Are significant numbers of Dublin mortgages overleveraged?

alannoone · 15-05-2020 9:40am #1

Hi. Long time lurker both here and proprty pin, first time interacting.

Are a significant number of dublin buyers/owners over-leveraging?
Are there figures to show this?
If they are not overleveraged, where is the money sourced?

I ask based on an anecdotal info.

We had wanted to puchase in the South Side but anything we could afford within 30 mins commute of the city center was small, in neighbourhoods we didnt like or would have needed 150k+ to renovate.
We ended up with a new build in the North of the city, taking out a mortgage that was about 2.5 times our annual income.
We didn't want to buy something that we couldn't afford should one of us be unable to work for whatever reason.

Since then a number of people in our circle have purchased houses that are double and even treble the cost (value?) of our home in top end leafy south side suburbs.
They are good sized top end homes in some of the best areas in Dublin.
We are all in the same demographic, we all have similar household income, +- 10% estimation.

The reason for the question is to help decide if we were too conservative when taking our mortgage.

mcbert · 15-05-2020 10:17am

alannoone wrote: »

Hi. Long time lurker both here and proprty pin, first time interacting.

Are a significant number of dublin buyers/owners over-leveraging?
Are there figures to show this?
If they are not overleveraged, where is the money sourced?

I ask based on an anecdotal info.

We had wanted to puchase in the South Side but anything we could afford within 30 mins commute of the city center was small, in neighbourhoods we didnt like or would have needed 150k+ to renovate.
We ended up with a new build in the North of the city, taking out a mortgage that was about 2.5 times our annual income.
We didn't want to buy something that we couldn't afford should one of us be unable to work for whatever reason.

Since then a number of people in our circle have purchased houses that are double and even treble the cost (value?) of our home in top end leafy south side suburbs.
They are good sized top end homes in some of the best areas in Dublin.
We are all in the same demographic, we all have similar household income, +- 10% estimation.

The reason for the question is to help decide if we were too conservative when taking our mortgage.

Maybe they have savings and/or parental support that you dont, or went for an exemption, or are reckless, or all of the above

SozBbz · 15-05-2020 10:38am

mcbert wrote: »

Maybe they have savings and/or parental support that you dont, or went for an exemption, or are reckless, or all of the above

Or maybe they earn more than you think they do.

Cuddlesworth · 15-05-2020 10:51am

There comes a point where your net income is significantly over your outgoings. You can increase your outgoings to match, or find your savings increasing by substantial amounts.

In reality a person or couple will have similar bills regardless of income, phone/car/electricity/heating/food etc. In some cases, those with less money can have higher bills through working longer hours, living further away, paying rent over mortgage(currently), higher heating costs because of less insulation etc.

johnnyskeleton · 15-05-2020 10:57am

alannoone wrote: »

Are a significant number of dublin buyers/owners over-leveraging?

No, at least not by the standard set by the Central Bank which is 80-90% Deposit, 3.5x salary exemption up to 4.5x their salaries. Unless there are people borrowing surreptitiously/fraudulently e.g. from a Credit Union to pay their deposit and creating false paperwork to make it seem like additional income, or borrowing from non traditional sources or from outside the jurisdiction, and there is no evidence of that, then people are sticking to the Central Bank Rules.

The next question may be whether the Central Bank rules themselves are allowing over leveraging. I would say that the rules are probably at the maximum level of borrowing before over leveraging, in my view. However, we are in a period of historically low interest rates, and with more money being pumped in by the ECB, it's hard to see interest rates rising any time soon. So in that context, the Central Bank rules are reasonable maximums.

The next question is, is everyone borrowing to the absolute max of these rules? It is hard to say, but I would venture a guess that no, they are not. You, for example, chose not to over leverage yourself, and there is no reason to believe that you are doing something radically different or exceptional to everyone else.

Some of your colleagues bought more expensive houses, as set out above by other posters, maybe they had a larger deposit than you, or earn more, or are prepared to take the risk and make sacrifices to pay the mortgage down earlier than expected.

Generally, people will tend to buy the most house for the money that they can get, but this isn't always so.

Finally, if I could change the question somewhat and ask are the majority of people who are already owners/borrowers over leveraged (as opposed to new purchasers getting into new debt), I would say that the vast majority of such people are not. The vast majority of houses are owned by people who bought them many years ago, with significant sums paid off their mortgages if they even have mortgages any more.

If they are not overleveraged, where is the money sourced?

Savings, income, gifts and inheritances, mostly. The occasional lottery win might add to it too.

We had wanted to puchase in the South Side but anything we could afford within 30 mins commute of the city center was small, in neighbourhoods we didnt like or would have needed 150k+ to renovate.
We ended up with a new build in the North of the city, taking out a mortgage that was about 2.5 times our annual income.
We didn't want to buy something that we couldn't afford should one of us be unable to work for whatever reason.

Since then a number of people in our circle have purchased houses that are double and even treble the cost (value?) of our home in top end leafy south side suburbs.
They are good sized top end homes in some of the best areas in Dublin.
We are all in the same demographic, we all have similar household income, +- 10% estimation.

The reason for the question is to help decide if we were too conservative when taking our mortgage.

Well do you feel that you were too conservative? It certainly sounds like you regret not buying a bigger more ostentatious property, and if so, it's not too late. You can sell your current house (albeit in the covid market) and look to buy somewhere more expensive in the areas that you want.

At the end of the day, buying a house is a difficult business, and for most people it only happens once or a few times in a lifetime. It is important that you feel happy with your choice.

In the scenario you describe, it isn't a case of one person being objectively right and the other being objectively wrong, it's about choices. For you, you were happy with the house and get extra benefit from knowing that if one or both of you lose your jobs the mortgage will still be manageable. For other people, they aren't too concerned about that and are happy to take the risk. It's horses for courses.

Personally, I struggle to see how very many people could buy "good sized top end homes in some of the best areas in Dublin" based solely on income. A €1m house would need a deposit of €200-300k plus an income of €200k per annum to justify. But obviously there are people that are able to do that!

Roger the cabin boy · 15-05-2020 10:58am

The whole housing market is overleveraged.

Purposefully..

Marius34 · 15-05-2020 11:04am

The typical picture of the FTB in Dublin is:
Loan Size: 291,701
Property Value: 370,666
LTV: 79.7%
LTI: 3.4
Income: €89,049

For majority its: Semi-Detached/Terraced (73%), with Average 106sqm/1144sqf in size.

Majority of FTB pushing to 3.5 LTI limits. Your 2.5 LTI mortgage, is very conservative in comparison, but this is not a bad thing.

https://www.centralbank.ie/docs/default-source/publications/household-credit-market-report/household-credit-market-report-2019.pdf

SozBbz · 15-05-2020 11:15am

Roger the cabin boy wrote: »

The whole housing market is overleveraged.

Purposefully..

Go on, actually explain that statement.

People borrowing mostly 3.5x and up to 4.5x their salary, wtih between 10-20% deposit is not over leveraged.

For context, in 2006/06, people didnt necessarily need a deposit, could borrow more than the house was worth and could borrow up to 9x salary.

Thats what over leveraged looks like.

Roger the cabin boy · 15-05-2020 11:56am

SozBbz wrote: »

Go on, actually explain that statement.

People borrowing mostly 3.5x and up to 4.5x their salary, wtih between 10-20% deposit is not over leveraged.

For context, in 2006/06, people didnt necessarily need a deposit, could borrow more than the house was worth and could borrow up to 9x salary.

Thats what over leveraged looks like.

...Based on a join income of highly paid professionals

Because its fine for a society to have both partners working 50hrs a week to put a roof over their head.

And its fine that only the highly paid in a society can afford to buy a house.

A) Ave. ind. wage is E39k

Ave. house price is E270k

B/A= 7 times.

So, to get a average house on an average wage, you need two incomes (perhaps more because the snd wage is never fully taken into account).

Fine, have at it, have mrs and mrs joe average go out to work to live, just don't be surprised when our native population begins to decline or the kids that do make it through that domestic nightmare are not "alright"

SozBbz · 15-05-2020 12:06pm

Roger the cabin boy wrote: »

...Based on a join income of highly paid professionals

Because its fine for a society to have both partners working 50hrs a week to put a roof over their head.

And its fine that only the highly paid in a society can afford to buy a house.

A) Ave. ind. wage is E39k
Ave. house price is E270k

B/A= 7 times.

So, to get a average house on an average wage, you need two incomes (perhaps more because the snd wage is never fully taken into account).

Fine, have at it, have mrs and mrs joe average go out to work to live, just don't be surprised when our native population begins to decline or the kids that do make it through that domestic nightmare are not "alright"

Such nonsense.

Average industrial wage includes plenty of people who will never be home owners and would never have been at other times in history too. Its never been the case that every person in society can afford to buy a house. Thats literally why social housing exists.

Ordinary people buy houses, but not very low income earners. Is a couple on €80k between them classified as high earning professionals? I wouldn't think so. The sounds like average enough earners to me and going by your numbers, they can afford the average house. Hardly the preserve of the elite is it?

The majority of houses are bought by couples as their family homes, so of course 2 incomes typically go into the purchase of a home.

Finally, you may not like house prices, but thats not the same as them actually being overleveraged, which is whats being asked here.

2nd income not taken into account - not true. Affordability can be impacted if the 2nd income is temporary or part time or there are already kids, but 2 adults in full time work and no dependants, then its both incomes x3.5

Who do you suppose pays for housing otherwise? The state? Houses cost real money to build and building to current standards is very expensive.

Roger the cabin boy · 15-05-2020 12:09pm

SozBbz wrote: »

Such nonsense.

Average industrial wage includes plenty of people who will never be home owners and would never have been at other times in history too. Its never been the case that every person in society can afford to buy a house. Thats literally why social housing exists.

Ordinary people buy houses, but not very low income earners. Is a couple on €80k between them classified as high earning professionals? I wouldn't think so. The sounds like average enough earners to me and going by your numbers, they can afford the average house. Hardly the preserve of the elite is it?

The majority of houses are bought by couples as their family homes, so of course 2 incomes typically go into the purchase of a home.

Finally, you may not like house prices, but thats not the same as them actually being overleveraged, which is whats being asked here.

Congrats on just ignoring anything said against your opinion whilst regurgitating your own.

I've just spelled it out for you. Everything has context.
You will be championing generational mortgages next.

lomb · 15-05-2020 12:11pm

johnnyskeleton wrote: »

happy to take the risk. It's horses for courses.

Personally, I struggle to see how very many people could buy "good sized top end homes in some of the best areas in Dublin" based solely on income. A €1m house would need a deposit of €200-300k plus an income of €200k per annum to justify. But obviously there are people that are able to do that!

500k in cash or equity and 500k mortgage. Even company owners generally don't draw large incomes for tax reasons. Same with 1.5 million house likely 1 mill in cash 500k mortgage etc

SozBbz · 15-05-2020 12:16pm

Roger the cabin boy wrote: »

Congrats on just ignoring anything said against your opinion whilst regurgitating your own.

I've just spelled it out for you. Everything has context.
You will be championing generational mortgages next.

At least i'm on topic.

Again, I'll ask you how 3.5x income + 10%+ deposit is overleveraged? That is the question, but if you want to rant about other issues, perhaps start your own thread.

Your using the word context as cover to introduce your own agenda.

toughlife · 15-05-2020 12:20pm

alannoone wrote: »

Hi. Long time lurker both here and proprty pin, first time interacting.

Are a significant number of dublin buyers/owners over-leveraging?
Are there figures to show this?
If they are not overleveraged, where is the money sourced?

I ask based on an anecdotal info.

We had wanted to puchase in the South Side but anything we could afford within 30 mins commute of the city center was small, in neighbourhoods we didnt like or would have needed 150k+ to renovate.
We ended up with a new build in the North of the city, taking out a mortgage that was about 2.5 times our annual income.
We didn't want to buy something that we couldn't afford should one of us be unable to work for whatever reason.

Since then a number of people in our circle have purchased houses that are double and even treble the cost (value?) of our home in top end leafy south side suburbs.
They are good sized top end homes in some of the best areas in Dublin.
We are all in the same demographic, we all have similar household income, +- 10% estimation.

The reason for the question is to help decide if we were too conservative when taking our mortgage.

Lots of people earn a lot more than you think.

BoyLaw937 · 15-05-2020 12:26pm

I wouldnt say they are over leveraged as I assume most mortages are completed with adherence to the central bank rules, but the price of the properties are over valued due to the Dublin factor and will ebb if we end up with a more sensible diversification of corporations over more of the cities in Ireland.

I do not think this will happen in my lifetime. So I would say you are "playing it safe".

Roger the cabin boy · 15-05-2020 12:27pm

SozBbz wrote: »

At least i'm on topic.

Again, I'll ask you how 3.5x income + 10%+ deposit is overleveraged? That is the question, but if you want to rant about other issues, perhaps start your own thread.

Your using the word context as cover to introduce your own agenda.

Well done.
Switch an opinion that's not yours into a raging rant and agenda whilst sidelining any facts put against your own.

In housing, context is everything because no two houses are the same and no two buyers are the same.

If you care to put the bat down for a minute and stop swinging, I will repeat to
you, my reply to the OP.

The housing market in Ireland in general, in my opinion as a father and homeowner is overleveraged because, on average, it is not possible for an average couple on an average wage to buy an average house and continue to have any quality of life or family.

I appreciate that you think the plebs should be left to rot in their shoebox tenements and only the educated elite deserve housing, but i disagree.

toughlife · 15-05-2020 12:30pm

Roger the cabin boy wrote: »

Well done.
Switch an opinion that's not yours into a raging rant and agenda whilst sidelining any facts put against your own.

In housing, context is everything because no two houses are the same and no two buyers are the same.

If you care to put the bat down for a minute and stop swinging, I will repeat to
you, my reply to the OP.

The housing market in Ireland in general, in my opinion as a father and homeowner is overleveraged because, on average, it is not possible for an average couple on an average wage to buy an average house and continue to have any quality of life or family.

I appreciate that you think the plebs should be left to rot in their shoebox tenements and only the educated elite deserve housing, but i disagree.

It is possible for couples to buy an average house?

say average salary of 40k each that is allowing (saying 10% deposit rather than 20%) them to buy a house of just over 300k. There are plenty of houses sub 300k even in Dublin region.

SozBbz · 15-05-2020 12:44pm

Roger the cabin boy wrote: »

Well done.
Switch an opinion that's not yours into a raging rant and agenda whilst sidelining any facts put against your own.

In housing, context is everything because no two houses are the same and no two buyers are the same.

If you care to put the bat down for a minute and stop swinging, I will repeat to
you, my reply to the OP.

The housing market in Ireland in general, in my opinion as a father and homeowner is overleveraged because, on average, it is not possible for an average couple on an average wage to buy an average house and continue to have any quality of life or family.

I appreciate that you think the plebs should be left to rot in their shoebox tenements and only the educated elite deserve housing, but i disagree.

I'm not engaging with you beyond this because you're not only accusing me of things that i'm not doing but that you are actually doing yourself. Just to point out that going by your own numbers an average couple can afford an average house. You want to dilute this by now banging on about dependants and reasons why both incomes should not be counted, then thats another discussion, but its not this one.

I also never said anything about "plebs" or "tenments", thats all your language and I'll ask you not to speak for me. What I said was that in every comparable society, not everyone ends up owning a house. There is a place for social housing, and I've never said that it should be substandard. I'm actually very pro social housing, pro affordable housing especially for key workers and definitely pro high construction standards. But I'm under no illusion that all of this needs to be financed and not everyone needs the help.

Overleveraged is when borrowings are at a level that they cannot be serviced. Simple. That is not the Irish market in recent years. The Central Bank rules have ensured banks don't lend recklessly, they've tempered prices and have really saved us from ourselves in the past few years when prices could have easily raced ahead if the rules had been relaxed.

You might think houses are overpriced, but thats not the same as overleveraged.

Roger the cabin boy · 15-05-2020 12:45pm

toughlife wrote: »

It is possible for couples to buy an average house?

say average salary of 40k each that is allowing (saying 10% deposit rather than 20%) them to buy a house of just over 300k. There are plenty of houses sub 300k even in Dublin region.

Yea, its doable when you look at it that way.

It troubles me that it needs two earners though. I think that's a huge problem with modern society. A family really is better when there is one person at home.

I bought my house on a 3x single income. I could have gone higher than 3 at the time, but i wanted to have some security that if i lost my good job, i could stay afloat if we both found lower paid jobs.

Now, we are talking about having two good jobs running 365 without blips to get a house.

Not right. Not to me.

A house is just one part of the structure of life, it shouldn't be most of it.

Roger the cabin boy · 15-05-2020 12:50pm

SozBbz wrote: »

I'm not engaging with you beyond this because you're not only accusing me of things that i'm not doing but that you are actually doing yourself. Just to point out that going by your own numbers an average couple can afford an average house. You want to dilute this by now banging on about dependants and reasons why both incomes should not be counted, then thats another discussion, but its not this one.

I also never said anything about "plebs" or "tenments", thats all your language and I'll ask you not to speak for me. What I said was that in every comparable society, not everyone ends up owning a house. There is a place for social housing, and I've never said that it should be substandard. I'm actually very pro social housing, pro affordable housing especially for key workers and definitely pro high construction standards. But I'm under no illusion that all of this needs to be financed and not everyone needs the help.

Overleveraged is when borrowings are at a level that they cannot be serviced. Simple. That is not the Irish market in recent years. The Central Bank rules have ensured banks don't lend recklessly, they've tempered prices and have really saved us from ourselves in the past few years when prices could have easily raced ahead if the rules had been relaxed.

You might think houses are overpriced, but thats not the same as overleveraged.

Again, you are missing context.

Overpriced/overleveraged are two sides of the same coin.

Because of the high average price of housing in Ireland, Average Irish people need to be over leveraged to buy.

SozBbz · 15-05-2020 1:01pm

Roger the cabin boy wrote: »

Again, you are missing context.

Overpriced/overleveraged are two sides of the same coin.

Because of the high average price of housing in Ireland, Average Irish people need to be over leveraged to buy.

I know I said I wouldn't do this but you're just being so obstinate.

Over leveraged means you can't make your repayments. The CB rules prevent people from borrowing more than they can afford to repay. Therefore your last sentence makes no sense, because by and large, people can afford their mortgage payments.

Your social agenda of houses being priced so that one income can purchase is a whole other discussion and by all means start your own thread. The world is built on most adults working, and our lives have become sophisticated to a level whereby if we were to go back to a time where one parent, typically the mother didnt work then frankly we couldn't sustain our current standard of living.

Overleveraged does not mean that houses are more expensive than you'd like them to be. They are not the same thing or two sides of the same coin.

Goodnight.

Roger the cabin boy · 15-05-2020 1:06pm

SozBbz wrote: »

I know I said I wouldn't do this but you're just being so obstinate.

Over leveraged means you can't make your repayments. The CB rules prevent people from borrowing more than they can afford to repay. Therefore your last sentence makes no sense, because by and large, people can afford their mortgage payments.

Your social agenda of houses being priced so that one income can purchase is a whole other discussion and by all means start your own thread. The world is built on most adults working, and our lives have become sophisticated to a level whereby if we were to go back to a time where one parent, typically the mother didnt work then frankly we couldn't sustain our current standard of living.

Overleveraged does not mean that houses are more expensive than you'd like them to be. They are not the same thing or two sides of the same coin.

Goodnight.

You are sounding like a VI.

Good day (its lunchtime)

thegetawaycar · 15-05-2020 1:19pm

My opinion on the OPs question,

If both partners jobs are secure and the mortgage was taken out under the 3.5X rules then probably not but if either or both jobs are insecure then yes.

The use of "significant" is important here and I'd reasonably suggest that 15% would be over leveraged, if you view that as significant.

The COVID 19 situation probably changes that now as childcare may not be an option for the short term (so 2 salaries may be difficult to maintain) and also formerly secure jobs may not be any more (air travel etc...). We will know a lot more in 6 months time but hopefully the 3.5X means that payments would be possible on 1 salary or a small extension on the mortgage payback time will be available and allow comfortable payment.

SozBbz · 15-05-2020 1:25pm

Roger the cabin boy wrote: »

You are sounding like a VI.

Good day (its lunchtime)

Reported.

ted1 · 15-05-2020 1:29pm

Roger the cabin boy wrote: »

A) Ave. ind. wage is E39k
Ave. house price is E270k

B/A= 7 times.

A person on the average industrial wage isn’t the average house buyer. So the above is irrelevant

Shared ownership / affordable housing/ social housing etc picks up those on the lower wages.

Roger the cabin boy · 15-05-2020 1:34pm

ted1 wrote: »

A person on the average industrial wage isn’t the average house buyer.

Exactly.

A person on the average industrial wage is probably stuck in a rent vortex where rents are higher than mortgages (!) and so he can't save.

Returning to the OP,

He has a 2.5x combined income mortgage. I would think thats about the limit because if either lose the job, that 2.5 becomes 5 and that's not good, but its much better than 3.5 becoming 7 and so on and so forth.

Roger the cabin boy · 15-05-2020 1:41pm

SozBbz wrote: »

Reported.

?

For disagreeing with you?

Crikey.

SozBbz · 15-05-2020 1:44pm

Roger the cabin boy wrote: »

?

For disagreeing with you?

Crikey.

For personal abuse.

Or was "you sound like a VI" supposed to be a compliment? Granted I had to look it up as I'm not fully ofay with internet whacko vernacular originating from deepest darkest reddit, but lets just say if you're slinging names about, you know you're losing.

Roger the cabin boy · 15-05-2020 1:47pm

SozBbz wrote: »

For personal abuse.

Or was "you sound like a VI" supposed to be a compliment? Granted I had to look it up as I'm not fully ofay with internet whacko vernacular originating from deepest darkest reddit, but lets just say if you're slinging names about, you know you're losing.

Oh please, saying your comments sound like a vested interest's isn't accusing you of being one, for Gods sake.
And quite how that equates to personal abuse, i don't know. Its just adult debating.

toughlife · 15-05-2020 1:58pm

Roger the cabin boy wrote: »

Yea, its doable when you look at it that way.

It troubles me that it needs two earners though. I think that's a huge problem with modern society. A family really is better when there is one person at home.

I bought my house on a 3x single income. I could have gone higher than 3 at the time, but i wanted to have some security that if i lost my good job, i could stay afloat if we both found lower paid jobs.

Now, we are talking about having two good jobs running 365 without blips to get a house.

Not right. Not to me.

A house is just one part of the structure of life, it shouldn't be most of it.

Not going to get into an argument but if you have both parties in the workforce then you'll have that change permanently. That's just efficient market pricing. Otherwise one salary could buy 2 houses..

Are significant numbers of Dublin mortgages overleveraged?

Comments