Recession: Which falls first - rent or house prices?

saabsaab

As far as I recall the last recession the rents fell a little and then stabilized house prices dropped slowly at first then fell like a stone until Nama set a baseline ending the fall.

The Belly

SozBbz wrote: »

Firstly on mortgage payments -they can be deferred, it won't trigger arrears or anything like that.

The landscape will definitely be different, but the hospitality trade has always been tough and there have always been businesses sailing close to the wind. There will be again in future no doubt - its just the nature of the business. Its adapt of die time, and many are adapting, but some will die.

I think we'll see changes - yes certain places in town that depended on the office trade will be in trouble, but subruban places are doing really well. My local village is full of upmarket eateries and they've all queues outside at lunch with people picking up take away and more recently they're all as busy as they're allowed to be.

I was in Grafton St last friday for the first time since the shops reopened. Plenty of people around spending money.

I also was talking to a plumber yesterday - he was here to fix my dishwasher -took me over a week to get someone, they all said they're out the door with work.

Came across this earlier.

https://www.allthefood.ie/single-post/2020/07/07/Five-New-Openings-In-Dublin

Adapting to tourist numbers collapsing how are they supposed to adapt to that?

Aggregate earnings from foreign tourists to the Irish economy in 2018 reached a record €6.874 billion, a 6% increase in current terms on 2017. €5.15 billion was spent in the country, including €47 million from day visitors, while Irish carriers earned an estimated €1.7 billion from visitors travelling to Ireland.

Allinall

Roughly 80% of a pub's net turnover is taken up by stock and payroll.


Both of these costs are directly related to turnover, so fixed costs are usually about 15% ( leaving 5% net profit).

If the 15% can be reduced / deferred, then the business should be viable, even at 50% normal levels.

SozBbz

The Belly wrote: »

Adapting to tourist numbers collapsing how are they supposed to adapt to that?

Aggregate earnings from foreign tourists to the Irish economy in 2018 reached a record €6.874 billion, a 6% increase in current terms on 2017. €5.15 billion was spent in the country, including €47 million from day visitors, while Irish carriers earned an estimated €1.7 billion from visitors travelling to Ireland.

Again - please point me to where I said that incomes would be exactly as before?

We are talking about businesses surviving. I happen to think a lot will survive.

Sure, there will be fewer foreign tourist here, but there will be more domestic tourists. There is opportunity for businesses that are creative and adaptable and make money from either adapting their offering or appealing to a different type of customer.

The Belly

SozBbz wrote: »

Again - please point me to where I said that incomes would be exactly as before?

We are talking about businesses surviving. I happen to think a lot will survive.

Sure, there will be fewer foreign tourist here, but there will be more domestic tourists. There is opportunity for businesses that are creative and adaptable and make money from either adapting their offering or appealing to a different type of customer.

Over 11 million tourists estimated to have visited Ireland in 2019.

Domestic tourism will not replace a big reduction in this regardless of how creative they are or how much adapting they do.

SozBbz

SozBbz wrote: »

Firstly on mortgage payments -they can be deferred, it won't trigger arrears or anything like that.

The landscape will definitely be different, but the hospitality trade has always been tough and there have always been businesses sailing close to the wind. There will be again in future no doubt - its just the nature of the business. Its adapt of die time, and many are adapting, but some will die.

I think we'll see changes - yes certain places in town that depended on the office trade will be in trouble, but subruban places are doing really well. My local village is full of upmarket eateries and they've all queues outside at lunch with people picking up take away and more recently they're all as busy as they're allowed to be.

I was in Grafton St last friday for the first time since the shops reopened. Plenty of people around spending money.

I also was talking to a plumber yesterday - he was here to fix my dishwasher -took me over a week to get someone, they all said they're out the door with work.

Came across this earlier.

https://www.allthefood.ie/single-post/2020/07/07/Five-New-Openings-In-Dublin

Fair enough - maybe if mortgages and Revenue payments are paused, and the worst of it only lasts a year, then all will be okay.

Good point about suburbia picking up some of the business from city centre establishments. I find my local village looking healthier than it has looked in years!

I should have noted that the plumber who told me stories of doom was also a hard man to get

The most painful bit might be after the storm when we have to close the budget deficit again. Maybe I'm just looking for reasons to be pessimistic about property!

saabsaab

saabsaab wrote: »

As far as I recall the last recession the rents fell a little and then stabilized house prices dropped slowly at first then fell like a stone until Nama set a baseline ending the fall.

Thanks - that's what I was wondering.

saabsaab

Deleted User wrote: »

Thanks - that's what I was wondering.

I expected rents to fall further but they didn't at least in bigger centres.

Assetbacked

JimmyVik wrote: »

I had planned not to go to a pub until next year.
I was walking past one the other day and there was 1 person in it. So I went in for a sneaky pint. Now that ive gone once, im going back again tonight.

afatbollix

Rents should come down as the air B&B places will be on daft now looking for long term tenants.


House prices I think will stay about the same. It seems most people kept their jobs so far and they will still have some money in there pockets ready to spend.

...Ghost...

SozBbz wrote: »

With respect, how is following the guidelines not sufficient? They're designed to be followed, not as some baseline. I've followed them all the way along - and I do wear a mask because thats the advice- so tell me again how I'm selfish?

Why should restaurant owners and staff give up their livelihood? They've already done it for months. Its time to get life underway in as safe a way as possible. Expecting people to let their otherwise viable businesses go to the wall because people should go above and beyond government and public health advice and stay at home indefinitely - to me that's pretty selfish.

Also, how are we supposed to fund our society if no one gets out there and spends money again? We might get on top of Covid but be left with a whole myriad other problems.

It's not sufficient if the advice can't be trusted. First the Gov say facemasks are useless and not to buy them. Then, as supply chains are established and stabilised, they change their tune and say we should wear them. At first, they claimed that children were major spreaders of the disease, but when the narrative suited them, they say "children are not as contagious as first thought". Reading between the lines, it tells me that children spread the disease as much as, or more than adults. But they want the to push for schools reopening, which all of a sudden halved the minimum distance and added multiples of times periods children can share the same same space....now referred to as "pods" (a deceptive word for a group). There's more, but I won't fill the page, as there are threads covering this in more details already.

Why are you selfish? Well, I inferred that your attitude was selfish when you suggested that it's ok to only follow the guides unless you are in a high risk category. My view is that we should act as if we are all in a high risk category, because most of us have friends, family and neighbours who are high risk. We should all be watching out for everybody and not just ourselves. I would prefer to see a hundred businesses go to the wall, including my own than to risk a single life adhering to the hap-hazard guidelines issued by the Gov which change to suit them on weekly basis. We all want the economy running smoothly and for things to get back to normal. But hearing things like "Schools will be back open in late August" with no plans being presented and social distancing being walked all over....it's terrifying.

SozBbz

...Ghost... wrote: »

It's not sufficient if the advice can't be trusted. First the Gov say facemasks are useless and not to buy them. Then, as supply chains are established and stabilised, they change their tune and say we should wear them. At first, they claimed that children were major spreaders of the disease, but when the narrative suited them, they say "children are not as contagious as first thought". Reading between the lines, it tells me that children spread the disease as much as, or more than adults. But they want the to push for schools reopening, which all of a sudden halved the minimum distance and added multiples of times periods children can share the same same space....now referred to as "pods" (a deceptive word for a group). There's more, but I won't fill the page, as there are threads covering this in more details already.

Why are you selfish? Well, I inferred that your attitude was selfish when you suggested that it's ok to only follow the guides unless you are in a high risk category. My view is that we should act as if we are all in a high risk category, because most of us have friends, family and neighbours who are high risk. We should all be watching out for everybody and not just ourselves. I would prefer to see a hundred businesses go to the wall, including my own than to risk a single life adhering to the hap-hazard guidelines issued by the Gov which change to suit them on weekly basis. We all want the economy running smoothly and for things to get back to normal. But hearing things like "Schools will be back open in late August" with no plans being presented and social distancing being walked all over....it's terrifying.

You actually sound hysterical and offensive.

If following the govt advice didn’t work, then why have our numbers come right down? You’re talking as if we were actually mislead - are you for real? It was a brand new virus, the evidence evolved over time and advice was modified. Yes the govt could go stronger on masks but overall they did a good job and I’m sure could do without fear mongers like you spreading hysteria.

I have cancelled holidays at my own cost, not seen my family for months, wear a mask, keep my distance, wash and sanitise my hands regularly, downloaded the app, yet I’m selfish because now that the govt and medical advisors have cleared us to go to restaurants under limited conditions, I do that? Get off your high horse.

Are you saying that you know better than Dr Tony Holohan? Because I know who I’d rather listen to.

LuckyLloyd

I think for this type of topic it should be split in two: one thread that accepts the premise of a recessionary effect on the market; another that accepts tenuous bull arguments like ‘lack of supply will keep prices stable’

It’s unreadable otherwise.

And let me say this much: it’s liberating to accept reality. Once you do, you can start preparing for how you might handle it.

Dav010

LuckyLloyd wrote: »

I think for this type of topic it should be split in two: one thread that accepts the premise of a recessionary effect on the market; another that accepts tenuous bull arguments like ‘lack of supply will keep prices stable’

It’s unreadable otherwise.

And let me say this much: it’s liberating to accept reality. Once you do, you can start preparing for how you might handle it.

Discussions of recessions have to include both the cause and effect. The reason that there are such conflicting opinions is because this recession was not caused by the unusual factors. There was no over supply in Ireland prior to this, in fact chronic under supply was the complaint, people were not over extended in their borrowing due to CB rules, there is billions of cash savings in banks and jobs, apart from some sectors seem to be secure and returning to normal.

Right now, rental prices are dropping, but not by as much as expected, due to there being no students, no influx of international workers, people moving out and back to where they are originally from as they wfh, but the prospects of that changing, particularly the students in 2021 is high, so LLs know that the chances of renting are good. Some LLs will of course have to rent now in order to pay mortgages, others will not drop price because they know that RPZ regs lock them in at lowered price.

I was amazed by how little house prices seem to have dropped, but as always, there is a difference between asking and selling price, selling price is often higher, as a few posters have confirmed on other threads when recently bidding on properties.

So, asking that you have separate threads for pessimists and optimists leaves important considerations out of both.

Wanderer78

Dav010 wrote:

Discussions of recessions have to include both the cause and effect. The reason that there are such conflicting opinions is because this recession was not caused by the unusual factors. There was no over supply in Ireland prior to this, in fact chronic under supply was the complaint, people were not over extended in their borrowing due to CB rules, there is billions of cash savings in banks and jobs, apart from some sectors seem to be secure and returning to normal.

Disturbingly, I heard an 'expert' on a podcast recently claim, since prices are falling, we clearly don't have a supply problem! Jesus when will these neoclassicals take their heads out of the clouds!

GooglePlus

cgcsb wrote: »

Honestly it's like the karens commenting on Dublin Live.

On a separate note: it is estimated that the propulation of Dublin City will increase 60,000 between now and 2026. Say 10,000 per year between now and then. There were 1,800 housing completions in the city in 2019 (with no signs of that picking up), so unless all the new residents live 6 people to a dwelling, then the housing crisis will get worse.

With remote working being taken on by so many, we're bound to see an outward movement of people from Dublin to more affordable peripherals, so those projections might not be worth as much now.

I know I'll be moving straight out if I continue working from home, even if it's 3 or so days a week off and 2 in.

Dav010

Wanderer78 wrote: »

Disturbingly, I heard an 'expert' on a podcast recently claim, since prices are falling, we clearly don't have a supply problem! Jesus when will these neoclassicals take their heads out of the clouds!

That’s the thing Wanderer, usually there are obvious reasons and signs which can be identified for a recession occurring, before it happens, this one is different, so how long it lasts and it’s effects are difficult to predict. There will be a lot of experts who will get it wrong.

Wanderer78

Dav010 wrote:

That’s the thing Wanderer, usually there are obvious reasons and signs which can be identified for a recession occurring, before it happens, this one is different, so how long it lasts and it’s effects are difficult to predict. There will be a lot of experts who will get it wrong.

I was actually extremely disturbed by this, these people do actually advise our governments, when are they gonna give it up, neoclassical economics is done, it's a bust

cgcsb

Without pubs restaurants cinemas theatres concerts or holidays I would say the majority of people looking to buy have actually significantly increased the deposit they can put down on a house.

LuckyLloyd

LuckyLloyd wrote: »

I think for this type of topic it should be split in two: one thread that accepts the premise of a recessionary effect on the market; another that accepts tenuous bull arguments like ‘lack of supply will keep prices stable’

It’s unreadable otherwise.

And let me say this much: it’s liberating to accept reality. Once you do, you can start preparing for how you might handle it.

I'd accept a split of the thread that siphoned off the heated arguments between people about how safe it is to go to the pub! Surely there's a lengthy thread for that somewhere.

In the last crash - and before the last crash - credit seemed to play a key role. We had high numbers of houses being built every year but credit was easy so prices kept going up regardless.

Then when things soured, it was really that credit dried up and people could no longer outbid one another. Cash was king again for a while.

Still early days, so hard to say how banks will behave if there is uncertainty in the short term. Maybe they'll ride it out. Maybe they'll be very cautious for a year or two until the future is clearer. Or maybe the government will come up with some magically solution in the budget that ensures banks keep the taps running.

I should add that my reason for starting this thread followed a daydream about investing in a buy-to-let. I would need a mortgage so it may or may not be possible at all.

But I wondered whether I'd regret buying and letting now, if the price of buying dips significantly next year. Or, if I waited, would I save a bit on the initial outlay but maybe be locked into a lower rate this time next year.

Probably not massive losses/gains to be had either way unless there is a big time lag between the rate/timing at which rents fall vs prices.

sweetie

Ray Palmer wrote: »

Except we have seen people can't exercise good judgement and cop on. Are the staff some of these people who went out and didn't socially distance? You don't know and can't possibly know to make a judgement call.

At the start of this a shop worker though him wearing gloves kept me safe even though he had just rubbed his face while wearing them.

Were these magic gloves that kill the virus upon contact? :rolleyes:
As regular gloves can still pickup/carry the virus and transfer it to other surfaces including your face. Of course lots of stupid people don't realise that.

johnnyskeleton

JimmyVik wrote: »

Only way house prices will fall are


if the market gets flooded with houses for sale. If it does they will come from the rental market. Landlords selling up. Because there is no oversupply at the moment.


or b)
If the supply of buyers dries up. That would require major job losses.
So maybe rents would fall then. But the country and all of us would be in some state.

Both can be affected by a number of other factors. People who have lingering covid symptoms for years after and can't get back to work, sadly people passing due to covid, reduced immigration due to travel restrictions, potentially people relocating outside of cities to smaller towns due to working from home, etc. There are lots of things that could affect both supply and demand as a result of this.

As against this, if there is a large EU wide, indeed worldwide, period of quantitative easing, we could see continued stagflation where people's daily lives are difficult but asset prices continue to rise due to the availability of cheap credit (at least, to certain people and institutions, who will then buy up lots of property driving prices up). We did this in 2008 rather than face the full ravages of a worldwide depression, and it has resulted in property which is just as unaffordable as it was during the credit driven property bubble. We are on course to potentially repeat the same mistake making matters worse.

This is further compounded by market sentiment which, IMO, is not the most important factor in the property market, but is a significant factor. While it is hard to quantify, the general feeling I get is that people are feeling that prices have or will drop a little bit, but that property is still a reasonably good investment and an essential part of life.

Also, property is not uniform. We could see massive demand for houses in one are with drops in apartment prices in others etc.

Finally, very few property owners have to sell, even in a recession. Lots of properties are owned outright or with a very small mortgage. Typically, when house prices are down, it is only properties that have to sell that come on to the market e.g. estate sales, bankruptcy etc.

What does all this mean when you add it up? The property market is very complicated and difficult to predict. But it is not a simple question of landlords leaving and job losses, there are far more factors than that to consider.

bob mcbob

Deleted User wrote: »

I hope you're right about the (lack of a deep) recession but the Central Bank says it will be the 'worst in history'. Hopefully it will be short.

Thanks for the observation on rents/prices. So, rents are softening but house prices stable enough.

Was there anything about the previous recession that could help predict the next 12 months? Access to credit/mortgages might be a factor.

It depends on how long it lasts. Here is a graph showing house prices for the last 25 years. You can see that from the recession in 2008/09, house prices only reached the bottom in 2013

https://tradingeconomics.com/ireland/housing-index

It basically takes a while for people to accept that their asset is not worth what they thought it was.

cgcsb

bob mcbob wrote: »

It depends on how long it lasts. Here is a graph showing house prices for the last 25 years. You can see that from the recession in 2008/09, house prices only reached the bottom in 2013

https://tradingeconomics.com/ireland/housing-index

It basically takes a while for people to accept that their asset is not worth what they thought it was.

This is an interesting phenomenon. There are properties on DAFT in Dublin that have been there about 2 years, and penny obviously hasn't dropped for the owners. Most of these are derelict properties / sites without planning permission in undesirable suburbs asking for a quarter of a mil. Or in the City Centre, TINY decrepit 1 bed apartments in need of renovation for also about a quarter of a mil.

Claw Hammer

Deleted User wrote: »

I should add that my reason for starting this thread followed a daydream about investing in a buy-to-let. I would need a mortgage so it may or may not be possible at all.

But I wondered whether I'd regret buying and letting now, if the price of buying dips significantly next year. Or, if I waited, would I save a bit on the initial outlay but maybe be locked into a lower rate this time next year.

Probably not massive losses/gains to be had either way unless there is a big time lag between the rate/timing at which rents fall vs prices.

The time to acquire a buy to let is when the market has started recovering. The rent will move up reasonably quickly for a while leaving you fairly comfortable after a short time.

Wanderer78

cgcsb wrote: »

Without pubs restaurants cinemas theatres concerts or holidays I would say the majority of people looking to buy have actually significantly increased the deposit they can put down on a house.

yup, in true downturn style, savings are rocketing, due to the humans getting scared

JimmyVik

SozBbz wrote: »

You actually sound hysterical and offensive.

If following the govt advice didn’t work, then why have our numbers come right down? You’re talking as if we were actually mislead - are you for real? It was a brand new virus, the evidence evolved over time and advice was modified. Yes the govt could go stronger on masks but overall they did a good job and I’m sure could do without fear mongers like you spreading hysteria.

I have cancelled holidays at my own cost, not seen my family for months, wear a mask, keep my distance, wash and sanitise my hands regularly, downloaded the app, yet I’m selfish because now that the govt and medical advisors have cleared us to go to restaurants under limited conditions, I do that? Get off your high horse.

Are you saying that you know better than Dr Tony Holohan? Because I know who I’d rather listen to.

Agreed. If everyone followed the rules we have now we would be fine.
They are suffiecient.

The rules can then be tweaks if the situation gets worse or better.
But its the people not following the rules who are going to destroy us.

perfectkama

Claw Hammer wrote: »

The time to acquire a buy to let is when the market has started recovering. The rent will move up reasonably quickly for a while leaving you fairly comfortable after a short time.

I am not sure buy a buy to let will ever be an investor choice

a friend sold his house 5 years ago and put 1/2 into McDonnells share it gone up 15% every year + he gets a divie just 1 example, amzn up 69% this year
Anyway last recession in dublin rents trailed HP with massive over supply low demand 1-0 to renters

this time nada low supply low demand its a draw

Claw Hammer

perfectkama wrote: »

I am not sure buy a buy to let will ever be an investor choice

a friend sold his house 5 years ago and put 1/2 into McDonnells share it gone up 15% every year + he gets a divie just 1 example, amzn up 69% this year
Anyway last recession in dublin rents trailed HP with massive over supply low demand 1-0 to renters

this time nada low supply low demand its a draw

I don't follow your logic. I'm not recommending buying in recession. IM recommending buying in recovery, if you want to buy at all.