Help-to-buy incentive under scrutiny

This past Sunday, current Housing Minister Eoghan Murphy said on RTE’s The Week in Politics that the Help-to-Buy initiative introduced by his predecessor is currently under review. Since its introduction in January under former Finance Minister Michael Noonan and former Housing Minister Simon Coveney, the Help-to-Buy initiative has already received nearly 7,000 applicants and has successfully helped a great percentage of them with the purchase or building of their first home. However, the initiative has recently come under fire for exacerbating the problems it intended to solve, and there is speculation that it may be dissolved.

 

The purpose of the Help-to-Buy incentive was to encourage first buyers to enter the market by helping applicants with their deposit through the refund of applicants’ income tax and DIRT other the past 4 years. It applies to first time buyers who either purchase or build new residential properties, and allows them to receive 5% of the purchase price of their new home, with an upward limit of €20,000. It is hoped that the incentive would help more people climb the property ladder, …

Read More

ESRI is saying there is no housing bubble

With reference to ESRI says rapid rise in house prices does not signal new bubble by Eoin Burke-Kennedy 22 June 2017 in the Irish Times.

The Economic and Social Research Institute, ESRI, is stating that even though the housing prices and rents are rising rapidly this does not necessarily mean a new housing bubble. The official house construction may be overestimating the housing activity, according to the ESRI.

ESRI’s latest economic commentary included a section saying that even though new credit is growing in the residential market and small companies, a good credit risk assessment is still in place and seems to provide no risk.

ESRI still believes the housing prices and rent will be rising from the growing imbalance between supply and demand. The predicted the long-run housing demand to increase from 25,000 to 30,000-35,000.

The government supposedly overestimated the level of supply which may have overstated the true level of construction activity. Government estimating the housing supply at 15,000 in 2016 and ESRI at 12,700.

There is a lot of speculations of another housing bubble coming about. …

Read More

Analyzing rental yields – what this means for investors and renters

An article was published by Fiona Reddan on the Irish Times early this morning examining and evaluating property investment options in and around Dublin today. The article uses the measure of rental yields, how much rental income a property generates as a percentage of its market value, to compare the worthiness of investment options.

 

The major finding in the article was a negative correlation between housing prices and rental yields, meaning that, in Ireland, higher priced properties generate lower investment yields on average. The worst places to invest includes areas such as Dublin 6, Dublin 4, and Dublin 14, where average sale prices are well above €500,000. The best places to invest includes Dublin 10 and Dublin 2, where the average market value of property is much lower. In Dublin 6 for example, the average sale price is €706,741, while rental yields are only 3.6%. On the other hand, in Dublin 10, the average sale price is €173,478, but the annual rental yield is 10.4%.

 

These …

Read More

An Upscale Dorm for Adults

With reference to Co-living goes mainstream, but this is not roommate roulette by Diana Olick

A new housing trend called ‘co-living’ is an upgraded version of low cost living geared for young professionals. The concept of co-living works like a college dorm, complete strangers living in an apartment together with shared living spaces. The catch is every roommate has to sign their own lease so there is liability for their roommates.

The idea came from an increase of housing costs in Chicago and there was no place for two guys, Ryan Shear and Noah Gottlieb, to live so they created this new style targeted for the young professional. It gives another option for people moving to a new city who don’t want the liability of sharing a lease with a stranger but wants to meet new people. It comes with a bedroom and bathroom to yourself and a shared-furnished common area. There is also cleaning services that come and clean the common area.

Gottlieb found the demand to be stronger than expected in Chicago with average age of renters …

Read More

Housing Prices are to Remain High in the Future

With reference to Housing Costs likely to remain elevated in Medium Term by Ali Uğur.

The housing costs look to remain elevated with no promise of decreasing throughout the rest of 2017. With increases in the average price of property at 10.7% from 2016 to February 2017 according to the CSO residential property price index.

Concerning rental properties, the rental inflation is 13.4% for the first quarter of 2017. This being the second highest level since 2002. This is in part from the supply and demand issue here in Ireland for rental property. The May 1st, 2017 there was fewer than 3,100 rental properties available to rent. This is the lowest on the record, according to the Daft.ie report.

Looking on the bright side, we are seeing an 18% yearly increase in completed residential properties with 14,932 completed in 2016. This is in response to trying to meet the increase of demand in the housing market. A majority of these, however, are one-time builds and can’t predict any yearly continuous builds. The breaking of grounds for new residential homes has …

Read More

Mortgage Market Update

The Financial Broker gives readers an overview on currently property prices and mortgage market conditions.

The Central Statistics Office published a report showing price inflation on property had increased 10.7% in the past year up to February. A similar report reveal how the number of newly build housing last year was 14,932 units when estimates denote a demand of up to 50,000 units. These numbers illustrate a problem in the current mortgage market, which this article pinpoints the causes of. The author laments about rising property prices, arguing that many potential home buyers have missed out on the prime time to purchase property, and are currently no long capable of affording the housing of their choice at an acceptable price.

The author attributes the current housing price and rent inflation in Ireland as consequences of a lack of supply in urban areas instead of lax macro-prudential regulations. In fact, she argues that current Central Bank regulations are too restrictive, and thus have prevented demanders from being able to locate and buy affordable housing. While the prudential regulations have lowered the …

Read More

Highlights from the 2017 Macro-Financial Review

The Central Bank of Ireland published today it’s 2017 Macro-Financial Review. The report gives an overview of the Irish economy and the state of its financial environment. The aim of the report is to help protect the interests of the Bank’s stakeholders, these include: the Irish people, national and international authorities, and other participants in the financial market.

Sharon Donnery, the Central Bank’s deputy governor, introduced the report in a speech this morning. She states that the state of the general economy is improving, but also mentions a few outstanding issues that have the potential to negatively impact the economy’s improvement.

The report notes that much of the uncertainty in the Irish economy is a consequence of Brexit. The depreciation of the sterling against the euro and decreasing consumer spending in the UK has already put a burden on export industries. Uncertainties relating to Brexit may also arise from new trade barriers, trade policies and changes in international taxation.

Read More

A response to: Housing for homes – a classic case of market failure

A recent blog post published by Tom Healy, director of the Nevin Economic Research Institute, suggested that the current housing market in Ireland is an example of a failed market. Healy believes that the issue of under supply of housing can only be solved if the government expands provisions of social housing and extends its jurisdictions over prices and supply in the housing market.

Healy based his argument upon the assumption that the current housing market has failed and is unable to recover without intervention. He cites a chronic under supply of housing and the inability of government programs to sufficiently meet demand. While there is indeed a under supply of housing and rising prices due to pent up demand, a series of government construction plans such as the 2013 Forfas Strategy, Capital Investment Plan, and Action Plan for Housing and the Homeless, in addition to private investments are expected to dramatically increase housing supply within the next few years. These projects directly address the supply issue by promising 47,000 additional units of social housing before 2021.

The blog post …

Read More

How Do American Mortgages Work? Part 10: How does Western European Mortgages Compare

Relating this series to the Western European mortgage market, as fixed-rate mortgages are most common among America while variable-rate mortgages are the most common in Western Europe. This is because Fannie Mae and Freddie Mac insure their mortgages. This means it does not affect the lenders if the interest rate rises on a fixed-rate mortgage. It is so, because the mortgage market in the United States relies more on the secondary mortgage market than on formal government guarantees. Comparing home ownership rates between the United States and Western Europe, they are fairly similar but higher default rate in the United States. Mortgage loans are mostly non-recourse debt where the borrower is not personally liable in the United States.

With Ireland’s typical interest rate being higher compared to other Western European countries, theorist claim it was from the popularity of Tracker mortgages. Tracker mortgages being locked in at 1% higher than the European Central Bank (ECB) Rate, when the ECB rate hit 0% lenders were contractually obligated to have the borrowers’ interest rate at 1%. Since the lenders need to make …

Read More

How Do American Mortgages Work? Part 1

Looking at an American mortgage from the outside can seem identical as a mortgage you would obtain in Ireland. You sign a contract, you’re given the keys to your new home in exchange for monthly payments for a set amount of years. But behind the scenes is where things get a little more complicated. The United States has created a secondary mortgage market after the Great Depression in the 1930’s. Since then, the secondary mortgage market is a multi-billion dollar corporation that has the single biggest taxpayer corporation in the US.

In simple terms, the secondary mortgage market includes Government-Sponsored Enterprises that act as the middle man between the mortgage lenders and the investors. They will buy residential loans off of lenders then securitise and trade them to investors. When the Government-Sponsored Enterprises buy a loan off a mortgage lender it returns the loan amount so the lender can turn around and lend to a new family. This allows more capital to be freed to help more families reach their goals of becoming a homeowner and invest in their future.

Read More