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

There is a touch of selective amnesia around here lately. It was stated policy to discourage private citizens from from becoming LL's and encourage so called professional LL after the 08 crash.

The citizen landlord class was one of the few areas where market forces were allowed to play out as normal with rents collapsing and the overindebted becoming forced sellers after 08

Citizen landlords paying tax at marginal rate while funds were contributing close to 0 to the Irish tax system while being huge beneficaries of gov spending.

Local LL's paying a higher cost of capital while funds able to access close to 0 cost capital.

RPZ implemented in a way that trapped small landlords while funds were facilitated in workarounds. Selling up was the only escape for small LL's thereby helping funds monopolise high demand markets further increasing price.

The 08 crash was caused by the financial sector, they were bailed out by taxpayers and assisted by the system in fleecing said taxpayers and creating huge asset price bubbles not only in housing but almost every asset class you can mention

A quote from the last crash was the only thing worse than the banks failing was the banks surviving. Its now reap what we sow time

Thats because they don't and is a point that keeps getting glossed over in regards to interest rate rises and house prices here in the near term.

A lot of countries have macroprudential tools in place that relate typically to capital requirements for lenders and controls on Loan to Valuation ratios (LVRs). But Ireland is a bit of an outlier in that as well as the typical controls in place, we also have strict controls on Loan to Incomes (LTIs) ratios of 3.5x - 4.5x which has been very effective in controlling prices here.

Countries such as NZ & Australia were noted as having a significant proportion of borrowers in recent times having LTIs (sometimes referred to Debt to Income or DTI in other countries) of over 6x and in some cases as high as 9x. As a result house prices in these markets are going to be exteremly more sensistive to IR rises in the short to medium than the Irish market.

Obviously rising IRs still correspond with lower asset prices.

I believe they boomed from Chinese spending so we're sheltered somewhat from the financial crisis

When was it policy to discourage private citizens from becoming landlords…could you please share link as It’s my understanding that the big reason private citizens weren’t becoming landlords was because they could no longer get 100% mortgages and instead needed a 30-40% deposit. That and the fact that banks charged higher rates for BTL mortgages because of the increased risk meant that there was a big drop in numbers of private citizens becoming landlords. These are macro prudential rules and not government policy.

It may have been imf imposed but there definitely was a policy of discouraging citizens from becoming landlords.

Interesting approach. That would please the banks more than anyone

Increasing house prices brings an illusion of increased wealth. Theres enough new hybrid cars out there. All is well until it isn’t.

Additional Debt

it means you cant sell unless you have a large amount of cash to clear the balance of mortgage post-sale

it absolutely is a big deal

For most they are happy enough in the houses they are in, sure there are those that want to upsize, but for the majority of homeowners whilst they might not like being in negative equity they'll be grand if they can keep up their repayments. How many houses does the average person buy, I don't know but I'd guess its something like 1.5 less than 2 anyway.

Does that include the bank your with

Technically yes but mortgage providers are unlikely to look for a revaluation if you are staying with them. Yes negative equity might stop you shopping around but you will get a fixed rate off your current provider if you wish. However you may want to stay with a SV if you think rates may go down.

However it's unlikely anybody that is on a 3 or 5 year fixed will be suddenly in negative equity. With the minimum 10% deposit and any person that has bought 3 or 5 years ago will have seen there house increase by at least 20 and 35% respectively they would need a 30 -50% depreciation to be in negative equity.

Most policy on rental property ( not absolving the government) are driven by the left wing parties. REIT's were similar. Left wing thinking was with cheap rents and looking at Europe where at the time corporate rentals were secure and cheap. They taught the exact same thing would happen here.

So they pushed this agenda, just like RPZ,s. Previously to that after the crash in the 2010 to 2012 period they pushed to limit the tax relief on the interest on rental mortgages. Then we had more and more restrictions on a LlL's right to terminate a rental lease. Now we have them pushing for non corporate LL not to be allowed to terminate if they wish to sell and that there would not be allowed to increase rents in any circumstances.

Don’t think the have passed on yet to SRV…think it was only trackers mortgages impacted