Irish Property Market 2020 Part 2

Pelezico

PropQueries wrote: »

673,000 people in Ireland are over 65. Pensioners are the primary group who have been forced into saving, so I would believe the vast majority of the increased savings belong to this group.

If potential home buyers were saving €200 per week from WFH. Multiply by 26 Weeks = €5,200 or €10,400 a year or c.3% of the cost of a €350k house in Dublin. Such increased savings would hardly move the dial on house prices and especially as this group would probably already be in the market to buy a home.

Most potential FTB’s would also have been renting so that just brings their previously rented property back into the market if they do buy, so such purchases would add very little to the demand side or take away from the supply side of the equation.

Given that transaction levels were down c. 50% in Q2 and c. 40% in Q3, the bigger question is why aren’t these people buying? Unless the demand side of the equation isn’t as big as many believe.

I think there is a subset of potential buyers who are really coined up. They work for high tech companies or pharma, big solicitor practices and IT specialists.

These are not one bit unhappy about covid. They have saved say 25k between them in six months, maybe more.

Lots of other people are on struggle street.

Limpy

Can anyone recommend a list of questions to ask an auctioneer regarding A, a property up for auction or, B a repossessed property up for Normal sale. Incase I make an investment down the line. Thanks

Timing belt

cnocbui wrote: »

I'd be more worried about the €10 Billion a year in government debt servicing costs, which is 16.5% of 2019 revenue.

Servicing costs have dropped significantly with the QE that the ECB have undertaken.

cnocbui

Timing belt wrote: »

Servicing costs have dropped significantly with the QE that the ECB have undertaken.

Please explain how.

Timing belt

cnocbui wrote: »

Please explain how.

The ECB are buying the government bonds as part of the QE program which is ensuring that rates are kept low (or negative). rates are negative up to 10 years

Without this QE the yield would normally rise with more bonds issued as you would need to entice people/institutions to invest.

What the ECB are doing is ensuring that countries can borrow cheaply on the open market so they can deal with the crisis.

https://www.ntma.ie/business-areas/funding-and-debt-management/government-securities/auction-results-calendar

Average cost of the debt issued this year is 0.25%.

The majority of the 16.5% of tax paid to service the debt in 2019 would have been on bonds issued in previous years when costs were as high as 6.00%

cnocbui

Timing belt wrote: »

The ECB are buying the government bonds as part of the QE program which is ensuring that rates are kept low (or negative). rates are negative up to 10 years

Without this QE the yield would normally rise with more bonds issued as you would need to entice people/institutions to invest.

What the ECB are doing is ensuring that countries can borrow cheaply on the open market so they can deal with the crisis.

https://www.ntma.ie/business-areas/funding-and-debt-management/government-securities/auction-results-calendar

Do you honestly think that the Irish government borrowing €10 B, even at 0%, to pay the €10 B in interest on the existing debt, should lessen my concern, because it's "easy"? I stand by what I said and don't think QE does anything more than amplify my unease.

Bubbaclaus

Pelezico wrote: »

Agreed ..his numbers may be light. Massive structural deficit and government debt 125% of GDP.

https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.irishtimes.com/business/economy/walking-a-fine-line-on-budget-strategy-1.4354769%3Fmode%3Damp&ved=2ahUKEwilnJjRsZvsAhVQTBUIHTfeAy4QFjABegQIGRAJ&usg=AOvVaw2A5uKV9xSKaSqmF0Vol1Qx&ampcf=1

You are posting out of date information. 30bn was the high estimate made back in April and this has now since been shown to be a massive exaggeration.

And the overall cost of the financial crisis a decade ago was far more than 42bn.

Basically the entire post you are trying to defend was widely inaccurate.

Hubertj

neutral guy wrote: »

Ireland will borrow €30 billion this year to fight coronavirus, and at least another €9 billion next year, probably far more.

Housing crisis will become a monster unless the State kills it now

https://www.irishtimes.com/business/housing-crisis-will-become-a-monster-unless-the-state-kills-it-now-1.4369551

I would like remind everybody that 2009 mess cost government 42 billions

Covid mess cost same already just trough last 6 months with more on top coming

I dont have any illusions about property market will continue it business as usual in 2020 same as 2021

But they won’t borrow €30bn this year. Your out by about 25%-30%. So on 1 hand you are saying there is no housing crisis but on the other hand you are referring an article which states there is? Annoyed with myself engaging in this.

Bubbaclaus

Hubertj wrote: »

But they won’t borrow €30bn this year. Your out by about 25%-30%. So on 1 hand you are saying there is no housing crisis but on the other hand you are referring an article which states there is? Annoyed with myself engaging in this.

It's very annoying isnt it, like debating with a bot that has been designed to be deliberately inaccurate and nonsensical.

Pelezico

Bubbaclaus wrote: »

You are posting out of date information. 30bn was the high estimate made back in April and this has now since been shown to be a massive exaggeration.

And the overall cost of the financial crisis a decade ago was far more than 42bn.

Basically the entire post you are trying to defend was widely inaccurate.

We are not out of the woods yet. Government debt is increasing at a precipitous rate.

Walk down any street of any town and you will see economic destruction on a larger scale than 2008.

There is very little economic activity on the high street and the banking crisis has not started yet.....oh it has started but we dont see its implications yet.

Hubertj

Pelezico wrote: »

I think there is a subset of potential buyers who are really coined up. They work for high tech companies or pharma, big solicitor practices and IT specialists.

These are not one bit unhappy about covid. They have saved say 25k between them in six months, maybe more.

Lots of other people are on struggle street.

Agree with this. There is definitely evidence that some sectors of the economy have been largely unaffected. This has enabled people to save a lot more. A lot of people also saying workers left Dublin for wherever so have had reduced or no rent at all for 6+ months. Not as much socialising, holidays, transport costs etc too.
Looking at the supply side it will be interesting to see how new builds at FTB looks as well. Increased interest in regions towns perhaps.

Timing belt

Pelezico wrote: »

We are not out of the woods yet. Government debt is increasing at a precipitous rate.

Walk down any street of any town and you will see economic destruction on a larger scale than 2008.

There is very little economic activity on the high street and the banking crisis has not started yet.....oh it has started but we dont see its implications yet.

I would not be worried about the government debt at the moment. The only time I can see this being an issue is when it comes to maturity and the government try to roll the debt... It may not be as cheap then.

As for the domestic economy it is holding up quite well for such a shock but as you say we are not out of the woods yet and the big question will be how long Covid will be around.

Banks are holding adequate capital this time around to be able to deal with the Crisis unlike back in 2008. Yes there will be more people in arrears on mortgages and this might impact the property market as it is likely to push the cost of borrowing up as the banks will have an increase in RWA's.

Unemployment will be high in sectors of the economy while other sectors will continue to grow. It will be a very uneven recovery...... As for house prices I don't believe that they are going to collapse as the banks will still be issuing mortgages and any property from customers in arrears is not going to hit the market for a long time. So I don't see a house price collapse.

If the government were clever they would borrow more while rates are so cheap and use it to build houses to address the shortage in supply that has crippled the housing market since 2008 and driven rents through the roof.

Balluba

<SNIP>

Graham

Mod Note

Balluba / Bubbaclaus, read the previous mod note again. There will be no further warnings.

If you have an issue with a post, report it.

Smouse156

NPHET recommend level 5 lockdown for the whole country. Bankruptcies & job losses coming if this is implemented.

RTE/Irish Times will really have to up the property porn shows & articles to keep the market up if Level 5 comes in for the winter

Bass Reeves

PropQueries wrote: »

673,000 people in Ireland are over 65. Pensioners are the primary group who have been forced into saving, so I would believe the vast majority of the increased savings belong to this group.

If potential home buyers were saving €200 per week from WFH. Multiply by 26 Weeks = €5,200 or €10,400 a year or c.3% of the cost of a €350k house in Dublin. Such increased savings would hardly move the dial on house prices and especially as this group would probably already be in the market to buy a home.

Most potential FTB’s would also have been renting so that just brings their previously rented property back into the market if they do buy, so such purchases would add very little to the demand side or take away from the supply side of the equation.

Given that transaction levels were down c. 50% in Q2 and c. 40% in Q3, the bigger question is why aren’t these people buying? Unless the demand side of the equation isn’t as big as many believe.

I would not presume that pensioners would be the largest savers. A large majority of pensioners in Ireland are dependent on the OAP. This is a fixed income with little ability to save any extra great amount during COVID.

Most saving IMO would have been those that spend a lot of money on entertainment (pubs, returarants, holidays hotels) those that are working from home and no longer need childcare and those that move home and stopped renting. As well some student's/partime
workers on the COVID payment are better off than working and may be saving as there is little to spend on.

Assetbacked

Smouse156 wrote: »

NPHET recommend level 5 lockdown for the whole country. Bankruptcies & job losses coming if this is implemented.

RTE/Irish Times will really have to up the property porn shows & articles to keep the market up if Level 5 comes in for the winter

Those articles talking about the death of the office being overstated look mighty silly right now. Across three different sectors from talking to people who are WFH; one is WFH until next August (insurance), we are WFH 50/50 rotation for up to 12 months it seems (finance) and the other sector is WFH until January (current plan anyway) (law). These would be more traditional industries too, not typically into WFH unlike the tech companies. With the new restrictions, if they come in, that's 2020 done and dusted in terms of any prospect of getting the economy unfrozen. Funding infrastructure and housing will be the government's economic vaccine.

Obviously linking this to property, less transactions is what comes first and prices lag behind. But where I thought we'd see data from the impact of covid on property next July (Q2 data) or October (Q3 data), it won't be until Q3 data onwards that the fallout will start to show so more likely January 2022 (Q4 2021 data). I have no idea where people get the idea that house prices would fall or even fall substantially in 6 months where the economy has just been frozen.

Geuze

cnocbui wrote: »

I'd be more worried about the €10 Billion a year in government debt servicing costs, which is 16.5% of 2019 revenue.

2019 public debt interest = 4,458m


https://www.cso.ie/en/releasesandpublications/er/gfsa/governmentfinancestatisticsapril2020/




Where is the 10 billion figure from?

thefridge2006

https://www.independent.ie/business/technology/dell-vacates-office-space-with-room-for-hundreds-of-staff-39583308.html

Dell vacates office space with room for 'hundreds' of staff

has nobody mentioned this?

Cyrus

Assetbacked wrote: »

Those articles talking about the death of the office being overstated look mighty silly right now. Across three different sectors from talking to people who are WFH; one is WFH until next August (insurance), we are WFH 50/50 rotation for up to 12 months it seems (finance) and the other sector is WFH until January (current plan anyway) (law). These would be more traditional industries too, not typically into WFH unlike the tech companies. With the new restrictions, if they come in, that's 2020 done and dusted in terms of any prospect of getting the economy unfrozen. Funding infrastructure and housing will be the government's economic vaccine.

Obviously linking this to property, less transactions is what comes first and prices lag behind. But where I thought we'd see data from the impact of covid on property next July (Q2 data) or October (Q3 data), it won't be until Q3 data onwards that the fallout will start to show so more likely January 2022 (Q4 2021 data). I have no idea where people get the idea that house prices would fall or even fall substantially in 6 months where the economy has just been frozen.

Anyone talking about long term wfh looks silly when the advice is still wfh if you can, let’s see how it all pans out when the virus burns out / vaccine comes over the next 12 months

Assetbacked

Cyrus wrote: »

Anyone talking about long term wfh looks silly when the advice is still wfh if you can, let’s see how it all pans out when the virus burns out / vaccine comes over the next 12 months

It's not all or nothing with WFH. It will be a hybrid model of some days at home and some days in the office. The norm will not be to have everyone in at all times, that's pretty obvious. How that manifests in terms of office space and location requirements is what is unknown.

billybonkers

thefridge2006 wrote: »

https://www.independent.ie/business/technology/dell-vacates-office-space-with-room-for-hundreds-of-staff-39583308.html

Dell vacates office space with room for 'hundreds' of staff

has nobody mentioned this?

The first of many to come

beauf

A lot of people don't WFH and have been back at work for months, or indeed never stopped working.

https://www.rte.ie/news/dublin/2020/0807/1157915-dublin-traffic/

Cyrus

Assetbacked wrote: »

The norm will not be to have everyone in at all times, that's pretty obvious.

id suggest nothing is obvious at the moment.

MacronvFrugals

Our place own 1 office and rent another in south Dublin, the rented one is being given back on November 1st indefinitely.

PropQueries

Bass Reeves wrote: »

I would not presume that pensioners would be the largest savers. A large majority of pensioners in Ireland are dependent on the OAP. This is a fixed income with little ability to save any extra great amount during COVID.

Most saving IMO would have been those that spend a lot of money on entertainment (pubs, returarants, holidays hotels) those that are working from home and no longer need childcare and those that move home and stopped renting. As well some student's/partime
workers on the COVID payment are better off than working and may be saving as there is little to spend on.

True. Many are just on the state pension. But many many others are receiving significantly more than the state pension e.g. civil service pensioners, public sector pensioners (e.g. nurses, teachers, ESB, CIE etc.), retired banking staff, retired staff from large private sector companies etc.

Given that the lockdown has primarily impacted on the spending patterns from this group (over 65s were explicitly told to not leave their homes), I would believe a significant percentage of the extra savings belong to this group who would not be in the market for a new home.

I think the potential home buyers that are not as affected by the Covid-19 would have been earning enough anyway to already be in the market for a home pre-covid. I just don't think these extra savings are going to have as big an impact on the property market as many people believe.

And it must be remembered that many potential home buyers are already renting so if they do buy, if also frees up the property they were previously renting and brings their old rented property back into the market once they do proceed to buy. Without significant net migration it's kind of a near zero sum outcome for the property market.

Geuze

Bass Reeves wrote: »

I would not presume that pensioners would be the largest savers. A large majority of pensioners in Ireland are dependent on the OAP. This is a fixed income with little ability to save any extra great amount during COVID.

I think the CSO's HFCS contains an age breakdown of wealth:

https://www.cso.ie/en/releasesandpublications/ep/p-hfcs/householdfinanceandconsumptionsurvey2018/



For example, see table 5.2

Bass Reeves

Geuze wrote: »

I think the CSO's HFCS contains an age breakdown of wealth:

https://www.cso.ie/en/releasesandpublications/ep/p-hfcs/householdfinanceandconsumptionsurvey2018/



For example, see table 5.2

This looks at wealth not income. Older people usually have already accumulated wealth and there accumulation start to cease as they retire. On other words what they have they have

A saving surge like we have seen is more likely to be cause by a cessation of spending it a reduction in the need to spend. Across society where has spending declined and who spends there the most.

Main reductions spending has been on entertainment (over 65's would not be going to concerts, spending100 euro on a night out every week etc etc) it is unlikely that they are the cause of the serious uplifting in savings. Add in reduced childcare no expensive family holiday and you should be able have a better idea where these extra savings are accumulated.

PropQueries

Bass Reeves wrote: »

This looks at wealth not income. Older people usually have already accumulated wealth and there accumulation start to cease as they retire. On other words what they have they have

A saving surge like we have seen is more likely to be cause by a cessation of spending it a reduction in the need to spend. Across society where has spending declined and who spends there the most.

Main reductions spending has been on entertainment (over 65's would not be going to concerts, spending100 euro on a night out every week etc etc) it is unlikely that they are the cause of the serious uplifting in savings. Add in reduced childcare no expensive family holiday and you should be able have a better idea where these extra savings are accumulated.

All true. I would believe it's somewhere in the middle though. However, I'm still surprised by the c. 50% reduction in transactions in Q2 and c. 40% reduction in transactions in Q3 compared to Q3 2019.

If people were intent on buying this year (from Q1 onwards), I don't see how this level of reduction in transactions was possible given the level of demand we are told is there.

The reduction in transactions in Q2 (due to the lockdown) should have at least followed through and have been reflected in much higher Q3 transactions (the WFH people were largely unaffected and actually benefited from the lockdown), but there was still a significant reduction in Q3 (c. 40%).

Bubbaclaus

PropQueries wrote: »

All true. I would believe it's somewhere in the middle though. However, I'm still surprised by the c. 50% reduction in transactions in Q2 and c. 40% reduction in transactions in Q3 compared to Q3 2019.

If people were intent on buying this year (from Q1 onwards), I don't see how this level of reduction in transactions was possible given the level of demand we are told is there.

The reduction in transactions in Q2 (due to the lockdown) should have at least followed through and have been reflected in much higher Q3 transactions (the WFH people were largely unaffected and actually benefited from the lockdown), but there was still a significant reduction in Q3 (c. 40%).

Because houses purchased in the first half of Q3 would for the most part have gone sale agreed in Q2. When the country was in a lockdown. Of course it was down significantly.