2021 Irish Property Market chat - *mod warnings post 1*

yagan

PropQueries wrote: »

I suppose what I meant is that rising interest rates will help many of them more than any kind of explicit bailout.

But, excluding private pension funds, our public sector pension liabilities must also be among the most grossly under-funded (non-funded?) in the world.

It does look like many of the countries in the EU would now rather rising interest rates and let the few other countries with any debt problems to deal with the consequences of such rising rates themselves in whatever way they see fit IMO

Rising interest rates?

The whole pension problem is cash chasing return, and when that expectation of pensions always grows goes pop it ain't going to be an inflationary event.

PropQueries

yagan wrote: »

Rising interest rates?

The whole pension problem is cash chasing return, and when that expectation of pensions always grows goes pop it ain't going to be an inflationary event.

I suppose if you're a pension fund with e.g. €10 Billion in total assets and €1 Billion invested in residential real estate. Would you rather interest rates rise to e.g. 5% and the value of your residential investment properties falls in value of 50%?

While pension funds have started investing in residential property, it's not such a big percentage of their assets at the moment that it would be such a large problem if the residential property market did tank and they would much rather take a short-term hit of e.g. a 50% hit on their residential property investments if it did mean interest rates rising to 5% in most cases IMO

Maybe central banks will just look at the pros and cons and increase interest rates, inflation or no inflation?

Hubertj

I think this is a lovely house. I think it is really well presented.

https://www.myhome.ie/residential/brochure/8-palmerston-road-rathmines-dublin-6-d06-w562/4497216

PropQueries

The_Conductor wrote: »

Forget about HAP payments for a moment- and look at the 30k lumpsum for first time buyers- that could be abolished handily.
The HSE is going to see all its Covid induced largess evaporate.
Education is going to get hit.
DSP will see its budget slashed.

Outside of this- all the special projects (think pie-in-the-sky rural railways, cyle-links etc etc)- are next on the chopping block.

I don't see much in the way of additional tax rises (for the short to medium term) but I do see a lot of potential slash and burn in expenditure. One potential development will be a third rate of tax of 15% to kick in on all income above 12,940 per annum.

Of all the parties- the Greens are going to be furious- they seem to love splurging money around like there is no tomorrow- well, guess what, tomorrow is beckoning.

In the public sector- there are rumours of an early retirement scheme in the civil service open to those aged 51+
A new embargo on recruitment esp. in the HSE
A ban on the use of agency staff in all public sectors
A ban on all overtime payments (staff to be granted time-in-lieu where-ever possible)

etc etc

I reckon the focus will be firmly on expenditure reduction, as opposed to tax increases- however, there will also be a concerted effort to bring more into the tax regime- through a third tax rate- set immediately above the COAP rate.

It ain't gonna to be pretty.

I'm not sure this will/can actually play out. Back in February 2020 (pre-covid), there were c. 677k on hospital waiting lists and as of this month there were c. 880k on hospital waiting lists. That's out of a population of less than 5 Million people.

That backlog must be brought back even to at least the ridiculous pre-covid levels and requires additional, not reduced resources, especially as pay won't be touched. Are they really going to cut nurses salaries after the last 12 months?

The cuts will have to come from the housing budget in conjunction with significant taxes on property related assets IMO

There really aren't any other areas to cut or raise revenues IMO

Mini-budget by the end of July/ August?

awec

Hubertj wrote: »

I think this is a lovely house. I think it is really well presented.

https://www.myhome.ie/residential/brochure/8-palmerston-road-rathmines-dublin-6-d06-w562/4497216

Lovely house.

If I was to nitpick I think the kitchen is quite small for a house of that size. I would say the kitchen is not much bigger, if any bigger, than a kitchen you'd see in a standard semi-d.

hometruths

awec wrote: »

Lovely house.

If I was to nitpick I think the kitchen is quite small for a house of that size. I would say the kitchen is not much bigger, if any bigger, than a kitchen you'd see in a standard semi-d.

Initially thought that was a bit harsh, but looked at the pictures again and maybe you're right.

I wonder was the house renovated with the for sale photos in mind, hence the tighter kitchen space.

Just seems amazing that a family could live there and present the house for sale that well!

Claw Hammer

awec wrote: »

Lovely house.

If I was to nitpick I think the kitchen is quite small for a house of that size. I would say the kitchen is not much bigger, if any bigger, than a kitchen you'd see in a standard semi-d.

The kitchen seems to be the full extent of the basement with an informal lounge area in one half of it.

awec

schmittel wrote: »

Initially thought that was a bit harsh, but looked at the pictures again and maybe you're right.

I wonder was the house renovated with the for sale photos in mind, hence the tighter kitchen space.

Just seems amazing that a family could live there and present the house for sale that well!

The house has 3 living rooms (purple couches, white couches in blue room and then white couches beside kitchen). Waste of space IMO.

It could just be me but the kitchen is generally one of the first things I look at in expensive houses and I think I'd be annoyed if I owned a large, 4 million house that had a kitchen that just looked like an expensive kitchen in a standard semi-d.

awec

Claw Hammer wrote: »

The kitchen seems to be the full extent of the basement with an informal lounge area in one half of it.

Yea but the actual kitchen part, with worktops and storage is only a small part of it.

IMHO anyway.

Definitely nitpicking as it's otherwise a lovely house that I'd love to live in.

yagan

PropQueries wrote: »

I suppose if you're a pension fund with e.g. €10 Billion in total assets and €1 Billion invested in residential real estate. Would you rather interest rates rise to e.g. 5% and the value of your residential investment properties falls in value of 50%?

While pension funds have started investing in residential property,it's not such a big percentage of their assets at the moment that it would be such a large problem if the residential property market did tank and they would mu ch rather take a short-term hit of e.g. a 50% hit on their residential property investments if it did mean interest rates rising to 5% in most cases IMO

Maybe central banks will just look at the pros and cons and increase interest rates, inflation or no inflation?

Again from my earlier FT link:

The IMF estimates that pension plans have doubled their allocations to illiquid assets over the past 10 years, and for about a fifth of funds these capital commitments amount to more than half their liquid assets.

And it's not the residential market alone. It's the property that's bypassing the market and being sold straight from developer to pension fund.

That's why I thought the Marlet group not having buyers lined up where previously they had was an interesting development.

Perhaps pension groups that had snapped up Marlet property previous aren't impressed with their rental yield.

PropQueries

yagan wrote: »

Again from my earlier FT link:


And it's not the residential market alone. It's the property that's bypassing the market and being sold straight from developer to pension fund.

That's why I thought the Marlet group not having buyers lined up where previously they had was an interesting development.

Perhaps pension groups that had snapped up Marlet property previous aren't impressed with their rental yield.

I think Killian Woods referred to a similar thing in the SBP yesterday where the returns on these investments may be not what they appear on paper.

I'll have to dig out the paper to see exactly what he was saying though.

Timing belt

timmyntc wrote: »

The shorting of peripherals is a sign that almost all EU bonds are artificially undervalued, but also that its likely the yields will begin to rise and that the ECB will begin to wind down its stimulus somewhat.

Whether or not they short Irish govt bonds, they will rise. ALL EU govt bonds are artificially low right now. Going forward it will mean we have less access to cheap finance and cannot keep borrowing as easy.

The bond prices are overvalued there would be no benefit in shorting a undervalued bond. Any fund shorting will be betting that yields rise and the bond prices drops so they can buy it back at a cheaper cost in the future. Any fund shorting EU bonds runs massive risk as EU can step in and undertake QE. The only thing that would prevent them from doing so is run away inflation in the CPI which is still not hitting the books...yes we are seeing increases year on year but that is due to deflation last year brought about by Covid and gov cutting taxes such as vat as opposed to inflation this year.

Timing belt

PropQueries wrote: »

I suppose if you're a pension fund with e.g. €10 Billion in total assets and €1 Billion invested in residential real estate. Would you rather interest rates rise to e.g. 5% and the value of your residential investment properties falls in value of 50%?

While pension funds have started investing in residential property, it's not such a big percentage of their assets at the moment that it would be such a large problem if the residential property market did tank and they would much rather take a short-term hit of e.g. a 50% hit on their residential property investments if it did mean interest rates rising to 5% in most cases IMO

Maybe central banks will just look at the pros and cons and increase interest rates, inflation or no inflation?

They will be heavily exposed to gov bonds and if rates rise the value of bonds they hold will drop in value generating a bigger hole in the pension fund. Have you considered that ?

yagan

PropQueries wrote: »

I think Killian Woods referred to a similar thing in the SBP yesterday where the returns on these investments may be not what they appear on paper.

I'll have to dig out the paper to see exactly what he was saying though.

Just before the pandemic hit I actually got chatting with a senor Marlet figure and when I doorstopped them about how much longer the current cycle would last they cited end of 2020, beginning of 2021 as peak crane for them.

From what I know of the company structure individual developments are their own companies, so as the market turns individual projects fail on their own without bringing down the whole company.

I'd imagine Covid may have brought forward peak crane a year.

Cyrus

schmittel wrote: »

Initially thought that was a bit harsh, but looked at the pictures again and maybe you're right.

I wonder was the house renovated with the for sale photos in mind, hence the tighter kitchen space.

Just seems amazing that a family could live there and present the house for sale that well!

We have two under 6 and our place is like that all the time , it’s possible , just a lot of constant tidying helps that we have girls too , less physically destructive!

Hubertj

awec wrote: »

Lovely house.

If I was to nitpick I think the kitchen is quite small for a house of that size. I would say the kitchen is not much bigger, if any bigger, than a kitchen you'd see in a standard semi-d.

Yea I agree looking again. The kitchen should be larger and include the area where they have the dining table. Still wouldn’t put me off though!!

hometruths

Cyrus wrote: »

We have two under 6 and our place is like that all the time , it’s possible , just a lot of constant tidying helps that we have girls too , less physically destructive!

Fair play to you. We've got two girls under 6 as well, and our place hasn't looked like that in about 5 years. Coincidentally our eldest has just turned 5!

awec

Cyrus wrote: »

We have two under 6 and our place is like that all the time , it’s possible , just a lot of constant tidying helps that we have girls too , less physically destructive!

What's the secret?

I also have 2 girls and our house looks like a bomb has gone off most of the time.

Cyrus

awec wrote: »

What's the secret?

I also have 2 girls and our house looks like a bomb has gone off most of the time.

My wife and I have ocd basically one worse than the other ! Obviously we need to balance that with the kids but we have a little play house for them in the garden that they can wild in so that keeps the house from the brunt of it !

We also spend a lot more time tidying in the evening that most would consider sensible but neither of us can relax otherwise ! And my parents were the same so it’s normal to me I suppose .

Balluba

Hubertj wrote: »

I think this is a lovely house. I think it is really well presented.

https://www.myhome.ie/residential/brochure/8-palmerston-road-rathmines-dublin-6-d06-w562/4497216

It will be interesting to see how long it takes to sell.

Balluba

Hubertj wrote: »

I think this is a lovely house. I think it is really well presented.

https://www.myhome.ie/residential/brochure/8-palmerston-road-rathmines-dublin-6-d06-w562/4497216

I think I saw that house in the property price register when it sold in June 2017 for 2.2 million

hometruths

Balluba wrote: »

I think I saw that house in the property price register when it sold in June 2017 for 2.2 million

It was guiding 6.3m at auction in 2006!

Probably sold for more!

awec

awec wrote: »

The numbers are also likely to be a bit lower as the buying habits of the FTB have changed dramatically in the past decade.

People are now buying houses they intend to live in for a long time even for their first property. The whole "starter home" thing is not so prevalent. If you are tracking the trend in houses for sale this will surely mean it's down relative to what it was in the 00s, as a lot fewer of the FTBs of the 10s will be selling up at this stage.

schmittel wrote: »

Yep, agreed, it's definitely one of the reasons turnover has collapsed, and I think the potential medium term impact of this is not discussed/understood widely enough. But probably a bit OT for this thread!

From the other thread, more a topic for this one I think.

I think, on the bolded point, it means that over time the FTB segment becomes more and more dependent on brand new housing stock, as the "nearly new" stock
of basic enough houses pretty much dries up.

hometruths

awec wrote: »

From the other thread, more a topic for this one I think.

I think, on the bolded point, it means that over time the FTB segment becomes more and more dependent on brand new housing stock, as the "nearly new" stock pretty much dries up.

Yes agreed, but there is too much focus on that point -i.e the only solution anybody is talking about is we must build as many houses for FTBs as possible as soon as possible, without thinking through how that will play out in the wider market.

As you say over time FTBs become more and more dependent on new build stock that they can stay in long term, with FTBers representing an ever increasing % of turnover.

So simultaneously the idea both of trading up and trading down becomes less commonplace, and majority of stock on market is new builds/ex rentals/probate plus a few trader uppers/downsizers.

This is turn sustains prices as govt introduces more HTB and shared equity measures etc.

As long as demographics combined with govt supports ensure that the demand for FTBers is greater than the supply of new builds the whole merry go around probably continues as is.

But at some stage inevitably the combination of demographics/prices/support are going to hit a point that the demand is simply no longer there.

When that happens the supply of unsold new builds, probate and traders is going to immediately be greater than the demand in the market. This will be a very significant tipping point IMO as demographics start to work the other way - i.e the volume of older people vacating family homes either through death or downsizing is greater than the number wishing to buy them.

If this plays out like this it will be carnage. And it's why I think govt need a radical change in strategy to try to boost turnover in the market rather than just keep building more of the same.

PropQueries

According to the SBP today:

“A “significant number” of social housing projects will be delayed until next year due to the construction shutdown, Darragh O’Brien, the Minister for Housing, has said.”

Anyone got access to the online edition to see the “reasons” given as I generally only buy the actual paper on the Sunday.

I’ve a sneaking suspicion this has as much to do with cuts to the housing department’s budget than anything else, as I don’t see how his department will get a pass on the much flagged cuts that are coming IMO

Link to article here: https://www.businesspost.ie/houses/construction-shutdown-delays-significant-number-of-social-housing-projects-9623d449

Hubertj

schmittel wrote: »

Yes agreed, but there is too much focus on that point -i.e the only solution anybody is talking about is we must build as many houses for FTBs as possible as soon as possible, without thinking through how that will play out in the wider market.

As you say over time FTBs become more and more dependent on new build stock that they can stay in long term, with FTBers representing an ever increasing % of turnover.

So simultaneously the idea both of trading up and trading down becomes less commonplace, and majority of stock on market is new builds/ex rentals/probate plus a few trader uppers/downsizers.

This is turn sustains prices as govt introduces more HTB and shared equity measures etc.

As long as demographics combined with govt supports ensure that the demand for FTBers is greater than the supply of new builds the whole merry go around probably continues as is.

But at some stage inevitably the combination of demographics/prices/support are going to hit a point that the demand is simply no longer there.

When that happens the supply of unsold new builds, probate and traders is going to immediately be greater than the demand in the market. This will be a very significant tipping point IMO as demographics start to work the other way - i.e the volume of older people vacating family homes either through death or downsizing is greater than the number wishing to buy them.

If this plays out like this it will be carnage. And it's why I think govt need a radical change in strategy to try to boost turnover in the market rather than just keep building more of the same.

Interesting thoughts. Am I right in thinking Ireland has a relatively young population? Therefore, that tipping point could be some time away when combined with all the other problems with the property market?

PropQueries

Hubertj wrote: »

Interesting thoughts. Am I right in thinking Ireland has a relatively young population? Therefore, that tipping point could be some time away when combined with all the other problems with the property market?

After Cyprus and Luxembourg, we have the highest percentage of our population that was born in another EU country. This could be a big factor in our relatively young population IMO

They most likely won’t hang around long if the economy does go pear shaped to keep housing demand up as they would have real options (more options than Irish born people anyway) to move home in such a scenario IMO

hometruths

Hubertj wrote: »

Interesting thoughts. Am I right in thinking Ireland has a relatively young population? Therefore, that tipping point could be some time away when combined with all the other problems with the property market?

Definitely not going to happen next month for sure.

Maybe it is some distance away solely in terms of demographics. But remember it is not just volume of buyers that will bring the tipping point about. Affordability is the key to demand. Doesn't matter how many people want to buy a house, the important number is how many can afford to buy one?

There were some signs we were reaching peak affordability pre covid, Govt pushing through shared equity is another signal. In order to maintain the demand affordability has to be maintained, which means either prices fall or Govt provides increased supports. There is surely a limit to how much support govt can provide.

For sure we can probably sustain current levels of demand for some time to come, but the longer it takes to reach that tipping point the bigger the mess because we're just increasing the supply behind the dam wall in the mean time.

Browney7

PropQueries wrote: »

After Cyprus and Luxembourg, we have the highest percentage of our population that was born in another EU country. This could be a big factor in our relatively young population IMO

They most likely won’t hang around long if the economy does go pear shaped to keep housing demand up as they would have real options (more options than Irish born people anyway) to move home in such a scenario IMO

Were those stats be pre or post brexit? The north would skew our stats on that front you can be sure

PropQueries

Browney7 wrote: »

Were those stats be pre or post brexit? The north would skew our stats on that front you can be sure

January 2019 according to this EU/department of justice funded website:

https://emn.ie/useful-statistics/migration-and-migrant-population-statistics-in-eu-28/