Property Market 2015

alastair

Archaeoliz wrote: »

MyHome are going for a Bear Market backed by Standards and Poor:
http://blog.myhome.ie/2015/07/31/irish-house-prices-predicted-to-rise-the-fastest-in-the-eurozone/

That's not very Bearish! Growth in prices at a slower rate than previously predicted?

I've a vested interest in that I'm (hopefully) a seller and a buyer in a short period of time, so up, down, or stable prices really don't matter too much in that scenario. I'm expecting slow growth in prices over the next year..

gosplan

alastair wrote: »

That's not very Bearish! Growth in prices at a slower rate than previously predicted?

I've a vested interest in that I'm (hopefully) a seller and a buyer in a short period of time, so up, down, or stable prices really don't matter too much in that scenario. I'm expecting slow growth in prices over the next year..

Wouldn't that need quite a pickup in the remaining half of the year?

Anyway you can look back through previous commentaries and see how accurate they are.

(To save time, 2013 was supposed to be a 1% fall and 2014 flat)

slowjoe17

gosplan wrote: »

Wouldn't that need quite a pickup in the remaining half of the year?

Anyway you can look back through previous commentaries and see how accurate they are.

(To save time, 2013 was supposed to be a 1% fall and 2014 flat)

You'd think at this point, we'd understand that "flat" happen. Sellers will ask for an increase "in hope". Buyers either wait for the market to reach a bottom, or pile in on a rise.

This will also apply to the mythical "cash buyer from Australia". S/he is also likely to wait for the market to hit bottom before buying - they are more worldly than you would think.

Putting a hard limit on borrowing capacity has resulted in a discontinuity in demand. Those desperate to buy are aiming for Dublin 15/Kildare/Louth/Meath.

The market is flat YTD despite panic buying by artificial demand from the pre-central bank mortgage folks. Now, there is reduced demand and a flat market.

Expect a 10% drop in the second half.

dollar_king

slowjoe17 wrote: »

You'd think at this point, we'd understand that "flat" happen. Sellers will ask for an increase "in hope". Buyers either wait for the market to reach a bottom, or pile in on a rise.

This will also apply to the mythical "cash buyer from Australia". S/he is also likely to wait for the market to hit bottom before buying - they are more worldly than you would think.

Putting a hard limit on borrowing capacity has resulted in a discontinuity in demand. Those desperate to buy are aiming for Dublin 15/Kildare/Louth/Meath.

The market is flat YTD despite panic buying by artificial demand from the pre-central bank mortgage folks. Now, there is reduced demand and a flat market.

Expect a 10% drop in the second half.

I hope your right , id relish a 10% drop , I doubt we see the half of it though , any dips will be bought

Glas2016

10%! Laughable. You can't expect to have any credibility with statements like that. Just to be clear, you are predicting a 10% fall in house prices in ROI in 6 months?!

This is in the fastest growing economy in Europe, an expansionary budget on the way and EXPECTACTIONS of wage increases priced in, not to mention a predicted 20,000 further people in work.

That's brilliant. Read back over the above.

I just have to have this in writing so I can have a laugh over Christmas dinner.

alastair

gosplan wrote: »

Wouldn't that need quite a pickup in the remaining half of the year?

Not really. All it would require is slow growth over a year. The current falls from the pre-CB excitement are pretty small, and non-existent in some cases. It's not going to take much to bump a flat market up to a slow growth one, and all the determinants suggest growth is far more likely than falls in the medium term. I'd be very surprised if property isn't slightly more expensive a year from now.

There's sod all chance of a 10% fall over the next year, unless they discover the country is entirely made of asbestos, Donald Trump wins the primaries, and China implodes.

makeorbrake

alastair wrote: »

There's sod all chance of a 10% fall over the next year, unless they discover the country is entirely made of asbestos, Donald Trump wins the primaries, and China implodes.

Eh, I'd hate to think so but the second two are not impossible apparently!

gosplan

alastair wrote: »

Not really. All it would require is slow growth over a year. The current falls from the pre-CB excitement are pretty small, and non-existent in some cases. It's not going to take much to bump a flat market up to a slow growth one, and all the determinants suggest growth is far more likely than falls in the medium term. I'd be very surprised if property isn't slightly more expensive a year from now.

There's sod all chance of a 10% fall over the next year, unless they discover the country is entirely made of asbestos, Donald Trump wins the primaries, and China implodes.

I agree with what you're saying but they only have 5 months left.

They said 9% in 2015.

alastair

gosplan wrote: »

I agree with what you're saying but they only have 5 months left.

They said 9% in 2015.

No hope of 9% growth in 2015 either - don't know what Standard and Poors are drinking - but I reckon it'll end in some positive territory - and it certainly will over the next year.

gosplan

And I think that looking at one overall market will ignore the subtleties of what will happen in the next few months here.

In Dublin, places like D15 will become more popular whereas D3/5/9 just lost a lot of prospective buyers by CB new rules.

gosplan

Was that statement not released yesterday though?

alastair

gosplan wrote: »

Was that statement not released yesterday though?

I'd misread it - thought they were reeling back an earlier 9% prediction to 5% for this year. 9% makes no sense at all.

OfflerCrocGod

MarkAnthony wrote: »

Similar rules have been in force in the UK for quite soe time I thought. No sign of boom bust stopping there. Even outside of the Russian Mafia in London.

Their rules aren't as strict as ours, they have a 4.5 LTI cap for 85% of the market for the larger banks (small lenders can be as aggressive as they want). Unless they've changed recently to be more strict? These rules came into force late last year so not too far ahead of us.

Dublin isn't as attractive to foreign capital as London and I can't see how the local forces in the Irish market can ever push prices to the extremes we saw in the boom (same goes for price decreases). I think +/- 5% a year will be norm in Ireland once the effects of the CB rules filter though (they still have to play out fully).

The US has seen good employment growth for years now but their wages have lagged that growth so I wouldn't put much faith in unemployment falling from 10% (high) to 8% (still poor) being enough to push prices up.

gosplan

OfflerCrocGod wrote: »

Their rules aren't as strict as ours, they have a 4.5 LTI cap for 85% of the market for the larger banks (small lenders can be as aggressive as they want). Unless they've changed recently to be more strict? These rules came into force late last year so not too far ahead of us.

Dublin isn't as attractive to foreign capital as London and I can't see how the local forces in the Irish market can ever push prices to the extremes we saw in the boom (same goes for price decreases). I think +/- 5% a year will be norm in Ireland once the effects of the CB rules filter though (they still have to play out fully).

The US has seen good employment growth for years now but their wages have lagged that growth so I wouldn't put much faith in unemployment falling from 10% (high) to 8% (still poor) being enough to push prices up.

I think in the short term values have to drop a bit because credit has effectively been reduced. The growing economy and give away budgets may sustain it long term but for the next few months that won't make a difference.

We've just gone from a situation where people could borrow 4/4.5 times the earnings to 3.5. So a couple earning 100k with 50 grand in the bank can now get houses for 400k instead of 500k.

Employment, wage rises, a healthy economy - all that will sustain the market but right now the collective buying power of the nation just had an arm chopped off and it would take a seriously large and immediate influx of buying power for it not to hit house prices in some way.

But that's all short term.

It could of course just be enough to stop the upward trend but tbh I that's just bring said now because that's exactly where we are. There's probably a bit more too it.

Personally, and I said it before, I think the 3-bed semi-d crowd are in for the biggest shock. People that are from money and have money go for more. They're middle class houses and middle class buying power took a hit.

dollar_king

gosplan wrote: »

And I think that looking at one overall market will ignore the subtleties of what will happen in the next few months here.

In Dublin, places like D15 will become more popular whereas D3/5/9 just lost a lot of prospective buyers by CB new rules.

why pick 3,5,9 , why not 7 for example

gosplan

dollar_king wrote: »

why pick 3,5,9 , why not 7 for example

I only know particular areas. Same applies to a lot if south side properties too I'd imagine.

ixus

The Irish property boom was fueled by excessively cheap credit. It pulls investment and expectatuons forward.

If you overlayed property prices on this chart, you would see a lag of production and prices but it certainly fuels it. We're in the same scenario again.

Excess credit is coming. The near term push on local bank rates is down. You can borrow 400k @3.8 average over 30yrs. Approx 1700pm. The next banking crisis in Ireland will be when they get caught on long term low fixed rates.

The thing about the Irish economy is that the boom came about because of cheap rates. The bust or malinvestment was exposed by a global event and the ecb raising rates at the time.

We're at recored low rates for this country and people are crying poor mouth. Cash has been flooding the market for years on the back of the govt cgt incentive. Private equity funds are now getting involved. Ten months ago, there was a lag of supply and funding. That is being rectified.

It will be an external shock up/down that ultimately influences the Irish property market. China, further ECB QE, war etc

El_Dangeroso

Interesting article in the Sunday Business Post today (paywall so I can't link)

The head of the housing agency said that 'The cavalry are coming in 2017-2018' for those stuck renting for now in the form of many more new builds coming on stream, but people need to readjust their expectations of a semi-d in leafy south Dublin and more think of high density housing or further out.

Also Morgan stanley downgrades Irelands growth prospects: Morgan Stanley: Ireland's growth 'set to slow'

Glas2016

With due respect El I wouldn't place much reliance on either source. Neither have covered themselves in glory over the past decade. Morgan too far removed, SBP too close.

However I think the sentiments re increased density in city have been glaringly obvious for a long time.

El_Dangeroso

Glas2016 wrote: »

With due respect El I wouldn't place much reliance on either source. Neither have covered themselves in glory over the past decade. Morgan too far removed, SBP too close.

However I think the sentiments re increased density in city have been glaringly obvious for a long time.

Yes, the statements of the housing authority have been a reality most have adjusted to a long time ago, just thought the idea of new stock coming on stream in 2017 would be of interest to some.

OfflerCrocGod

ixus wrote: »

The Irish property boom was fueled by excessively cheap credit. It pulls investment and expectatuons forward.

If you overlayed property prices on this chart, you would see a lag of production and prices but it certainly fuels it. We're in the same scenario again.

Excess credit is coming.

Some of your statements are correct but the conclusions you make are harder to substantiate. We have a CB that is in no mood to tolerate another boom and has acted to constrain the leverage available to local housing market participants. Cheap credit doesn't matter if your wages aren't up to the required levels and you don't have your deposit. It could cost me 0% for a €1 Mil loan but I still won't be able to access the credit.

Credit will flow to other less regulated markets.

ixus

Nah. Joe Soap might have to lower their standards or desires if they want to own a property but the type of property will be provided to meet that.

The private equity funds don't need to access Irish banks for funding if they don't want to. CBRE, KKR, BBF & Lotus Investment Group just four funds of varying sizes in the Irish market. Providing bridge finance to developers or purchasing to build up REITs. Articles running this and last weekend in Sun papers (Times) backing this up.


Irish Central Bank did the right thing imho. I don't think anyone should borrow with less than 20%. If you had a properly regulated rental market like Germany we would be better off.

ixus

CGT incentive along with high DIRT has encouraged investors to buy and hold for 7 years minimum. That restricts supply. Funds bloc purchasing assets restricts supply and allows for control of a rental market. If rents are kept high, through artificial means or demand, it pushes demand to the purchase side.

People and govt will find a way to circumvent CB if demand strenghtens.

gaius c

OfflerCrocGod wrote: »

Some of your statements are correct but the conclusions you make are harder to substantiate. We have a CB that is in no mood to tolerate another boom and has acted to constrain the leverage available to local housing market participants. Cheap credit doesn't matter if your wages aren't up to the required levels and you don't have your deposit. It could cost me 0% for a €1 Mil loan but I still won't be able to access the credit.

Credit will flow to other less regulated markets.

A common misunderstanding. I doubt the CB care all that much about property prices. What they care about is the possibility of the banks getting over-extended again. As long as it's "only" cash that gets blown, damage to the backing sector will be minimal.

OfflerCrocGod

They won't build up their REITs by buying 3 bed semi-D's randomly around Dublin. It's just not worth the hassle for them. Bridge finance to developers to develop more REIT stock doesn't sound like the sort of thing that will trigger a boom either. Quite the opposite, more choice for people.

Controlling the rental market by building lots of new stock, how does that work? It's in my interest to rent the properties out so I can pay my dividends. We aren't talking about NAMA here, the REITs want stable cash flow not a boom bust cycle.

I can't think of a single boom in history that was fuelled only by cash. Credit is the poison.

castle2012

Just an observation. We're in early August and the amount of properties for sale has definitely shrunk on daft.ie to 35 and a half thousand . ( It was nearly 37k last month) But also the amount of rentals has shrunk to 4 and a half thousand ( It was over 5k last month) . Can't see a price decline while stock is dropping further. Any thoughts?

ixus

OfflerCrocGod wrote: »

They won't build up their REITs by buying 3 bed semi-D's randomly around Dublin. It's just not worth the hassle for them. Bridge finance to developers to develop more REIT stock doesn't sound like the sort of thing that will trigger a boom either. Quite the opposite, more choice for people.

Controlling the rental market by building lots of new stock, how does that work? It's in my interest to rent the properties out so I can pay my dividends. We aren't talking about NAMA here, the REITs want stable cash flow not a boom bust cycle.

I can't think of a single boom in history that was fuelled only by cash. Credit is the poison.

Not sure where i said Funds are purchasing semiD's randomly. In fact, i didn't. Standard btl investors game that.

The credit entering the market is coming via banks, local and international cash.

In theory, extra supply will lead to reduced demand and prices. But tell that to the previous housing boom cycle.

All i've done is explain how house prices have been affected by the ecb rate cycle and global events. I've also eplained what's going on in the market at present. Irish people are so insular they think it's because of what they do. The future of house prices will be determined primarily by ecb movements or a global event. Govt intervention is your next significant factor.

ixus

On the rentals. You're possibly assuming maximum occupancy at any price is desired. Maybe 7/80% at average price X is sufficient on a bloc of 100-1000 properties to turn profit. Keeping asking price at X and withold 2/30% from market. Achieving 85/90% is bonus territory.

If achieving max occupancy, your rent is too cheap.

OfflerCrocGod

ixus wrote: »

Not sure where i said Funds are purchasing semiD's randomly. In fact, i didn't. Standard btl investors game that.

My point was that REITs won't operate in the same areas most house purchasers would.

The previous cycle had credit flowing to local market participants, we won't have that again. In fact as already pointed out banks like BOI are increasing lending into the UK market. Credit will flow to the less regulated markets.

The situation is similar in some regards as to what we had before the boom but it's also different in important ways. We need to asses the impact the differences will make.

The_Conductor

castle2012 wrote: »

Just an observation. We're in early August and the amount of properties for sale has definitely shrunk on daft.ie to 35 and a half thousand . ( It was nearly 37k last month) But also the amount of rentals has shrunk to 4 and a half thousand ( It was over 5k last month) . Can't see a price decline while stock is dropping further. Any thoughts?

Any thoughts?
Yes- its that time of the year.......
Look at the same months in 2013 and 2014- and look at how they compare (not at the actual numbers- but at the declines in July/Aug)- and how they bounce back in Sept/Oct.