Newstalk: Pat Kenny show features Irish Mortgage Brokers

The Pat Kenny Show on Newstalk had Karl Deeter in studio to discuss the property market today. We tried to make the point that there are several issues in the market making a tricky situation even harder to navigate, but that double sided approaches by the Central Bank (loose monetary policy and low interest rates) are helping to drive prices up while other rules are attempting to restrict credit.

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The unaffordability index of Irish housing

This picture speaks a thousand words and in many cases tens of thousands of earnings that a person would have to have in order to afford an average home in different parts of the country. We used recent data from the Daft report and then broke it down into borrowings and compared that to average wages.

The column after ‘county’ is the average price in that region. If we assume a first time buyer will typically want a 90% mortgage we then look at the amount of earnings they’d need to have in order to get the loan.

The last column is where the real story lies, it compares prices in the area to average wages taken from the CSO.

Anything in a white cell with a minus is very affordable, anything in black means you’d have to be earning above average wage to buy a property in the area.

If the cell has a red background that is showing you where the difference is greater than €10,000.

It’s fairly clear that cities and in some cases …

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2016 Mortgage lending rules submission by Irish Mortgage Brokers

We sent our research and thoughts on the lending rules to the Central Bank as part of their industry consultation process regarding the existing mortgage lending rules.

While we are critical of them in particular for first time buyers, we haven’t had an issue on other aspects of it (such as controls for investors). The submission argues with supporting evidence for 90% loans for first time buyers to be available generally but to keep other controls generally in place, or to do nothing at all and give the adjustments more time to bed in.

Submission is here: 2016 Central Bank macroprudential rules submission Irish Mortgage Brokers

The findings of a survey carried out by Behavior and Attitudes of clients of Irish Mortgage Brokers, DNG and Hooke & MacDonald which was mentioned in the press is also available here: 2016 MacroPrudential review – survey findings

 

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Today FM: The last word, Matt Cooper talks to Karl Deeter & Ruth Coppinger

Karl Deeter was on Today FM’s ‘The Last Word’ with Matt Cooper to discuss proposals by TD Ruth Coppinger to break the law if you are at risk of eviction.

Our view is that the law should be honoured and that to suggest breaking the law ought to be way down the list of suggestions for people with housing difficulties. It would make far more sense to speak to the Department of Social Protection and to use the services and protections that we have set up as a society rather than to take the law into your own hands.

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The cost of turfing out tenants

It is often assumed that landlords don’t want to give people long leases preferring to see people leave and obtain a rent increase where possible. This belief doesn’t factor in several concerns, firstly is that rents are not always rising, that moving is an inconvenience to both tenant and landlord and that there are some hard costs to factor in.

For this reason we created a small basic calculation to show that in many cases the recouping costs equate to more than a months rent and that a landlord would have to increase rents by about 12% to break even.

The other thing that happens is the landlord takes on a new risk of an unknown tenant, good tenants are like good credit applicants, they often don’t pay top rates because of their past performance, a new person might be habitually late, break more, or be more high maintenance.

This is yet another reason that shows the benefit of a long lease to a landlord, equally the tenant also benefits by having the protections of a …

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Rent control Europe: France

Population: 66,689,000 GDP: $2,829,192,039,172 Avg. Weekly Earnings: €1,128.44 Avg. Apartment Price (Per. Sq. M.): €13,639.00 For 120-sq. m. apartment in city centre (Paris) Avg. Monthly Rent: €848.59

France boasts the second largest economy in the European Union, and alongside their German counterparts, are responsible for a major portion of the fiscal policy introduced by the Eurozone nations. French legislation is also among the most pro-tenant in the world, and this is coupled with the policies introduced by Francois Hollande, the French Socialist President, which target the wealthy.

Currently, France is faced with housing shortages of record proportions; despite government subsidies and tax cuts incentivising construction of rental properties, household investment is at its lowest point since mid-1999. This lack of investment puts additional stress on companies and consumers to create growth, and spur the recovery forward. Paris in particular is a popular destination for foreign investors, which has caused local legislation intended to curtail this absentee ownership. These housing regulations have made the situation worse, with additional restrictions on rents decreasing investor interest in the area.

There also exists considerable …

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Rent control Europe: Finland

Population: 5,488,543 GDP: $237,111,000,000 Avg. Weekly Earnings: €575.00 Avg. Apartment Price (Per. Sq. M.): €6,214.00 For 120-sq. m. apartment in city centre Avg. Monthly Rent: €887.30

Our second foray into the Nordic countries takes us to Finland; similarly to Sweden, Denmark, and Norway, the Finnish economy enjoyed unprecedented growth from 1999, when it joined the European Union’s single currency, until the recession in 2008. In comparison with the rest of the Eurozone, Finland’s recovery has been strong; in 2012, the public debt in Finland was estimated at 50% of GDP, significantly lower than the beleaguered Germans, for whom public debt was 80% of GDP.

Measured differently, however, the Finnish recovery is less impressive. In Q2 2012, the Finnish GDP dropped by 1%, whereas its nearby neighbour Sweden enjoyed an increase of 1.4% in the same period. In the same year, the Swedish government ran an account surplus of 7% of GDP, whereas the Finnish government operated its first deficit since 1993.

The differences between Sweden and Finland extend to their handling of property: while Sweden is staunchly pro-tenant, the practices …

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Rent control Europe: Denmark

Population: 5,717,041 GDP: $300,906,000,000 Avg. Weekly Earnings: €775.00 Avg. Apartment Price (Per. Sq. M.): €4,279.00 For 120-sq. m. apartment in city centre Avg. Monthly Rent: €1,077.69

In this post, we will be discussing the rent control strategies employed in Denmark, and their impact on the economic recovery and growth of the country. Of the countries we have analysed so far, Denmark ranks among the top in most complicated, convoluted rent control systems.

The Danish housing market is composed of four primary sectors: owner occupied housing, cooperative housing, public rental housing, and private rental housing.

The Danish system of rent control is predicated on the belief that landlords should not profit from letting their property; landlords can, therefore, only pass on day-to-day property costs (including property taxes) and a predetermined amount for the maintenance of the property. The Rent Act provides the general provisions of the contract between landlord and tenant, and pertains to the technical aspects of the tenant relationship.

There is also allowed a capital charge, which varies between 7% and 14%, depending on the age of the dwelling …

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Rent control Europe: Czech Republic

Population: 10,553,443 GDP: $189,982,000,000 Avg. Weekly Earnings: €198.25 Avg. Apartment Price (Per. Sq. M.): €3,384.00 For 120-sq. m. apartment in city centre Avg. Monthly Rent: €475.73

Any analysis of rent control in Europe must take careful note of the example that is the Czech Republic, where an estimated 90% of households lived in rent-controlled housing as of 2006. Since then, the country has begun the slow transition to a market-based system, although this has not been without pitfalls; there is a general consensus in favour of readdressing housing regulation legislation, but this has been met with considerable resistance by the citizens.

The prospect of citizens being responsible for their own housing is a new, and alien idea for Czechs, many of whom believe that the provision and maintenance of housing is the responsibility of the government. What has resulted is a split system: older Czechs live in rent controlled housing governed by the Price Regulation of the Ministry of Finance, whereas new renters, foreigners, and any property built after 1993 exists in the free market, with freely negotiated rental rates.

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Rent control in Europe: Sweden

Population: 9,884,285 GDP: $570,591,000,000 Avg. Weekly Earnings: €842.29 Avg. Apartment Price (Per. Sq. M.): €687.51 Avg. Monthly Rent: €1,252.83

To begin our series profiling the rent control situation in EU countries, we will take a look at the impact of rent control on the private rental market of Sweden, with a focus on the capital city of Stockholm where the city limits are home to 900,000 of Sweden’s 9.9 million citizens. The rental market there is a relevant reflection of the country’s conditions as a whole given the importance of the city to the economy in general.

Sweden has perhaps the most pro-tenant laws in the world, and has been held up as an example for other EU nations investigating rent control legislation. The reasons for the attractiveness of the example are largely because people look at the terms tenants in an existing tenancy face. The issue that arises, however, is that in creating such a tenant-friendly environment, the Swedes have subsequently alienated landlords and generated a dramatic shortage of rental properties, that aspect of their market is rarely raised …

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