Property Market 2020

fliball123

schmittel wrote: »

I don't think it is bad taste in the slightest - just stating facts in context, completely fair enough.

But I think it is misguided to think that doomsters are ignoring it and taking "any macro-event and fit it to the "properties will crash" narrative".

Part of the problem with the discussion here is posters are not looking at the macroenvironment seriously, both at a national and international level.

My view is that macro factors will cause properties to crash sooner or later, rather than trying to take macro factor and fit it to my gloomy narrative.

But whenever anyone tries to have a discussion along the lines of property prices are going to take a hammering because the ESRI says the Irish economy faces largest recession in history, a pile of posters will say "Nonsense, sure John and Mary are flying and still planning on buying this year."

Which sounds a lot like ignoring the macro, taking any positive micro event and fitting it to the "property prices won't go down/will stabilise, this time it's different" narrative.

Your macro events are going to have to put a huge dent in demand and while I know there will be a lot of job losses I believe they will be to those under the AIW as in the industries such as retail and tourism so a high % would not of been in a position to buy a house anyway. As long as Demand > Supply nothing will bring prices down. Supply vs Demand you cant get any more macro than this when it comes to the economic price of something

Hubertj

schmittel wrote: »

I don't think it is bad taste in the slightest - just stating facts in context, completely fair enough.

But I think it is misguided to think that doomsters are ignoring it and taking "any macro-event and fit it to the "properties will crash" narrative".

Part of the problem with the discussion here is posters are not looking at the macroenvironment seriously, both at a national and international level.

My view is that macro factors will cause properties to crash sooner or later, rather than trying to take macro factor and fit it to my gloomy narrative.

But whenever anyone tries to have a discussion along the lines of property prices are going to take a hammering because the ESRI says the Irish economy faces largest recession in history, a pile of posters will say "Nonsense, sure John and Mary are flying and still planning on buying this year."

Which sounds a lot like ignoring the macro, taking any positive micro event and fitting it to the "property prices won't go down/will stabilise, this time it's different" narrative.

i agree with you but when the ESRI predicted a 12%ish drop in prices their analysis was rubbished on here whilst the same people were ok with their economic forecasts......

hometruths

fliball123 wrote: »

Your macro events are going to have to put a huge dent in demand and while I know there will be a lot of job losses I believe they will be to those under the AIW as in the industries such as retail and tourism so a high % would not of been in a position to buy a house anyway. As long as Demand > Supply nothing will bring prices down. Supply vs Demand you cant get any more macro than this when it comes to the economic price of something

My point is the acts of the Fed and the ECB will influence prices more than whether or not Sheriff and his missus are flying. Is there a risk of deflation for example? I see that there is also a risk of inflation that will see prices rise.

When unemployment rises, demand drops. It is as simple as that.

hometruths

Hubertj wrote: »

i agree with you but when the ESRI predicted a 12%ish drop in prices their analysis was rubbished on here whilst the same people were ok with their economic forecasts......

Head in the sand stuff and exactly what I am talking about:

"Yeah, yeah, chill out, sure we know the worst recession in history is coming down the tracks, but house prices won't fall because all the people who will lose their jobs were never going to buy a house anyway."

i.e believing the micro factors will overcome the macro. Utter nonsense.

fliball123

schmittel wrote: »

My point is the acts of the Fed and the ECB will influence prices more than whether or not Sheriff and his missus are flying. Is there a risk of deflation for example? I see that there is also a risk of inflation that will see prices rise.

When unemployment rises, demand drops. It is as simple as that.

Yes this may be true but will it drop enough to alleviate the equation of supply > demand which is currently the case. Also supply has dried up as well.

cnocbui

schmittel wrote: »

My point is the acts of the Fed and the ECB will influence prices more than whether or not Sheriff and his missus are flying. Is there a risk of deflation for example? I see that there is also a risk of inflation that will see prices rise.

When unemployment rises, demand drops. It is as simple as that.

When demand is greater than supply, the amount of unemployment has to be greater than the demand/supply differential for prices to drop. If 5 people are bidding on a property, at least 4 of them have to lose their jobs before your hoped for demand reliant price drop happens. It is as simple as that.

I really do recommend you have a read of the currently buying/selling thread for a dose of the reality you sorely need.

OwlsZat

TheSheriff wrote: »

But its not doom and gloom, therefore not reported in the media.

Its a reality tough, often ignored on this board by those who want to take any macro-event and fit it to the "properties will crash" narrative. A few months back it was Brexit.

The Doom and Gloom narrative is a result of institutions like the ECD, ESRI, NTMA, OECD etc., predicting a global recession. It's little to do with sentiment on Boards, rather the dire global economic outlook. That's why your musings about your own financial strength are less well recieved.

Personally, I'd love to hear more about your plans. How are you both managing your financial winfall? It's a difficult time to find the right investment vehicles. Have you engaged a CFA or are you saving through traditional channels such as bank deposits?

hometruths

cnocbui wrote: »

When demand is greater than supply, the amount of unemployment has to be greater than the demand/supply differential for prices to drop. If 5 people are bidding on a property, at least 4 of them have to lose their jobs before your hoped for demand reliant price drop happens. It is as simple as that.

I really do recommend you have a read of the currently buying/selling thread for a dose of the reality you sorely need.

Just out of interest what have I said that makes you think I am hoping for price drops, demand reliant or otherwise?

Hubertj

schmittel wrote: »

Head in the sand stuff and exactly what I am talking about:

"Yeah, yeah, chill out, sure we know the worst recession in history is coming down the tracks, but house prices won't fall because all the people who will lose their jobs were never going to buy a house anyway."

i.e believing the micro factors will overcome the macro. Utter nonsense.

so are you saying you are ok with the ESRI economic forecast but not ok with their forecasted drops in prices? I don't see how they won't have factored all macro and micro elements into this. The scale of the recession would lead me ot think that prices would fall more than 12% (even though 12% sounds like a large decrease in a short period of time) but surely the likes of the ESRI would do their homework?

cnocbui

OwlsZat wrote: »

The Doom and Gloom narrative is a result of institutions like the ECD, ESRI, NTMA, OECD etc., predicting a global recession. It's little to do with sentiment on Boards, rather the dire global economic outlook. That's why your musings about your own financial strength are less well recieved.

Personally, I'd love to hear more about your plans. How are you both managing your financial winfall? It's a difficult time to find the right investment vehicles. Have you engaged a CFA or are you saving through traditional channels such as bank deposits?

If you want significant return from investment in the current climate, you have to risk your capital. I would suggest you look at dividend focused ETFs. A couple of mine have a notional 12+% return. That is probably significantly overstated, due to being based on pre Covid-19 financial performance of the underlying assets, but even if only 6% eventuates, i won't be complaining.

hometruths

Hubertj wrote: »

so are you saying you are ok with the ESRI economic forecast but not ok with their forecasted drops in prices? I don't see how they won't have factored all macro and micro elements into this. The scale of the recession would lead me ot think that prices would fall more than 12% (even though 12% sounds like a large decrease in a short period of time) but surely the likes of the ESRI would do their homework?

Apologies, I thought you meant that ESRI analysis was rubbished by people saying that they would not fall as much as 12%.

I am ok with the big picture of their analysis that we will see the largest recession in history. Intuitively that makes sense to me.

Personally I think prices, peak to trough, will fall more than 12%. I suspect the ESRI are under pressure to err on the side of caution when it comes to forecasting house prices.

cnocbui

schmittel wrote: »

Just out of interest what have I said that makes you think I am hoping for price drops, demand reliant or otherwise?

Your unabated fervour in the face of contrary arguments and real-time data. The ESRI and their ilk might as well be reading tea-leaves and sacrificed animal entrails. Economics is not a science and isn't science based. It's closer to literary criticism than it is physics.

hometruths

cnocbui wrote: »

Your unabated fervour in the face of contrary arguments and real-time data. The ESRI and their ilk might as well be reading tea-leaves and sacrificed animal entrails. Economics is not a science and isn't science based. It's closer to literary criticism than it is physics.

I certainly haven't heard any convincing contrary arguments round these parts (apart from inflation). Current real time data is a storm in a teacup as far as I am concerned.

I will be selling my house within the next two years, replacing it with a smaller house in a less desirable location. I personally stand to lose a lot more than most from falling prices.

I am hoping for a rocket fuelled boom in house prices. I just don't think it is terribly realistic hope.

TheSheriff

OwlsZat wrote: »

Personally, I'd love to hear more about your plans. How are you both managing your financial winfall? It's a difficult time to find the right investment vehicles. Have you engaged a CFA or are you saving through traditional channels such as bank deposits?

A sarcastic response. For what reason, I am unsure.

There is no windfall. We are in the same financial position we were last year. Nobody here is gloating they have some type of golden goose, you seem to have focused on that for some reason.

My overall feeling is that yes, prices will fall, is that what you wanted to hear?

TheSheriff

TheSheriff wrote: »

........ I've been shot down for saying this before, but I work in Pharma and my GF works in tech and we are busier than ever. GF's bonuses are up; I have recruiters calling looking for CVs as they have pending positions on the books due to the surge of CV-19; old drugs being ramped up in manufacture, new drugs, new devices etc. ..........

No doubt.
Not all healthcare places are unaffected though.........I know of a few Irish companies that have let go temporary/contract product builders/operators and overtime etc not required as so many elective surgeries were postponed worldwide. They've plenty safety stock etc and all back orders cleared.

OwlsZat

TheSheriff wrote: »

A sarcastic response. For what reason, I am unsure.

There is no windfall. We are in the same financial position we were last year. Nobody here is gloating they have some type of golden goose, you seem to have focused on that for some reason.

My overall feeling is that yes, prices will fall, is that what you wanted to hear?

If you don't think I'm genuinely interested in what your doing with your excess capital then you are mistaken.

Padre_Pio

Augeo wrote: »

No doubt.
Not all healthcare places are unaffected though.........I know of a few Irish companies that have let go temporary/contract product builders/operators and overtime etc not required as so many elective surgeries were postponed worldwide. They've plenty safety stock etc and all back orders cleared.

The occupation breakdown puts the majority of the workforce in industries affected by COVID.

Retail and services, tourism and construction. Those who are unaffected, or who benefit are in the minority.

GocRh

Augeo wrote: »

No doubt.
Not all healthcare places are unaffected though.........I know of a few Irish companies that have let go temporary/contract product builders/operators and overtime etc not required as so many elective surgeries were postponed worldwide. They've plenty safety stock etc and all back orders cleared.

And not all IT companies are doing brilliantly. Case in point, my employer (IT, 1k employees) had to temporarily reduce salaries to conserve cash.
Significant projects were delayed due to Covid as our customers couldn't get contracts and purchase orders in, and unlike the huge MNCs we're not sitting in piles of cash.

Villa05

brisan wrote:

Seeing how hard it is for banks to repossess property would you blame them

No one could have predicted that level of forbearance in 2008. A heavy cost to take into the next crisis

fliball123 wrote:

We have a better structure on banking loans and mortgages We have a better liquidity We have a lower level of debt vs savings We have a much higher demand for housing

All help in a time of no crisis, however all become irrelevant quickly in a crisis especially when a substantial legacy of the last crash remains on their books. Higher demand becomes a greater burden on the state when the income to support it starts to dissappear

Cyrus wrote:

things will need to be VERY bad before big mary gets the top seat, she is dangerously imcompetent.

Some of those SF members are excellent speakers and bring across their points very well. They wipe the floor with alot of their opnents in the Dail. Ff in particular are very weak

Dolbhad wrote:

Of course - no doubt the government will bring in something which was meant to help the market but will inadvertently make it worse.

You expect too much from politicians Measures were not brought in to help buyers, they were brought in to drive up price. There is nothing inadvertent about it. The measures are doing exactly what the politicians want

TheSheriff wrote:

There is also the fact that while there is vast unemployment, there are companies/industries which are booming. I've been shot down for saying this before, but I work in Pharma and my GF works in tech and we are busier than ever. GF's bonuses are up; I have recruiters calling looking for CVs as they have pending positions on the books due to the surge of CV-19; old drugs being ramped up in manufacture, new drugs, new devices etc.

Pharma and med are going to be impacted from this crisis for a number of reasons
1 hospitals focussesd on covid at the expense of other ailments
2 covid mortality rates are much greater with people with underlying conditions. This will remove/reduce future demand for products
3 lower/lost incomes will mean reduced medical insurance and further reliance on state. This wiil effect demand and general medical inflation

fliball123 wrote:

Your macro events are going to have to put a huge dent in demand and while I know there will be a lot of job losses I believe they will be to those under the AIW as in the industries such as retail and tourism so a high % would not of been in a position to buy a house anyway. As long as Demand > Supply nothing will bring prices down. Supply vs Demand you cant get any more macro than this when it comes to the economic price of something

Demand greater than supply creates a bubble in price and requires government intervention to house an increasing number of people at ever increasing cost because of sourcing solutions from the private sector. This is unsustainable for a state that is highly indebted. At some point the state will have to look at solutions that house people at half the cost of the private market.
Continuing on the current trajectory will result on a much greater crash when it happens

Cyrus

Villa05 wrote: »

Some of those SF members are excellent speakers and bring across their points very well. They wipe the floor with alot of their opnents in the Dail. Ff in particular are very weak

oh sure, some of them can speak very well, however 99.9999% percent of it is utter manure.

The irony is the only way to shut them up is to let them run/ruin the country for a year or so, and its not a risk id like to take.

wassie

Q&A in the Dáil is just theatre. The real work is done outside of that.

combat14

Central bank predicts modest 5% drop in house prices this year, max 2% increase in prices by March 2023

Overall very sobering economic report....


https://www.rte.ie/news/business/2020/0616/1147785-central-bank-stability-report/

cnocbui

Cyrus wrote: »

..

The irony is the only way to shut them up is to let them run/ruin the country for a year or so, and its not a risk id like to take.

Thtat's exactly what is happening, except with the Green Slime Party. Unfortunately, we 'are' taking the risk and all our living costs are going to escalate appreciably thanks to CO2 taxes.

Villa05

combat14 wrote:

Central bank predicts modest 5% drop in house prices this year, max 2% increase in prices by March 2023

That a survey of "property market professionals" its not a central bank prediction.

Very important distinction

Villa05

Cyrus wrote:

oh sure, some of them can speak very well, however 99.9999% percent of it is utter manure.

Cyrus wrote:

The irony is the only way to shut them up is to let them run/ruin the country for a year or so, and its not a risk id like to take.

My apologies, but my replies are not being posted,

You might like enlighten me on which parts of their housing policy are utter manure

Cyrus

Villa05 wrote: »

My apologies, but my replies are not being posted,

You might like enlighten me on which parts of their housing policy are utter manure

er the part of it where they are going to increase the amount of social housing while simultaneously abolishing LPT.

as with most of their policies the funding of any of it is always shrouded with mystery save for a tax the rich soundbite.

Hubertj

Villa05 wrote: »

My apologies, but my replies are not being posted,

You might like enlighten me on which parts of their housing policy are utter manure

O'brin is just words.... he can speak well but if you actually listen to what he says its just words with no substance, socialist boll*xology. Regarding any of their policies, they look good on paper but no real detail around funding, resourcing.

I see sheep

Yawn, can the FF/FG bores stay on the politics thread please.

Oliver Fisher

"20 per cent of mortgages drawn down in 2018 breached the loan-to-income or the loan-to-value ceilings set by the regulator, close to the maximum permitted." Source: irishtimes.com/business/financial-services/fifth-of-all-mortgages-in-2018-availed-of-rule-exemptions-study-finds-1.3968337

Does anyone have the figure for 2019?

With people in the "Saving/Applying for a mortgage 2020 Edition" thread saying that their exemptions got cancelled overnight, if this is an actual trend, how is this not going to impact the (new) housing market?

Here is my reasoning:

Before COVID:

Income of 80k x 3.5 = 280,000 maximum borrowing capacity. This fake couple (or a single person with a high income) gets a 3.9 exemption (nothing unrealistic pre-COVID). They now can borrow up to 312,000. With a deposit of 71.5k, they can buy a house worth 383,500.

Let's say they want to buy a new build worth 400k. They can get the HTB grant and get an extra 20k towards their deposit. Happy days, they "only" have to borrow 308,500. Their loan to value ratio is 76.82%, so well above the minimum 70% required to qualify for the HTB scheme.


Today (exemptions are gone):

Income of 80k x 3.5 = 280,00 maximum borrowing capacity. With a deposit of 71.5k, they can buy a house worth a maximum of 351,500.
With the HTB scheme, they can get another 18k so a total of 370k for a new home. Their loan to value ratio is now 74.46%.

That's a difference of 30k.


My couple says f*ck it, let's save more and ask the family for few grands (after all we keep hearing that people saved so much money during the lock down...). They get another 30k for their deposit so a total of 101.5k. They are happy as larry, thinking they are good to go for their dreamed property worth 400k. Yet, their loan to value ratio is now 63.55%, they don't qualify to the HTP grant anymore. 20k gone.

Even with 30k more toward their deposit, they will only be able to get a place worth a maximum of ±380k. Still a difference of 20k pre-COVID.

Thoughts?

Nijmegen

Re the “inappropriate” talk of people doing well, in the context of discussing the property market it’s pretty pertinent! Anyway, we can see it in the data: Despite hundreds of thousands losing income and unemployment up near 30%, income taxes were only down 7.5% in May. There’s lots of people doing ok at the moment.

Had a viewing on my own property today with several folks interested. One couple have their own house for sale in the past week and got an offer at asking from FTBs, the other viewers were themselves FTBs. EA noticeably more chipper - had been on reduced hours and feeling very glum a few weeks ago, naturally enough. Also spoke with the sales manager for the developer we’re looking to buy off of, about another nearby development of theirs and noticeably more upbeat than a few weeks ago. All anecdotal but alongside the data, gives one hope.

I am still expecting to have to do a deal off asking to close, though, but again nothing like the doom mongers suggested here a short while ago. Of course when you’re preaching doom all the time you’re bound to be correct eventually so keep at it....!