Property Market 2016

Bob24

The_Conductor wrote: »

Within the new limits- and its more the case that where up to 18 months ago BTL landlords could not access finance- and were purchasing solely with cash- now its a more standard mixture of 60% debt, 40% cash.

Government policy is to get landlords to maximise their debts- sure there is a perverse incentive to- when you're punished for repaying your debts.

From lenders perspective- when the landlord has 40% equity in a property- its a sufficient insurance policy for a prospective lender against any possible negative equity- should the borrower default on the loan (and the borrower is less likely to default on the loan- when they have personal equity tied up in it).

Yes as long as mortgages and the rental market are properly regulated there is nothing wrong with BTL (it is now looking OK with mortgages, but not sure about the rental market).

There seems to be some contradiction between quite many people who keep complaining on this forum that being a landlord in Ireland is such a bad business and they want to pull-out, and the fact that others would put a large deposit and borrow substantial amounts of money to enter that business. Not sure what to make of it.

Canadel

Bob24 wrote: »

Yes as long as mortgages and the rental market are properly regulated there is nothing wrong with BTL (it is now looking OK with mortgages, but not sure about the rental market).

There seems to be some contradiction between quite many people who keep complaining on this forum that being a landlord in Ireland is such a bad business and they want to pull-out, and the fact that others would put a large deposit and borrow substantial amounts of money to enter that business. Not sure what to make of it.

The majority of people can't afford to take out a mortgage on a single home, whereas a minority are taking out mortgages on buy to lets. The mantra then is to drive the majority into this exploitative and broken rental market run by that minority. That's how it works in a nutshell. The only hope is that someone eventually tackles housing policy and rental reform.

Piriz

i agree with a few of the concerns listed in this article:
Housing association buys up two Dublin estates; 117 families from Dublin waiting list will be accommodated in Finglas and Beaumont
http://www.irishtimes.com/news/social-affairs/housing-association-buys-up-two-dublin-estates-1.2586164

The lack of a social mix is a fair point, but the lack of transparency is another issue. Considering the extent of the homeless crisis it is likely that we will see more of these housing associations buying large numbers of property.

Do we know if housing associations are only interested in new properties or will they also bid on and purchase second hand houses?
What has occurred in the story linked above may dissuade buyers from new developments for fear the development will house large numbers of those on the housing list. Imagine what that does to the market value for new builds. I wonder what the 'developers' make of this..will they see deals / money to be made from housing agencies who are willing to pay 'market value' what ever that is?

Furthermore, this stock of newly build houses in Beaumont and Finglas has been removed from the supply side for private purchase thus adding upward pressure to prices [great craic for those saving to buy and taking out high interest rate mortgages].

titan18

Tbf, even in regards to social mix, if you were told your neighbours were from housing lists, you'd probably think twice about purchasing the house. One bad neighbour is all you need, and it'll sink house prices in the area.

El_Dangeroso

http://www.irishtimes.com/news/politics/fine-gael-to-propose-reduction-in-vat-on-new-homes-1.2590165

'Help to buy' = 'Help to ensure everyone pays that bit more for a house'

Jesus wept.

Bob24

Piriz wrote: »

Furthermore, this stock of newly build houses in Beaumont and Finglas has been removed from the supply side for private purchase thus adding upward pressure to prices [great craic for those saving to buy and taking out high interest rate mortgages].

I would share that concern. Plus if the developer went for that deal rather than selling on the open market, it obviously means they thought they were going to make more profit that way. So while I have obviously nothing against social housing, using public money* to outbid individual buyers on the very few units available on the market while not encouraging the construction of more units is quite questionable.

* I am not sure how these housing associations work, but I assume there is public funding behind it.

Michael D Not Higgins

El_Dangeroso wrote: »

http://www.irishtimes.com/news/politics/fine-gael-to-propose-reduction-in-vat-on-new-homes-1.2590165

'Help to buy' = 'Help to ensure everyone pays that bit more for a house'

Jesus wept.

Thankfully there's also a help to build scheme for builder's finance, which is the only part of their plans that will actually tackle supply.

Kaizersoze81

Surely all this talk of a vat reduction of 4.5% will cause anyone about to buy a new build house to wait until it's implemented ? You'd be crazy to buy a new build house today costing 400k which you could get for 380k in a few months time.

Shedite27

Kaizersoze81 wrote: »

Surely all this talk of a vat reduction of 4.5% will cause anyone about to buy a new build house to wait until it's implemented ? You'd be crazy to buy a new build house today costing 400k which you could get for 380k in a few months time.

Any proposals pre-government formation are fairly worthless. Wouldn't be delaying any purchases on a political promise.

PhoenixParker

Kaizersoze81 wrote: »

Surely all this talk of a vat reduction of 4.5% will cause anyone about to buy a new build house to wait until it's implemented ? You'd be crazy to buy a new build house today costing 400k which you could get for 380k in a few months time.

You'd be crazier to think the builders will reduce the price by 20K in line with the VAT reduction. Far more likely, the price stays the same and the builder pockets the difference.

The increase in profit might lead to more activity in the building sector (which is needed), but that'll be the sole outcome, not a reduction in house prices.

SarahMollie

Kaizersoze81 wrote: »

Surely all this talk of a vat reduction of 4.5% will cause anyone about to buy a new build house to wait until it's implemented ? You'd be crazy to buy a new build house today costing 400k which you could get for 380k in a few months time.

Also, would you really get it for €380k?

I think one of two things will happen.

1. The builders will just keep the extra money so the price will still be €400k

and/or

2. Any price drop just attracts more buyers/bidding, so price is still €400k


I don't think this will have any real effect for quite some time until there is genuinely some balance between the numbers of units being built and the demand for said units. A supply side issue won't resolve itself overnight.

Cuddlesworth

PhoenixParker wrote: »

You'd be crazier to think the builders will reduce the price by 20K in line with the VAT reduction. Far more likely, the price stays the same and the builder pockets the difference.

The increase in profit might lead to more activity in the building sector (which is needed), but that'll be the sole outcome, not a reduction in house prices.

Putting in money in developer pockets under the guise of helping the people out? Sounds familiar.

keane2097

Well tbf if it's a choice between almost no properties on sale at a given price, or more properties on sale at the same price I'll take the more please Bob.

dubrov

All building of new houses will now stop as builders wait to see if there is a change in VAT.

I wish the government would stop meddling in the property market.
They should issue a statement saying that there will be no rule changes for 5 years.

That should give stability to the market which is also in builder's interests.

johnp001

keane2097 wrote: »

Well tbf if it's a choice between almost no properties on sale at a given price, or more properties on sale at the same price I'll take the more please Bob.

Margins got massively increased in the housing boom.
When crash came NAMA stepped in to defend the vested interests, artificially upholding open market property prices while they sold off in bulk to foreign venture capital funds at knockdown rates. While the rest of the country suffered with austerity and had to reduce wages, costs, workforce etc the building industry was protected from all that by government intervention.
As they are under no pressure to shave their margins down to compete developers can just wait for further government intervention to make the crazy boom time profit margins possible again.
"Building costs" as defined by the vested interests will always remain "just a bit too high to make building profitable at current levels" as long as weak-willed populist politicians give in to the demands of this ridiculously sheltered industry and introduce scheme after scheme that only serve to transfer wealth from taxpayers to developers and landowners.

keane2097

johnp001 wrote: »

Margins got massively increased in the housing boom.
When crash came NAMA stepped in to defend the vested interests, artificially upholding open market property prices while they sold off in bulk to foreign venture capital funds at knockdown rates. While the rest of the country suffered with austerity and had to reduce wages, costs, workforce etc the building industry was protected from all that by government intervention.
As they are under no pressure to shave their margins down to compete developers can just wait for further government intervention to make the crazy boom time profit margins possible again.
"Building costs" as defined by the vested interests will always remain "just a bit too high to make building profitable at current levels" as long as weak-willed populist politicians give in to the demands of this ridiculously sheltered industry and introduce scheme after scheme that only serve to transfer wealth from taxpayers to developers and landowners.

I wouldn't be surprised if some of this is true, but I find it somewhat difficult to believe that there are developers all over the country turning down the chance to make good margins for the last five+ years in the hopes of making great margins at some unknown date in the future when the government gives them all tax breaks.

It just seems a bit conspiracy-ish to think nobody would have broke down at some stage and said '**** it, I can make 5 million now or 8 million in 2020, I'll take the 5 million now'.

johnp001

keane2097 wrote: »

I wouldn't be surprised if some of this is true, but I find it somewhat difficult to believe that there are developers all over the country turning down the chance to make good margins for the last five+ years in the hopes of making great margins at some unknown date in the future when the government gives them all tax breaks.

It just seems a bit conspiracy-ish to think nobody would have broke down at some stage and said '**** it, I can make 5 million now or 8 million in 2020, I'll take the 5 million now'.

It is of course slightly more complex than that because its about defending the asset value of property and the asset value of building land too.
The margins attained in the housing boom are no longer sustainable but they led to the overvaluation of property. If the open market valuation of property had fallen to what supply/demand would have set it to in the housing crash then the Irish banks (by now largely state owned) would have obviously been far more insolvent than they supposedly were hence the government stepped in to protect the property prices and the housing crisis is a symptom of the dysfunctional housing market caused by this intervention.
Similarly the value of building land was massively inflated in the boom because it was the necessary raw material on which the massive profits from selling overpriced property could be generated. A significant portion of building land that could be built on today changed hands for silly money during the boom and therefore cannot be built on without crystallising the loss on its reduced value. As the government has protected the banks and therefore property/land speculators from taking a loss in the property crash then the owners of this land are able to defend it's "value" at boomtime levels.
Capitalism since "Too Big To Fail" with privatised profits and socialised losses does not work and is directly responsible for the housing crisis. There are no easy answers at this stage but more government intervention will only make the problem worse.

keane2097

I accept all of the above but it seems unlikely that every potential developer in the country is waiting around to get out of land purchase holes. No doubt at all that a good share are, but it also seems from various bits and pieces I've seen that the price of building here is prohibitively high.

Is there anything to stop developers from other countries coming along and building here if the margins are already very good and Irish developers are only holding off to get land prices to go up?

SarahMollie

keane2097 wrote: »

I accept all of the above but it seems unlikely that every potential developer in the country is waiting around to get out of land purchase holes. No doubt at all that a good share are, but it also seems from various bits and pieces I've seen that the price of building here is prohibitively high.

Is there anything to stop developers from other countries coming along and building here if the margins are already very good and Irish developers are only holding off to get land prices to go up?

Red tape possibly? But in theory, no I cant see whats stopping them.

I think some of the newish REITs are getting involved with development, but nothings going to appear overnight.

I think the earlier post about certainty is critical though. There is so much speculation out there at the moment, on the part of both buyers and sellers, that its actually causing a sort of paralysis.

El_Dangeroso

On the last word this evening, CFI member and someone else talking about the proposed drop in VAT. The made the (fair IMO) point that approx 1/3 of the cost of a new house goes to the exchequer.

But the proposed and completely unchallenged solution? A freddie mac/fannie mae style government mortgage scheme as the central bank rules are so draconian. :rolleyes:

So either we have a supply issue that exacerbated by demand and their solution is to.. increase demand?

12Phase

kneesox wrote: »

I never said in Dublin. Unfortunately your standards of living are poor and ridiculous. Open your eyes and see how rest of civilised world is living people.

The issue here is that historically very, very few people rented. It's a relatively new phenomenon and it's still not really functioning.

We still have one of the highest level of home ownership vs rental in the world. Irish people tend to absolutely obsessed with owning property compared to most of the rest of Europe.

That's basically created a two-tier experience of Ireland. You can buy something quite nice, but if you're forced into the rental sector because you're not here permanently or you cannot qualify for a mortgage, it puts your standard of living through the floor.

Also, you're in Ireland just after a massive property crash. There has been no construction of housing here since probably about 2009 due to the banking collapse so. That's resulted in very little property being available. At the peak of the boom 100,000 extra homes per year were being built. For the past few years almost none have.

On top of that, local 'first time buyers' (or would be firs time buyers) are no longer being granted mortgages as easily as they would have before the crash. The result of that is many people being pushed into the rental market that wouldn't normally be.

All of that is piling pressure onto an already totally dysfunctional rental market with very little supply, mostly run by individual amateur landlords rather than investment funds and so on and it's driven rents way too high.

It's also what's caused the homelessness crisis as the state hasn't built social housing in decades and the private rental sector is now out of reach for people at the bottom rung, in cities anyway.

The vision in the 1990s and 2000s was that instead of building social housing, property developers would be incentivised to build 'social and affordable' homes as part of mixed developments. Due to intensive lobbying and snobbery, they were allowed to simply pay local councils a levy to get out of this. The result of that was little or no social housing was built and the money got absorbed into council budgets for other services.

I would also add that about 69.7% of households in 2011 were owned by their occupiers / mortgaged. (That had been 76% a few years earlier).
Because the people who were renting were either people in temporary setups : students, short term lets etc or people who had recently moved here and didn't have a vote, politicians simply didn't care about that at all. Those in long-term private rental scenarios tended to be people who simply didn't have any political voice.

Result is that the system is entirely balanced towards small landlords, not towards creating a solid rental system.
To make it really work, you'd need to bring in funds to invest in serious property and quality of build and so on for long term leasing. None of that's happened.

It has the potential to make Ireland a very unattractive place when it comes to companies trying to recruit talent from elsewhere in Europe as there simply isn't any option to live here for 2,3,4+ years in comfort and stability without buying a house.

Busier parts of the UK, especially SE England / Greater London are as bad or worse. It's also creating a fairly horrible lifestyle as you can be on pretty good money and living in a hovel.

I think what you're seeing reflected in our elections here is partly the fact that the formerly quiet or 'voiceless' rental sector is suddenly full of 20/30-somethings who can't get onto the traditional property ladder and they're angry and voting for alternative parties.

FF and FG are very much catering towards a large, middle-class, middle-of-the-road, established voter. They've never really given a toss about people who are 'only renting' as is evidenced by all of their policies for decades and decades.

Even now, in the middle of a housing crisis, I am seeing no solid proposals from any of the major parties at all. It's all about tweaking things at the edges and trying to encourage yet more small time, low-funded speculators to flip property.
We really need to bring in some kind of serious alternatives.

--

I would add that Ireland and Britain also come from a history of high inflation. So, the usual approach her to accommodation was to get the biggest mortgage you could possibly afford, struggle for a few years and due to high inflation, it would reduce in size relative to your income far more rapidly and a notion that prices could only go up.

The Euro brought price stability and the crash saw property prices drop dramatically. So, you'd a total disaster of financial cultural clashes between Anglosphere inflation-growth capitalism and Germanic stability at all costs. The two don't fit together very well at all.

athtrasna

post above moved from rental standards thread. Off topic for that thread but too detailed to be missed.

Mod

koheim

12Phase wrote: »

The issue here is that historically very, very few people rented. It's a relatively new phenomenon and it's still not really functioning.

We still have one of the highest level of home ownership vs rental in the world. Irish people tend to absolutely obsessed with owning property compared to most of the rest of Europe.

I see this statement a lot here on boards, but it this true, does anyone have stats to back this up? Ireland seems to have low home ownership rate compared to other European countries (65% for Ireland) https://en.m.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate

MayBea

koheim wrote: »

I see this statement a lot here on boards, but it this true, does anyone have stats to back this up? Ireland seems to have low home ownership rate compared to other European countries (65% for Ireland) https://en.m.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate

Thanks for that. I too was doubting this statement, but never actually looked at home ownership rates across Europe.

Dinny Byrne has Angina

OK, we all have a basic understanding of supply and demand. Supply is low, demand is high, I get that.

But interest rates have never been lower.

Inflation has barely moved since the crash.

The economy is in recovery.

So why are landlords increasing rents so dramatically? I understand that it's a business, but it just seems like the increase in rents is more driven by opportunism than any genuine market forces.

12Phase

Traditionally it's very, very high. In the 1990s it was 80%.
The bulk of the rest would have been made up of very stable council house leases with a small % being private rental sector.

There's been a massive shift towards to private rental market.

The low interest rates from the ECB aren't changing the fact that Irish banks are very conservative these days. Criteria for lending are much tighter both for individuals and developers because.

You've also got central bank and ECB rules designed to prevent a repeat credit bubble.

Supply is low, demand is very high so, landlords will seek to maximise profits. It's a fairly ruthless market.

Dinny Byrne has Angina

Dinny Byrne has Angina wrote: »

OK, we all have a basic understanding of supply and demand. Supply is low, demand is high, I get that.

But interest rates have never been lower.

Inflation has barely moved since the crash.

The economy is in recovery.

So why are landlords increasing rents so dramatically? I understand that it's a business, but it just seems like the increase in rents is more driven by opportunism than any genuine market forces.

Opportunism is a 'market force'

The opportunity to make more money given the dynamics of the market (low supply, high demand) exists, and many landlords are choosing to take that opportunity (as they ought to be entitled to).

In normal market conditions, when this situation occurs / opportunity exists for some time, we should see an introduction of new suppliers to the market, to take advantage of the supernormal profits available. However, we have a problem there in that the standard route for a new "rent supplier" is to buy/vacate an existing house or to build one.

These markets that the potential "rent supplier" needs access to in order to increase the amount of supply in the rental market itself are also in a bad state and so their situation spills rapidly into the rental market offering significant barriers to entry.

Any company/firm/individual that wanted to offer new rental accommodation supply would find it extremely difficult to do so given the lack of available suitable property.

Without new rental accommodation being supplied, the pressure on the rental market from the demand side can only really force the prices up.

The low interest rates, growing economy etc should see an increase in the amount of building work being done, which then in turn removes some of the barriers to entry to the rental market and should reduce market rents. However there is significant lag time between building getting going again, and the rental rates in the country adjusting on the back of them.

quadrifoglio verde

Dinny Byrne has Angina wrote: »

OK, we all have a basic understanding of supply and demand. Supply is low, demand is high, I get that.

But interest rates have never been lower.

Inflation has barely moved since the crash.

The economy is in recovery.

So why are landlords increasing rents so dramatically? I understand that it's a business, but it just seems like the increase in rents is more driven by opportunism than any genuine market forces.

John and I go to view a house, asking 1500 pm. At a push I think its worth 1500, John is in need of a place quite quickly and offers 1600. Rent goes up

Low Interest rates and inflation, an economy in recovery won't have any effect on short term demand or supply which is what determines the rent.
In the long run, low interest rates and a recovering economy will lead to more housing getting built, but that could be two or three years from now.
However given a Buy to let needs 30% deposit up front you won't find to many jumping in to the game.
Added to that, when all expenses are put on the table, a landlord doesn't make much money on the business of renting out to you. He's lucky if the mortgage is covered (and fair enough a chunk of the mortgage is covered) but that 400 going out per month towards his BTL mortgage from his own wages could be giving his children a better childhood.

So long as we build less houses per year than we have demand for from buyers, demand for rentals is going to increase as new renters enter the system.
Its not as simple as introducing rent controls either.
Fair enough, Person A's rent might not increase, but that is no comfort to person B who can't find a place to rent and in the long run will reduce supply further as landlords exit the system and invest their money elsewhere

PhoenixParker

When talking about rents I think it's worth bearing in mind that rent hasn't followed the same pattern as property prices, though most people seem to think they have.

Rents didn't follow the same trajectory as property prices. Buy prices shot up at varying rates of increase from the early 90s to 2007 at which point they fell. Rental prices climbed sharply in the 90s, fell in the early 2000s then started to rise again in the mid 2000s before falling post 2007. In 2007(ish) they had just about reached their early 2000's peak. Right now they are again just about hitting the same peak they hit in the early 2000s and in 06/07.

If you look at historical daft rent reports the pattern is very clear.

Shedite27

Dinny Byrne has Angina wrote: »

So why are landlords increasing rents so dramatically? I understand that it's a business, but it just seems like the increase in rents is more driven by opportunism than any genuine market forces.

Rent is Income for landlords.

If you had the choice to increase your income (say a salary increase), would you take it?