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

16-06-2021 10:42PM

cnocbui wrote: »

I'd be concerned about buying property in NZ at current prices.

That's from a Bloomberg article about global housing bubbles: https://www.bloomberg.com/news/articles/2021-06-15/world-s-most-bubbly-housing-markets-flash-2008-style-warnings

As I would have suspected, Irish house price increases are very modest compared to the trend.

But for some reason smalest Irsish bubles explodes louder !

If its fresh information I think cockoo funds will drop property in Ireland in next 3-6 months.

Zenify · 16-06-2021 10:42PM

Balluba wrote: »

The Central Bank is carrying out a review of mortgage lending rules. If things change and buyers are allowed to borrow four and a half times their salary will developers then just hike up their prices further ??

The aim of busines is to maximize profit. Developers are no different. I don't blame the developers for hiking prices after the HTB was introduced and other schemes. I blame the incompetence of the people in charge of the policies and introducing schemes.

The review happens every year. They haven't changed them before and I haven't heard any suggestion about them changing. Maybe I've missed something they have announced?

Couldn't see any reason to increase them. Honestly, I see more reason to reduce them than increase. The CB is against people over borrowing, hence why the don't exactly approve of the shared equity scheme.

Especially with the risk of interest rates rising in the medium term due to inflation. I think the risks of people over borrowing and not being able to repay is far greater now since the celtic tiger.

Hubertj · 16-06-2021 10:50PM

Zenify wrote: »

The aim of busines is to maximize profit. Developers are no different. I don't blame the developers for hiking prices after the HTB was introduced and other schemes. I blame the incompetence of the people in charge of the policies and introducing schemes.

The review happens every year. They haven't changed them before and I haven't heard any suggestion about them changing. Maybe I've missed something they have announced?

Couldn't see any reason to increase them. Honestly, I see more reason to reduce them than increase. The CB is against people over borrowing, hence why the don't exactly approve of the shared equity scheme.

Especially with the risk of interest rates rising in the medium term due to inflation. I think the risks of people over borrowing and not being able to repay is far greater now since the celtic tiger.

I think that when a review was announced a couple of weeks ago some of the conspiracy theorists took that as a direction from government to central bank to increase limits.

I think I agree with most of your post but I don’t think they will reduce the limit.

Timing belt · 16-06-2021 10:54PM

Balluba wrote: »

The Central Bank is carrying out a review of mortgage lending rules. If things change and buyers are allowed to borrow four and a half times their salary will developers then just hike up their prices further ??

Can’t see them changing the rules until the supply side improves would only lead to more problems.

If they do make changes I can see further exemptions based on ability to repay for FTB and leaving everything else as is

16-06-2021 11:04PM

Hubertj wrote: »

I think that when a review was announced a couple of weeks ago some of the conspiracy theorists took that as a direction from government to central bank to increase limits.

I think I agree with most of your post but I don’t think they will reduce the limit.

This is not conspiracy this is the facts

Mortgage approvals slumped by massive 48% over new year
https://extra.ie/2021/03/15/news/irish-news/mortgages-slump-new-year

Central Bank mortgage lending rules keeping house inflation down - ESRI
https://www.rte.ie/news/business/2021/0223/1198696-mortgage-esri-central-bank/

Economic recovery may be 'bumpy and uneven' - Central Bank
https://www.rte.ie/news/business/2021/0616/1228450-central-banks-financial-stability-review/

Buyers need mortgage rules to change so they can afford a home, Central Bank is warned

https://www.independent.ie/business/personal-finance/property-mortgages/buyers-need-mortgage-rules-tochangeso-they-can-afford-a-homecentral-bank-is-warned-40506651.html

There is no people on market who can afford pay today price !
This is the Bubble !
And Central bank will not change anything !

Villa05 · 16-06-2021 11:54PM

MacronvFrugals wrote:

Have tried to order a skip over the last few days and the earliest is two weeks they told me, 20 drivers (all eastern European) never returned

I'd imagine PUP payments go further in Eastern Europe.

Hubertj · 17-06-2021 05:27AM

[Deleted User] wrote: »

This is not conspiracy this is the facts

Mortgage approvals slumped by massive 48% over new year
https://extra.ie/2021/03/15/news/irish-news/mortgages-slump-new-year

Central Bank mortgage lending rules keeping house inflation down - ESRI
https://www.rte.ie/news/business/2021/0223/1198696-mortgage-esri-central-bank/

Economic recovery may be 'bumpy and uneven' - Central Bank
https://www.rte.ie/news/business/2021/0616/1228450-central-banks-financial-stability-review/

Buyers need mortgage rules to change so they can afford a home, Central Bank is warned

https://www.independent.ie/business/personal-finance/property-mortgages/buyers-need-mortgage-rules-tochangeso-they-can-afford-a-homecentral-bank-is-warned-40506651.html

There is no people on market who can afford pay today price !
This is the Bubble !
And Central bank will not change anything !

It would be “facts” if you were a conspiracy theorist. The CB themselves said the rules have prevented prices increasing further. With the ongoing availability of credit and constrained supply this was a likely outcome.

JDD · 17-06-2021 09:40AM

The Central Bank won't change the lending limits. They may have considered it if Covid had led to a slump in property prices, and the market needed an injection of buyers, but since that didn't happen there's literally no motivation there for them to change the limits. They have been completely deaf so far to articles in newspapers and government pressure, and I imagine that will continue.

tigger123 · 17-06-2021 09:45AM

JDD wrote: »

The Central Bank won't change the lending limits. They may have considered it if Covid had led to a slump in property prices, and the market needed an injection of buyers, but since that didn't happen there's literally no motivation there for them to change the limits. They have been completely deaf so far to articles in newspapers and government pressure, and I imagine that will continue.

I'm not sure that would motivate the Central Bank into adjusting the lending limits.

From the Central Bank website:

"As part of its goal to safeguard financial stability and contribute to the long term resilience of the financial system, the Central Bank has in place a series of mortgage measures. These measures were first introduced in 2015 and are reviewed on an annual basis. The measures are designed to ensure that banks and other lenders lend money sensibly. They are also designed to stop house buyers from borrowing more than they can afford and prevent excess credit from building up within the Irish financial system."

https://www.centralbank.ie/consumer-hub/explainers/what-are-the-mortgage-measures

yagan · 17-06-2021 09:48AM

It's not domestic lending that driving our current bubble, it's the institutional funds, or dumb money as Wall Street calls pensions.

Villa05 · 17-06-2021 09:57AM

cnocbui wrote:

That's from a Bloomberg article about global housing bubbles:

Thanks for posting, we'll worth a read. They say collectively that housing affordability has surpassed 2008 levels. Lots of warning signals flashing but no obvious trigger for a decline

For Ireland credit growth is negative while real house price growth puts us in the top 5, just goes to show the impact of the investment funds on the market.

These investment funds drive up rents to unsustainable levels thereby distorting the price to rent ratio

A very useful metric to establish the health of the Irish property market would be a rent to income metric

Wonder how the 2008 crash effects our overall metrics. Over supply in the regions with undersuppy in the cities, plus inability to deal effectively with long term arrears

Balluba · 17-06-2021 10:19AM

JDD wrote: »

The Central Bank won't change the lending limits. They may have considered it if Covid had led to a slump in property prices, and the market needed an injection of buyers, but since that didn't happen there's literally no motivation there for them to change the limits. They have been completely deaf so far to articles in newspapers and government pressure, and I imagine that will continue.

The Central Bank are now inviting input from the public on their current strategy. Apparently they will be holding ‘engagement’ and ‘listening’ events, in July.
Estate agents and the property industry are naturally in favour of raising the lending limits.
I am not convinced that the central Bank will leave lending limits unchanged.

tigger123 · 17-06-2021 10:19AM

Balluba wrote: »

The Central Bank are now inviting input from the public on their current strategy. Apparently they will be holding ‘engagement’ and ‘listening’ events, in July.
Estate agents and the property industry are naturally in favour of raising the lending limits.
I am not convinced that the central Bank will leave rates unchanged.

What do you think would motivate them in changing the limits?

Balluba · 17-06-2021 10:22AM

tigger123 wrote: »

What do you think would motivate them in changing the limits?

Depends on what they hear at these engaging and listening events.
Why else are they holding them?

timmyntc · 17-06-2021 10:43AM

tigger123 wrote: »

What do you think would motivate them in changing the limits?

If they believe that house prices have risen beyond affordability and that the 3.5 rule is outdated - personally I dont believe this, but it could be argued that prices may never decline to a point where 3.5 income is enough anymore, as house price inflation goes beyond wage inflation, due to cost of materials and land rising.

Shedite27 · 17-06-2021 11:07AM

Shedite27 wrote: »

Anyone able to point me in the direction of the largest Estate Agents in the country? Looking o see what % of market share Lisney, Sherry Fitz etc have. Google keeps point me to overall property market reports. Thanks

Sorry for bumping my own thread, but the discussion took off without an answer. Anyoe know of any reports on the breakdown of estate agents and who the biggest players are? Are any of the Irish estate agents public companies that would allow me to look through financial reports?

Ray Palmer · 17-06-2021 11:16AM

[Deleted User] wrote: »

There is no people on market who can afford pay today price !
This is the Bubble !
And Central bank will not change anything !

This is fundamental untrue. If nobody could afford to pay prices would not be rising and nobody would be buying anything. You are reading the information in a way that suits your views.
The last bubble was an over supply and cheap credit.
We are currently under supplying and credit is hard to get. Very different situation.

The articles you pointed to don't agree with you but are saying there is a larger inequity appearing as different industries were effected differently. Construction workers are now benefiting from the pandemic and charge more. Office workers saved money and never lost any income. Many younger office workers dropped their rental and moved home. Lots of stored income.

I get the feeling Irish people think the property market will return to bygone times where most people could buy a home. We had the highest homeownership in the world in 80s/90s. That was always going to change as we became more integrated in global economics. This was obviously going to effect property.

There are permanent changes that happened to the property market that started in the late 90s, they won't ever be reversed. People are having difficulty accepting this. It is weird somebody in their 20s going on about how houses were cheaper and easier to get in times before they were born. Often overlooking stamp duty and large interest rates.

tigger123 · 17-06-2021 11:23AM

Balluba wrote: »

Depends on what they hear at these engaging and listening events.
Why else are they holding them?

They could well be holding them so afterwards they can say 'having taken on board the views of all stakeholders, we are content that the lending rules should not be modified'.

timmyntc wrote: »

If they believe that house prices have risen beyond affordability and that the 3.5 rule is outdated - personally I dont believe this, but it could be argued that prices may never decline to a point where 3.5 income is enough anymore, as house price inflation goes beyond wage inflation, due to cost of materials and land rising.

The Central Bank want to ensure that sensible lending practices are in practice, and that people don't borrow more than they can repay.

If anything, the fact that prices are rising so rapidly only underpins the need for the 3.5 times limit. You would need to have supply and demand at a far more balanced point before you could think about removing them.

If they were removed now, prices would jump even higher, as demand is outstripping supply, and people would be bidding crazy money.

Hubertj · 17-06-2021 11:56AM

Villa05 wrote: »

Thanks for posting, we'll worth a read. They say collectively that housing affordability has surpassed 2008 levels. Lots of warning signals flashing but no obvious trigger for a decline

For Ireland credit growth is negative while real house price growth puts us in the top 5, just goes to show the impact of the investment funds on the market.

These investment funds drive up rents to unsustainable levels thereby distorting the price to rent ratio

A very useful metric to establish the health of the Irish property market would be a rent to income metric

Wonder how the 2008 crash effects our overall metrics. Over supply in the regions with undersuppy in the cities, plus inability to deal effectively with long term arrears

What % of the market to funds own? In the latest ESRI report what % of units did funds purchase?

And why focus on 1 metric vs the various metrics in the article?

Are the issues in other countries such as New Zealand as a result of greater government interference in the market such as macro rules, stamp duty etc? Are there common issues across all?

Browney7 · 17-06-2021 12:14PM

tigger123 wrote: »

They could well be holding them so afterwards they can say 'having taken on board the views of all stakeholders, we are content that the lending rules should not be modified'.

The Central Bank want to ensure that sensible lending practices are in practice, and that people don't borrow more than they can repay.

If anything, the fact that prices are rising so rapidly only underpins the need for the 3.5 times limit. You would need to have supply and demand at a far more balanced point before you could think about removing them.

If they were removed now, prices would jump even higher, as demand is outstripping supply, and people would be bidding crazy money.

There was a contributor (Dowling financial mortgage broker I think) on morning Ireland this a.m. outlining why he believes they need to change. He seemed to think supply was going to come quickly which isn't borne out in other opinions (both new builds and existing properties being put up for sale).

Main substance of his point was that limits should be based on what the repayment is from net income and that gross salary multiple is too crude a measure. With a low fixed interest rate of 3% for 20 years (he mentioned finance Ireland), someone with a mortgage of 175k (50k X 3.5) would have repayments of 750ish (didn't give specifics) and that 750 would be only 25% of net income. He was advocating that if 35% of net income was the repayment then that person would a 250k mortgage.

A carrot for the industry may be that if they can deliver 30000 new build homes they'll get their rule change but i personally wouldn't be in favour of changes to the macro Prudential rules given the dearth of supply at present and would just cause chaos to prices at the lower levels of the property market.

yagan · 17-06-2021 12:36PM

Ray Palmer wrote: »

I get the feeling Irish people think the property market will return to bygone times where most people could buy a home. We had the highest homeownership in the world in 80s/90s. That was always going to change as we became more integrated in global economics. This was obviously going to effect property.

High rates of homeownership were a direct response of domestic policy, and the pendulum seems to be swinging back towards policies that favour it.

At the same time that Ireland had trade wars with the UK and its empire our trade with the rest of the world grew. At independence 90% of Irish exports went to Britain, now that figure fluctuates in single digits.

All through the growth of our global economy home ownership rates grew via government housing policies, so globalisation is simply not the issue.

JDD · 17-06-2021 12:37PM

Browney7 wrote: »

There was a contributor (Dowling financial mortgage broker I think) on morning Ireland this a.m. outlining why he believes they need to change. He seemed to think supply was going to come quickly which isn't borne out in other opinions (both new builds and existing properties being put up for sale).

Main substance of his point was that limits should be based on what the repayment is from net income and that gross salary multiple is too crude a measure. With a low fixed interest rate of 3% for 20 years (he mentioned finance Ireland), someone with a mortgage of 175k (50k X 3.5) would have repayments of 750ish (didn't give specifics) and that 750 would be only 25% of net income. He was advocating that if 35% of net income was the repayment then that person would a 250k mortgage.

A carrot for the industry may be that if they can deliver 30000 new build homes they'll get their rule change but i personally wouldn't be in favour of changes to the macro Prudential rules given the death of supply at present and would just cause chaos to prices at the lower levels of the property market.

The problem with the percentage of net income is that a couple, applying for a mortgage before they have children could probably afford a mortgage more than 3.5 times their net income. However, once children and childcare come along that mortgage payment becomes more like 50/60% of net income, and wage increases don't come near to offsetting that. Throw in a redundancy or a cut in hours for one partner during a recession and you have a couple who are coming to the bank looking for an adjusted repayment plan. Exactly what the bank want to avoid.

If you do have a couple that already have kids and are unlikely to have large additional outgoings in the future, and can afford to repay more than the 3.5 times salary mortgage, then this is where the exemption comes in. But there isn't that many couples out there, hence the limit on exemptions.

And of course a mortgage broker wants the rules to change. More clients, higher mortgages, more commission for him.

Regarding the carrot, I wouldn't be in favour. It would artificially reduce demand, while house hunters sat on their deposit anticipating the rule change coming and the ability to borrow more. We need to avoid those artificial peaks and troughs.

genericgoon · 17-06-2021 12:47PM

Every time the Government signals a new demand side intervention, the primary beneficiaries are speculative investors/developers since there is no cost to sitting on their hands for the expected site/house price increases. If the Central bank were to signal a loosening of rules, same result so would be surprised if the current comments from vested interests did not prompt a CB slap down of those expectations prior to these public consultations.

JDD · 17-06-2021 12:50PM

yagan wrote: »

High rates of homeownership were a direct response of domestic policy, and the pendulum seems to be swinging back towards policies that favour it.

At the same time that Ireland had trade wars with the UK and its empire our trade with the rest of the world grew. At independence 90% of Irish exports went to Britain, now that figure fluctuates in single digits.

All through the growth of our global economy home ownership rates grew via government housing policies, so globalisation is simply not the issue.

Somebody give me an example of a wealthy country where there is low home ownership levels. How do they provide security to renters? How do they deal with retirees, who don't have the income to pay market rent - but would have a mortgage paid off by retirement? What about payment for nursing homes etc, if they are not to be paid out of the equity owned in a house?

If your government policy is not to positively act in favour of home ownership, they'd want to be making a lot of changes elsewhere to protect the large proportion of the population that the government will now accept will rent forever.

I might be wrong here, but my impression of a country with lower home ownership levels is a country where buildings are owned and rented by the very few super wealthy. And that means your Joe Soap like you or me are not in a position to leave a significant asset to our children, thus redistributing wealth across a much large swathe of the population than just a small number of landlords. There's no way, if you were renting for your whole life, that you would be able to invest additional money, on top of rent, that would give you an asset the equivalent value of a home at retirement.

cnocbui · 17-06-2021 01:08PM

You could start with Germany, Switzerland, Austria. Ironically, it's the poorer countries that have the higher home ownership.

growleaves · 17-06-2021 01:12PM

cnocbui wrote: »

I'd be concerned about buying property in NZ at current prices.

That's from a Bloomberg article about global housing bubbles: https://www.bloomberg.com/news/articles/2021-06-15/world-s-most-bubbly-housing-markets-flash-2008-style-warnings

As I would have suspected, Irish house price increases are very modest compared to the trend.

The mean for Real Price Growth is 6.35%. Ireland is 8.7%

Only the US and New Zealand have broken 10%. Surely 8-9% is high?

yagan · 17-06-2021 01:20PM

JDD wrote: »

Somebody give me an example of a wealthy country where there is low home ownership levels. .

Denmark and Germany are two examples that spring to mind. But both have housing policies that strongly protect renters via caps and leases for longer than in Ireland which simply doesn't draw in rent farmers. Compared to Ireland and other open door markets they simply aren't as attractive for international yield seeking funds.

We've tended to favour the policies of home ownership but until recently we had never been a target for rent yield farmers, which is why our government is painfully slow to react as they are wedded to a totemic belief that interfering in FDI in any way will be negative, even though most multinationals in Ireland have cited that housing cost for their staff as a negative.

Those who own property of course are happy for the hot money to push up their equity.

Hubertj · 17-06-2021 01:52PM

yagan wrote: »

Denmark and Germany are two examples that spring to mind. But both have housing policies that strongly protect renters via caps and leases for longer than in Ireland which simply doesn't draw in rent farmers. Compared to Ireland and other open door markets they simply aren't as attractive for international yield seeking funds.

We've tended to favour the policies of home ownership but until recently we had never been a target for rent yield farmers, which is why our government is painfully slow to react as they are wedded to a totemic belief that interfering in FDI in any way will be negative, even though most multinationals in Ireland have cited that housing cost for their staff as a negative.

Those who own property of course are happy for the hot money to push up their equity.

I would suggest housing policy in Germany and Denmark is more stable which provides security for both tenant and landlord. Caps etc on 1 side to protect tenants but also certainty for landlords around regs, tax, recourse for arrears etc.

MacronvFrugals · 17-06-2021 02:38PM

The SCSI now reiterating the ESRI's call for an increase in capital spending for housing

The new president of the Society of Chartered Surveyors Ireland (SCSI) has called on the Government to follow through on the ESRI’s recommendation to borrow an additional €4 billion-€7 billion a year to invest in housing.

“The SCSI has been calling for a major government-funded housebuilding programme involving both the private and public sectors for some time. Even at the pre-Covid rate of output of around 20,000 units, we forecast that supply and demand would not be in equilibrium until 2031. So unless drastic action is taken, tens of thousands of people hoping to buy an affordable home, will face another decade of despair,” he said

.

https://www.irishtimes.com/life-and-style/homes-and-property/state-urged-to-borrow-up-to-7bn-more-a-year-for-housing-1.4593042?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Flife-and-style%2Fhomes-and-property%2Fstate-urged-to-borrow-up-to-7bn-more-a-year-for-housing-1.4593042

Villa05 · 17-06-2021 02:43PM

Hubertj wrote:

What % of the market to funds own? In the latest ESRI report what % of units did funds purchase?

The most recent set of new build figures suggest that only a third Were made available for sale to the general public. Gov, ahb and investment funds purchased the remainder. Recent developments would suggest that invest funds are the dominant player amongst them

Hubertj wrote:

And why focus on 1 metric vs the various metrics in the article?

I cited 3 and suggested another that might be more relevant to the Irish market (rent to income)

Top 20% can probably afford to buy

Maybe 60% are stuck renting at considerably higher cost than buying

The state is supporting the bottom 20% through rent supports that drive up rents for the middle 60% and outbidding the top 20% through purchasing or long term leasing pushing that cohort further away from their place of work

A survey with 5 metrics can't capture all this market behaviour that is far from sustainable

Hubertj wrote:

Are the issues in other countries such as New Zealand as a result of greater government interference in the market such as macro rules, stamp duty etc? Are there common issues across all?

There are other posters better placed to comment on New Zealand, but they survey suggested numerous bubble dangers including affordability at 2008 levels

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

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