Property price are set to rise and rise… (then crash)

We have been clear about our views on property cycles for many years. That is why we said when many were saying the crash would run and run, that we took a contrarian view and said the market would rise and rise quickly, then experience a mid-cycle slow down and return to a rapid increase in prices.

Our ‘mid-cycle’ was called in 2015 as the Macro-Prudential rules kicked in that they wouldn’t calm the market. We said any effect would be temporary at best and that price increases would return and lead us up and up into a crash in the mid 2020’s. This prediction has been one we made long before almost anybody else in the market and we see no reason to believe (for now) that it won’t happen.

The frustration now is about what to do in light of this, for people who want to rent you need to nail down rental contracts – even though more than half the country has rent control because it is going (meant to) end in 2019. For those looking to …

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What about small radical housing plans?

In speaking with several people within industry I have come across the same idea a few time, to the extent that the thought has occupied my mind and turned into this article.

The idea is that experimentation is part of progress, but that we rarely experiment with housing, in particular we rarely experiment with the ‘how’ of  it. Historically it has taken calamitous events to make changes, for instance, the timber and plaster construction of Tudor homes was replaced by the brick and stone of Georgian construction only after large fires and events like the Great Gunpowder Disaster of 1597 in Dublin.

So what if we did the following: take a single street in Dublin, Cork and Galway, ideally one which is fairly ruined (there are many) and we said that for this one street that people could do whatever they wanted in terms of building anything they felt was appropriate or what they wanted to do.

That might mean you have a four storey house next to some shipping container apartments or some other weird mix, but we could …

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Mortgage approvals

Analysing figures released by the Banking and Payments Federation, the article sends a somewhat contradictory message. On the one hand, first time buyer mortgage approval volumes increased 19% this April compared to April of 2016. However, this volume also represents a 8.4% drop from the number of mortgages approved last month in March.

The decrease in the number of first time buyer mortgages this month is not indicative of the generally increasing annual trend, and may be due to the lack of buyer discounts offered in the month of April, when there isn’t many major holidays or events. April is generally the worst time of the year to finance a house (Business Insider).

On a larger scale, the trend in approval volumes for all mortgages follows that of first time buyer mortgages, but to a less exaggerated extent. The number in April represents an increase of 11.7% compared to April of 2016, and a decrease of 11.6% compared to March of this year.

The greater increase in first time buyer mortgages as compared to all mortgages could indicate that more …

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The great Irish deleveraging

This is like the Great Irish Bake-off but all about delevaging, Central Bank economists Reamonn Lydon and Tara McIndoe-Calder put together an excellent paper (05/RT/2017)on the topic, the full technical paper is here.

Our condensed and plain English version is below:

ABSTRACT The authors drew on the 2013 household Finance and Consumption Survey (HFCS) to stimulate household balance sheets form 2005 to 2014 for the purposes of investigating household leveraging and deleveraging during this period. The paper shows that deleveraging has proceeded significantly faster with older households as opposed to younger ones. With younger borrowers, tracker mortgages have eased the debt repayment burden in the presence of large income shocks. All in all, income shocks are the main factor contributing to mortgage repayment problems.

INTRODUCTION From the early 2000s through to the peak of the property boom in 2007, rapid increases in leverage ratios and repayment burdens far outstripped growth in disposable income, leaving households exceptionally vulnerable to the economic shock of 2008. One result of the crisis was the large increase in non-preforming mortgage loans. …

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Irish Times mention Irish Mortgage Brokers, 9th May 2017

We were mentioned by the Irish Times in a piece about mortgage arrears. It was in conjunction with a talk given to the Housing Agency on mortgage arrears. It quoted part of the talk we gave…

Financial adviser Karl Deeter told the conference his research puts the non-engagement rate at closer to 80 per cent.

Mr Deeter said the courts are “predisposed” towards borrowers, and that people are given many chances before they lose their homes.

“There’s three magic rules if you want to lose your home: pay zero for a long period of time, don’t engage with your lender – and then don’t show up to court,” he said.

“These three inputs were central to virtually every case of possession we saw.”

Mr Deeter said that according to his research, more than 90 per cent of distressed borrowers who engaged with their lender were able to work out some sort of deal to avoid repossession.

 

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RTE History show features Irish Mortgage Brokers

We were really pleased to take part in a piece on RTE Radio 1’s ‘History Show with Myles Dungan’. The topic was historic property cycles and how the most recent crash was big news to most of us, but was far from the most enduring (which lasted about a century).

Karl Deeter of Irish Mortgage Brokers was on with Frank Quinn from the Blackrock Further Education Institute, the piece was based on their paper which had been presented to the Statistical and Social Inquiry Society of Ireland last October (David Duffy formerly of the ESRI and now of Property Ireland was also an author on the technical paper).

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Today FM ‘Last Word’ speaks to Irish Mortgage Brokers, 27th April 2017

Matt Cooper had several guests in to discuss the new proposal for 800 sites owned by the government to be released in order to provide new housing.

There was  Jim Bainam from the Department of Housing, Karl Deeter from Irish Mortgage Brokers and Sinn Fein TD Eoin O’Brionn.

There were differences of opinion in terms of the ‘how’ regarding the sites, in terms of ‘how they are delivered’ via housing bodies, local authorities or privately, but all of the panellists were positive about a move to increase housing supply.

The main thing to remember in our view, is that it doesn’t really matter who builds what because the local authority remain the tax authority on all housing so they can get the housing with no capital outlay and then capture the property tax in future years if a private developer does it.

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Q102 Drive at 5 features Irish Mortgage Brokers, Wednesday 26th April

Scott and Venetia had us on their show to discuss the property market and to go through some of the things that are affecting it.

They also found out how much he paid for his last haircut and a few other unusual things that you don’t normally hear on radio!

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RTE Sean O’Rourke speaks to Irish Mortgage Brokers

Sean O’Rourke had Karl Deeter on his ‘Today’ show to discuss planning laws and how a change in them could result in up to 4,000 additional Dublin City homes at a very low financial cost.

The idea was to reduce the regulatory burden and inefficiency of planning, and (in Karl’s opinion) to also consider some reductions in the standards because applying modern standards to old buildings is like applying modern car safety rules to old cars.

The clip is a good debate showing the good and bad facets of this argument.

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