Property Market 2016

The_Conductor

The knux of the article- is that we cannot rely on industry to increase supply of housing to the market- we have tried this solution- and while there are encouraging signs in the sector- they are clearly insufficient.

Irish builders do not have the benefit of scale- which is present in the UK- and are inefficient at building. There is no consensus on what building costs in Ireland actually are- different people have different competing claims- who is to say who is right and who wrong.

The Central Bank rules- have cooled rampant house price inflation- however, they've done precisely nothing to assist with supply. They have stopped people taking on ever larger loans- chasing non-existent supply.

Supply constraints are reflected across the board- with now over 20% of our housing stock in the rental sector

Attitudes towards renting are toxic- and need to be addressed- and long term renting a la what happens elsewhere- has to be encouraged.

We need to build upwards but not outwards

We now have a Minister with specific responsibility for housing- and a good broad remit under his belt to tackle the various issues which have conspired to keep supply in constraint.

Mac Coille- while he is not in favour of relaxing Central Bank rules- most certainly is applauding that there is a new Minister who actually has the means at his disposal to get houses built- he has weaponry none of his predecessors ever had.

If you come at all of this- with the express belief that constraining people's borrowing capacity is wrong- people should be allowed borrow whatever they want (obviously to an income multiple or some other factor)- you're going to disagree with the article, come what may.

In brief- the single biggest issue- in common with all segments of the market- and all vested interests (tenants, landlords, home owners etc etc)- is lack of supply- and we now have a Minister who for the first time ever is in a position to actually do something about it.

It appears Coveney specifically requested this portfolio. I wish him the best of good luck with it- he was a good Minister under the last government- I hope he is as good a Minister under his new remit.

El_Dangeroso

The_Conductor wrote: »

We need to build upwards but not outwards

This is an article that asks 'what if sprawl is the only housing affordability strategy that actually works?':

http://blogs.wsj.com/economics/2016/04/18/why-the-great-divide-is-growing-between-affordable-and-expensive-u-s-cities/

Interesting to see these challenges are not unique to Ireland.

Icepick

El_Dangeroso wrote: »

This is an article that asks 'what if sprawl is the only housing affordability strategy that actually works?':

http://blogs.wsj.com/economics/2016/04/18/why-the-great-divide-is-growing-between-affordable-and-expensive-u-s-cities/

Interesting to see these challenges are not unique to Ireland.

Another journalist who doesn't understand the correlation / causation problem.
Comparing San Francisco-San Jose (Silicon Valley) with Atlanta based on 'developed residential land' is just dumb. Especially when SF combines huge demand from well-paid people with low-rise buildings.
We need to increase supply within the current city limits.

brownbeard

CSO April figures released:

National: up 0.3% month on month
Dublin: up 1.6% month on month

http://www.cso.ie/en/releasesandpublications/er/rppi/residentialpropertypriceindexapril2016/

johnp001

Two-tier market has returned this year despite suggestions that the €220k threshold would drive demand out into cheaper more rural areas.
Property outside Dublin index continues to drop while Dublin increases strongly.

Bob24

johnp001 wrote: »

Two-tier market has returned this year despite suggestions that the €220k threshold would drive demand out into cheaper more rural areas.
Property outside Dublin index continues to drop while Dublin increases strongly.

I am also surprised by the apartment/house divide in Dublin.

It was said a few times apartment would see high pressure as people who can't afford house revert to higher density housing, but apartments have actually slightly lost value since the end of last year, and are "only" up 1.1% over the past 12 months (whereas houses are up 5%).

audi12

Bob24 wrote: »

I am also surprised by the apartment/house divide in Dublin.

It was said a few times apartment would see high pressure as people who can't afford house revert to higher density housing, but apartments have actually slightly lost value since the end of last year, and are "only" up 1.1% over the past 12 months (whereas houses are up 5%).

People are mental paying such mad money for a three bed semi in Dublin. I for am delighted to see prices falling outside the capital.

slowjoe17

johnp001 wrote: »

Two-tier market has returned this year despite suggestions that the €220k threshold would drive demand out into cheaper more rural areas.
Property outside Dublin index continues to drop while Dublin increases strongly.

What is this "strongly" you speak of?

What is this "outside Dublin drop?"

Property outside Dublin last 12 months: +9.5%

Houses in Dublin last 12 months: +5.0%
Houses in Dublin since October:
Nov: -1.2
Dec: -0.5
Jan: -1.1
Feb: -0.3
Mar: +1.2
Apr: +1.9

Apartments in Dublin last 12 months: +1.1%
Apartments in Dublin since October:
Nov: -1.3
Dec: +0.5
Jan: -2.0
Feb: +1.5
Mar: -0.5
Apr: -0.5

Idbatterim

I just read that article. There should be no relaxing of the mortgage rules, that just allows the snakes to get off the hook. Let the government sort out costs on its take of a property. Do away with stamp duty for first time buyers. There is no way wages in the construction sector will be cut, so not even a point in going there...

Build higher and lets get proper facts on costs, starting with apartments. Where were the rules on dual aspect and lift ration pulled from?

Villa05

Idbatterim wrote:

I just read that article. There should be no relaxing of the mortgage rules, that just allows the snakes to get off the hook. Let the government sort out costs on its take of a property. Do away with stamp duty for first time buyers. There is no way wages in the construction sector will be cut, so not even a point in going there...

The only way to sort out the tax take is to move from a one off payment at purchase to a significantly higher recurring payment ie sharp increase in property tax for all.

If construction workers are immune to pay cuts then we have to get people from Europe to build them. Almost all took a drop in pay during recession. Construction work costs need to reflect that also.

Bob24

Villa05 wrote: »

The only way to sort out the tax take is to move from a one off payment at purchase to a significantly higher recurring payment ie sharp increase in property tax for all.

This would be ideal reduce selling prices and prevent speculation, and good for everyone except speculators in the long-term. But not a chance any government could enact something like this, the potential number of lost votes with homeowners would weight much more in the balance that the long term interest of the country in a politician's decision.

yqtwqxqm

Bob24 wrote: »

I am also surprised by the apartment/house divide in Dublin.

It was said a few times apartment would see high pressure as people who can't afford house revert to higher density housing, but apartments have actually slightly lost value since the end of last year, and are "only" up 1.1% over the past 12 months (whereas houses are up 5%).

Very few for sale now.

Sleepy

Idbatterim wrote: »

There is no way wages in the construction sector will be cut, so not even a point in going there...

Due to the demand for housing? Trees don't grow to the sky and semi-skilled employees don't earn super-normal wages over the long term.

slowjoe17

Sleepy wrote: »

Due to the demand for housing? Trees don't grow to the sky and semi-skilled employees don't earn super-normal wages over the long term.

For whatever reason, half the irish cab drivers I get from Hailo are out of work construction workers. How strong are the construction unions?

The_Conductor

slowjoe17 wrote: »

How strong are the construction unions?

Very strong.
However...... they would rather people were laid off- than rates cut.........
Some sort of perverse logic there........

quadrifoglio verde

The_Conductor wrote: »

Very strong.
However...... they would rather people were laid off- than rates cut.........
Some sort of perverse logic there........

Yeah, but it's like all unions. Pay is key. Sure look at the public sector unions, they voted to screw over new entrants massively instead of taking a small pay cut for everyone.

Wasn't the Ulster bank headquarters one of the first to be built in Ireland without blocks due to the brickies union demands

The_Conductor

quadrifoglio verde wrote: »

Yeah, but it's like all unions. Pay is key. Sure look at the public sector unions, they voted to screw over new entrants massively instead of taking a small pay cut for everyone.

Thats just not true though.
The public sector unions voted to accept levies and paycuts- the equivalent of >25% of net pay for pre-existing staff- and about 30% for new starts- in exchange for no redundancies. It was the polar opposite to the approach in the private sector- where they fought to keep pay where it was- but not prevent redundancies. The largest group of those laid off were males in the 16-25 and 25-35 age category- at one stage there were almost 3 times more males who lost jobs- than females- solely because of the massive workforce who were in the construction sector.

The public sector and private sector unions- took completely opposite approaches- the public sector agreed pay cuts to actual pay scales (which also affected pensioners) alongside significant new levies. Yes- new starts got the raw end of a stick- however- that too is being unwound.

quadrifoglio verde wrote: »

Wasn't the Ulster bank headquarters one of the first to be built in Ireland without blocks due to the brickies union demands

Yup- spot on.

handlemaster

I know of a site during the boom where brickies kept harassing the site manager for work. They had to put in cctv. Now at that stage in the build they werent at the stage where brick layers were required. ... But it was in the drawings i.e. bricks. The developer changed the design because of the brickies harressment and prices .... builth the building without brickies been required.

athtrasna

Have we drifted somewhat from the property market here?

Ipro

So looking at the general look of things property prices still seem to be climbing which I guess is a good thing from an economic point of view. What's the general thoughts on here though regarding property prices. Will they reach boom time prices again and then crash or do we expect that people will be more sensible this time around and that prices should start to level off /slowly increase in the near future ?

Villa05

Ipro wrote:

So looking at the general look of things property prices still seem to be climbing which I guess is a good thing from an economic point of view.

You might explain that to PayPal, Intel and other multinationals who have expressed concern over housing costs in this country and expressed it will be a consideration for future investment

Ipro

Villa05 wrote: »

You might explain that to PayPal, Intel and other multinationals who have expressed concern over housing costs in this country and expressed it will be a consideration for future investment

The multinationationals you refer to are concerned about the high rents that are being charged in the current market.

My post was referring to purchase costs.

IMO if large companies are landing here and attracting a lot of people they should provide campus accomadation as part of their infrastructure. Same way as ikea were made fund roads etc when building out in ballymun. Any negatives need to be offset. These companies get plenty of tax breaks and avoid paying the even small amount of taxes they are suppose to pay so they should at least provide accomadation and not put pressure on local resources.

Bob24

Ipro wrote: »

do we expect that people will be more sensible this time around

I don't expect people to be more sensible, if you let them they will make the same mistakes and then blame the government and banks for having let them take too much risk.

We do have more sensible lending rules though, which if maintained should prevent the country from going completely nuts again (the problem is that we do lack supply in Dublin which still pushes prices up, so at some point we will have to make a choice: either seriously address the supply issue or relax the rules so that people can borrow more to keep buying in a very limited market).

dubrov

Bob24 wrote: »

or relax the rules so that people can borrow more to keep buying in a very limited market).

What does that achieve except line builder's pockets?

The same people would be competing for the same houses but would just have to pay more.

Idbatterim

Not just the developers also the government. The banks as you borrow more and might pay it back over a longer period. Current home owners in terms if equity. It's one big racket... The central bank shouldn't budge on current rules. It will force the vested interest snakes. The government included, to look at their side. Rather than simply shouldering joe soap with more debt!

Bob24

dubrov wrote: »

Bob24 wrote: »

or relax the rules so that people can borrow more to keep buying in a very limited market).

What does that achieve except line builder's pockets?

The same people would be competing for the same houses but would just have to pay more.

Oh I obviously agree this would be a bad policy. But I am just saying I am concerned that at some point most people won't be able to buy anymore as in spite of the rules prices will keep rising due to very short supply and the lack of new builds. And at that point relaxing the rules will be the easy option for the government to "fix" the problem.

The_Conductor

Bob24 wrote: »

Oh I obviously agree this would be a bad policy. But I am just saying I am concerned that at some point most people won't be able to buy anymore as in spite of the rules prices will keep rising due to very short supply and the lack of new builds. And at that point relaxing the rules will be the easy option for the government to "fix" the problem.

But its not a 'fix'- because it does precisely nothing to tackle the underlying complete and utter lack of supply.
The current increases in prices- are happening despite the lending rules- so obviously they are not a constraint- the constraint is supply- pure and simple.

If increased supply meant prices fell- so bloody what? Perhaps the REITs might see that the headline 10%+ increases in rent that they are selling their investors as a given- are not the norm- and rents- as well as absolute prices of property- can fall as well as rise......... Perhaps they may even be inclined to drip feed entire blocks onto the open market- which would be helpful for prospective purchasers- not so helpful for the tenants of the units (unless they had somewhere else to go..........

Supply- and the lack thereof- is at the knux of most of the ills in the Irish property market.

Bob24

The_Conductor wrote: »

But its not a 'fix'- because it does precisely nothing to tackle the underlying complete and utter lack of supply.
The current increases in prices- are happening despite the lending rules- so obviously they are not a constraint- the constraint is supply- pure and simple.

Sure I know, (hence the quotation marks I put around it).

But I am afraid this is the path of least resistance compared to fixing the actual supply issue, and might be what the government will try to promote as a fix. It's bad in the long term, but in the short term relaxing the rules to keep the madness going would please existing property owners, banks and their negative equity customers (and their large shareholder: the Irish State), and various types of property industry insiders. From a "selfish" and purely political point of view, it might be the best option for the government (and I know the CBI is independent :-) ... Just not sure how long it can resist the pressure).

Idbatterim

... Just not sure how long it can resist the pressure)

all it has to do, is do nothing, leave the ball in governments court. That will force those snakes to do something ...


Well the central bank is independent. So let's hope they stick to their guns. It doesn't even sort out all the issues. This drive to live in Dublin is relentless, yet the development plans still only allow for low rise in dicks for example. What's the point in the councils trying to fight the inevitable at this stage? The government less than a year ago kicked a decent Dublin transport network back half a decade minimum, for inferior plans that taking inflation into account will actually cost more than the original plans!

The effects of living in a country that doesn't "do" planning are becoming more and more obvious and more and more serious!

newacc2015

Ipro wrote: »

The multinationationals you refer to are concerned about the high rents that are being charged in the current market.

My post was referring to purchase costs.

IMO if large companies are landing here and attracting a lot of people they should provide campus accomadation as part of their infrastructure. Same way as ikea were made fund roads etc when building out in ballymun. Any negatives need to be offset. These companies get plenty of tax breaks and avoid paying the even small amount of taxes they are suppose to pay so they should at least provide accomadation and not put pressure on local resources.

Should we also make Irish firms do the same thing? CRH is one of the largest companies in the world. Should we tell them not to bother expanding in Ireland unless they get the cheque book out to compensate for all the extra jobs they will create? There are a handful of companies that pay most corporation tax in Ireland. Medtronic paid €750m alone last year in corporation tax. That is probably more tax paid than all the residents in a small county. 40% of this country dont pay a cent in income tax, should we ask them to leave urban areas as they using local resources but contributing little to them?

How absurd does it look to a multinational to ask them to build accommodation for their workers as the Government of Ireland is incapable of providing sufficient housing? Your idea is completely ridiculous in my opinion. A single job provided by a multinational generally provides an additional 2 jobs indirectly. Google or Facebook might be paying hundreds of millions in corporation tax. But they are contributing far more to the employee than you think. ie they are using Irish suppliers, employees, banks, solicitors etc.