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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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makeorbrake

flintash wrote: »

personally i dont see anything wrong with long mortgages. even lo ger what they are now. see all it matters is montly repayment. so lets say you have 40 years mortgage and payment say of 400. cant check calculators online but from my head it would be it over 100k. you could afford gaff down the country. you would put rainy day money and in the case of job loss you would not default on your payment.

That's a mistake. This is the type of practice that allows people to pay more than they can afford - to the detriment of themselves and the detriment of other potential buyers.

Its another reason why this measure is badly needed.

Go here => https://www.drcalculator.com/mortgage/ie/

100k @ 5% over 25 years = €75,337 in interest payments
100k @ 5% over 30 years = €93,256 in interest payments

Spreading over an additional 5 years is going to cost you an additional 18K. Of course, you get the benefit of spreading it over the additional 5 years - but seems like a major expense for that luxury. Furthermore, if all the people who opted to go longer could no longer do so (or otherwise were restricted in their spending as per these proposed measures), then it's more likely that they wouldn't be paying such prices to begin with (and before someone snaps at me - that's leaving Dublin's supply issue aside - as that has nothing to do with this measure - and something that has to be addressed in other ways).

The_Conductor

handlemaster wrote: »

Any ponderings from the educated economists where we will property going after ECB QE starts in march

http://www.irishexaminer.com/breakingnews/business/ecbs-quantitative-easing-will-drive-investment-in-irish-property-market-659185.html

So Savills think that investors will abandon the bond markets as yields are too low- and instead chase property again? While ignoring the fact of where the suggestion is coming from- they are onto something. There is going to be additional excess liquidity sloshing around, seeking a home. Thats a simple fact. Whether it comes to rest in Irish property, gold, US equities- or whatever, is a point of conjecture. If you want to view the excess liquidity purely as a asset whose value you are trying to save- the safer people are shying away both from equities and property- as there are even larger cadres of pundits, suggesting both are in bubble territory already. That leave bonds- which may not keep pace with even weak inflation (already investors are effectively paying to hold some classes of German bonds for example)- and gold...........

If I had a few million- and I was seeking a home for it- I'd sit down and crunch the numbers. Even with sky high rents in Ireland- the ROI doesn't make sense to invest in property. Even Savills should be able to see that- but of course this would punch a hole in their 'advertisement' for Irish property......... I think I'd try and ascertain who the stronger (both from a financial and a regulatory perspective) of the BRICs are- and buy equities there........ I don't see any merit in buying Irish (or indeed European) bonds or equities- or indeed US equities.

If I wanted a relatively safe punt with a still reasonable return- I'd pour my money into Mexico........

The Spider

The_Conductor wrote: »

So Savills think that investors will abandon the bond markets as yields are too low- and instead chase property again? While ignoring the fact of where the suggestion is coming from- they are onto something. There is going to be additional excess liquidity sloshing around, seeking a home. Thats a simple fact. Whether it comes to rest in Irish property, gold, US equities- or whatever, is a point of conjecture. If you want to view the excess liquidity purely as a asset whose value you are trying to save- the safer people are shying away both from equities and property- as there are even larger cadres of pundits, suggesting both are in bubble territory already. That leave bonds- which may not keep pace with even weak inflation (already investors are effectively paying to hold some classes of German bonds for example)- and gold...........

If I had a few million- and I was seeking a home for it- I'd sit down and crunch the numbers. Even with sky high rents in Ireland- the ROI doesn't make sense to invest in property. Even Savills should be able to see that- but of course this would punch a hole in their 'advertisement' for Irish property......... I think I'd try and ascertain who the stronger (both from a financial and a regulatory perspective) of the BRICs are- and buy equities there........ I don't see any merit in buying Irish (or indeed European) bonds or equities- or indeed US equities.

If I wanted a relatively safe punt with a still reasonable return- I'd pour my money into Mexico........

Ok Irish property fine, however with the extreme lack of supply in Dublin, and no reasonable amount coming onstream for the forseeable future then Dublin property may indeed be the place to invest any extra cash that's floating around.

Not a popular viewpoint but if you wanted to invest for a year or two, you may be guaranteed of a return especially if more investors snap up wht's available in Dublin. I'm aware of the .1 percent drop but lets face it that was before QE, you may find a situation where Dublin is simply unaffordable for even people with very good salaries.

Dublin is still good value as capital cities go, use this to compare the prices of Dublin to other Capitals

http://www.numbeo.com/property-investment/comparison.jsp

[Deleted User]

The guy from Savills is right. This only makes it less attractive to leave money in the bank and bonds are almost equally pointless.

In his note, he is mainly taking about commercial property. These are the guys who might otherwise buy bonds. What he says about residential is that weakening the euro makes Ireland more attractive if you live in UK/US. There surely have been some expats and others buying places as an investment that you'd like to live in a few years down the line. Are they a big chunk of the market? I doubt it. Foreign-based investors are the most disadvantaged by the CB's new rules so you're talking about people with a big stash of cash.

He's an interesting chap Dr McCartney. Used to be a CSO statistician so I treat him as a scientist (to be respected) rather than a hyperbolic estate agent (to be taken with a dollop of salt) taking up the market.

Indeed he has cast doubt on the sustainability of last year's rapid growth.
Even before that small fall in Dublin prices, he had called the dip. His reasons were:

Reduced cash-sales as much of the boom-time ‘mattress money’ has been spent
Tighter bank lending with further restrictions to come
Gradual scaling-back of investor demand due to lower yields
Withdrawal of CGT incentives which allowed some investors to pay more

So he's right about QE and he's probably right about the other factors. How much weight you apply to each of these things is the big question.

Personally, I rarely see people who I think are professional investors at viewings. Definitely see middle-aged parents with their adult kids, and often see couples in their 50s looking to invest in a property. Although whether there will be as many this spring as last spring remains to be seen.

dr.fuzzenstein

The Spider wrote: »

Ok Irish property fine, however with the extreme lack of supply in Dublin, and no reasonable amount coming onstream for the forseeable future then Dublin property may indeed be the place to invest any extra cash that's floating around.

Not a popular viewpoint but if you wanted to invest for a year or two, you may be guaranteed of a return especially if more investors snap up wht's available in Dublin. I'm aware of the .1 percent drop but lets face it that was before QE, you may find a situation where Dublin is simply unaffordable for even people with very good salaries.

Dublin is still good value as capital cities go, use this to compare the prices of Dublin to other Capitals

http://www.numbeo.com/property-investment/comparison.jsp

Typed in Dublin and London, those Brits are having a Giraffe with their prices!

The Spider

dr.fuzzenstein wrote: »

Typed in Dublin and London, those Brits are having a Giraffe with their prices!

Think you'll find Dublin is cheap or average compared to almost any other capital in Europe, when you compare salaries to affordability, so a lot of the talk about being unaffordable is nonsense.

[Deleted User]

The Spider wrote: »

Dublin is still good value as capital cities go, use this to compare the prices of Dublin to other Capitals

http://www.numbeo.com/property-investment/comparison.jsp

Cool tool. Based on prices of 90m2 apartments but still, interesting.

The Spider

Deleted User wrote: »

Cool tool. Based on prices of 90m2 apartments but still, interesting.

Slightly above average Dublin sizes, but it gives the cost per square meter.

[Deleted User]

Great site

gaius c

Deleted User wrote: »

The guy from Savills is right. This only makes it less attractive to leave money in the bank and bonds are almost equally pointless.

In his note, he is mainly taking about commercial property. These are the guys who might otherwise buy bonds. What he says about residential is that weakening the euro makes Ireland more attractive if you live in UK/US. There surely have been some expats and others buying places as an investment that you'd like to live in a few years down the line. Are they a big chunk of the market? I doubt it. Foreign-based investors are the most disadvantaged by the CB's new rules so you're talking about people with a big stash of cash.

He's an interesting chap Dr McCartney. Used to be a CSO statistician so I treat him as a scientist (to be respected) rather than a hyperbolic estate agent (to be taken with a dollop of salt) taking up the market.

Indeed he has cast doubt on the sustainability of last year's rapid growth.
Even before that small fall in Dublin prices, he had called the dip. His reasons were:

Reduced cash-sales as much of the boom-time ‘mattress money’ has been spent

Tighter bank lending with further restrictions to come

Gradual scaling-back of investor demand due to lower yields

Withdrawal of CGT incentives which allowed some investors to pay more

So he's right about QE and he's probably right about the other factors. How much weight you apply to each of these things is the big question.

Personally, I rarely see people who I think are professional investors at viewings. Definitely see middle-aged parents with their adult kids, and often see couples in their 50s looking to invest in a property. Although whether there will be as many this spring as last spring remains to be seen.

Yeah, in theory QE will make saving even less attractive but for asset prices to rise indefinitely, it needs to be backed up by increased credit and increased wages to support the increased credit.

Seeing as we're already at peak bubble affordability (or lack of) and that wages are static or close to, how is increased lending going to be supported? We already have the situation where younger people do the exact same jobs as older ones but get paid considerably less.

Japan is instructive because their bubble collapse was followed by ZIRP and zombie banks. Wealth then got trapped in the geriatric layer because younger people had no capacity to take on the debt required to re-inflate the bubble.

gaius c

The Spider wrote: »

Think you'll find Dublin is cheap or average compared to almost any other capital in Europe, when you compare salaries to affordability, so a lot of the talk about being unaffordable is nonsense.

Apples =/= oranges.

Dublin is the 3rd smallest capital city in the EU in a country with the lowest population density in western Europe (by quite some distance). It's also the 53rd or 54th largest city in the EU.

Comparing Dublin to mega-cities like Paris, London or Rome is nonsense.

BoatMad

gaius c wrote: »

Yeah, in theory QE will make saving even less attractive but for asset prices to rise indefinitely, it needs to be backed up by increased credit and increased wages to support the increased credit.

Seeing as we're already at peak bubble affordability (or lack of) and that wages are static or close to, how is increased lending going to be supported? We already have the situation where younger people do the exact same jobs as older ones but get paid considerably less.

Japan is instructive because their bubble collapse was followed by ZIRP and zombie banks. Wealth then got trapped in the geriatric layer because younger people had no capacity to take on the debt required to re-inflate the bubble.

Indeed , There is credible evidence that people are deleveraging and that there is little appetite for more debt.This coupled with banks now seeking lower risk borrowers . The main " advantage " of QE will be a lower euro and the possibility of some inflation.

[Deleted User]

gaius c wrote: »

Yeah, in theory QE will make saving even less attractive but for asset prices to rise indefinitely, it needs to be backed up by increased credit and increased wages to support the increased credit.

Seeing as we're already at peak bubble affordability (or lack of) and that wages are static or close to, how is increased lending going to be supported? We already have the situation where younger people do the exact same jobs as older ones but get paid considerably less.

Japan is instructive because their bubble collapse was followed by ZIRP and zombie banks. Wealth then got trapped in the geriatric layer because younger people had no capacity to take on the debt required to re-inflate the bubble.

Really good point. A lot of the new jobs being created are badly paid. Friend of mine works in a multinational tech company - or to be more precise, for a company to which the multinational outsources certain functions. But his salary is less than 25k.

Obviously some established people in higher-end jobs in multinationals could be on three or four times that but younger contractors (and they are often contractors rather than employees) are going to get fairly paltry mortgages when their time comes.

I plan to buy a house asap for family reasons but looking at the people 10 years behind me, I doubt my house will be a good 'investment' (apart from the major value I get from living in it!).

A lot of people getting their first jobs now are on lower starting salaries than they would have been and the prospects of steep pay increases are not what they were in the past.

The Spider

gaius c wrote: »

Apples =/= oranges.

Dublin is the 3rd smallest capital city in the EU in a country with the lowest population density in western Europe (by quite some distance). It's also the 53rd or 54th largest city in the EU.

Comparing Dublin to mega-cities like Paris, London or Rome is nonsense.

Ok how about Helsinki?

Buy Apartment Price [Edit] [Edit]
Price per Square Meter to Buy Apartment in City Centre 3,559.47 € 6,055.56 € +70.13 %
Price per Square Meter to Buy Apartment Outside of Centre 2,602.50 € 3,666.67 € +40.89 %

Salaries And Financing [Edit] [Edit]
Average Monthly Disposable Salary (After Tax) 2,272.07 € 2,222.50 € -2.18 %
Mortgage Interest Rate in Percentages (%), Yearly 4.18 2.12 -49.43 %

Or how about Amsterdam?

Buy Apartment Price [Edit] [Edit]
Price per Square Meter to Buy Apartment in City Centre 3,559.47 € 4,927.27 € +38.43 %
Price per Square Meter to Buy Apartment Outside of Centre 2,602.50 € 3,077.78 € +18.26 %

Salaries And Financing [Edit] [Edit]
Average Monthly Disposable Salary (After Tax) 2,272.07 € 2,337.40 € +2.88 %
Mortgage Interest Rate in Percentages (%), Yearly 4.18 4.07 -2.64 %

Left column is Dublin

by the seaside

Deleted User wrote: »

The guy from Savills is right. This only makes it less attractive to leave money in the bank and bonds are almost equally pointless.

In his note, he is mainly taking about commercial property. These are the guys who might otherwise buy bonds. What he says about residential is that weakening the euro makes Ireland more attractive if you live in UK/US. There surely have been some expats and others buying places as an investment that you'd like to live in a few years down the line. Are they a big chunk of the market? I doubt it. Foreign-based investors are the most disadvantaged by the CB's new rules so you're talking about people with a big stash of cash.

He's an interesting chap Dr McCartney. Used to be a CSO statistician so I treat him as a scientist (to be respected) rather than a hyperbolic estate agent (to be taken with a dollop of salt) taking up the market.

Indeed he has cast doubt on the sustainability of last year's rapid growth.
Even before that small fall in Dublin prices, he had called the dip. His reasons were:

Reduced cash-sales as much of the boom-time ‘mattress money’ has been spent

Tighter bank lending with further restrictions to come

Gradual scaling-back of investor demand due to lower yields

Withdrawal of CGT incentives which allowed some investors to pay more

So he's right about QE and he's probably right about the other factors. How much weight you apply to each of these things is the big question.

Personally, I rarely see people who I think are professional investors at viewings. Definitely see middle-aged parents with their adult kids, and often see couples in their 50s looking to invest in a property. Although whether there will be as many this spring as last spring remains to be seen.

The currency is interesting from my perspective. We are considering moving from England to Dublin and have a decent amount of cash in house equity and savings all in sterling. Whether or not it makes sense financially to move is very finely balanced, but the decline in the value of the Euro may be enough to tip the balance in favour of moving over. However, Dublin property looks overvalued to me, but in truth who knows? QE can keep the bubble inflated for longer than I'm prepared to wait, but I don't want to be left holding the parcel when the misc stops / bubble bursts. It's all rather depressing.

Michael D Not Higgins

Deleted User wrote: »

Great site

I've had problems with the accuracy of some figures. It says the average price per square metre here in Edinburgh is £2125 in the city centre. You'd be hard pressed to find anything below £3000/sq.m though.

As an example, I found one apartment on Zoopla for over £4000/sq.m, nothing below £3000 and places outside of the city centre for over the 'average' £2125.

gaius c

The Spider wrote: »

Ok how about Helsinki?

Pick and mix to suit your narrative all you want. I'm not that interested.

When you look at the % of disposable income required to be spent on rent in Dublin, you can see there's clearly a problem.

The Spider

gaius c wrote: »

Pick and mix to suit your narrative all you want. I'm not that interested.

When you look at the % of disposable income required to be spent on rent in Dublin, you can see there's clearly a problem.

That's fine, the point remains, Dublin isn't as inordinately expensive as some would claim especially when taken in the context of other European capitals, and salaries in fact looking at it Dublin salaries are up there when compared to other cities.

Seeing as you bring rents into it, lets go to that often quoted city of Manchester when people are comparing Dublin (I don't Dublin is a capital Manchester isn't).

Again left hand column is Dublin

Rent Per Month
1,033.33 € 831.60 € -19.52 %
Apartment (1 bedroom) Outside of Centre 857.02 € 604.31 € -29.49 %
Apartment (3 bedrooms) in City Centre 1,826.60 € 1,524.60 € -16.53 %
Apartment (3 bedrooms) Outside of Centre 1,385.56 € 1,094.67 € -20.99

So now lets take a look at salaries

Salaries And Financing
Average Monthly Disposable Salary (After Tax) 2,272.07 € 1,623.67 € -28.54 %
Mortgage Interest Rate in Percentages (%), Yearly 4.18 3.94 -5.86 %

So you earn an extra 649 a month on average in Dublin and rent is roughly an extra 2-300 euro a month, which still leaves you in a better position than working and renting in Manchester.

Again looking through that site and comparing prices Dublin would be an ideal spot to invest in property.

by the seaside

dr.fuzzenstein wrote: »

Typed in Dublin and London, those Brits are having a Giraffe with their prices!

Mate of mine in a nice but ordinary area of North London just paid £850,000 for a nice but ordinary 1930's 4 bed semi. It's only going to end one way (but who knows when). It will be interesting to see whether a bursting bubble in London has an effect in Dublin.

dr.fuzzenstein

by the seaside wrote: »

Mate of mine in a nice but ordinary area of North London just paid £850,000 for a nice but ordinary 1930's 4 bed semi. It's only going to end one way (but who knows when). It will be interesting to see whether a bursting bubble in London has an effect in Dublin.

I do not understand the London housing market. The have been going boom-bust-boom-bust on a fairly regular basis since forever.
They seem to be happy with it, so the people who run the banks seem to say "yep, everything is fine and dandy here" and the government agrees.
At least we're trying to do something about it, while in the UK they seem to say "Bring it on! Loadsamoney!!"

by the seaside

dr.fuzzenstein wrote: »

I do not understand the London housing market. The have been going boom-bust-boom-bust on a fairly regular basis since forever.
They seem to be happy with it, so the people who run the banks seem to say "yep, everything is fine and dandy here" and the government agrees.
At least we're trying to do something about it, while in the UK they seem to say "Bring it on! Loadsamoney!!"

London is a mess and I don't know anybody of my old friends still in London who is happy with it. Money is flowing in from Hong Kong, China, Singapore, Russia and Ukraine (ant other places). Blocks of flats are being marketed off plan in these places and bought off plan, and then nobody is living in them. They are a store of value, like buying gold. But eventually there will be a change in sentiment and people will want to unload and find their investment is not as liquid as gold.

zl1whqvjs75cdy

Hopefully I'll have a bit more funds for the next London rise after the inevitable fall that is coming. Serious money to be made there if you get in at the right time.

Muahahaha

gaius c wrote: »

Pick and mix to suit your narrative all you want. I'm not that interested.

When you look at the % of disposable income required to be spent on rent in Dublin, you can see there's clearly a problem.

many are spending 40% of their income on rent, some even higher, €1500 seems to be the market price of a 2 bed inside the canals of Dublin these days so €750 per person per month just to share a gaff, single people are now completely priced out. You'd wonder where the tipping point is at this stage.

by the seaside

Muahahaha wrote: »

many are spending 40% of their income on rent, some even higher, €1500 seems to be the market price of a 2 bed inside the canals of Dublin these days so €750 per person per month just to share a gaff, single people are now completely priced out. You'd wonder where the tipping point is at this stage.

People are sleeping inside canals now? :eek:

I'm increasingly concerned about my planned move over from England. I've got a young family to think of.

gaius c

handlemaster wrote: »

So true and their are others that believe you should be able to buy a home with little effort and very little savings

Actually no. There's no media commentators who say such things. The media coverage is exclusively bullish with bearish coverage given minimal print or airtime.

[Deleted User]

handlemaster wrote: »

So true and their are others that believe you should be able to buy a home with little effort and very little savings

Why shouldn't you?

What is desirable about a situation in which a young couple have to save 40,000 euro to buy a house?

I understand there might be reasons WHY it is hard to buy a house but the objective should be making good, affordable housing available to all.

Shouldn't it?

What else do you think should be really difficult to buy?

The Spider

Deleted User wrote: »

Why shouldn't you?

What is desirable about a situation in which a young couple have to save 40,000 euro to buy a house?

I understand there might be reasons WHY it is hard to buy a house but the objective should be making good, affordable housing available to all.

Shouldn't it?

What else do you think should be really difficult to buy?

Well you won't need 40'000 outside Dublin you can buy much cheaper down the country. However if you're looking to buy in Dublin, the capital city as I've previously pointed out, it's still relatively affordable compared to other European capitals, and the same rules apply to anyone wishing to buy in a western capital city.

BoatMad

Deleted User wrote: »

Why shouldn't you?

What is desirable about a situation in which a young couple have to save 40,000 euro to buy a house?

I understand there might be reasons WHY it is hard to buy a house but the objective should be making good, affordable housing available to all.

Shouldn't it?

What else do you think should be really difficult to buy?

The central bank is attempting to control the amount of credit in the market, in previous times it would simply have jacked up interest rates

Now it can only set lending rules, essentially bank risk conditions

Credit in Ireland does need to be reigned in.

the 20% is somewhat collateral damage to young couples,

But then again young couples have time in their hands to collect the 20%

[Deleted User]

BoatMad wrote: »

The central bank is attempting to control the amount of credit in the market, in previous times it would simply have jacked up interest rates

Now it can only set lending rules, essentially bank risk conditions

Credit in Ireland does need to be reigned in.

the 20% is somewhat collateral damage to young couples,

But then again young couples have time in their hands to collect the 20%

I don't have an issue with the measures as part of a package to reduce house prices, quite the opposite.

My issue is with the perception that it's a great thing altogether that couples have to spend their 20s saving like crazy just to get a roof over their heads and have children.

I'd like to make buying a house the easiest thing in the world.

The Spider

BoatMad wrote: »

The central bank is attempting to control the amount of credit in the market, in previous times it would simply have jacked up interest rates

Now it can only set lending rules, essentially bank risk conditions

Credit in Ireland does need to be reigned in.

the 20% is somewhat collateral damage to young couples,

But then again young couples have time in their hands to collect the 20%

Older couples don't, a lot of people are only in a position to buy in their thirties after saving for a decade, those people won't get mortgages in their 40's.

Of course QE is probably going to put paid to any hoped for drops in Dublin anyway for the forseeable future.