Irish Property Market 2020 Part 2

Bass Reeves

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%).

Maybe a lot if buyers think there will be s price drop and ate waiting for this to happen However prices have remained much the same. Supply has slackened somewhat which has helped prices. As well people who intended to move may be recessing there options.

With limited ability to buy in Q2 would this have reduced transactions in Q3 especially in the first two months of Q3. As well limited new completions on Q2 would have limited the ability to close transactions in Q3.

It very easy to get carried away with data in isolation. The fact is supply is still tight at present and prices seem to be holding very firm. If for any reason we see significant changes in Q4/Q1 2021 we will have a better idea.

I still think at most 5-10% drop but there's a small chance of strengthing prices

Claw Hammer

People didn't want to close in Q2 due to restrictions on movement. People did not agree transactions in Q 2 due to restrictions on movement, hence fewer closings in Q 3.

JimmyVik

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.

Most older peoples wealth is tied up in their house too.

Balluba

[QUOTE=Bass Reeves;114827910

I still think at most 5-10% drop but there's a small chance of strengthing prices[/QUOTE]

Yes it is safer to hedge your bets by foreseeing more than one possible result

JimmyVik

Balluba wrote: »

Yes it is safer to hedge your bets by foreseeing more than one possible result

It doesnt matter what anyone says here, even if they do hedge their bets.
Nobody here knows anything about where property prices are going.
We are all just guessing.
Whats sad is that some people seem to not realize that they are guessing.

PropQueries

JimmyVik wrote: »

It doesnt matter what anyone says here, even if they do hedge their bets.
Nobody here knows anything about where property prices are going.
We are all just guessing.
Whats sad is that some people seem to not realize that they are guessing.

Well, it would be a fairly boring forum/debate on the property market if nobody made guesses on its future direction based on the data available to them or interpreting the available data in different ways.

Guesses are also made by all the worlds top hedge fund managers. One hedge fund has to buy and one hedge fund has to sell for their market to work. Both make a decision based upon different interpretations of the data available to them.

Springy Turf

PropQueries wrote: »

Well, it would be a fairly boring forum/debate on the property market if nobody made guesses on its future direction based on the data available to them or interpreting the available data in different ways.

Guesses are also made by all the worlds top hedge fund managers. One hedge fund has to buy and one hedge fund has to sell for their market to work. Both make a decision based upon different interpretations of the data available to them.

It's a pretty tedious "debate" on the property market. It's 99% barstool talk. And I think you miss the point here - the absolute certainty some here have in their hubristic predictions is pretty sad.

PropQueries

Springy Turf wrote: »

It's a pretty tedious "debate" on the property market. It's 99% barstool talk. And I think you miss the point here - the absolute certainty some here have in their hubristic predictions is pretty sad.

"barstool talk" is actually the best analysis. Most of the "professional" analysis is based on data that existed 6 to 18 months ago.

Back in 2006, if you were sitting at a "bar stool" and talking to a construction worker, you would have seen the writing on the wall for the property market 12 to 18 months before many of the "professionals".

Bass Reeves

Balluba wrote: »

Yes it is safer to hedge your bets by foreseeing more than one possible result

No it not hedging you bets. If you see from the start I have always stated that I think a 10% drop is the most that will happen. However that was 3-4 months. House prices have been much more resilient than I expect with s tendancy to strengthen rather than drop. However builders are reconfiguring there product at present which may bring cheaper product onto the market on the short to medium term in Dublin. However outside of Dublin demand is strengthing. It not about hedging bit reading the signs

Bass Reeves

PropQueries wrote: »

"barstool talk" is actually the best analysis. Most of the "professional" analysis is based on data that existed 6 to 18 months ago.

Back in 2006, if you were sitting at a "bar stool" and talking to a construction worker, you would have seen the writing on the wall for the property market 12 to 18 months before many of the "professionals".

I would not totally agree with that most in the construction were caught out. It generally tended to be people who were not fully benefiting from the Tiger that saw the signs. The car industry was a case in point. In 2009 it slowed down but lads were blaming tax changes rather than looking at the product as and price

PropQueries

Bass Reeves wrote: »

I would not totally agree with that most in the construction were caught out. It generally tended to be people who were not fully benefiting from the Tiger that saw the signs. The car industry was a case in point. In 2009 it slowed down but lads were blaming tax changes rather than looking at the product as and price

Here's a signal from November 2019:

"Building and construction activity declined at the fastest pace for more than six years last month, new figures show.

Ulster Bank’s monthly construction purchasing managers’ index (PMI) which is seen as a leading barometer of the sector’s health showed a reading of 46.2 points for October.

This was down from a reading of 48.3 in September and marked the second consecutive month of decline. Any reading below 50 illustrates a sector in decline.

The rate of contraction seen last month was the fastest since June 2013, Ulster Bank said.

The survey showed that new business orders fell last month for the first time in six years."

Link to article in Irish Examiner here: https://www.irishexaminer.com/business/arid-30962988.html

This appeared to match up with what I was hearing on the ground late last year that some Irish construction workers were heading back over to England late last year.

Vieira82

bit off topic but... just got off the phone with my bank where I have a car loan and... no further payment break possible if I take another one it will affect my credit rating. Wondering how many people with mortgages will have this problem too atm and if credit rating will be that important for someone already with a mortgage?

Vieira82

Vieira82 wrote: »

........... if credit rating will be that important for someone already with a mortgage?

Depends on if they want to borrow money going forward. Impossible to quantify even a crude % really but borrowing for cars and home improvement loans isn't uncommon amongst folk with mortgages.

Changing the term to bring monthly repayments down may be an option for some also and that of course wouldn't impact credit ratings.

JimmyVik

PropQueries wrote: »

Well, it would be a fairly boring forum/debate on the property market if nobody made guesses on its future direction based on the data available to them or interpreting the available data in different ways.

Guesses are also made by all the worlds top hedge fund managers. One hedge fund has to buy and one hedge fund has to sell for their market to work. Both make a decision based upon different interpretations of the data available to them.

No problem with guesses.

Its the ones who think they are not guessing who I think are deluding themselves.

PropQueries

From Irish Times today:

"Job site Indeed has become the latest company to tell its staff that they can work from home on a permanent basis, with the “vast majority” of its 1,000 Irish staff set to be allowed continue to work on a remote basis - either full or part time - once the pandemic ends. The company said it remains committed to the leases on its Dublin offices but will “revisit as they come up for renewal”.

Link to Irish Times here: https://www.irishtimes.com/business/work/indeed-to-allow-vast-majority-of-irish-employees-to-work-from-home-forever-1.4372417

I guess whatever employees who are working there who are in the market for buying a home can now make their decision on where to live i.e. Dublin or other.

Timing belt

Assetbacked wrote: »

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.

I agree that it will be a hybrid model as this is what has happened with companies that have implemented a WFH policy for the past few years. Gone are the days of having your own desk in the office and in comes the need to book a desk for when you are in the office.

Even if staff WFH 2 days a week it will mean a 20% drop in office space needed. However when you do implement a policy like this you find everyone wants to WFH on a thur/Friday or Friday/Monday and offices are dead on these days.

What does this mean for the property market?

Well Commercial Real estate takes a hit and that is why you saw all the property REITs/funds in the uk suspended till the end of September to give them time to arrange liquidity needed for redemptions.

The residential market is not as badly affected as people still need to live close for the days they are in the office. However in London I have seen some people opt to move out and instead stay in hotels at there own cost for the days they are in the office. So I would expect to see a softening in residential property but not a collapse.

PropQueries

Timing belt wrote: »

I agree that it will be a hybrid model as this is what has happened with companies that have implemented a WFH policy for the past few years. Gone are the days of having your own desk in the office and in comes the need to book a desk for when you are in the office.

Even if staff WFH 2 days a week it will mean a 20% drop in office space needed. However when you do implement a policy like this you find everyone wants to WFH on a thur/Friday or Friday/Monday and offices are dead on these days.

What does this mean for the property market?

Well Commercial Real estate takes a hit and that is why you saw all the property REITs/funds in the uk suspended till the end of September to give them time to arrange liquidity needed for redemptions.

The residential market is not as badly affected as people still need to live close for the days they are in the office. However in London I have seen some people opt to move out and instead stay in hotels at there own cost for the days they are in the office. So I would expect to see a softening in residential property but not a collapse.

I believe the real problem will be in the reversing of the bargaining power of landlords over tenants. If your lease on your one bed apartment is renewing in February 2021, will that tenant who has now been told he can WFH continue to pay €1,500 per month for the one bed apartment or will he decide to rent a two-bed just outside Dublin for €1,300.

Either way, it gives him an option and a way out if the landlord doesn't play ball with a rent reduction. If enough tenants decide to use their increased bargaining power due to their increasing options on where to live, Dublin landlords may have to reduce rents faster than many people believe.

And this is where I see the feedback loop coming into play. As Dublin landlords reduce their rents to compete with the rental properties outside Dublin, the rental properties outside Dublin become relatively unattractive again and the feedback loop comes back into play again with rental prices outside Dublin falling again to entice more Dublin renters and so on and so on.

Timing belt

PropQueries wrote: »

I believe the real problem will be in the reversing of the bargaining power of landlords over tenants. If your lease on your one bed apartment is renewing in February 2021, will that tenant who has now been told he can WFH continue to pay €1,500 per month for the one bed apartment or will he decide to rent a two-bed just outside Dublin for €1,300.

Either way, it gives him an option and a way out if the landlord doesn't play ball with a rent reduction. If enough tenants decide to use their increased bargaining power due to their increasing options on where to live, Dublin landlords may have to reduce rents faster than many people believe.

And this is where I see the feedback loop coming into play. As Dublin landlords reduce their rents to compete with the rental properties outside Dublin, the rental properties outside Dublin become relatively unattractive again and the feedback loop comes back into play again with rental prices outside Dublin falling again to entice more Dublin renters and so on and so on.

Yes they will have bargaining power if demand drops significantly but I think that the demand will still outstrip supply.

awec

PropQueries wrote: »

From Irish Times today:

"Job site Indeed has become the latest company to tell its staff that they can work from home on a permanent basis, with the “vast majority” of its 1,000 Irish staff set to be allowed continue to work on a remote basis - either full or part time - once the pandemic ends. The company said it remains committed to the leases on its Dublin offices but will “revisit as they come up for renewal”.

Link to Irish Times here: https://www.irishtimes.com/business/work/indeed-to-allow-vast-majority-of-irish-employees-to-work-from-home-forever-1.4372417

I guess whatever employees who are working there who are in the market for buying a home can now make their decision on where to live i.e. Dublin or other.

This is interesting, but probably not in the way you think. Indeed has 2 leased buildings in Dublin.

One in the Capital Docks, which they are 3 years into a 13 year lease (it's a 20 year lease with a break option after 13). And one in Stephens Green, which they are 8 months into a 10 year lease (renewed in February this year).

Both up for renewal in 2030.

PropQueries

Timing belt wrote: »

Yes they will have bargaining power if demand drops significantly but I think that the demand will still outstrip supply.

I suppose this is where we disagree with the data on future demand:

Total increase in population 2011 – 2016 was 173,613 as per Census 2016:

0 - 34 Years: -72,493 (yes, minus)
35 - 64 Years: +143,932
65 - 85+ Years: +102,174

Central Bank report in December 2019 based their housing demand projections on net migration remaining at c. 30,000 per annum out until 2030:

https://centralbank.ie/news-media/press-releases/press-release-economic-letter-population-change-and-housing-demand-in-ireland-10-december-2019#:~:text=Today%20the%20Central%20Bank%20of,Thomas%20Conefrey%20and%20David%20Staunton.&text=Assuming%20a%20lower%20level%20of,per%20annum%20out%20to%202030

Timing belt

PropQueries wrote: »

I suppose this is where we disagree with the data on future demand:

Total increase in population 2011 – 2016 was 173,613 as per Census 2016:

0 - 34 Years: -72,493 (yes, minus)
35 - 64 Years: +143,932
65 - 85+ Years: +102,174

Central Bank report in December 2019 based their housing demand projections on net migration remaining at c. 30,000 per annum out until 2030:

https://centralbank.ie/news-media/press-releases/press-release-economic-letter-population-change-and-housing-demand-in-ireland-10-december-2019#:~:text=Today%20the%20Central%20Bank%20of,Thomas%20Conefrey%20and%20David%20Staunton.&text=Assuming%20a%20lower%20level%20of,per%20annum%20out%20to%202030

As long as the majority of FDI is in the Dublin region demand will be strong but rather that argue about it lets just agree to disagree,

Bass Reeves

PropQueries wrote: »

I believe the real problem will be in the reversing of the bargaining power of landlords over tenants. If your lease on your one bed apartment is renewing in February 2021, will that tenant who has now been told he can WFH continue to pay €1,500 per month for the one bed apartment or will he decide to rent a two-bed just outside Dublin for €1,300.

Either way, it gives him an option and a way out if the landlord doesn't play ball with a rent reduction. If enough tenants decide to use their increased bargaining power due to their increasing options on where to live, Dublin landlords may have to reduce rents faster than many people believe.

And this is where I see the feedback loop coming into play. As Dublin landlords reduce their rents to compete with the rental properties outside Dublin, the rental properties outside Dublin become relatively unattractive again and the feedback loop comes back into play again with rental prices outside Dublin falling again to entice more Dublin renters and so on and so on.

The problem is the two bed outside Dublin now starts to rise in price a d reaches 1500 euro. This year I changed tenants in both houses I have I did not advertise in either situation one is a rural property and the other in a small towns. In both cases I had multiple parties contact me about the properties

PropQueries

awec wrote: »

This is interesting, but probably not in the way you think. Indeed has 2 leased buildings in Dublin.

One in the Capital Docks, which they are 3 years into a 13 year lease (it's a 20 year lease with a break option after 13). And one in Stephens Green, which they are 8 months into a 10 year lease (renewed in February this year).

Both up for renewal in 2030.

Yes, they admitted that: "The company said it remains committed to the leases on its Dublin offices but will revisit as they come up for renewal.".

They're a reputable company, so they will most likely honour their lease agreement until renewal.

But they still are going to allow the majority of their workers the option of working from home once the pandemic ends.

PropQueries

Bass Reeves wrote: »

The problem is the two bed outside Dublin now starts to rise in price a d reaches 1500 euro. This year I changed tenants in both houses I have I did not advertise in either situation one is a rural property and the other in a small towns. In both cases I had multiple parties contact me about the properties

If you didn't advertise, how did you manage to get multiple parties contacting you?

Timing belt

PropQueries wrote: »

If you didn't advertise, how did you manage to get multiple parties contacting you?

Most good rental properties are never advertised because a friend of the previous tenant normally moves in. (that is properties that are not overpriced and are seen as a good deal by the renter)

AlmightyCushion

awec wrote: »

This is interesting, but probably not in the way you think. Indeed has 2 leased buildings in Dublin.

One in the Capital Docks, which they are 3 years into a 13 year lease (it's a 20 year lease with a break option after 13). And one in Stephens Green, which they are 8 months into a 10 year lease (renewed in February this year).

Both up for renewal in 2030.

It will still have an impact. If they expand then they may not need to rent additional office space like they would have without this policy. Also, the fact they are introducing it means it is more likely others will introduce it too. 1 or 2 companies doing this is an outlier but as more companies do it, more will consider doing it. It can cause a cascade effect. Companies who were considering it will become more likely to do it, and those who weren't considering it will become more likely to consider it. If enough companies do it then, employees and potential employees will start to expect it or get annoyed that they don't have it.

There was a time when everyone wore suits to the office. Then it was shirts and ties. Now a lot are jeans and t-shirt with some even more casual than that.

awec

AlmightyCushion wrote: »

It will still have an impact. If they expand then they may not need to rent additional office space like they would have without this policy. Also, the fact they are introducing it means it is more likely others will introduce it too. 1 or 2 companies doing this is an outlier but as more companies do it, more will consider doing it. It can cause a cascade effect. Companies who were considering it will become more likely to do it, and those who weren't considering it will become more likely to consider it. If enough companies do it then, employees and potential employees will start to expect it or get annoyed that they don't have it.

There was a time when everyone wore suits to the office. Then it was shirts and ties. Now a lot are jeans and t-shirt with some even more casual than that.

When I said it was interesting, I meant that it's interesting they are allowing current staff to work from home, but also interesting that they are committed to paying their rent for the next 10 years.

I said before that WFH gives tech companies great potential to expand without needing more space, as this is usually the limiting factor when it comes to increasing headcount.

PropQueries

awec wrote: »

When I said it was interesting, I meant that it's interesting they are allowing current staff to work from home, but also interesting that they are committed to paying their rent for the next 10 years.

I said before that WFH gives tech companies great potential to expand without needing more space, as this is usually the limiting factor when it comes to increasing headcount.

I don't think it's that they're committed to paying their rent. It's a legal obligation. They will most likely try sublet most of their space.

Timing belt

awec wrote: »

When I said it was interesting, I meant that it's interesting they are allowing current staff to work from home, but also interesting that they are committed to paying their rent for the next 10 years.

I said before that WFH gives tech companies great potential to expand without needing more space, as this is usually the limiting factor when it comes to increasing headcount.

I don't think it will just be the tech companies as the financial sector in London have been implementing a WFH Policy for 1 or 2 days a week for the last 5 years.

Bass Reeves

PropQueries wrote: »

If you didn't advertise, how did you manage to get multiple parties contacting you?

In one case I was painting some of the house and I had enquiries from neighbouring tenants for friend's I also had a trades man in to repair and he rang me back later about a prospective tenant and I has two phone calls that I did not know how they got my number. In the other case the rural house I just had enquiries after the previous tenant face his notice.

In great as if you advertise you are plagued with phone calls and trying to suss out tenants