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Central Bank to limit amount banks lend for home purchase

handlemaster

http://www.irishtimes.com/business/sectors/financial-services/central-bank-to-impose-limits-on-home-loans-1.1948176

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dubrov

The Spider wrote: »

Supply folks, it's all about supply, new rules mean builders won't build, the land is still going to cost a fair chunk either way irregardless of taxes. If there's no one to sell houses to why would you build them?

The below link will show you some rough costs excluding the land costs, solicitors and the usual.

http://www.planahome.ie/calculator2?nid=239&check=1

It doesn't take into account the fabled SCD or other desirable areas.

the supply issue is "apparently" in Dublin and property prices there far exceed the cost of building. So there is plenty of money to be made.

You could argue land prices are too high but their value is set based on the profitability to sit on it. If builders can't make a profit at current land prices, they will fall.

I can see a big upswing in Dublin construction this year given current prices

_Kaiser_

kippy wrote: »

Can you think why the state would wish to inflate house prices from the prices in 2010/2011 that they were at?

- Lobbyists
- Personal interests (many are landlords/BTL owners themselves I'm sure)
- Saves them having to deal with the arrears/defaults mess if NE is swallowed by price increases

bluesteel

The Spider wrote: »

Supply folks, it's all about supply, new rules mean builders won't build, the land is still going to cost a fair chunk either way irregardless of taxes. If there's no one to sell houses to why would you build them?

bizarre logic.

The land is the most volatile part of the price - builders won't build if the market value is less than cost of materials, labour etc. but the price of land is not fixed!

If you were asked to value an empty site how would you do it? You'd get the market value of a completed house and site - and subtract the costs like materials, building, solicitor etc. It's not rocket science

kippy

_Kaiser_ wrote: »

- Lobbyists
- Personal interests (many are landlords/BTL owners themselves I'm sure)
- Saves them having to deal with the arrears/defaults mess if NE is swallowed by price increases

I suspect they are concerned about the bottom line for Nama. Nama which of course every citizen has an indirect interest in.
Unfortunately NAMAs losses are directly tied to property prices.

mathie

Jack O’Connor has a "different" angle on things ...

http://www.irishtimes.com/business/economy/new-mortgage-rules-will-confine-house-purchases-to-the-rich-1.2072412

The country’s largest trade union Siptu has called on the Central Bank to abandon plans to require home buyers to have a deposit equal to 20 per cent of property’s purchase price.

Central Bank governor Patrick Honohan said decision on whether or not homebuyers will be required to have a 20 per cent deposit in place before being approved for a mortgage will be made in the “coming days” but The Irish Times has learned the regulator plans to make an announcement next week.

The new rules are designed to cool a recovering housing market.

But Siptu General President, Jack O’Connor said, if implemented as currently envisaged, “would put home ownership beyond the reach of thousands of individuals and couples.

“They would in fact make it the exclusive preserve of the better-off, those able to access inherited wealth and of serial investors,” he said in a statement this morning.

“ Many of our members have expressed concern about the impact of this proposal on them, or their children, and their chances of getting on to the property ladder.”

I am Jacks inability to see long-term.

Michael D Not Higgins

mathie wrote: »

Jack O’Connor has a "different" angle on things ...

http://www.irishtimes.com/business/economy/new-mortgage-rules-will-confine-house-purchases-to-the-rich-1.2072412

I am Jacks inability to see long-term.

Union leaders are always reactionary to anything that disproportionally affects their members, especially short term effects.

[Deleted User]

He said on News At One that this is closing the stable door after the horse has bolted; regulating for a crisis that has already happened. But when we're talking about a horse that is inclined to bolt from time to time it's best to put a lock on to prevent a repeat.

I was encouraged by what Brendan Howlin had to say on the same programme. To paraphrase, we can't have it every way: we can't complain about lack of regulation last time around and then freak out when the regulator does their job. He also noted that the regulator is politically independent. He should tell his cabinet colleagues.

gaius c

Jack O'Connor would definitely be my first port of call for advice when it comes to bank regulation.

[Deleted User]

Agreed. Although not all of these guys would inspire massive confidence:

The Central Bank Commission

Edit: just to clarify, I get that gaius was joking and agree that unions would not make great financial regulators

stevedublin

Its a case of people who have already climbed the property ladder, then taking the ladder away so that no-one else can climb it.

johnp001

mathie wrote: »

Jack O’Connor has a "different" angle on things ...

http://www.irishtimes.com/business/economy/new-mortgage-rules-will-confine-house-purchases-to-the-rich-1.2072412

I am Jacks inability to see long-term.

None of this is an issue for the central bank which must act to protect Irish banks from lending as irresponsibly as they have done in the past.
The government is responsible for social policy and it has used lots of tools to manipulate the housing market to this end in the past.
E.G. First Time Buyers grant, Mortgage interest relief, differential stamp duty rates for different classes of buyers, CGT exemption on property investments.

LuckyLloyd

What it comes down to is that these proposals are the product of analysis by the expert body with responsibility for regulating the financial sector and economy. The dissenting voices are political and lobby group in nature. As such if you're fully objective, just weighing up the credentials and motivations of either side of the debate should make it clear which should be weighed more heavily.

I'm not heartless - I get that it must be very frustrating for those in the specific situation Lucy B finds herself. Nonetheless, for those in such a situation this maybe delays their dreams by 18 - 24 months but ties them to less debt in the long term.

Ultimately, a rising property market is bad for our economy, not good. The aim needs to be to keep a lid on property prices. Yes we need to increase supply - but not at an ultimately harmful price point. I will commend Honohan if he sticks to his guns on this.

[Deleted User]

Steve, if you mean that people with property are in favour of the rules while those without are against, then I disagree. I think it's the opposite.

From where I sit (in my rented house!), it's people who own property, and are content to see double-digit price rises, who oppose these rules.

Well, to be fair, mortgage brokers, estate agents and banks are generally against the rules as well. Fine. But let's not take their input for any more than it is.

Most politicians are going with the homeowners who enjoy seeing their imaginary wealth increase - it's a sign things are 'on the up' etc.
If that results in a new generation of people on the hook for massive mortgages, it's safe to say that Noonan will be out of office by the time those chickens come home to roost.

After that, FTBs are split between those who would prefer to borrow big to get a house now and those who would be content to wait, save more, borrow less - and have reasonable house prices into the future.

Then there are more high-minded individuals who look back at the crash we've endured and want to do the right thing. I'm not pretending that's where I'm coming from but I think it's Honohan's starting point.

johnp001

Deleted User wrote: »

Steve, if you mean that people with property are in favour of the rules while those without are against, then I disagree. I think it's the opposite.

From where I sit (in my rented house!), it's people who own property, and are content to see double-digit price rises, who oppose these rules.

Well, to be fair, mortgage brokers, estate agents and banks are generally against the rules as well. Fine. But let's not take their input for any more than it is.

Most politicians are going with the homeowners who enjoy seeing their imaginary wealth increase - it's a sign things are 'on the up' etc.
If that results in a new generation of people on the hook for massive mortgages, it's safe to say that Noonan will be out of office by the time those chickens come home to roost.

After that, FTBs are split between those who would prefer to borrow big to get a house now and those who would be content to wait, save more, borrow less - and have reasonable house prices into the future.

Then there are more high-minded individuals who look back at the crash we've endured and want to do the right thing. I'm not pretending that's where I'm coming from but I think it's Honohan's starting point.

I agree, property owners would generally be against new rules which would reduce the value of their assets.
Non-property owners protesting the rules is akin to turkeys voting for Christmas. For some, the timing of the rules might appear inconvenient (and, for sure, it would have been better for everyone if they had been made 15 years ago and 100% mortgages had never existed but prudence is necessary and the best time to enforce it is always "now")
Vested interests in the media may be disingenuous in their championing of the cause of the unfortunate FTB - when the FTB's need for a functioning property market is directly opposed to their own interests.

Honohan is responsible for not letting the banks get further into the situation they are in now where their assets are irrecoverable because they are not worth what is owed on them. 20% house price inflation against a backdrop of 0.2% overall inflation is not sustainable and the banks need to be regulated to prevent them from becoming further exposed to bad debt when prices fall again.

The Spider

Can I ask a question, relevant to Dublin anyway, not the rest of the country, what will people do if the new rules don't reduce prices? There's 3,083 properties for sale in Dublin at the moment, what if vendors decide to take say 20 percent of those off the market because they can't get the price they want?

What if big investors decide that they'll buy up property because the rental yields will now more than deliver a profit as the vast majority of people can't get 60-80 grand together so are forced to rent?

What if builders decide that they're not going to build because the amount of buyers available are minuscule in comparison to the risks involved in taking on any such development.

As has been pointed out already, people with rich parents or families will be in the position to buy because they'll have the deposit.

What if at best it just stagnates the price rather than producing any drops?

And will people who were saving for a deposit in Dublin now look towards commuter counties because the 10 percent they saved for a house is now the 20 percent required in a commuter town?

Just asking the questions, because a lot of the comment seems to be that if FTB's can't get a 20 percent deposit then prices will have to drop to what they can afford, I'm not sure what percentage are first time buyers perhaps someone else does.

[Deleted User]

The Spider wrote: »

Can I ask a question, relevant to Dublin anyway, not the rest of the country, what will people do if the new rules don't reduce prices? There's 3,083 properties for sale in Dublin at the moment, what if vendors decide to take say 20 percent of those off the market because they can't get the price they want?

What if big investors decide that they'll buy up property because the rental yields will now more than deliver a profit as the vast majority of people can't get 60-80 grand together so are forced to rent?

What if builders decide that they're not going to build because the amount of buyers available are minuscule in comparison to the risks involved in taking on any such development.

As has been pointed out already, people with rich parents or families will be in the position to buy because they'll have the deposit.

What if at best it just stagnates the price rather than producing any drops?

And will people who were saving for a deposit in Dublin now look towards commuter counties because the 10 percent they saved for a house is now the 20 percent required in a commuter town?

Just asking the questions, because a lot of the comment seems to be that if FTB's can't get a 20 percent deposit then prices will have to drop to what they can afford, I'm not sure what percentage are first time buyers perhaps someone else does.

I think Honohan said that if these rules had been in place for 2013 it would have affected around 2,800 borrowers (definitely

,000). Very roughly, that's about 10% of house sales.

But you're right that if 20% of houses were taken off the market and investors buy up property and builders stop building and only the rich will be able to buy and people leave Dublin for the commuterbelt it would be bad. I don't see it but who knows. (I was very wrong about what would happen house prices in 2014!)

I think the supply problem is beyond the list of problems we can expect the Central Bank to solve. The government can reduce the slice it takes from new properties - that would make it more attractive to builders.

As it is, house prices have been rising rapidly and I am often outbid by people attending viewings with their retired parents - who I guess are, in some cases, topping up the war chest so that their offspring can win the bidding war.

The other set of 'What Ifs' can be summed up by 'What if we repeat the bubble/bust cycle of the past and wind up with insolvent banks, negative equity, rising unemployment, IMF bailouts etc.?'

The above might seem a bit dramatic but it's also possible. And, while the DoF said yesterday that mortgage lending limits are 'not socially acceptable', many here would find double-digit house price growth followed by a messy crash even more socially disruptive.

[Who did worst during the crash/bailout era? 'Twasn't the wealthy - they still have bank accounts full of cash to throw at their kids' property purchases!]

gaius c

dubrov wrote: »

the supply issue is "apparently" in Dublin and property prices there far exceed the cost of building. So there is plenty of money to be made.

You could argue land prices are too high but their value is set based on the profitability to sit on it. If builders can't make a profit at current land prices, they will fall.

I can see a big upswing in Dublin construction this year given current prices

Regarding supply, Honohan dropped a pretty big hint yesterday that a key problem with current supply is that banks are holding onto houses in arrears or that have already been repossessed in the expectation of further price increases.

NAMA are doing similar. As pointed out before, there's approx 500 apartments sitting empty in Tallaght because nobody will pay NAMA what they think they are worth. Sure Tallaght might not be "fashionable" but that's 500 units of stock being kept off the market, an awful lot of stock relative to current stock levels.

Mr.McLovin

The Spider wrote: »

Can I ask a question, relevant to Dublin anyway, not the rest of the country, what will people do if the new rules don't reduce prices? There's 3,083 properties for sale in Dublin at the moment, what if vendors decide to take say 20 percent of those off the market because they can't get the price they want?

What if big investors decide that they'll buy up property because the rental yields will now more than deliver a profit as the vast majority of people can't get 60-80 grand together so are forced to rent?

What if builders decide that they're not going to build because the amount of buyers available are minuscule in comparison to the risks involved in taking on any such development.

As has been pointed out already, people with rich parents or families will be in the position to buy because they'll have the deposit.

What if at best it just stagnates the price rather than producing any drops?

And will people who were saving for a deposit in Dublin now look towards commuter counties because the 10 percent they saved for a house is now the 20 percent required in a commuter town?

Just asking the questions, because a lot of the comment seems to be that if FTB's can't get a 20 percent deposit then prices will have to drop to what they can afford, I'm not sure what percentage are first time buyers perhaps someone else does.

These are more rhetorical questions if anything :rolleyes:

The Spider

gaius c wrote: »

Regarding supply, Honohan dropped a pretty big hint yesterday that a key problem with current supply is that banks are holding onto houses in arrears or that have already been repossessed in the expectation of further price increases.

NAMA are doing similar. As pointed out before, there's approx 500 apartments sitting empty in Tallaght because nobody will pay NAMA what they think they are worth. Sure Tallaght might not be "fashionable" but that's 500 units of stock being kept off the market, an awful lot of stock relative to current stock levels.

repossessions don't increase supply, because you have to rehouse those people elsewhere. Article on Newstalk below.

http://www.newstalk.com/Decision-on-20-per-cent-mortgage-deposit-rules-due-in-coming-days

To Quote:

"The affordability thing is not about credit, if you increase credit the only thing you do is push up house prices. If houses are not affordable, it's because there are too few of them and that's particularly true in the Dublin area at the moment."

""It looks like Dublin, between 2010 and 2020, needs about 100,000 new homes and is on course to get maybe 10 or 15,000 of those 100,000".

[Deleted User]

gaius c wrote: »

Regarding supply, Honohan dropped a pretty big hint yesterday that a key problem with current supply is that banks are holding onto houses in arrears or that have already been repossessed in the expectation of further price increases.

Some people are against repossessions (even when people haven't paid in more than two years) because 'you can't repossess family homes', yet are against Honohan's plans because rising prices are really just a supply issue.

gaius c

Deleted User wrote: »

As it is, house prices have been rising rapidly and I am often outbid by people attending viewings with their retired parents - who I guess are, in some cases, topping up the war chest so that their offspring can win the bidding war.

That's actually deliberate policy and it's exactly what Baldy wants, bailing out the banks by the back door. Trouble is that the mattress money producing machine is starting to cough.

The concern with QE on the way is that the bidders losing to cash buyers will now get equipped with finance and the arms race will continue.

In that context, the moves are very sensible and really should have been in place years ago.

[Deleted User]

The Spider wrote: »

repossessions don't increase supply, because you have to rehouse those people elsewhere. Article on Newstalk below.

http://www.newstalk.com/Decision-on-20-per-cent-mortgage-deposit-rules-due-in-coming-days

To Quote:

"The affordability thing is not about credit, if you increase credit the only thing you do is push up house prices. If houses are not affordable, it's because there are too few of them and that's particularly true in the Dublin area at the moment."

""It looks like Dublin, between 2010 and 2020, needs about 100,000 new homes and is on course to get maybe 10 or 15,000 of those 100,000".

Funny how we all hear what we want to hear. What I took from that interview with Ronan Lyons (who favours the LTV limits but has reservations on the LTI limit) was: 'if you increase credit the only thing you do is push up house prices'.

The sooner the better they make the announcement and put us out of our misery. We're all only getting more entrenched on this one! (Me included)

gaius c

The Spider wrote: »

repossessions don't increase supply, because you have to rehouse those people elsewhere. Article on Newstalk below.

http://www.newstalk.com/Decision-on-20-per-cent-mortgage-deposit-rules-due-in-coming-days

To Quote:

"The affordability thing is not about credit, if you increase credit the only thing you do is push up house prices. If houses are not affordable, it's because there are too few of them and that's particularly true in the Dublin area at the moment."

""It looks like Dublin, between 2010 and 2020, needs about 100,000 new homes and is on course to get maybe 10 or 15,000 of those 100,000".

The banks had a stockpile of 1,500 houses this time last year. I'm talking about the houses that have already been repossessed and are not being released to the market.

Let's do something about the houses we've already built and then we'll talk.

Jeremyr

Sorry i'm late into this thread and haven't been up to pace but from what i gather from various sources is that the 20% mortgage lending rule is supposed to come in effect for the 1st of February ?? Any truth in this people have any of you heard the same rumours??

[Deleted User]

Jeremyr wrote: »

Sorry i'm late into this thread and haven't been up to pace but from what i gather from various sources is that the 20% mortgage lending rule is supposed to come in effect for the 1st of February ?? Any truth in this people have any of you heard the same rumours??

Any inside sources? The media genuinely don't seem to know.

MouseTail

gaius c wrote: »

The banks had a stockpile of 1,500 houses this time last year. I'm talking about the houses that have already been repossessed and are not being released to the market.

Let's do something about the houses we've already built and then we'll talk.

Are these 1500 properties vacant or tenanted?

Jeremyr

Deleted User wrote: »

Any inside sources? The media genuinely don't seem to know.

Few sources in the banking sector that know the industry well

They have gotten previous predictions right about 80% of the time but not sure about this one as CB don't seem to be giving much away

Stavro Mueller

So if someone has gotten approval in principal and has found a house to buy right now (but hasn't got the 20%), there's no point in going ahead with the purchase?

Jeremyr

Stavro Mueller wrote: »

So if someone has gotten approval in principal and has found a house to buy right now (but hasn't got the 20%), there's no point in going ahead with the purchase?

Depends on the bank i suppose but i hear the CB are really putting pressure on them so you would perhaps want to seal the deal asap just incase

Stavro Mueller

Well, it's not affecting me personally but someone close to me who got mortgage approval before Christmas. They've just had a bid accepted on a house but I'm wondering will it all be for nowt.