Property Market 2020

Graham

Cyrus wrote: »

I like wfh ergo it's the future and no one will go back to an office

I couldn't find a post suggesting no one will go back to an office.

Graham

pearcider wrote: »

We are in a housing bubble. House prices have doubled in 8 years. Rents have more than doubled. Incomes have risen around 15%. .

House prices 8 years ago were below construction costs in many areas.

It's not really a realistic benchmark.

Cyrus

addaword wrote: »

I know many if not all properties were woth less in Jan 2020 than in 2007.
In 2007, someone calling a 13 year long decrease in prices would have been declared mad.
Now the world has changed utterly due to the pandemic, brexit, huge rise in national debt, the rise of the left and other factors, a 10 year long decrease in prices is far from impossible imho.

That's not a 13 year long decrease in prices , the increases aren't as great as the original decrease was but you are missing the point

10 continuous years of decreasing prices is unprecedented

Cyrus

Graham wrote: »

I couldn't find a post suggesting no one will go back to an office.

I'm exaggerating I admit but it's the general tone.

pearcider

Graham wrote: »

House prices 8 years ago were below construction costs in many areas.

It's not really a realistic benchmark.

Construction costs have very little to do with it since new supply is only a tiny proportion of the housing stock. Credit availability, unemployment and rents are more important.

addaword

Cyrus wrote: »

calling a 10 year long decrease in prices is a massive statement .

You just said a decrease, not a continuous decrease.
I said "I know many if not all properties were woth less in Jan 2020 than in 2007.
In 2007, someone calling a 13 year long decrease in prices would have been declared mad.
Now the world has changed utterly due to the pandemic, brexit, huge rise in national debt, the rise of the left and other factors, a 10 year long decrease in prices is far from impossible imho."

Cyrus wrote: »

That's not a 13 year long decrease in prices ,

Prices did fall from 2007, that is a decrease, as anyone selling a property in 2020 will tell you.

Cyrus wrote: »

10 continuous years of decreasing prices is unprecedented

There is always some volatility in the market if you but a property now and value it / sell it in 10 years time, who cares about fluctuations in the meantime? I do not think anyone is expecting property to increase in value in the next year or two anyway.

After the depression of 1929, things did not pick up until the 50's, 60's?

Graham

pearcider wrote: »

Construction costs have very little to do with it since new supply is only a tiny proportion of the housing stock. Credit availability, unemployment and rents are more important.

Not entirely convinced by the logic there. Goods being sold at less than cost is not a good thing if you hope supply will continue.

Marius34

pearcider wrote: »

Construction costs have very little to do with it since new supply is only a tiny proportion of the housing stock. Credit availability, unemployment and rents are more important.

For period of 5 years, that's estimated over 100.000 new properties.
But people crying here how taking out few thousand of AirBNB would reduce the price.

pearcider

Graham wrote: »

Not entirely convinced by the logic there. Goods being sold at less than cost is not a good thing if you hope supply will continue.

Assets routinely sell below cost. There are numerous examples of this. Also in a bubble the industrial commodities rise in price as construction goes mad so the high construction costs are illusionary in the first place ie dependent on the expanding credit bubble.

This has all happened before and Adam Smith said the following about housing bubbles in 1776.

“A dwelling-house, as such, contributes nothing to the revenue of its inhabitant; and though it is, no doubt, extremely useful to him, it is as his clothes and household furniture are useful to him, which, however, make a part of his expense, and not of his revenue. If it is to be let to a tenant for rent, as the house itself can produce nothing, the tenant must always pay the rent out of some other revenue.... Though a house, therefore, may yield a revenue to its proprietor, and thereby serve in the function of a capital to him, it cannot yield any to the public, nor serve in the function of a capital to it, and the revenue of the whole body of
the people can never be in the smallest degree increased by it”

cnocbui

pearcider wrote: »

We are in a housing bubble. House prices have doubled in 8 years. Rents have more than doubled. Incomes have risen around 15%.

Let’s not forget we have 200 billion of sovereign debt now, any significant rise in bond rates and we are bankrupt. In 2008 our debt was like 40 billion. If turmoil returns to the bond markets and the federal reserve loses control we are in a precarious position. We could be looking at widespread sovereign defaults over the next two years and the break up of the euro.

The United States is a huge risk for Ireland and they are looking at a 4 trillion deficit this year and their economy is very important for us...last year in the other topic, I speculated that the next recession would take the US deficit to 2 trillion given that they had a 1 trillion structural deficit with effectively no unemployment. They are looking at 4 trillion now.

So the global debt bubble is actually way worse than 2008.

It wasn't a bubble. The recent increase was a return to normality and sense after a catastrophe brought about nonsense - house prices less than the cost of construction/supply.

Dublin is one of the most expensive capital cities anywhere to rent, but not to buy (no wonder corporations bought 95% of the apartments built last year, obviously great government policies in play:rolleyes:). Dublin's price to income ratio, in a list of 441 major cities, places it at 214th down the list: https://www.numbeo.com/property-investment/rankings.jsp

It's cheaper to buy in Dublin, in terms of affordability, than many other countries secondary cities, let alone their capitals. You want bubble, try Sydney, where the average house price went over a million Australian dollars a couple of years ago. That's about €603,000, nearly double the €383,000 for Dublin in March 2019.

cnocbui

pearcider wrote: »

Construction costs have very little to do with it since new supply is only a tiny proportion of the housing stock. Credit availability, unemployment and rents are more important.

Not if demand is increasing or has never been met.

Pivot Eoin

Decent summation/forecast of the current Irish Property situation: https://perfectproperty.ie/advice/entry/revising-2020-irish-property-market-predictions-post-covid-19-world/

Cyrus

addaword wrote: »

You just said a decrease, not a continuous decrease.
I said "I know many if not all properties were woth less in Jan 2020 than in 2007.
In 2007, someone calling a 13 year long decrease in prices would have been declared mad.
Now the world has changed utterly due to the pandemic, brexit, huge rise in national debt, the rise of the left and other factors, a 10 year long decrease in prices is far from impossible imho."


Prices did fall from 2007, that is a decrease, as anyone selling a property in 2020 will tell you.



There is always some volatility in the market if you but a property now and value it / sell it in 10 years time, who cares about fluctuations in the meantime? I do not think anyone is expecting property to increase in value in the next year or two anyway.

After the depression of 1929, things did not pick up until the 50's, 60's?

I didn't say anything smurgen did I called it out as horse manure

If you dont understand the different between 10 years of decreasing prices and prices being lower ten years later I can't help

The point being a 10 year continuous decrease in prices is very very unlikely no matter how bad this is

The Student

pearcider wrote: »

Assets routinely sell below cost. There are numerous examples of this. Also in a bubble the industrial commodities rise in price as construction goes mad so the high construction costs are illusionary in the first place ie dependent on the expanding credit bubble.

This has all happened before and Adam Smith said the following about housing bubbles in 1776.

“A dwelling-house, as such, contributes nothing to the revenue of its inhabitant; and though it is, no doubt, extremely useful to him, it is as his clothes and household furniture are useful to him, which, however, make a part of his expense, and not of his revenue. If it is to be let to a tenant for rent, as the house itself can produce nothing, the tenant must always pay the rent out of some other revenue.... Though a house, therefore, may yield a revenue to its proprietor, and thereby serve in the function of a capital to him, it cannot yield any to the public, nor serve in the function of a capital to it, and the revenue of the whole body of
the people can never be in the smallest degree increased by it”

Assets may sell for below cost but if the asset does not exist how do you encourage the creation of the asset in the first place.

The State has indicated we don't have enough properties to meet existing demand let alone any increase in demand.

pearcider

cnocbui wrote: »

Not if demand is increasing or has never been met.

What if demand s decreasing? There was plenty of demand for cars last year. Will the demand be the same this year?

pearcider

The Student wrote: »

Assets may sell for below cost but if the asset does not exist how do you encourage the creation of the asset in the first place.

The State has indicated we don't have enough properties to meet existing demand let alone any increase in demand.

Guess what? The State is wrong.

Cyrus

pearcider wrote: »

What if demand s decreasing? There was plenty of demand for cars last year. Will the demand be the same this year?

the difference being most of the demand for cars is people who already have cars

pearcider

cnocbui wrote: »

It wasn't a bubble. The recent increase was a return to normality and sense after a catastrophe brought about nonsense - house prices less than the cost of construction/supply.

Dublin is one of the most expensive capital cities anywhere to rent, but not to buy (no wonder corporations bought 95% of the apartments built last year, obviously great government policies in play:rolleyes:). Dublin's price to income ratio, in a list of 441 major cities, places it at 214th down the list: https://www.numbeo.com/property-investment/rankings.jsp

It's cheaper to buy in Dublin, in terms of affordability, than many other countries secondary cities, let alone their capitals. You want bubble, try Sydney, where the average house price went over a million Australian dollars a couple of years ago. That's about €603,000, nearly double the €383,000 for Dublin in March 2019.

A catastrophe brought about by a credit bubble...a credit bubble which is now far worse and with a deteriorating global economy that must service it.

addaword

Cyrus wrote: »

the difference being most of the demand for cars is people who already have cars

Car sales have fallen because of lack of demand. And falling incomes of many, many people.

Demand for property will be the same. Everyone from the hotel worker to the pub worker to the shopkeeper to the pilot to the dentist will be affected by falling income / lack of confidence.

pearcider

Cyrus wrote: »

the difference being most of the demand for cars is people who already have cars

The point being demand can and often does evaporate overnight. This is why half of the high end apartments built in Manhattan since 2015 are unsold.

Cyrus

pearcider wrote: »

The point being demand can and often does evaporate overnight. This is why half of the high end apartments built in Manhattan since 2015 are unsold.

fine just don't compare cars and houses it's not the same

The Student

pearcider wrote: »

Guess what? The State is wrong.

Is the central bank also wrong?

Who are going to live in these houses that are being built soso.

Care to share why you believe the State and all political parties are wrong

Ozark707

Ozark707 wrote: »

In the last recession there was a prevalent mindset at the outset that 'Irish property does not go down in value', so in effect it was a death by a thousand cuts. Lots of people followed the market down and ended up selling at a very low price instead of cutting their price earlier and possibly then exiting the market. This time around no one in the right mind believes it is not possible for huge drops in property prices so if there are eager sellers they might try and get ahead of the curve. If this is the case then I don't expect whatever correction will come to take as long.

I made the point earlier, after the last recession kicked in in 2008 you would have been better selling you house in 2009 for 10% below peak than waiting about for prices to rise again. Prices didn't reach that level again until 2014 or 2015.

If people think they are going to wait this one out they may need to wait 5 years or more.

hometruths

Bass Reeves wrote: »

First it would be investors only this effects. Most of these investors will have substantial capital appreciation at present. If they consider the downturn long-term yes they may. But if market shift downwards too much they may be reluctant to sell.

Yes, but investors impact property prices too! And they are less likely to have an emotional notional value on the property.

Bass Reeves wrote: »

It would depend as well on there requirement for cash. If they saw a better opportunity they might have. However as the market in Dublin has stabilized since 2018 many may already have exited.

Obviously if they need cash they will have to sell, but it doesn't follow that if an investor did not need the cash they would not sell. A rational investor will weigh up the risk/reward to holding the property vs selling, and if they decide the potential risks outweigh the potential rewards they will sell regardless of whether they need the cash.

Bass Reeves wrote: »

Later purchasers who bought in 2013/14 may sit out this downturn and the allowance would be beneficial in next upturn.

The relief dose not reduce. You divide the CG by number of years you own the house and are allowed 7 years of it tax exempt

I actually think the complete opposite is more likely. Consider the following scenario:

2013 - Investor buys 1 bed BTL apartment in SCD for €160k
Lets it on long term market for a few years, decent yield and capital gain. Happy days.
2016 - Assesses investment performance. Very happy with capital gains, whilst yield is good, anti-LL regulations increasing, and there is chance of increasing the yield with the red tap on the booming short term let market. Moves to short term lets.
2019 - Assesses investment performance. Strong further capital gains but looks like might be flattening. Increased legislation re STLs but enforcement is non existent, everybody flouting it. Keep at the STLs whilst we can, keep an eye on the way the wind is blowing.

Feb 2020 - Not just wind, but a bit of storm now. SF surged in election due in large part to broken rental market, new government likely to crackdown on STLs, will reassess options when/if they announce crackdown.

Apr 2020 - Entire country on lockdown. 30% unemployment. Ar$e fallen out of the STL market. What now? Do I sell or hold.


Property is currently worth €280k - sell now bank 120k/75% capital gain tax free - his risk reward in this scenario is whether or not he is giving up future returns by holding onto it.

Chances are he won't see the same levels of STL income so has to decide whether to become regular LL. With regulations and problem tenants, only really worth it if rents and purchase prices are likely to stay at same level or rise.

Are they? Nobody knows. But will he sit out this downturn because the allowance would be beneficial in next upturn?

Lets say that next upturn is 5 years away - i.e property prices are 5% up from 2020 levels in 2025.

His property now worth 294k - if he sells in 5 years his gain is 134k but now 5/12 of that is taxable - i.e €55833 x 0.33 = €18,424

His net proceeds in 5 years time are 275k i.e 5k less than he would get now if he could sell for 280.

Not sure how beneficial this will be in the next upturn given the uncertainty of waiting.

Who knows what austerity measures/new flavour of government/scrapping CGT exemptions/increasing rates/targeting landlords might be introduced over the next 5 years.

And yes I know that nobody knows what is going to happen, and we could have a vaccine tomorrow, a capitalist government who cut CGT to 10% etc etc.

But the point is what does a rational investor assessing the future risks/rewards on an investment that has a 75% CGT free gain currently think is most likely to happen?

For him not to sell now, he needs to be pretty confident that

a) prices will be materially higher in 5 years time than they are now
b) the regulatory/tax position will be at least the same as it is now, i.e not any less friendly to property investment

Is he likely to be confident of this?

I am not suggesting that everybody who has a CGT exemption in their back pocket will suddenly panic sell, just that I think on the balance of probabilities, it is quite likely that a reasonable proportion will try to sell this year.

addaword

Probably some properties currently occupied by unemployed publicans, hotel workers, pilots etc will come to the market in the next few years too. And properties of people unfortunately deceased.

Cyrus

addaword wrote: »

Probably some properties currently occupied by unemployed publicans, hotel workers, pilots etc will come to the market in the next few years too. And properties of people unfortunately deceased.

the incremental number of deaths won't be huge the majority would have died this year anyway. That won't be a significant factor.

addaword

Cyrus wrote: »

the incremental number of deaths won't be huge the majority would have died this year anyway. That won't be a significant factor.

Agreed, that number pales in to insignificance compared to the majority of workers, who find themselves on reduced income.

Mon1239

addaword wrote: »

Probably some properties currently occupied by unemployed publicans, hotel workers, pilots etc will come to the market in the next few years too. And properties of people unfortunately deceased.

Interesting point.. and these guys would probably be best selling those kind of properties now before any potential 'slip' in prices.

This excerpt from an Irish Times article also raised a few interesting facts that indicate market confidence has dramatically reduced. It looks like any properties that were finalising as lockdown came in have finalised.. but buyers that weren't as far along in the process have hit pause so we can see what happens. I'd expect a huge decrease in registered sales from April/May onwards, particularly in used properties.. and a slight decrease in new builds (many would have bought from plan and are too far down the rabbit hole to pull out now).

Keith Lowe, managing director with DNG, says house sales have held up well. “We have completed around 70 per cent of our expected sales for this time period. Most unconditional contracts have completed with the assistance of the legal industry which has stepped up to the challenge.”

It’s likely to be months before we see the impact of Covid-19 on new sales, but a fall off is likely. In the first week of March there were 730 properties Sale Agreed on MyHome - a fairly typical figure. In the last week of April that number had fallen to 228.

Lowe says where sales haven’t gone ahead, the reasons vary. “Some buyers have lost their jobs, some have had pay cuts and can no longer meet the income conditions in their loan approvals, a number of banks have reneged on loan approvals and will not stand over loan to value exceptions for first time buyers which are now withdrawn from the market by the majority of financial institutions. Many of these properties are being re-agreed very quickly to under-bidders or other interested parties and the rest have been put back for sale to be re-sold.”

The area of valuations is certainly a vexed one. Where contracts have been signed on a house at one value, the concern is that the bank will revise downwards its loan approval to the buyer. Professional valuers, appointed by the bank, carry out valuations.

amyed198

Dav010 wrote: »

This time it is different to anything that has gone before, every economist is saying that. Where recessions historically were due to fiscal mismanagement or conflict, this is due to neither, so we have to see if the sound principles economies were built on after the last recession will help to recover from this unprecedented shock.

Thanks for giving me a laugh, needed that.

Hubertj

addaword wrote: »

Agreed, that number pales in to insignificance compared to the majority of workers, who find themselves on reduced income.

Are the majority of workers on reduced income?