boom, (unless we count families who bought homes), yet we all felt the harsh measures for having gone mad/partied, (which was an insult). The point is, I think people may be dragged into any upcoming recession regardless of personal choices. These things are too big to avoid, but if you're big enough, it seems you've less or no consequences, which may explain why the same people are back doing a lot of the same things and you and I should be the ones worried.

Chips Lovell · 01-06-2018 4:41pm

6541 wrote: »

What I can't get my head around is it is clear we have a housing shortage and I think the OECD are blaming housing, but how is that when we have a shortage of housing ? So how does overheating correlate to housing ?

The link to housing is that, shortage of housing is driving house price inflation (unlike the last time around, when access to credit the main driver). Prices of houses are going up faster than incomes, meaning there's more likelihood of people overstretching themselves in order to finance a house. If there was another economic shock, job losses and pay cuts could put borrowers under pressure to repay.

Now mortgage lending restrictions are much tighter than they used to be, but it's still a worry to see house price growth sprinting ahead of incomes

Wanderer78 wrote: »

Oh there's no question, another crash is on the way, the only problem is, nobody knows the details of what, when, where and how it's gonna happen.

If you don't know the details of what, when, where and how, how are you so sure there's another crash on the way?

NIMAN · 01-06-2018 5:21pm

But surely the only people exposing themselves to problems are those who are now stupidly paying way above the odds for Dublin houses?

That, in the context of the entire country, is only a small number of people. They can't be causing the whole economy to overheat surely?
Take out the housing crisis, is the country doing anything else majorly wrong in terms of the economy?

And if the arse falls out of the Irish housing market again, then those people will suffer, the likes of me won't?

James Brown · 01-06-2018 5:39pm

NIMAN wrote: »

But surely the only people exposing themselves to problems are those who are now stupidly paying way above the odds for Dublin houses?

That, in the context of the entire country, is only a small number of people. They can't be causing the whole economy to overheat surely?
Take out the housing crisis, is the country doing anything else majorly wrong in terms of the economy?

And if the arse falls out of the Irish housing market again, then those people will suffer, the likes of me won't?

It's a knock on effect. If enough people can't pay mortgages, the lenders tighten loan restrictions, companies hire less, freeze pay levels, rates increase to make up losses, taxes need meet more demand for people on low incomes needing more and more assistance and so on.
As regards housing the state enables the developers and (non-accidental) landlords set their own terms and if the public can't meet it, subsidies and aid comes in to play.
The housing market should be left to it's own devices in my view, more so, at any rate. If we, (tax payer/state) keep buying, they'll certainly not lower prices or if needs be push for circumstances were they can afford to lower prices.

Edward M · 02-06-2018 8:56am

Matt Barrett wrote: »

It's a knock on effect. If enough people can't pay mortgages, the lenders tighten loan restrictions, companies hire less, freeze pay levels, rates increase to make up losses, taxes need meet more demand for people on low incomes needing more and more assistance and so on.
As regards housing the state enables the developers and (non-accidental) landlords set their own terms and if the public can't meet it, subsidies and aid comes in to play.
The housing market should be left to it's own devices in my view, more so, at any rate. If we, (tax payer/state) keep buying, they'll certainly not lower prices or if needs be push for circumstances were they can afford to lower prices.

Sounds a bit contradictory Matt?
It looks like you're criticising govt/state for allowing them set their own market, then state that they should be left to their own devices.
IMO the biggest threat to our economy is from outside of our control factors, given that we are so dependent on FDI.
Trump at the minute is a big threat, the situation in Italy and brexit, much more of a threat than housing!

Akrasia · 02-06-2018 9:13am

The last crash was driven by 2 things, an unsustainable tax bubble because of construction related economic activity, and excessive debt that was underwritten by speculative demand. When people start buying property because they intend to flip it shortly afterwards to other speculators for a profit, that's a bubble.

Now we have stupid rents because there is a shortage of property so people are prepared to pay higher mortgages because it's cheaper than renting. The number of property transactions is low because credit is still unavailable to most people. People are buying for long term investment, not as a frenzy to realize short term profits

The last bubble was characterized by the banks throwing money at everyone and sub prime lending deliberately packaging bad loans and selling them to pension funds. This isn't happening in Europe now. Although American household debt is back at record levels.

02-06-2018 9:23am

Wanderer78 wrote: »

Oh there's no question, another crash is on the way, the only problem is, nobody knows the details of what, when, where and how it's gonna happen. The fundamentals that caused the crash in 2008 have not changed, so we await... Disturbingly, I suspect the changes that are required could take years if not decades to occur, so maybe we ll have to experience a few more serious crashes before we realise, something is seriously wrong

What fundamentals haven't changed? Please list them in bullet point style one by one rather than in a huge speel

Personally, I think 2008 bust was fueled as much externally as internally. Irish banks had access to huge sums .... they're lending nowhere near to those amounts currently.

Also many Irish folk had received SSIA returns in the years leading up to the crash. For the last decade we've been paying taxes with money that otherwise would have found its way into the economy.

Two major differences & I'm not really thinking about it.

Sierra Oscar · 02-06-2018 10:40am

It was interesting chatting to some of the vendors at Bloom in the Park. General consensus is that people are starting to spend silly money on their gardens again, akin to the Celtic Tiger days.

I don't really like drawing comparisons with the Celtic Tiger though as no two bubbles are the same.

The Irish economy seems to be in a good place at the moment. However things are looking shaky internationally. We have the emergence of trade wars, a risky political climate in the US and parts of the EU, the unfolding of Brexit and an underlying sovereign debt crisis that still hasn't been resolved. Interest rates are also set to rise.

I would have concerns that these issues could conflate to bring about a global economic down turn which would inevitably have an impact on Ireland.

The average length of time between recessions in the US in the modern era is ten years. The previous one ended in 2009 so (crudely) speaking one is due. The question is whether it will just be a slight down turn or something that could trigger a global rout.

Edward M · 02-06-2018 11:18am

Sierra Oscar wrote: »

It was interesting chatting to some of the vendors at Bloom in the Park. General consensus is that people are starting to spend silly money on their gardens again, akin to the Celtic Tiger days.

I don't really like drawing comparisons with the Celtic Tiger though as no two bubbles are the same.

The Irish economy seems to be in a good place at the moment. However things are looking shaky internationally. We have the emergence of trade wars, a risky political climate in the US and parts of the EU, the unfolding of Brexit and an underlying sovereign debt crisis that still hasn't been resolved. Interest rates are also set to rise.

I would have concerns that these issues could conflate to bring about a global economic down turn which would inevitably have an impact on Ireland.

The average length of time between recessions in the US in the modern era is ten years. The previous one ended in 2009 so (crudely) speaking one is due. The question is whether it will just be a slight down turn or something that could trigger a global rout.

Mainly agree. I would imagine now though that silly money is disposable income rather than borrowed money perhaps.
The main problem here is with attitudes about the economy doing well.
So many expect that to be passed down to everybody, basically thinking that if the economy is doing well everyone should be rich, that's never the case.
Its so easy for political party's to tell people that they will ensure that benefits from their policies will be to share the prosperity evenly, when genuinely that's never going to be the case.
What we need to realise is that a good economy means is that there is a chance for everyone to benefit, if they work at it themselves, not expect a govt to take from those driving the economy and hand it out to them in benefits.
You must be prepared to work at improving your own situation, then everyone can benefit from a good economy.

Villa05 · 02-06-2018 11:34am

Fr Tod Umptious wrote:

I'm really not sure where I see the overheating, but then again I'm not an ecomonist nor do I have the facts.

If the supply of something essential is curtailed/blocked it's price rises substantially. Given that accommodation costs accounts for nearly a third of income of an individual/family any rise in this puts significant pressure on wage and general inflation

Rising house/rental prices are the equivalent of an own goal in a soccer match. Not dealing with it adequately is like putting karius in goals

Villa05 · 02-06-2018 11:46am

Akrasia wrote:

The last crash was driven by 2 things, an unsustainable tax bubble because of construction related economic activity, and excessive debt that was underwritten by speculative demand. When people start buying property because they intend to flip it shortly afterwards to other speculators for a profit, that's a bubble.

We now have concerns of the sustainability of corporation tax.

Prices rising due to the lack of supply is a bubble

State finances are in a dire position while there was a buffer going into the last crisis

Bank are extremely vulnerable as much of the mess from the last crisis was swept under the carpet rather than being adequately

Low interest rates in a booming economy was a major contributory factor in the last collapse. This again is a problem for Ireland

Arthur Daley · 02-06-2018 12:34pm

Baron de Charlus wrote: »

Prices of houses are going up faster than incomes, meaning there's more likelihood of people overstretching themselves in order to finance a house.

I think at this stage, this condition has been observed so much since 1995 that it now warrants it's own space in economic textbooks as 'an Irish boom'.

We can talk about shortage of supply around Dublin, and the dogs on the street talk about that to death. But we also need to understand why we have such population growth, particularly in Greater Dublin, what these people are all doing they were not doing in 2008 or 2012, and how sustainable their current economic activity is.

Dohnjoe · 02-06-2018 3:28pm

Augeo wrote: »

Personally, I think 2008 bust was fueled as much externally as internally. Irish banks had access to huge sums .... they're lending nowhere near to those amounts currently.

Indeed. A lot has changed since the 2008 systemic crash. Globally there are much stricter lending and credit practices, much more (effective) regulation and things are generally much tighter.

The risks that banks, shadow banks and institutions took on a daily basis leading up to 2008 were staggering in comparison to today

Infini · 02-06-2018 8:19pm

I doubt the economy is at risk of overheating here, price's in the property market are high due to lack of supply, they're even been advertising in the building industry to try and get people back home from Australia and that because they need people to build new homes and offices such is the choke on supply.

If anything the risk's to the economy wont be from inside it would be external or something like a debt crisis in Italy dragging down things across the board. We got President Troll acting the bollocks as well and picking the wrong fight's to say the least but hopefully in another 2 years he'll be gone or sinking quickly during the 2020 election there.

Akrasia · 02-06-2018 9:08pm

Villa05 wrote: »

Prices rising due to the lack of supply is a bubble

No it isn't, that's the law of supply and demand. A speculative bubble is where people buy something today because they believe it is going to be more expensive tomorrow, but that belief is not tied to the intrinsic value of the asset. Things like tulips or .com tech stocks, or one bed apartments off the plans as investment properties.

If more houses are built, the price increases should subside. In a speculative bubble akin to 2005-2008, the more houses that got built. The faster the prices were rising.

02-06-2018 10:26pm

Also....the "vulture funds" buying up blocks of apartments etc to let aren't borrowing the cash from Irish banks.

& I reckon most other priorities are being bought by effectively cash buyers or folk with quite credible income streams.

The exposure to an Irish property price crash is small compared to a decade ago.

FreudianSlippers · 05-06-2018 10:15am

NIMAN wrote: »

But surely the only people exposing themselves to problems are those who are now stupidly paying way above the odds for Dublin houses?

Nothing personal, but this post personifies the real lack of understanding of general economics and housing that seems to be prevalent in Ireland - I blame the lack of a proper rental market and the abundance of social housing.

Paying above the odds has little to no relevance if the person can afford the house.

A house that costs €1m in Dublin at the moment has a possible LTV of 80%, monthly repayments of about $3k on a fixed 30-year mortgage. If one follows standard best practice a couple on a combined income of €200k can easily afford that house.

It makes little difference if there is a correction or even a significant drop in the value of that house unless they're basically flippers.

05-06-2018 10:22am

FreudianSlippers wrote: »

...........

A house that costs €1m in Dublin at the moment has a possible LTV of 80%, monthly repayments of about $3k on a fixed 30-year mortgage. If one follows standard best practice a couple on a combined income of €200k can easily afford that house..............

What institution are offering 2.1% 30 year fixed mortgages to folk living in Dublin?

Lantus · 05-06-2018 10:55am

I'd say we will experience smaller peaks and troughs and in specific areas. More like localised crisis points.

Vulture funds are now ripe to dispose of their holdings at massive profit. Potential impact on property market prices and demand. Another group of people now stuck in zero or near negative equity possibly.

Agriculture affects from brexit.

Italy affects on banking.

Tariffs on EU goods. This will have minimal effect on Ireland unless currency varies. It could help offset brexit issues?

FreudianSlippers · 05-06-2018 11:02am

It's 2.9% (I said about €3k) and it's KBC.

I just roughly used a mortgage calculator - the specifics don't negate my underlying point.

FreudianSlippers · 05-06-2018 11:03am

Lantus wrote: »

Vulture funds are now ripe to dispose of their holdings at massive profit.

Why does that matter?

Potential impact on property market prices and demand.

How so?

05-06-2018 11:04am

FreudianSlippers wrote: »

It's 2.9% (I said about €3k) and it's KBC.

I just roughly used a mortgage calculator - the specifics don't negate my underlying point.

KBC offer a 30 year fixed rate?
Your underlying point is the alleged affordability of a 30 year €800k mortgage at a fixed rate.

their site mentions a 10 year fixed at 3.40%.

FreudianSlippers · 05-06-2018 11:08am

Augeo wrote: »

KBC offer a 30 year fixed rate?
Your underlying point is the alleged affordability of a 30 year €800k mortgage at a fixed rate.

their site mentions a 10 year fixed at 3.40%.

Am I your personal banker or do you have some actual point here?

05-06-2018 11:13am

FreudianSlippers wrote: »

Am I your personal banker or do you have some actual point here?

I think your claims that €800k can be borrowed over 30 years and repaid at €3k ish a month on a 30 year fixed rate are false.

Thus, your underlying point of affordability is a stretch too

3.4% would put repayments north of €3500/month.
I don't see a KBC product where you can fix for longer than 10 years.

FreudianSlippers · 05-06-2018 11:15am

Augeo wrote: »

I think your claims that €800k can be borrowed over 30 years and repaid at €3k ish a month on a 30 year fixed rate are false.

Thus, your underlying point of affordability is a stretch too

3.4% would put repayments north of €3500/month.
I don't see a KBC product where you can fix for longer than 10 years.

Even a variable at around 3% is around €3,500/month. €200k joint income for a married couple is approx €10k/month.

Therefore within the 1/3 salary range of affordability.

Doesn't seem you have much to add other than to quibble about the specifics of mortgage rates?

05-06-2018 11:16am

FreudianSlippers wrote: »

Even a variable at around 3% is around €3,500/month. €200k joint income for a married couple is approx €10k/month.

Therefore well within the 1/3 salary range of affordability.

Doesn't seem you have much to add other than to quibble about the specifics of mortgage rates?

lol

variable rates have a habit of going up.

You made a point that was complete and utter horsesh1t, there is no fixed term product on the market that is as you described initially.

FreudianSlippers · 05-06-2018 11:18am

Augeo wrote: »

lol

variable rates have a habit of going up.

You made a point that was complete and utter horsesh1t, there is no fixed term product on the market that is as you described initially.

So your saying that an LTV of 80% is too much and people purchasing houses at this rate are totally screwed?

My point was not about variable or fixed mortgage rates - if you have a point of merit that discusses my underling point that's "hosesh1t" (sic) then I gladly await to debate it on its merits.

05-06-2018 11:22am

FreudianSlippers wrote: »

So your saying that an LTV of 80% is too much and people purchasing houses at this rate are totally screwed?

..........

No, I'm not saying that.
Expecting to borrow €800k over 30 years and to repay €3500/month is IMO ludicrous as interest rates are quite low currently and quite likely to rise over the next decade .... or two.

FreudianSlippers wrote: »

.........

A house that costs €1m in Dublin at the moment has a possible LTV of 80%, monthly repayments of about $3k on a fixed 30-year mortgage. If one follows standard best practice a couple on a combined income of €200k can easily afford that house..............

There is no 30 year fixed rate product.

FreudianSlippers wrote: »

Even a variable at around 3% is around €3,500/month. €200k joint income for a married couple is approx €10k/month.

Therefore within the 1/3 salary range of affordability.

.....

Variable rates can go up, a €4000 repayment is outside the 1/3 salary range of affordability that you mention. €3500 is actually just about scraping it.

FreudianSlippers · 05-06-2018 11:29am

Augeo wrote: »

No, I'm not saying that.
Expecting to borrow €800k over 30 years and to repay €3500/month is IMO ludicrous as interest rates are quite low currently and quite likely to rise over the next decade .... or two.

There is no 30 year fixed rate product.

Variable rates can go up, a €4000 repayment is outside the 1/3 salary range of affordability that you mention. €3500 is actually just about scraping it.

So are you saying that 80% LTV is too much? Are you suggesting that a couple earning €200k gross can't afford an €800k mortgage?

What point exactly are you trying to make in relation to the topic of discussion?

I'm not suggesting that ones mortgage will always be the exact same amount -which seems to be your issue here. Maybe you're looking for the banking/mortgages forum?

05-06-2018 11:35am

FreudianSlippers wrote: »

.So are you saying that 80% LTV is too much? Are you suggesting that a couple earning €200k gross can't afford an €800k mortgage?............

I'm not suggesting that ones mortgage will always be the exact same amount -which seems to be your issue here. Maybe you're looking for the banking/mortgages forum?

You specified a 30 year fixed rate and €3k/month ish repayments as a point of affordability.

I asked where this rate (2.9% you then mentioned) was available and you said KBC.

None of your utterings are correct.

You then mention the 1/3 affordability, the couple you mentiuon just about scrape into that criteria now.

If folks want to stay within the 1/3 affordability guideline they need to earm more than €200k/year if they are borrowing €800k over 30 years.

Seems as you brought up fixed rates etc and mortgages themselves maybe you're looking for the banking/mortgages forum !!

FreudianSlippers · 05-06-2018 11:41am

Augeo wrote: »

None of your utterings are correct.

None of your utterances are relevant, so...

You specified a 30 year fixed rate and €3k/month ish repayments as a point of affordability.

I asked where this rate (2.9% you then mentioned) was available and you said KBC.

You then mention the 1/3 affordability, the couple you mentiuon just about scrape into that criteria now.

If folks want to stay within the 1/3 affordability guideline they need to earm more than €200k/year if they are borrowing €800k over 30 years.

1) A couple earning €200k in 2018 can pay €3,395/month as 1/3 of their salary, exactly as I said in the first post;
2) As you point out, mortgage rates can increase or decrease - as do income taxes, salary rates, etc.

None of the "utterings" (sic) you make address the underlying point made in my post (and if you think it's the specifics of the mortgage then you're wrong).

Either way, you haven't addressed a single relevant point: whether you are suggesting that 80% LTV is too high or whether this mortgage is affordable on the mooted income?

(as a personal aside, I probably wouldn't buy a house today for €1m if my household income was only €200k p.a.)

Seems as you brought up fixed rates etc and mortgages themselves maybe you're looking for the banking/mortgages forum !!

You've cherry-picked one line from my post and are attempting to derail the thread, ignoring the underlying point which I've now pressed you on no less than 3 times.

05-06-2018 11:46am

cherry picked?

Your post mentioned a 30 year fixed rate that doesn't exist, that was key to the affordability claim.

After several to and fro posts you now claim that "as a personal aside, I probably wouldn't buy a house today for €1m if my household income was only €200k p.a."

I'm happy to have helped you see the light

FreudianSlippers wrote: »

...........

It makes little difference if there is a correction or even a significant drop in the value of that house unless they're basically flippers.

LTV makes no difference either

You seem fixated on the 80% LTV for some reason, it's largely meaningless. Repayments and potential repayments as a % of income and likely future incomes are far more important.

If you think the 1/3 ration is meaningful starting out in and around that with both working is ludicrous IMO

FreudianSlippers · 05-06-2018 11:51am

Augeo wrote: »

cherry picked?

Your post mentioned a 30 year fixed rate that doesn't exist, that was key to the affordability claim.

After several to and fro posts you now claim that "as a personal aside, I probably wouldn't buy a house today for €1m if my household income was only €200k p.a."

I'm happy to have helped you see the light

LTV makes no difference either
You seem fixated on the 80% LTV for some reason, it's largely meaningless. Repayments and potential repayments as a % of income and likely future incomes are far more important.

If you think the 1/3 ration is meaningful starting out in and around that with both working is ludicrous IMO

This is like taking blood from a stone.

What exactly is the point you're trying to make here?

Are people "paying above the odds" exposed in Dublin? If yes, how so?

Is the 80% LTV too high in your opinion? If yes, why?

The example was not "key to the affordability claim" (which wasn't even the claim btw).

There's no light to see here. There are various reasons I wouldn't recommend spending €1m on a house in Dublin at the moment, but affordability on a gross joint income of €200k (presuming usual salary increases) is not one of them.

05-06-2018 11:52am

And to think you responded to someone with this as opener ......

FreudianSlippers wrote: »

Nothing personal, but this post personifies the real lack of understanding of general economics and housing that seems to be prevalent in Ireland .............

FreudianSlippers · 05-06-2018 11:53am

Augeo wrote: »

And to think you responded to someone with this as opener ......

So you've got nothing then?

05-06-2018 11:54am

FreudianSlippers wrote: »

................

Is the 80% LTV too high in your opinion? If yes, why?............

I have never said that and answered several times

It's largely meaningless as the value can fluctuate wildly.
The repayments and likely future repayments along with income are key.

05-06-2018 11:55am

FreudianSlippers wrote: »

So you've got nothing then?

Well

30 year fixed rate - doesn't exist
2.9 % KBC - doesn't exist
1/3 affortability - just scraped in

I think it is you who has "got nothing"

FreudianSlippers · 05-06-2018 12:02pm

Augeo wrote: »

I have never said that and answered several times
It's largely meaningless as the value can fluctuate wildly.
The repayments and likely future repayments along with income are key.

You didn't answer several times actually.

So do you agree with my initial point that:

1) Paying "above the odds" has little to do with "exposure to problems" if the price paid is affordable to the buyer?
2) Investment in a home (in the context in which we're discussing) as a long-term asset is linked to affordability as opposed to normal fluctuation of market rates, buoyed by the 80% LTV limit of lending.

Regardless of your need to nitpick the (as I said approximate) calculation, the underlying point I made is sound.

05-06-2018 12:04pm

FreudianSlippers wrote: »

You didn't answer several times actually.
................

I think you'll find I answered that immediately

FreudianSlippers wrote: »

So your saying that an LTV of 80% is too much ...............

Augeo wrote: »

No, I'm not saying that.
..........................

Your example was poor, badly backed up as it was based on non existing products and the latest general questions you have I never commented on or discussed with you. I presume they are rhetorical.

Do re read one of my earlier posts "It's largely meaningless as the value can fluctuate wildly.
The repayments and likely future repayments along with income are key." You should be able to see my thoughts from there.

FreudianSlippers · 05-06-2018 12:07pm

Augeo wrote: »

Expecting to borrow €800k over 30 years and to repay €3500/month is IMO ludicrous as interest rates are quite low currently and quite likely to rise over the next decade .... or two.

Nowhere did I suggest that to be the case, nor did I suggest that interest rates do not or would not fluctuate.

There is no 30 year fixed rate product.

I didn't suggest there was.

Variable rates can go up, a €4000 repayment is outside the 1/3 salary range of affordability that you mention. €3500 is actually just about scraping it.

The 1/3 salary rage is suggested not imperative; as salaries increase so do variable rates.

I wouldn't suggest €4k/month repayment is "unaffordable" for someone on €10k/month net. There are various factors in play here.

FreudianSlippers · 05-06-2018 12:10pm

Augeo wrote: »

Your example was poor, badly backed up as it was based on non existing products

The example was, as I pointed out, largely irrelevant to the underlying point of my post.

and the latest general questions you have I never commented on or discussed with you. I presume they are rhetorical.

They aren't "the latest questions", they're the underlying and fundamental point of the post which you have decided to nit-pick on an irrelevant and estimated example.

You're ignoring the underlying points here in an attempt to derail, deflect and point-score.

05-06-2018 12:14pm

Augeo wrote: »

.......There is no 30 year fixed rate product .........

FreudianSlippers wrote: »

..............
I didn't suggest there was.................

FreudianSlippers wrote: »

..................

A house that costs €1m in Dublin at the moment has a possible LTV of 80%, monthly repayments of about $3k on a fixed 30-year mortgage. If one follows standard best practice a couple on a combined income of €200k can easily afford that house.
..............

You mentioned fixed 30 year mortgage, fixed refers to interest rate.

I queried this ........you clarified it was 2.9% with KBC

Augeo wrote: »

What institution are offering 2.1% 30 year fixed mortgages to folk living in Dublin?

FreudianSlippers wrote: »

It's 2.9% (I said about €3k) and it's KBC.

I just roughly used a mortgage calculator - the specifics don't negate my underlying point.

FreudianSlippers · 05-06-2018 12:20pm

Augeo wrote: »

You mentioned fixed 30 year mortgage, fixed refers to interest rate.

As you are well aware "fixed" refers to the amount of years the rate is fixed, not the duration of the mortgage. I never suggested there was a 30 year fixed mortgage; manifestly different to a fixed [term] 30-year mortgage. If you were such an expert on the rates (as you appear to be holding yourself out to be and which I'm not holding myself out to be) then you would have clearly seen I was referring to a 1-year fixed 30-year mortgage based on the figures in my example.

Either way, the example is largely irrelevant to the underlying point which you have and continue to ignore, instead insisting on deflecting to nit-pick the example. Either you do or you don't agree with the actual point here, regardless of your views on the affordability (or otherwise, as I don't recall you've never actually said that you don't believe it's affordable) of the example.

05-06-2018 12:25pm

Augeo wrote: »

What institution are offering 2.1% 30 year fixed mortgages to folk living in Dublin?

FreudianSlippers wrote: »

As you are well aware "fixed" refers to the amount of years the rate is fixed, not the duration of the mortgage. I never suggested there was a 30 year fixed mortgage; manifestly different to a fixed [term] 30-year mortgage. If you were such an expert on the rates (as you appear to be holding yourself out to be and which I'm not holding myself out to be) then you would have clearly seen I was referring to a 1-year fixed 30-year mortgage based on the figures in my example..........................

That was not at all clear, I'm sure you can appreciate.
Especially in the context that I asked you to clarify it more than once.
I'm not at all an expert on rates btw, I know where to find them of course for reference. But I'm not going to trawl when I can just ask the person with the example.

I cannot fsthom why someone would use an example that's largely irrelevant BTW

FreudianSlippers wrote: »

The example was, as I pointed out, largely irrelevant to the underlying point of my post.
.............

FreudianSlippers · 05-06-2018 12:37pm

Augeo wrote: »

why someone would use an example that's largely irrelevant BTW

Probably the same reason someone would fixate on an example, ignoring the underlying point and then refuse to state whether they agree with the underlying point or whether they disagree with the affordability of the mortgage in the example.

BTW: examples which are irrelevant to the underlying point can be or are useful in illustrating the underlying point. Only where someone decides to cherry-pick an example to nitpick it in an attempt to deflect from the validity of the underlying point does the example become relevant.

Irish Economy at risk of overheating.

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