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Ireland: Ftb's Priced Out, "investors" Getting Burned

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First the FTB's situation

Interest-rate hikes this week will have a significant impact on the housing market by pricing out first-time buyers for the first time, banking industry leaders have warned.

Mortgage experts said a widely expected rate rise this Thursday - the third increase in six months - will squeeze first-time buyers who will no longer qualify for the loans required to buy a home.


Michael Dowling, president of the Independent Mortgage Advisers Federation, has warned that some borrowers will find that loans they think have been approved will be withdrawn under stress-testing by banks, as interest rates rise.

‘‘Would-be borrowers will have to eat into their Special Savings Incentive Account (SSIA) savings to come up with the deposit for a house. Borrowers will also have to cut back on their spending and credit card bills, as otherwise they will fall outside the lending criteria.”

First-time buyers priced out of market


Is there a ‘‘tipping point’’ for the Irish housing market, or are we facing into a slow squeeze on incomes from higher interest rates and rising costs, which will slowly take air out of the market?

Next Thursday, the European Central Bank in Frankfurt will announce its third interest rate increase since December, probably increasing rates by a quarter of a percentage point, though a half-point rise cannot be ruled out. Perhaps more importantly, the language from the bank’s urbane president, Jean-Claude Trichet, will point to further increases later this year and into 2007. So far two rate rises have done nothing to slow the Irish market, but at some stage higher rates will take their toll.


Then came the Central Bank borrowing figures, which showed the total level of borrowing was up 29.6 per cent in the April, the highest rate of increase since – you’ve guessed it – 2000.

In the sober words of the Central Bank: ‘‘If residential mortgages continue to grow at this rate, the amount outstanding would double in three years.”


Even if the market does not collapse, the slow squeeze this will have on incomes and on borrowing ability is bound to start telling. But when is the question.

Rising rates set to start slow squeeze


There is some positive spin in the next article, but considering the source that should not be unexpected.

According to Dowling, investors have become increasingly active in the market over the past number of months, due in part to new products from two of the country’s largest financial institutions.

‘‘Bank of Ireland and Permanent TSB recently launched products which allow existing investors to gear up in order to purchase more units, and they have had a phenomenal response,” he said.

‘‘They’re offering interest-only finance at 0.9 per cent over the cost of funds and people are snapping it up. I have one client who bought four houses in a new development in Kildare - it’s great for them because they can afford it, but it’s very unfair to the first-time buyer who is queuing up beside them.”


Michael Dowling believes there could be trouble ahead for first-time buyers as they struggle to adjust to the new interest rate environment.

‘‘At the moment there are a lot of first-time buyers coming off discounted rates of 2.55 per cent, but the cheapest tracker rate they can get is 3.6 per cent - that’s a hell of a jump, and when you consider that there is probably another 1 per cent to come, you can see where the problems could arise,” he said.

But for now, buyers seem happy to carry on borrowing.

‘‘I can’t remember the last time I arranged a capital and interest loan for someone buying a house worth around €1million - it’s interest-only all the way,” said Dowling.

‘‘People want the house but they don’t want to sacrifice their lifestyle, and they don’t seem too concerned about what could be coming down the line.”

Housebuyers chase soaring prices, but what’s the limit?


And now the so called "property investors" :lol:

Dilemma: My partner and I bought our first house as first-time buyers over three years ago. Initially we lived in that house as our principal private residence. A year ago, we purchased a second house, in which we have lived for the past year.

When we purchased our second home, we planned to rent the first home.

However, we had difficulty finding tenants and have recently decided to move back to the first house and sell our second house.

No one has been living in our first property for the last year.

Do we need to pay capital gains tax on the second property that we intend selling, even though we have been living there as our principal private residence for the last year?

Reply @

When does a second home attract capital gains tax?


The latest surveys on what those who have special savings incentive accounts (SSIA) intend to do with their money have thrown up some interesting results.

One conducted by the Financial Regulator says only one person in 10 intends to reduce their debt with the proceeds of their fund, while another conducted by Ulster Bank says more than one in 10 plans to use their cash to buy an investment property.


Already, the rental yield in Dublin is only about 2% or less (nearly two percentage points below the official inflation figure) and adding thousands more properties to the market is hardly going to put more money in landlords’ pockets.


However, as auctioneers will cheerfully tell anybody who asks them, their buy-to-let customers aren’t interested in anything as insignificant as an annual yield. They are chasing capital appreciation.

And as we were told last week, capital appreciated by 14% in the past year.

Comment: Jill Kerby: Property investors ignore feeble yields


Its going to be messy when this bubble pops.



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First the FTB's situation

There is some positive spin in the next article, but considering the source that should not be unexpected.

And now the so called "property investors" :lol:

Its going to be messy when this bubble pops.

Dublin & the rest of Eire is one great bubble waiting to happen more so then the UK.

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  • 339 Brexit, House prices and Summer 2020

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