Central Bank comments on house prices

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Brendan Burgess

Brendan Burgess

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Pearse Doherty is pushing the Central Bank Governor on this.

Doherty: You said you would intervene if a house price bubble appeared.
House prices have gone up by €6k a month in Dublin, and €4k nationally.
When are you going to intervene

Governor: We are not going to intervene soon.
Mortgages are not going ahead of the 3.5 times income level.
It's self limiting

Doherty: A lot of people who want to live in Dublin. Won't be able to afford to.
 
Ciarán O'Donnell

Talking about house prices and Central Bank restrictions. - I missed most of it

When will you step in to change the rules so that ordinary people can afford to buy houses

Lane:
Credit rules are not about solving the affordability rules. They are primarily to protect the system. The changes were small as a lot of people were getting exemptions. Our changes have not driven the house prices increase. The anchor is the 3.5 times limit on incomes.

O'Donnell: Why are house prices going up

Lane: Dysfunctional housing market, the economy is growing and employement is growing, we live in a low interest rate world.
Only people on decent incomes can buy houses. We need affordable housing supply.

O'Donnell: until supply catches up, do you not see your role to make sure that house price for first time buyers do not go out of control.

Lane: If house prices go up beyond reasonable levels - we will intervene

O'Donnell : What rate of price increase will you get involved in

Lane; It's the level of house prices compared to incomes and interest rates - are they in a danger zone. We can't do it within a year.

O'Donnell: At what level will you intervene?

Lane: It's a calendar based review on 1 November.

[It's not clear what Kieran O'Donnell is asking for. For the limits to be tightened? This is mad stuff.]

O'Donnell: If the LTV goes mad, there will be another bout of people in NE.

Lane: It's so so tempting to say that we should intervene. Incomes can't spiral upwards, so mortgages cannot spiral upwards.
 
Michael D'Arcy TD

There needs to be more flexibility in your rules. You may have to intervene more than once a year.
 
What do the politicians want to CB to do? If you ask me one minute they're screaming for mortgage rules to be eased and another they want the CB to stop house prices increasing. I'm no expert but I see a property bubble right now and nothing coming at all from the politicians about the elephant in the room which is supply. How many years now and nada.
 
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It was a mad discussion.

The Governor should have asked O'Donnell straight out:

What specifically do you want me to do?

The answer would probably have been "Reduce house prices and let the borrowers borrow more."

Brendan
 
Well he has no way to reduce house prices. And house prices are high because the governement has done zero really to sort out a) supply b) planning c) higher densities d) incentivise landlords to buy by threating them like any other business e) incentivise people to convert vacant or suitable properties (I could house four people if some of these options were tackled). f) infrastruction to help builders build housing, g) make rules that incentivise the building of proper family apartments in Dublin ...
 
Whatever O'Donnell was saying, and I couldn't understand it, The RTE News at One gave him great prominence for it.

Brendan
 
Soon now the politicians will make a strong pro-cyclical intervention in the housing market, or perhaps force the central bank to do so. It will be sold as a way to allow more people buy their own home, it will cause prices to rocket.

I forecast this when the current CB rules were introduced. Those had the effect of causing an unsatisfied pent-up demand. When the politicians release this demand then there will be a bubble.

Bubbles don't reoccur because people are stupid, they reoccur because people have not figured out a way to deal with the housing needs of a successful economy.
 
cremeegg said:
Bubbles don't reoccur because people are stupid, they reoccur because people have not figured out a way to deal with the housing needs of a successful economy.
Click to expand...

There are plenty of successful economies without housing bubbles. It's not rocket science how the government could act to increase supply (use it or loose it zoned land to address land costs; eliminate levies to reduce build costs; tax vacant properties, the list goes on), but will they act? Too many vested interests out there, I'm afraid......
 
cremeegg said:
Soon now the politicians will make a strong pro-cyclical intervention in the housing market, or perhaps force the central bank to do so. It will be sold as a way to allow more people buy their own home, it will cause prices to rocket.

I forecast this when the current CB rules were introduced. Those had the effect of causing an unsatisfied pent-up demand. When the politicians release this demand then there will be a bubble.

Bubbles don't reoccur because people are stupid, they reoccur because people have not figured out a way to deal with the housing needs of a successful economy.
Click to expand...
I hope you're right because CGT or not I'm selling a house, waiting and coming back in when everything collapses. I should have done so last time but I'm ready this time. I reckon as a landlord it's really the only way to make money. Capital appreciation.
 
Say it isn't so! Bronte selling an investment property!

Capital appreciation is the only way to make money on an asset class that has basically tracked inflation over the long term.

You heard it here first folks....
 
Bronte said:
I hope you're right because CGT or not I'm selling a house, waiting and coming back in when everything collapses. I should have done so last time but I'm ready this time. I reckon as a landlord it's really the only way to make money. Capital appreciation.
Click to expand...

Bronte calling the bottom...I love it!
 
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