How will the proposed restrictions affect house prices?
- Thread starter Bronte
- Start date
How will this impact house prices?
With 44% of mortgages issued in 2013 breaching the 80% ltv rule....CGT 7yr exemtpion ending in December this yr....a big increase in supply likely to kick in about 2 years from now...surely the days of 25% growth in Dublin and double digit growth in other cities are coming to an abrupt end (just after the stress tests were completed!).
But the cynic in me is saying that the Govt won't allow prices to drop so close to a general election....so what mad cap ideas are we going to see in this and next year's budget...guarantee scheme for FTB's for example?
With 44% of mortgages issued in 2013 breaching the 80% ltv rule....CGT 7yr exemtpion ending in December this yr....a big increase in supply likely to kick in about 2 years from now...surely the days of 25% growth in Dublin and double digit growth in other cities are coming to an abrupt end (just after the stress tests were completed!).
But the cynic in me is saying that the Govt won't allow prices to drop so close to a general election....so what mad cap ideas are we going to see in this and next year's budget...guarantee scheme for FTB's for example?
Brendan Burgess
Founder
- Messages
- 52,175
Hi Bronte
As the purpose of this is to cool prices, we will make an exception to allow discussion of the impact of these proposed restrictions on house prices.
But please guys, don't go off into a general rant about house prices.
Brendan
As the purpose of this is to cool prices, we will make an exception to allow discussion of the impact of these proposed restrictions on house prices.
But please guys, don't go off into a general rant about house prices.
Brendan
Ok this is good, my point about land prices is because of the Central Banks decision to restrict mortgages and how this will affect land prices. I'm really thinking of the Dublin region.
We know there is a supply problem, and it seems to me that everybody, in general, wants to live in what had come to be known as SCD (South Country Dublin).
For a non Dubliner like me I cannot figure out why on earth why. I think places like Malahide are lovely and compared to the overcrowding I see in building development where the Dart south of Dublin is, that kind of area, it's beyond my comprehension.
I don't think, but I'm not sure if there is a lot of land in this SCD area. There are rumours as well that NAMA is holding a lot of land.
But now with this CB cap, will it mean land prices will have to drop.
As far as I can see, you get nothing in Dublin as regards a family home for 200K, a minimum of 300K is needed. To build terraced 3 beds, on a large scale is about 80K - 100K. Apparently there is 60 acres available in the inner city, between the 2 canals (not that I'd be sure exactly where they are). And a lot more elsewhere. The only problem with SCD is the Dublin mountains, you're not allowed build on it.
Though I do find one thing odd about the supply problem. About 3 weeks ago, there was a 'queue' in Swords to buy houses, yet all the houses were not sold and as 3 bed semi d's go they looked the business. So is it actually true there is a supply issue.
So if you're going to build, and your potential market has a max budget of 300K, and your build cost is 100K, add in a profit say of 20K per house, how much will land prices be lowered by, if any.
Also anyone disputing my figures.
We know there is a supply problem, and it seems to me that everybody, in general, wants to live in what had come to be known as SCD (South Country Dublin).
For a non Dubliner like me I cannot figure out why on earth why. I think places like Malahide are lovely and compared to the overcrowding I see in building development where the Dart south of Dublin is, that kind of area, it's beyond my comprehension.
I don't think, but I'm not sure if there is a lot of land in this SCD area. There are rumours as well that NAMA is holding a lot of land.
But now with this CB cap, will it mean land prices will have to drop.
As far as I can see, you get nothing in Dublin as regards a family home for 200K, a minimum of 300K is needed. To build terraced 3 beds, on a large scale is about 80K - 100K. Apparently there is 60 acres available in the inner city, between the 2 canals (not that I'd be sure exactly where they are). And a lot more elsewhere. The only problem with SCD is the Dublin mountains, you're not allowed build on it.
Though I do find one thing odd about the supply problem. About 3 weeks ago, there was a 'queue' in Swords to buy houses, yet all the houses were not sold and as 3 bed semi d's go they looked the business. So is it actually true there is a supply issue.
So if you're going to build, and your potential market has a max budget of 300K, and your build cost is 100K, add in a profit say of 20K per house, how much will land prices be lowered by, if any.
Also anyone disputing my figures.
House prices
What's the effect on these, it will almost certainly take the heat out of the bubble, and it was looking like a bubble, 25% in one year is crazy rises. Nearly as bad as the drop down after the tiger. So that rise was actually not a sustainable rise, more another bubble. The only advantage being that it took presumable many people out of negative equity.
So where now Dublin house prices. They have got to now drop or stay steady with no price rise, unless supply is going to drive it, but supply cannot drive it because if you can't borrow you cannot buy. So will the market grind to a halt.
Will cash buyers be the winners, or those with bank of Mum and Dad deposits.
Will landlords gain, if rents shoot up, and they are already gone way up in Dublin, we know that homelessness is on the rise, and there are an awful lot of hardship stories from many different sources in the last 12 months.
After Bacon was implemented, rents went through the roof.
What's the effect on these, it will almost certainly take the heat out of the bubble, and it was looking like a bubble, 25% in one year is crazy rises. Nearly as bad as the drop down after the tiger. So that rise was actually not a sustainable rise, more another bubble. The only advantage being that it took presumable many people out of negative equity.
So where now Dublin house prices. They have got to now drop or stay steady with no price rise, unless supply is going to drive it, but supply cannot drive it because if you can't borrow you cannot buy. So will the market grind to a halt.
Will cash buyers be the winners, or those with bank of Mum and Dad deposits.
Will landlords gain, if rents shoot up, and they are already gone way up in Dublin, we know that homelessness is on the rise, and there are an awful lot of hardship stories from many different sources in the last 12 months.
After Bacon was implemented, rents went through the roof.
I dont believe the 25% price increase in the last year amounts to a bubble I think it represents a bounce off the bottom of the market which had overshot. As others have already said, for a bubble to exist, an abundant supply of credit is needed and this is not the current situation
I think this latest move by the central bank will hold back prices but probably wont stop them completely. Certainly a lot of would-be buyers are out of the game in terms of "SCD" but there are plenty still in the race to mop up available supply through support from the "bank of mom and dad" The ones that are now locked out of the SCD market will inevitably look further afield and this will help to kick start the housing market in the outer environs and outside of Dublin.
I remember as a young buck living in Dublin in the early 90s and earning 22000, Irish punts (a decent salary back then !!) that I didnt have a hope of buying a decent house in SCD. A decent 3 bed semi in Rathfarnham was 75,000 and the building societies adopted a strict 2.5 times earnings and a 20% deposit. This was outside of the means of most people but yet the housing market was functioning normally. You will always have certain people who can come up with the bucks. Those people were around in 1990 and they are still around.
So if this is a crisis about young people not being able to buy nice houses in good suburbs of Dublin, then its nothing new I'm afraid. That's the way it always was before the tiger. Same also in London, New York, Paris, Munich etc etc. Property ownership in choice parts of big cities has always been the domain of the rich.
I can't see that changing any time soon.
I think this latest move by the central bank will hold back prices but probably wont stop them completely. Certainly a lot of would-be buyers are out of the game in terms of "SCD" but there are plenty still in the race to mop up available supply through support from the "bank of mom and dad" The ones that are now locked out of the SCD market will inevitably look further afield and this will help to kick start the housing market in the outer environs and outside of Dublin.
I remember as a young buck living in Dublin in the early 90s and earning 22000, Irish punts (a decent salary back then !!) that I didnt have a hope of buying a decent house in SCD. A decent 3 bed semi in Rathfarnham was 75,000 and the building societies adopted a strict 2.5 times earnings and a 20% deposit. This was outside of the means of most people but yet the housing market was functioning normally. You will always have certain people who can come up with the bucks. Those people were around in 1990 and they are still around.
So if this is a crisis about young people not being able to buy nice houses in good suburbs of Dublin, then its nothing new I'm afraid. That's the way it always was before the tiger. Same also in London, New York, Paris, Munich etc etc. Property ownership in choice parts of big cities has always been the domain of the rich.
I can't see that changing any time soon.
25% in the last year and how much more in the year/18 months before that? A bubble does not need credit to form...surely if prices go out of kilter with affordability/wages etc, thats a bubble whether credit is present or not.
Out of curiosity, how would that 22k salary and 75k house look in today's market? My bet is that the gap is much bigger than 3.5 times now
Totally agree with Dellboy on the Bubble issue. In this instance it is lack of availability that is driving up prices rather than supply of cheap credit. The bubble anology would indicate that if new builds and supply returned to the norm this would generate a higher level of available properties and thus drive down the price. We're probably not at the point yet where properties are seriously over priced but certainly we are in that vicinity.
Spanners post is a very valid one. It's not just new builds that have dried up, the potential to move to a larger house is also restricted by the many mortgage holders who are not paying their full mortgage. In a normal market many of these people would be exiting starter homes and moving on to bigger properties. despite the rise in property prices many of these people are unable to move and therefore not freeing up the properties.
The big question is Should the banks become more trenchant in their enforcement proceedings. i.e. if you can't afford your mortgage then you are evicted from the property! This would definitely free up many properties but are we prepared to live with the consequences for the evicted families? Not too bad if alternative social housing was available. But it's not!!!
Spanners post is a very valid one. It's not just new builds that have dried up, the potential to move to a larger house is also restricted by the many mortgage holders who are not paying their full mortgage. In a normal market many of these people would be exiting starter homes and moving on to bigger properties. despite the rise in property prices many of these people are unable to move and therefore not freeing up the properties.
The big question is Should the banks become more trenchant in their enforcement proceedings. i.e. if you can't afford your mortgage then you are evicted from the property! This would definitely free up many properties but are we prepared to live with the consequences for the evicted families? Not too bad if alternative social housing was available. But it's not!!!
Of course it should be enforced.
What consequences? That people have to live in houses they can afford in their new circumstances i.e smaller houses, different locations.
Not everyone in arrears is out of work- some have reduced incomes but are trying to keep houses they can no longer afford.
So social housing would not be needed for everyone!
The only consequences I see now are higher mortgage rates for those taking out new mortgages, partly because the banks aren't getting back in the money they are owed from 10's of thousands of home owners.
I think you are right, there is no supply problem. We built thousands more houses than we needed in the boom, and they are not all in Leitrim.
I hear a lot of people with an overdeveloped sense of entitlement moaning on the radio about how they cannot find a nice house in a nice area at a nice price.
The problem of homelessness is completely different. There are people in society who lack the skills to provide housing for themselves. Neither the public sector nor the private rental sector are doing as much to help these people as they did in the past. This is not really a matter of supply, no matter how many new houses are built there will be people who will not be able to provide for their own housing needs.