Ronan Lyons | Personal Website
Ronan Lyons | Personal Website

Ideas for building Property Market 3.0

  • Ondaboos ,

    Given my own recent experiences in attempting to get finance to purchase a house, I’d add a couple of (albeit less technical suggestions) to your listing:

    1. Hand in hand with the property database, our property purchasing mechanism would do well to mirror the Scottish system. An asking price is published (which can be compared to the database) and then sealed bids are tendered to solicitor by a closing date. Highest bidder wins – this would have enormous benefits fir house buyers in reducing uncertainty.

    2. Longer term fixed rate mortgages, such as available in the US, would be something I’d like to see made available.

    3. Right now, we need a Credit Review Office for mortgages. Banks are not lending to anyone except civil and public servants at the moment, as bourne out by Central Bank report yesterday. This is despite, in my case, being over qualified in terms of repayment ability, to borrow the amount I’m looking for.

    In relation to last point, it’s being said that banks didn’t follow the right procedures during the boom when approving mortgages. It’s quite obvious that today they’re also not following those lending procedures. Where it used to be “yes@ no matter what previously, it’s now “no”, no matter what.

    • Eamonn Moran ,

      Once and for all implement the Kelly report?

      • Just one more Q? ,

        Although property tax is a better idea than one time hit of stamp duty giving money to an inefficient and corrupt monolith (Government) will not improve any service. However it would be better if property tax was implemented in conjunction with reform of local government. If local government got this tax and improved their area and competed with other local areas then this would be much better. It would also leave the state government to sub vent the poorer areas in a much more efficient and targeted manner, rather than overloading services in richer areas which probably don’t need them as much. Moral hazard comes into the equation but it would be interesting to see what happens. Although an existing tax rate of 52% for earners and then having a property tax as well is hard to take. Especially with no improvement in infrastructure, services or society in general. But a least we have a functioning banking system …

        • Tara ,

          Ronan, thanks for another great piece.

          I have a question about the fixed rate mortgages. A 25-year fixed rate mortgage may provide certainty of expenditure to the borrower but surely it leaves the lender open to significant losses, if interest rates were to increase substantially?

          It may reduce the credit risk to the lender (ie, the risk that the borrower can’t pay back the mortgage) but it does raise the interest-rate risk.

          Or is there something I’m not seeing?

          • Ronan Lyons ,

            Hi Tara,
            Thanks for the question. The idea would be that banks have to think about lending before they do it. For example, Danish banks work under a model whereby if they want to lend €200m out in, say, a thousand 30-year mortgages, they have to go off to the markets and borrow €200m on a 30-year bond. They then find out pretty quickly what rate of interest they have to pay and thus they set their mortgage rate based on that.
            The current system – offer someone a 3% rate for the first 18 months and then sure who knows what’ll happen twenty years down the line – is, for obvious reasons unsustainable! I’d like to see something like the Danish system replace it.
            Ronan.

            • On Hogan’s Stand – or how to introduce an interim property charge fairly | Ronan Lyons ,

              […] Browse All Posts « Ideas for building Property Market 3.0 […]

              • How a fairer property tax can be quickly implemented – even a SVT! – Smart Taxes Network ,

                […] As readers of this blog are aware, though, I’m not a fan of giving out for the sake of it – I try and make some sort of constructive suggestion. I’m hoping today’s suggestion will be particularly useful. It’s a simple one. Put every Census district of the country into ten different bands of the approximate cost of land and scale the property tax according to that. There is a wealth of information out there on Ireland’s property market, which the Government can use to find out the approximate “pecking order” of property values around the country. This would then be a very handy interim step towards the introduction of a full and fair land value tax, as discussed last week. […]

                • Paul Mara ,

                  Hi Ronan

                  Very interesting blog article, thanks!

                  I was just thinking about the issue of mortgages tonight and wondered… why do we even need them?

                  Could we not just require that people have a 100% deposit? After an initial (maybe nasty) price shock, would the market (i mean supply and demand) not just realign itself to the requirement after a while?

                  I can’t see the maths for _who_ can afford _what_ house being affected. I’d imagine that house prices would just be a fair bit smaller. Would this type of requirement then leave people free to waste their credit on other stuff that wouldn’t have the possible affect of them losing their homes?

                  Just a thought! I’d be interested in understanding just where I’ve gone wrong with my assumptions.

                  Paul

                  • James Rockall ,

                    Ronan

                    Following on from your response to Tara’s question there is a risk of early repayment from the borrowers.

                    What would you suggest in these circumstances?

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