South Dublin prices 2001

I really cannot agree with any of the above. I think that traditional income multiples will make a big comeback. Moreover, so will LTV limits. Indeed, no one can get 100% mortgages any more, I suspect that no bank will lend more than 90% for a PPR and 80% for a second property.

For sure, there will be individual cases that will be able to borrow more than the stated multiples, but the for the majority there will no such leeway.

Remember, these decisions will be taken out of the hands of the banks. The regulatory agencies will, belatedly, seek to limit mortgage borrowing according to standardized criteria. Furthermore, funding markets, credit agencies, equity analysts and institutional investors will all be looking for signs that a bank has loosened its lending criteria. Banks will be forced to go back to basics - they will never be trusted again.

Also, these income multiples were adhered to by most banks until fairly recently. These are simply not old-fashioned rules that have no place in modern economies, they are based on prudent lending criteria, the absence of which in part was responsible for the gigantic mess that we now find ourselves in.

I think it is self apparent - by mid twenties most people are well out of college and working and spending that money on themselves

SDCC - highest proportion of fee paying schools in the country by a distance

This may be the right thing to do but memories are short. AIB and BOI slated Anglo for their lending polices and then threw their business plans out the window when Anglo started to out perform them. This will happen again - we live in a world of cycles. Already investment banks in London are starting to “hire aggressively”.

Property prices should rise temporarily on the introduction of double incomes due to an increase in the economic demand for property however there’s no reason at all why double income households should lead to a permanent and irreversible increase in property prices. Houses still cost the same to build even if people with two incomes are buying them so over time the efficiency of the market should revert the price to its norm.

I honestly have no idea why you think 2.5 + 1 is some sort of crazy anachronism that’s no longer relevant to the modern world. Why should double incomes increase property permanently but not baked beans or Sky subscriptions? Why is the property market so special and specifically why is the Irish property market special?

I should have covered my ass by saying that the lessons of today’s financial mess are really only applicable to the current generation. For sure we will have another house price bubble but the next one will be different!!

Why should it only be a temporary rise? Unless most families are reduced to one income, and that’s not going to happen, people with two incomes will simply be able to pay more than those with one income, thus higher prices are maintained. And before anyone shouts growing unemployment, unfortunately that will simply create more families with no income at all.

All this talk of reverting to the ‘norm’ makes no sense. Take it from an oldie like me, there is no norm other than what is currently happening. Things never go back to what they were. If prices drop to the same level that they were at in 2000, that is simply a coincidence. Prices are not at 2000 levels they are at 2009 levels, which just happen to be the same as 2000.

2.5 + 1 is some sort of crazy anachronism. Salaries and jobs fluctuate much more today than they used to. It may be that banks won’t even be prepared to lend 2.5 +1.

2.5 + 1 became very quickly outdated

30-40% of net monthly income was what was used but some difficulties arose because bonuses that were discretionary were factored in as guaranteed
then when prices started to stretch 40% the mortgage term was increased and then increased again
inflation didn’t eat into the debt either

It should be a temporary rise because price is set by supply and demand. In a normal well functioning market if demand increases then supply should increase to compensate for it. The property market operates much more slowly than other markets for obvious reasons but the principle is the same and there’s no reason at all why dual incomes should fundamentally increase the price floor.

The norm is an approximate average of how the market behaves relative to certain variables over extremely along periods of time. Part of returning to “the norm” will be to undershoot relative to those variables.

What you’re suggesting is that it’s impossible to consider current events in their historical context and make predictions about the future on that basis. This is simply not true and if it were then it would be impossible to make any rational decision concerning the future.

Right now we’re fluctuating wildly because a large number of people decided to believe such things as “market fundamentals” were irrelevant that having a quarter of the economy dedicated to building property was a good idea. Salary multiples flow through to many important aspects of home purchase like the deposit, repayment amount and term length. You can only increase the multiple by relaxing the other requirements. You can only relax the other requirements by increasing the risk. Increasing the risk increases the cost.

I disagree. While a lot of people overextended themselves ridiculously, it became impossible for a family to live on one average income several years ago, whether you’re renting or you own. I rent and if we were to try living on just my salary, we would have €1100 a month for four people to live on after paying rent. This is exactly what we’d get on SW, without the rent allowance, medical card etc. I don’t include child benefit in this as it’s no longer a given. I’d love to have been able to buy a house and furnish it over years the way my parents did, but we didn’t have, and still don’t have a snowball’s chance in hell of buying, even with two average incomes. We have a really simple lifestyle - we haven’t even a car. Sorry, I just don’t like all of my generation characterised as wildly overspending and feckless; this country just got ridiculously expensive.

What you’re suggesting is that it’s impossible to consider current events in their historical context and make predictions about the future on that basis. This is simply not true and if it were then it would be impossible to make any rational decision concerning the future.

I’m not, Sharper. What I’m saying is that no one say with authority what will happen. Predictions are fine, but they are just that… predictions.

Just my 2c.

People seem to forget that we need people to lend to the banks so that they can lend to us. The whole AAA rating of MBS is gone for good (or at least a generation). So it won’t matter a jot what banks want to lend or what people want to borrow it will come down to the lenders to the bank insisting that they want x% return and they want the bank to only lend to people who have virtually no chance of defaulting. IMO the only way you that banks will convince investors of this is to show that from 19XX to 19YY we lent using these multiples and we had a <ZZ% delinquency so this is what we intend to do again. Hence a return to historic multiples.

SC - I think you underestimate the desire for profit and performance. Once somebody starts moving and generating returns all the competitors will be forced to do likewise - domestically or internationally

Look at investment banks in London - back to bonuses!! The new greed is good.

Well we can see now that the banks are not lending at all, irrespective of multiples, and this is while they can still use QE; just wait till they actually have to go to a real wholesale funding market.

If we are to believe what we are told that this bubble was caused by those pesky saver nations lending us money, then I am fairly they will have learned their lesson and that they won’t to us anytime soon.

Seriously if I was a saver with 1 million all I would want is a reasonably guaranteed yield. I don’t care that it might be more work for the banks to sell 5 X 200k mortgages to 5 people on 60k jobs and that for that to happen Irish prices will have to fall. Put simply I will not lend you (the bank) the money for you leverage it up lend it to a bunch of people who will not pay it back and for you to pay yourself a big bonus.

I think everyone is well aware they’re reading opinions on an internet forum.

In context though I think it’s perfectly reasonable to assume the property market will continue to operate as it always has unless someone can make a case for why it’ll be different. “Yeah but you don’t know it’ll be like that” is fairly useless when you need “No it’s going to be different because of X” where X is a well reasoned case for the difference. “Double income households” is itself not a reason for a permanent increase in prices and I don’t believe it’s had that effect elsewhere.

Sharper - how can double incomes not be a reason for a permanent increase??? Be realistic and at least acknowledge that this has to happen in some areas as there is limited space to build and as such supply is constrained.

Take Dublin for example (I don’t know what it’s like elsewhere) - a lot of double income households will be professionals working in a small area in the city centre (IFSC, Stephen’s Green area etc). Unless you want to put up with a horrendous commute, like I now do, you’ll want to live close to work, you’ll probably want a home for a family too with garden etc. We’ve been looking for such a house for months now and have had no joy. A lot of couples we know are now looking to move closer to work too. With a two incomes we can afford to pay more than a single income household and we will if it’s the only way to get the house we want.

If you can explain how to increase the supply of family homes close to town in order to meet the increased demand / spending power and prevent a permanent increase I’d be very interested to hear

Particular areas will always be changing because of different pressures. What we’re talking about here is the market average and the average multiple of the average salary.

Very few working professionals will want to live in that area permanently or raise kids there, particularly around the IFSC. Many couples who bought there did so to get “on the ladder” with the intention of buying a house later.

Dublin’s transport infrastructure is a mess so people are forced to choose between unsuitable accommodation close to work or unsuitable accommodation far from work (in terms of travel time, not distance). Over time we can reasonably expect the infrastructure to better service where people actually want to live.

Sharper, according to you - “Double income households” is itself not a reason for a permanent increase in prices.

I’m not talking about living in the IFSC I’m talking about places like Terenure, Ranelagh, Rathmines, Clonskeagh, Goatstown, Donnybrook etc etc. All great areas to bring up a family, close to town that people do want to live in and will want to live in no matter what happens Dublin’s infrastructure. If you can figure out how to increase supply in those areas then maybe your comment above will hold water. I don’t see how it’s possible and therefore don’t agree with your statement. I’m sure the same will apply to places like Cork, Limerick, Galway etc, there’ll always be places people would like to live where more houses cannot be built. Double income households will be able to outbid single income household so there will be a permanent increase in prices.

Firstly **some **areas may experience price increases as people want to live there to raise a family however the primary salary will almost always be the deciding factor not the secondary.

Your position is like saying that an increase in the number of [well paying profession] will **permanently ** raise the market average as [well paying profession] will always outbid everyone else.

All of this is secondary to what the banks will actually lend. As I mentioned already an increase in multiples signifigantly increases the risk attached so someone has to be willing to lend that money.

There’s nothing different about the kind of demand created by dual income households in relation to either other kinds of housing demand or other kinds of demand for other kinds of products.

yes not now you wouldn’t - you would be happy with 6, 7, 8% - everybody says that after they take a beating but they take a beating because they chased the returns. Memories fade though and with a bit of experience you say I will know better next time

However in a certain amount of time if somebody else is getting 20 or 30% you might say to yourself I would like that kind of return too. This all happened before and will happen again.

But who chased the returns? Was it the Mon and Pop investors or the cowboys they trusted their money to?

Of my parents cohort the many I have spoken would be happy just to retain their wealth.

Anecdotally my MIL who lost out earlier this year went to discuss it with her fund manager or whatever they are called, he said that she should move out of whatever she was in and into something else and that the returns were virtually guaranteed, she then asked are they* actually* guaranteed, to which he of course replied no but its a sure thing etc. etc., she said thank you for your time, I will take my cash. 4 years ago she would have invested her money and been delighted with how much she was going to make.

No doubt it will happen again but not until there is a new cohort of savers who have not been fleeced before, and in the meantime lending will have to fall.