Government to pursue permanent price/rent increases?

KomradeBishop

antoinolachtnai wrote: »

How can house prices go up if there is no money to drive them up?

If it is possible, it is good news because it means that developers will continue to enter the market and build homes even though the purchasers can't borrow the money.

You appear to be opposed to building high quality housing and would prefer lower quality, less expensive housing to be built instead. I have some sympathy with this view as do many developers.

You can have increased restrictions on mortgages and still have house prices rising, if those rises are driven by speculative/investment purchases, and restricted supply.

The latter is a false dichotomy - increasing/reducing house prices, does not inherently mean increasing/reducing quality of construction - the value of land is a significant portion of the value of a property, and when the supply of property is restricted or the market becomes overly financialized, the value of land makes up a bigger portion of the purchase cost.

In other words: You can have exactly the same amount spent on construction quality as before, yet still have increasing or decreasing house prices.

This also means that affordable and social housing, does not inherently mean lower quality.

Marcusm

antoinolachtnai wrote: »

Changing the ownership of housing stock does absolutely nothing to increase he housing stock.

It often does when the units are empty as was the case at Tallaght Cross for a long while. I think they only started letting the 442 units to optimise selling possibilities. The 65 units which are going to Tuath are going empty.

KomradeBishop

Marcusm wrote: »

I'm unsure what you mean by the "financialization"?; do you mean an increase in the number of non owner occupiers? Frankly, the population increase in Ireland and particularly in the Dublin area could have benefited from decent "financialization" 15 years ago. The lack of a long term supply of decent rental stock facilitating family development and growth was one of the features of the "property ladder" focused topsy turvy growth and contraction in the Irish property market. Long term financial investors, particularly pension funds and life insurance companies, are ideal in that they are focused on stable revenues rather than price growth and instability. Had the Irish Estates arm of Irish Life continued building up a stock of rental developments (such as the Mespil Estate) and focused on managing that for Irish pension funds, i suspect that there would have been better alternatives for mid 20 somethings than heading to the suburbs for the 2/4 bed semi that they didn't really want or expect to stay in for long.

Large scale investors, such as Kennedy Wilson, will hopefully turn into lng term investors and permit the development of a stock of long term rentals in Dublin (especially) which would likely provide stability (including the achievable portion of AK47's ludicrous rent certainty). Decrying all financial investors is a silly activity.

The financialization of the property market, is best explained in the articles. In short, it's a transition of the property market away from being based on domestic homeowner purchases, and moving it towards being based on foreign financial investment, where rentals and speculative buying, along with government policies aimed at promoting speculative rewards to the finance industry (i.e. promoting price/rental increases and gentrification), are encouraged.

The government here has ample ability to reform the rental market, and to fund affordable/social housing (particularly with NAMA's resources) - so there is no need 'wait' for the property market to begin to correct the supply shortage by itself.

Financialization of the property market - as described above - and reducing the supply shortage, do not go hand in hand. If anything, it's likely to lead to perpetual supply shortages, long into the future, because that's what keeps the property market profitable for investors.

Nobody decried all financial investors either.

KomradeBishop

Augeo wrote: »

Indeed they are, and as they are government backed it seems that Government to pursue permanent price/rent increases is not 100% what's going on, that is the thread title with a ? after it.

The topic is to debate that point presumably, my view is that they are not pursuing permanent price/rent increases to a degree that would be problematic. Thus they are backing the CB rules. Perhaps you don't like debate, you seem a tad dictorial.

As you said yourself mortgage restrictions are a downward force on prices so they are not a red herring You can't seem to see this.

Stop quote-mining my posts, thanks. Since everything you have stated here, has been answered already in the post you're replying to - except you've cut out all the answers in the quote... - there's nothing here for me to reply to.

Villa05

Augeo wrote:

Indeed they are, and as they are government backed it seems that Government to pursue permanent price/rent increases is not 100% what's going on, that is the thread title with a ? after it.

They were not government backed. Government tried to dilute them up to the bitter end. The central bank is independent of government and the measures had heavy German/ECB influence.

athtrasna

Mod note

Please don't get personal. If you have an issue with posts please report, don't retort.

quadrifoglio verde

Villa05 wrote: »

They were not government backed. Government tried to dilute them up to the bitter end. The central bank is independent of government and the measures had heavy German/ECB influence.

And thank God they did

The government want higher house prices. It solves both the problem of negative equity and mortgage arrears which helps sorts out the banks and the hard pressed borrower without costing the tax payer money
However this only happens in the short term, but then again we only elect politicians for the short term.
They rarely care about the long term.

In the long term, what we need is housing prices that are stable with increases inline with inflation. Thankfully the central bank's rules ensure that the borrowing capacity can only increase as their income increases which should ensure stable rises in the price of property

Villa05

Villa05 wrote: »

They were not government backed. Government tried to dilute them up to the bitter end. The central bank is independent of government and the measures had heavy German/ECB influence.

Minister for finance backed them.

gjim

"Financialized" rental stock is far superior to that managed by part-time landlords.

I live in a block which is owned by a financial fund (who knows - behind the scenes there may have been a bunch of evil cackling cigar-chomping foreign capitalists sipping brandies - but it was presumably a pension fund) and it is far better than renting an apartment from any small-time landlord. A single company is in charge of the whole block so they have a real interest in its long term maintenance. It is run on a very professional basis - presumably with proper sink-fund planning, etc. and issues are addressed very quickly. There is no anti-social behaviour tolerated - the company was not going to risk pissing off 10 tenants just to keep getting rent from 1 problem tenant. Tenure is a lot more secure also.

As far as I know, the Irish tax system discourages funds and REITs from buying up residential apartment blocks which is a big pity as they seem far better than small-time landlords (or local authorities) at managing housing stock, in my experience.

KomradeBishop

KomradeBishop wrote: »

The financialization of the property market, is best explained in the articles. In short, it's a transition of the property market away from being based on domestic homeowner purchases, and moving it towards being based on foreign financial investment, where rentals and speculative buying, along with government policies aimed at promoting speculative rewards to the finance industry (i.e. promoting price/rental increases and gentrification), are encouraged.

.........

Financialization of the property market - as described above - and reducing the supply shortage, do not go hand in hand. If anything, it's likely to lead to perpetual supply shortages, long into the future, because that's what keeps the property market profitable for investors.

Nobody decried all financial investors either.

The majority of housing in Ireland does not lend itself to financialisation as described. A small percentage does.

Villa05

Augeo wrote: »

Minister for finance backed them.

Of course he did, he couldnt be seen to be against prudent policy so soon after the crash, however he was well behind an insurance scheme to get around the rules.

Central Bank governor Patrick Honohan wrote to Minister for Finance Michael Noonan last May, complaining about a Government initiative to make mortgage loans more affordable for first-time buyers.

Mr Noonan had floated the idea of establishing a State-backed insurance scheme to allow first-time buyers purchase homes with smaller deposits, in some cases, with mortgages of up to 95 per cent of the house value.

http://www.irishtimes.com/business/economy/honohan-wrote-to-noonan-to-complain-about-mortgage-insurance-plan-1.2111427


Now that Honohan is gone, there at it again. Lets hope Berlin is watching

Global insurance broker JLT says a mortgage indemnity guarantee (MIG) scheme to would allow mortgage banks to lend more and still cut their risk, as intended by mortgage lending caps introduced by the Central Bank last year.
Central Bank governor Philip Lane has been urged to consider bringing in the MIG scheme when the bank's review into its own mortgage lending limits is compele.

http://www.independent.ie/business/irish/insurer-plans-get-around-for-mortgage-lending-cap-34331185.html

antoinolachtnai

KomradeBishop wrote: »

You can have increased restrictions on mortgages and still have house prices rising, if those rises are driven by speculative/investment purchases, and restricted supply.

The latter is a false dichotomy - increasing/reducing house prices, does not inherently mean increasing/reducing quality of construction - the value of land is a significant portion of the value of a property, and when the supply of property is restricted or the market becomes overly financialized, the value of land makes up a bigger portion of the purchase cost.

In other words: You can have exactly the same amount spent on construction quality as before, yet still have increasing or decreasing house prices.

This also means that affordable and social housing, does not inherently mean lower quality.

It may well be that the dichotomy is false, but you are advocating that fewer high-quality units be built (i.e fancy, high-spec more expensive units) and that the resources instead be used to build lower quality, lower-spec units (i.e., social and affordable housing).

If you build to a higher standard, it will cost more. This is inevitable. More square feet, more expensive finishes, better amenities and so on cost money.

Really, I don't understand what you are calling for.

Do you think there should be more low-spec units (social and affordable housing) and that high-spec development should be cancelled to facilitate this? This is what your article in the Irish Times suggests (http://www.irishtimes.com/opinion/rory-hearne-the-state-must-intervene-in-housing-market-1.2400551) as well as the article linked above.

Surely it would be better if we developed all types of property and so reduced the rental cost of all types of property?

It sometimes seems that what your issue is not what kind of housing is provided, but who finances and manages the property. You want private housing associations in Ireland to own and manage the property rather than people from abroad. Is this the crux of your concern?

Why is it bad that international funds invest in housing in Ireland? And if we had all these housing associations, then wouldn't they just go and borrow the money from foreign banks? And wouldn't they be just as beholden to 'financialisation' as our friends from abroad? Surely having the government borrow money on international markets causes just as much, and maybe more 'financialization'? You are just moving the problem around.

If as you say, the homes that these international funds are building are not available to regular people, then these international funds are going to be in a lot of trouble, because they won't be able to sell or rent them (unless the international one percent decides to move en bloc to Ireland which seems unlikely).

defrule

Funny, I saw this video recently. It mentions the height limits that we have in Dublin.

https://www.youtube.com/watch?v=TRb52O76HxQ

I personally think we need property in Dublin to be largely owned by one government-majority owned corporation. I think a single entity is needed because it concentrates revenue for large scale developments. Capital intensive projects are unlikely to be achievable when property it predominantly owned by small-time landlords living off the rental income.

I would prefer it government-majority held as the government should be a stakeholder in sustainable development in the city.

This setup has worked well for the MTR corporation in Hong Kong. They own all the train and metro lines and own entire shopping malls that sit right on top of train stations (extremely good for commercial property). They are able to make profits and re-invest rapidly in rail extensions, new rail lines and new properties.

beauf

Perhaps I'm not understanding it, but for me, there really two separate issues at work here.

Failing to deal with the housing problem, in specifically social housing.
The second is inflating the market, so its more attractive to investors, and out of the reach of home owners.

As others have said, it all points to heading to being more like London/UK. Its a bit of a race to see if people finances can keep up, or will it leave more people behind, and increase pressure on quality of life and all the associated services.

beauf

defrule wrote: »

Funny, I saw this video recently. It mentions the height limits that we have in Dublin.

https://www.youtube.com/watch?v=TRb52O76HxQ

I personally think we need property in Dublin to be largely owned by one government-majority owned corporation. I think a single entity is needed because it concentrates revenue for large scale developments. Capital intensive projects are unlikely to be achievable when property it predominantly owned by small-time landlords living off the rental income.

I would prefer it government-majority held as the government should be a stakeholder in sustainable development in the city.

This setup has worked well for the MTR corporation in Hong Kong. They own all the train and metro lines and own entire shopping malls that sit right on top of train stations (extremely good for commercial property). They are able to make profits and re-invest rapidly in rail extensions, new rail lines and new properties.

Unfortunately Irish Govts and have the private sector have a long history of putting making a fast buck over ahead of sustainable and quality development. Its pretty corrupt here. Is it any different in HK.

Villa05

Marcusm wrote:

I suspect also an issue must arise as to the suitability of the build for low income housing - it looks like a fairly maintenance heavy development requiring significant Mgt charges and sinking funds.

Marcusm wrote:

65 of the units on this site have been transferred to social housing via Tuath.

If tuath can buy 65 for social housing, there doesn't appear to be any major issue with mgt charges. Aldi in the development and excellent transport links to the city.

If it's not consistent with council plans why are the 190,000euro fancy portakabins going in working class areas

Marcusm

Villa05 wrote: »

If tuath can buy 65 for social housing, there doesn't appear to be any major issue with mgt charges. Aldi in the development and excellent transport links to the city.

If it's not consistent with council plans why are the 190,000euro fancy portakabins going in working class areas

I don't know if you are familiar with large mixed use developments but they are generally designed from the beginning separating the social and full price housing. Often, as I suspect here, the social housing will be a separate block or it will be incorporated into the development in such a way as few management charges arise - for example lots of own door ground and upper floor units. Few if any indoor spaces or lifts to service and maintain. This is all perfectly normal and not as egregious as the "poor door" type arrangements which are often highlighted in London. Generally, landlords such as Tuath look to have few ongoing maintenance costs or similar ones to semis or terraced houses, certainly not ongoing management charges and large reinstatement bills.

In relation to the fancy portakabins, surely it's better to think of these as cut price Huf Hauses rather than the type of prefab many of us were educated in. They are not lower spec but capable of being fabricated offsite making them easier to install in bad weather. There clearly would not be common area or lift type charges attaching to these either.

Villa05

Marcusm wrote:

I don't know if you are familiar with large mixed use developments but they are generally designed from the beginning separating the social and full price housing. Often, as I suspect here, the social housing will be a separate block or it will be incorporated into the development in such a way as few management charges arise - for example lots of own door ground and upper floor units. Few if any indoor spaces or lifts to service and maintain. This is all perfectly normal and not as egregious as the "poor door" type arrangements which are often highlighted in London. Generally, landlords such as Tuath look to have few ongoing maintenance costs or similar ones to semis or terraced houses, certainly not ongoing management charges and large reinstatement bills.

At a 100k per apartment, it would be affordable for low income couples. It would be 2.5 times income for a couple who are on 20k each which is very prudent.

handlemaster

The government needed to get the property prices up to sell the NAMA stock and also bring back confidence in the economy.

Graham

Villa05 wrote: »

At a 100k per apartment, it would be affordable for low income couples. It would be 2.5 times income for a couple who are on 20k each which is very prudent.

Assuming the apartments are going to be rented out, I don't think the wholesale sale is a bad thing. Large-scale professionally owned/managed/rented accommodation should be encouraged.

Villa05

Graham wrote:

Assuming the apartments are going to be rented out, I don't think the wholesale sale is a bad thing. Large-scale professionally owned/managed/rented accommodation should be encouraged.

I don't think it is a bad thing either, but given that we have a housing crisis, I think there are alot of missed opportunities to provide long term affordable accommodation for people on low wages. This will come back to kick us in rear end again.

Marcusm

Villa05 wrote: »

I don't think it is a bad thing either, but given that we have a housing crisis, I think there are alot of missed opportunities to provide long term affordable accommodation for people on low wages. This will come back to kick us in rear end again.

With a likely annual management charge of €2.5k, I doubt they would have been truly suitable for people on low incomes. The posited yield of 6% is not bad but taking account of near boom time rental costs in Dublin, there is a limited prospect for substantial capital growth. Ultimately very few people will get excited about a small apartment in Tallaght - a semi or terrace in that area is going to be more attractive. I see apartment living in Tallaght as much more transient and therefore less likely to attract significant appreciation.

Graham

Villa05 wrote: »

I don't think it is a bad thing either, but given that we have a housing crisis, I think there are alot of missed opportunities to provide long term affordable accommodation for people on low wages. This will come back to kick us in rear end again.

The housing crisis won't be solved by selling apartments to first-time buyers rather than leaving/putting them on the rental market. The net effect on the housing stock is 0.

Long-term affordable accommodation won't come about until there's increased supply of housing stock, it won't be achieved by shuffling the existing stock around.

beauf

How quickly we forget those first time buyers stuck in tiny apartments unable to move. Also low cost housing that requires expensive transport to be viable isn't ideal either. Public transport is expensive, and rising.

KomradeBishop

antoinolachtnai wrote: »

It may well be that the dichotomy is false, but you are advocating that fewer high-quality units be built (i.e fancy, high-spec more expensive units) and that the resources instead be used to build lower quality, lower-spec units (i.e., social and affordable housing).

If you build to a higher standard, it will cost more. This is inevitable. More square feet, more expensive finishes, better amenities and so on cost money.

Really, I don't understand what you are calling for.

Do you think there should be more low-spec units (social and affordable housing) and that high-spec development should be cancelled to facilitate this? This is what your article in the Irish Times suggests (http://www.irishtimes.com/opinion/rory-hearne-the-state-must-intervene-in-housing-market-1.2400551) as well as the article linked above.

Surely it would be better if we developed all types of property and so reduced the rental cost of all types of property?

It sometimes seems that what your issue is not what kind of housing is provided, but who finances and manages the property. You want private housing associations in Ireland to own and manage the property rather than people from abroad. Is this the crux of your concern?

Why is it bad that international funds invest in housing in Ireland? And if we had all these housing associations, then wouldn't they just go and borrow the money from foreign banks? And wouldn't they be just as beholden to 'financialisation' as our friends from abroad? Surely having the government borrow money on international markets causes just as much, and maybe more 'financialization'? You are just moving the problem around.

If as you say, the homes that these international funds are building are not available to regular people, then these international funds are going to be in a lot of trouble, because they won't be able to sell or rent them (unless the international one percent decides to move en bloc to Ireland which seems unlikely).

You just agreed that "financialization = high quality, and affordable + social housing = low quality" is a false dichotomy - and then you went on to claim that I am advocating 'low quality' because I advocate more affordable/social housing.
You're contradicting yourself there. I did not advocate low quality, that is not synonymous with affordable/social housing.

The focus of my posts, is more the price of land and the profit share of the property, not the cost of building materials and labour - the scarcity of supply in the market, fuels speculative price increases, largely taken up by land value and profit margin.

I never posted that Irish Times article, neither do I back it.

The crux of what I'm taking issue with here, is the increasing price of houses and of renting, becoming a bigger share of peoples cost of living - due to increased financialization - to the point that it will drive people out of the property market, and promote gentrification.

Increasing/predominant financialization of the property market, causing the above, is the problem - there being any level of financialization, is not the problem (but you're trying to present this as me having a problem with financialization as a whole - when that's not the case).

You're also presenting another false dichotomy: That affordable/social housing means government borrowing.

You're putting words in my mouth as well, I did not say "the homes that these international funds are building are not available to regular people" - I didn't say that.

You're throwing up a lot of red-herrings, rather than replying to my actual arguments.

KomradeBishop

beauf wrote: »

Perhaps I'm not understanding it, but for me, there really two separate issues at work here.

Failing to deal with the housing problem, in specifically social housing.
The second is inflating the market, so its more attractive to investors, and out of the reach of home owners.

As others have said, it all points to heading to being more like London/UK. Its a bit of a race to see if people finances can keep up, or will it leave more people behind, and increase pressure on quality of life and all the associated services.

When you look at the actions of NAMA, it connects those two issues: Instead of using the NAMA stock for promoting affordable and social housing, the stock is being privatized for a pittance (well below optimal value, pretty much throwing free money at the developers who snap-up NAMA property), mainly to wealthy developers and the financial industry - promoting financialization of the property market.

They're both different parts of a wider/bigger problem.

Villa05

Building affordable accommodation apparently costs 250k+ per unit, yet the Government through NAMA is selling at 100k

Public transport is cheaper than running a car especially with most services at your doorstep

gaius c

handlemaster wrote: »

The government needed to get the property prices up to sell the NAMA stock and also bring back confidence in the economy.

Pretty much and with half the market being cash, it's effectively a bailout of the banks by the back door.

Don't give any credit to home buyers. Make them raid their prudent parents' bank account instead!

KomradeBishop

KomradeBishop wrote: »

...............

The crux of what I'm taking issue with here, is the increasing price of houses and of renting, becoming a bigger share of peoples cost of living - due to increased financialization - to the point that it will drive people out of the property market, and promote gentrification.

Increasing/predominant financialization of the property market, causing the above, is the problem - there being any level of financialization, is not the problem (but you're trying to present this as me having a problem with financialization as a whole - when that's not the case)...............

Predominant financialisation of the property market;
Could you quantify what that is and also what stage are we currently at?

Surely the current increasing price of renting is not attributed to increased financialisation, or are you doing so?

antoinolachtnai

KomradeBishop wrote: »

You just agreed that "financialization = high quality, and affordable + social housing = low quality" is a false dichotomy - and then you went on to claim that I am advocating 'low quality' because I advocate more affordable/social housing.
You're contradicting yourself there. I did not advocate low quality, that is not synonymous with affordable/social housing.

The focus of my posts, is more the price of land and the profit share of the property, not the cost of building materials and labour - the scarcity of supply in the market, fuels speculative price increases, largely taken up by land value and profit margin.

I never posted that Irish Times article, neither do I back it.

The crux of what I'm taking issue with here, is the increasing price of houses and of renting, becoming a bigger share of peoples cost of living - due to increased financialization - to the point that it will drive people out of the property market, and promote gentrification.

Increasing/predominant financialization of the property market, causing the above, is the problem - there being any level of financialization, is not the problem (but you're trying to present this as me having a problem with financialization as a whole - when that's not the case).

You're also presenting another false dichotomy: That affordable/social housing means government borrowing.

You're putting words in my mouth as well, I did not say "the homes that these international funds are building are not available to regular people" - I didn't say that.

You're throwing up a lot of red-herrings, rather than replying to my actual arguments.

1. I never said that the dichotomy was false. Those are words you put in my mouth.

2. I never said you were advocating low quality housing. Those are words you put in my mouth. (You do appear to be advocating the building of smaller units with lower quality finishes which is what social and affordable housing actually is when you strip away the politics and snobbery, and I personally have no problem with that view.)

3. Sorry, I had the impression you were Rory Hearn. So you are not?

4. I am sorry if it seems like these are red herrings or putting words in your mouth, but I am trying to work out what your issue is and what you are calling for. Now you say it is a question of degree rather than of nature, which makes things a little clearer. You are ok some 'financialization' (which is a word I only understand in general terms and which i think you understand in a very broad sense) but your problem is that there is too much of it.

Your focus is not the cost of labour and materials to build a building, but I can assure you that it is a big issue. Building high-density is a very expensive undertaking and it is years before the investor sees any money back. That is fine, but if there is not a very high degree of 'financialization' there will be very few homes built. There just isn't anybody sitting around Dublin with billions in their back pocket ready to sink into building homes.

As a result, less 'financialization' (which is what you are calling for) = fewer homes built.

You also say that the cost of land and profit share is your focus. That is fair enough, but I cannot understand what exactly your point is in relation to this. The government and local authority take a big share of land value increases and of rents. You think they should take more?