Irish Property Market chat II - *read mod note post #1 before posting*

fliball123

https://www.boards.ie/discussion/comment/118087149#Comment_118087149

https://www.boards.ie/discussion/comment/118087149#Comment_118087149

Well we have more mortgage draw downs in the first 2 quarters of 2021 than in 2020. Already about 18.5k mortgage draw downs so if we keep on at that pace mortgage draw downs will be 37k for 2021. Also there is not a lot of selection out there will be some people holding off till the right property comes along and this can be seen by the amount of mortgage approvals. Just to put that in context in the same 2 quarters only 8250 houses have been completed meaning current building is not even keeping up with half the demand for buying property.

https://www.cso.ie/en/statistics/construction/newdwellingcompletions/

Welcome back by the way I hadnt seen you post on here for some time

Marius34

https://www.boards.ie/discussion/comment/118087131#Comment_118087131

If they start to build much larger volumes there maybe drop in the price to balance demand/supply. But currently it's still along way to go, and currently there are demands in all sectors, not only FTB and STB, but social/council, Rental market.

Marius34

https://www.boards.ie/discussion/comment/118087202#Comment_118087202

there is data for Q3 2021. It will be over 42K drawdowns in 2021, and over 22K FTB drawdowns alone.

https://bpfi.ie/publications/bpfi-mortgage-drawdowns-q3-2021/

hometruths

https://www.boards.ie/discussion/comment/118087207#Comment_118087207

Sure that takes us back to the social/council propping up the market point as the marginal buyer point. Hopefully that is showing signs of change finally. I read somewhere over the last few days, (maybe in this thread), that councils have already pulled up the drawbridge on leasing.

In any market, once the marginal buyer realises they're being taken for a mug, and steps back or bids less, prices fall.

That's a slightly different discussion though, my point was I don't think the stats show a massive pent up demand for FTBs and 300k houses.

If they are out there, where are they currently living? threshold's latest survey suggests they're not currently in private rented accommodation. That's the only point I was making.

Ozark707

https://www.boards.ie/discussion/comment/118087017#Comment_118087017

Councils/charities are going to hoover up many places coming on stream.

fliball123

https://www.boards.ie/discussion/comment/118087242#Comment_118087242

I think going forward we are going to need a lot more social houses and council houses.

hometruths

https://www.boards.ie/discussion/comment/118087202#Comment_118087202

I just found the various threshold posts and realised we had pretty much exactly the same argument back in July! I said "Look at the PRS figures, if only 6% of people living in PRS earn over 45k, it doesn't seem like a lot of private renters are forming this anticipated demand", you (and others) said "Nonsense, look at the drawdown figures".

We'll leave it there so!

Welcome back by the way I hadnt seen you post on here for some time

Cheers, my interest was waning a little, then found the new site a bit clunky and annoying. Been lurking nonetheless.

DataDude

On the supply side. 21.5k new commencements in the last 6 months alone. Astonishing numbers. Interesting to see if it can be sustained, would have us blowing by all government/CBI targets by 2023 if it does!

https://www.gov.ie/en/publication/a5cb1-construction-activity-starts/

https://www.boards.ie/discussion/comment/118086502#Comment_118086502

It won’t bite straight away given the proportion of people on fixed rates. I’ve only a couple of months short of 5 years before I feel the direct impact on interest rates on my mortgage payment.

Zenify

https://www.boards.ie/discussion/comment/118084661#Comment_118084661

Bubbles are caused by FOMO! Tulips, .com, 07 property, and bitcoin. It wouldn't be a bubble from supply and demand. Then it would be normal justified market forces that would sustain. The reason why bubbles burst is people no longer have FOMO and the normal supply and demand are out of kilter.

https://www.boards.ie/discussion/comment/118088202#Comment_118088202

And what does FOMO come from other than an imbalance in supply and demand? FOMO is the manifestation of scarcity

Villa05

https://www.boards.ie/discussion/comment/118085462#Comment_118085462

The link to the 2016 figures states that two thirds of households earn less than 63k, while in the podcast broadcast last week and posted here yesterday, the chief exec of the land development agency said the middle third earned between 45 and 80k.

The LDA must have the most up to date figures as this is the demographic they have been tasked with providing housing solutions for.

The typical 2person average salary couple appear to be in the top 20% of household income earners

Villa05

https://www.boards.ie/discussion/comment/118088202#Comment_118088202

Do you think the fear of being stuck in the Irish rental market is greater than the fear of missing out.

For the vast majority of Irish people housing is a home not an investment opportunity.

The stick is a far greater weapon than the carrot when influencing human behaviour and super charging bubbles.

Zenify

https://www.boards.ie/discussion/comment/118088810#Comment_118088810

Yeah, I agree. I would include your example in FOMO. Fear Of Missing Out of both investment and getting a home etc.

Timing belt

https://www.boards.ie/discussion/comment/118088061#Comment_118088061

I wonder how many of the commencements are a over spill of projects that were delayed during the lockdowns when builders concentrated on finishing projects rather than starting new ones.

Timing belt

https://www.boards.ie/discussion/comment/118088138#Comment_118088138

Banks stress test for ability to repay if rates rise so there should be a buffer.

The real risk is when fixed rates expire if your in a rising rates environment for 5 years as the new rate could be significantly higher at the end of the five years. (E.g. five years of rate rises in one go)

DataDude

https://www.boards.ie/discussion/comment/118089401#Comment_118089401

Yeah difficult to know, will take a year or so before it all shakes out I guess. Interestingly, Davy seem to be getting increasingly bullish on a monthly basis now around building activity. Time will tell.

Number of housing starts passes 30,000 as construction hits its fastest pace since 2008 - Independent.ie

hometruths

https://www.boards.ie/discussion/comment/118089495#Comment_118089495

In all our previous exchanges re inflation and potential of higher rates you've been adamant I was wrong to predict inflation would be a concern; you were of the view any inflation would not be meaningful or longlasting - i.e transitory.

Is this still your view? Not asking to score points, genuinely interested, as plenty of others had that view, just wondering if they're reassessing things now.

rocjohn

Large building site for residential 3 and 4 bedroomed houses in Dublin closed since Thursday evening of last week. Its hardly due to a Covid outbreak or extended Halloween break.?

I do not know the reason but am wondering if this could be a consequence of supply problems. The builder has an excellent reputation for quality builds and running a well organised site.

I wont identify the building site .

Timing belt

https://www.boards.ie/discussion/comment/118090285#Comment_118090285

I still think that the inflation won’t be long lasting unless we see wage inflation as people won’t be able to pay.

A lot of the inflation we have seen have been for specific items that are in short supply e.g. second hand cars etc. or have been energy related as oil prices returned to pre covid prices.

The one area that does concern me is the blackouts in China as that is where most of the manufacturing of products take place and if they are producing less prices will rise across the board. If they try to devalue the currency to combat it they run into issues with debt in foreign currencies.

I also think we will hear a lot in coming months that raising rates won’t dampen inflation as people still need oil and gas for transport and heating.

Saying all that I will say that The longer we see inflation the more likely it will grab hold as there will be an expectation of inflation and business will raise prices wherever they can.

Timing belt

https://www.boards.ie/discussion/comment/118089864#Comment_118089864

There is definitely an increase even allowing for the spillover from lockdowns.

hometruths

https://www.boards.ie/discussion/comment/118091750#Comment_118091750

I think wage inflation has kicked off already. Once the inflation ball gets rolling it will be difficult to stop, it looks to me to be already rolling, and will gather speed whilst CBs dither about raising rates.

ittakestwo

https://www.boards.ie/discussion/comment/118091833#Comment_118091833

But by Masstrict the ECB have to keep it below 2% long term. Today's figures show it is over 4%. I think if it were any other time the ECB would be raising rates. It wont be long before the Germans are demanding rates be raised. We could see it sooner rather than later given today's figures. The ECB have been saying they only believe it to be temporary but core inflation which excludes volatile inputs like Energy has also risen above the ECB's target.

Timing belt

https://www.boards.ie/discussion/comment/118092146#Comment_118092146

If you take out the base effect we have only seen 2.6% inflation over the previous 2 year period.

J_1980

https://www.boards.ie/discussion/comment/118092146#Comment_118092146

unlike the Fed and BoE, the ECB can’t afford to raise rates because of the massive indebtedness of some member states.

The Euro will have its 20th birthday soon, I would guess it wont make it to 30. I only have USD/GBP/CHF savings accounts now and will transfer back if needed.

AdamD

https://www.boards.ie/discussion/comment/118093006#Comment_118093006

Someone needs to start making a list of the outlandish predictions on this thread

Bass Reeves

https://www.boards.ie/discussion/comment/118093006#Comment_118093006

The US and the UK have have debt issues as well. Inflation is a lot better than deflation. Be careful what you wish for regarding the euro. I think you totally off the ball regarding the euro. It is now a solid currency. There is danger you may see a few countries leave the EU however after the UK that gra seems to be gone.

On inflation it is the friend if the property owner and buyer. Inflation will increase wages. Most buyers are going for 5 year fixed at minimum. A 5 year fixed on a 300k loan is around 1100-1150/ month at present. If at the end of the 5 years if fixed rates rose to 4% the repayments would be about 1340/ month.

For that to happen you need a continuous inflation rate of 3% wages would rise by 10% at least if that happens. That 8k in extra pre tax income for a couple on 80k and that is not allowing for any wage rise due to either increment in the PS or natural wage rises that may happen anyway by modern job movement in the private sector.

Villa05

German inflation is over 5% with industrial unrest threatened.

I'm making assumptions here, but Germany would not be in favour of EU monetary policy over the last decade. They probably kept there disapproval under wraps while inflation was kept in check.

This will be an issue in the future I suspect

dashcamdanny

Hi. Im after opinion on my strategy

I will be putting my home which I bought in 2007 up for sale in the next couple of weeks.

I want to move the family west or the midlands where I can have a big home and maybe a bit of land for my children to possibly build on in the future. And a very small mortgage.

With my long overdue equity build up, and the the current house prices in the east, I should walk away from the sale with 150k in my pocket.

But without a property.

We intend to rent in the midlands and continue to work in Dublin, and wait out the current high price boom.

We have all seen collapse in the recent past. Albeit with different economic reasons . But it cant really continue like this forever.

Im looking at 1.5 to 2 hour commute daily and child care till an alternative is found in my new setting.

We are trying to look at the bigger picture of what we want to achieve in our life. And I am witnessing alot of landlords sell up now in an attempt to catch the tip of the wave.

Big question is, When do you predict a fall in property prices.. Should I buy now? Or rent and wait.

Marius34

https://www.boards.ie/discussion/comment/118093878#Comment_118093878

What you expect from the fall? When the fall happens it may still be above current price in its nominal value. My advice don't bet on predicting which way property price goes, if its your primary home.

Beigepaint

https://www.boards.ie/discussion/comment/118093878#Comment_118093878

What’s your commute now? If diesel goes to €3 a litre in the next ten years would that make a 45x2 commute less attractive?

I know many posters will consider this outrageous but we are in the “just the tip” phase of carbon taxes meeting Irish society (national herd etc) and even though the Greens will be unceremoniously turfed out at the next election, the carbon considerations they brought to Gov will necessarily stay.

If commuters are ever asked to pay there fair share of carbon taxes, they are getting the full shaft, not just the tip.

Irish people are road warriors and love to drive (hence the obesity) but I really think you are swimming against the tide.

dashcamdanny

Thankfully, travel cost will not be an issue with free travel . But it takes an extra 30 mins compared to a car

Bass Reeves

https://www.boards.ie/discussion/comment/118093878#Comment_118093878

Back in 2002/3 a lad not too far from me sold his house at the edge of the village as a small estate was being build opposite him.

He spend 12 years renting before he managed to build again. If as some predict we are entering an inflationary period I be very slow to do what you intend. You will buy very little with 150k or even sub 350-500k. Remember it immaterial to an investor, he is either walking away with a handsome profit or is escaping a negative equity situation.

Even in a lot of rural Ireland rents are 1k+/month. If you are paying 15k/ year for 5+6 years how will you feel about it. Any fall in 2-5 years time may only bring you back to today's prices.

Too many fail to understand the factors for the 2008-10 crash. People owning multiple properties with 100%+ mortgages, people with proper abroad, a construction industry that was the economy not serving the economy, 70k houses build in one year, developers holding back houses as prices were continually rising. Developers acquiring large land banks and hoarding them for to develop 3-5 years time.

There is no where near them factors at present.

Villa05

https://www.boards.ie/discussion/comment/118093878#Comment_118093878

Do you really want to take yourself and family from a home owning situation to a non home owning situation. Ask the renters, what they think of their current situation

I think you've missed the boat on the bargains further west, not too many left. Waterford and commuting towns around Limerick maybe

dashcamdanny

Ok. Thanks. Wise advice.

I would have all my eggs in one basket for sure..

Great value is still to be had in the Midlands so we will probably forge ahead and buy something soon after we sell.

Mad_maxx

https://www.boards.ie/discussion/comment/118093878#Comment_118093878

Not sure I'd agree with that

Rural locations have only just gotten started in terms of prices ,covid has been a real boost to rural living in terms of renewed appeal

Doubt prices fall

Villa05

https://www.boards.ie/discussion/comment/118096923#Comment_118096923

Fair enough summation, but I would look at locations with strong rail links to the capital.

With young kids and daily commute to Dublin. Will you ever see them not to mention getting someone that will cover a day's work and 3 to 4 hour commute in childcare.

You never really value what you have untill you have lost it.

Demand pushed out to more rural locations increases the likelihood of an oversupply as happened after 08

Mad_maxx

https://www.boards.ie/discussion/comment/118097206#Comment_118097206

I would not move out myself if I lived in Dublin but sitting things out in the expectation of a price correction is very risky IMO

SmokyMo

Rates will be raised and might be sooner than later... ECB don't care for Eugène who took out 700k mortgage to buy brand new 2 bed in Milltown.

But I also think people financial situations are probably quite resilient to dramatic rate hikes what could follow over coming years...

Its corporate + government debt that is a time bomb.

Edit: https://www.ft.com/content/e8fd411b-6adc-4404-9d72-88fc7f9f475e

JimmyVik

https://www.boards.ie/discussion/comment/118090905#Comment_118090905

Same thing near where I live.

I believe they are making lots of starts, for the stats and reit and council leases. But dont have the builders to keep all the sites going.

No other reason to be working on a site for a while, closing it down for a couple of months and going back to it again.

Amadan Dubh

I'd love a shot of whatever they have when they write these reports, it seems like I'd be buzzing all day with that enthusiasm! The adjectives are immense, though I read the article and see it slightly differently based on how the information is presented; it seems that deals are not actually completed yet and a lot of the activity is just pre-planning and site visits.

https://www.irishtimes.com/business/commercial-property/commercial-property-bounces-back-as-restrictions-lift-1.4715925

The Irish commercial property market has been “phenomenally busy” in the past two months.

The ability of investors and occupiers to travel to undertake property inspections since restrictions were lifted in the summer has been “transformative” for the market.

There has been a “significant uptick” in transactional activity underway in all sectors, both on and off market.

There have been “robust volumes” of activity in the retail property sector of late.

What I see is that there is still significant uncertainty in the commercial sector, with the following parts of the article;

...although CBRE expressed frustration “that negotiations are proving overly protracted in many sectors with transactions taking several months to complete in some cases”.

It claimed therefore that the extent of activity underway “is not fully appreciated” due to the length of time it is taking to translate into completed transactions.

And

There have been “robust volumes” of activity in the retail property sector of late as potential occupiers conduct site visits and inspect available premises searching for the optimum store best suited to their specific requirements.

In recent months, several potential new entrants have conducted site visits intending to open their first Irish stores, which will see new brands “emerging in due course”, the report said.

I won't say too much about the report highlighting the "recovery" in the Irish economy other than to point out that the economy has nothing to recover from so it is false to claim we need to "recover" from the pandemic when there was no fallout...as of yet.

Amadan Dubh

https://www.boards.ie/discussion/comment/118100479#Comment_118100479

It really does seem that the "transitory" mantra is a dogma in the regulatory bubbles and the ship has already sailed on inflation - the wage increases are only just beginning so there is some road left to run for the current wave of inflation. I mean, how could living costs soar the last 18 months without wages needing to climb up at least some level to match them? Transitory inflation still results in permanent cost of living increases. The wage increases coming will of course feed into higher costs and more inflation. The post-pandemic recovery, when it finally begins without a threat of more restrictions, is going to be a huge test to the Eurozone, especially when the ECB is now between a rock and a hard place where they can't stop QE and raise rates without causing severe trouble for many Eurozone countries but at the same time need to act already to dampen inflation.

Timing belt

https://www.boards.ie/discussion/comment/118100834#Comment_118100834

Where are you getting 18 months of inflation. There was deflation for 11 months and we have only seen true inflation where prices rose above pre pandemic levels for the past 7 months.

C14N

https://www.boards.ie/discussion/comment/118093878#Comment_118093878

This is just me, but I do not see the value in travelling 3-4 hours per day to save money. Assuming you will also be driving, fuel bills will increase substantially from this kind of daily journey. Aside from that though, the fact is that this much time on the road doesn't leave you with much time for your actual family. You'll be gone daily from 7am-7pm, and presumably will be very tired when you get back. Again, just me, but time spent with loved ones seems ultimately more important than a bit of extra money per month or a bigger garden.

Amadan Dubh

https://www.boards.ie/discussion/comment/118101039#Comment_118101039

The property market has soared during covid restrictions the past 18 months and then other sectors saw costs increase as they reopened. CPI-measured inflation is a scam.

Timing belt

https://www.boards.ie/discussion/comment/118101267#Comment_118101267

It's not a scam... it is the most accurate way to measure inflation.... What % of the population has purchased property during the last 18 months and have been impacted by property inflation.

It's the same as a smoker saying that the price of cigarettes has increased more than the CPI so its a scam.... but as not all people smoke it has a lower weighting in CPI as it does not impact the majority of people.

The inflation in Ireland has kicked in as lockdowns ended and people went out and started spending savings.... We are in the middle of the economic recovery at present and the next step will be companies missing profitability targets as shortages of goods start to impact on there sales. US is further down the road on the recovery than Europe and their are signs of the US economy beginning to slow and an increase in fear of a double dip recession kicking in.

Amadan Dubh

https://www.boards.ie/discussion/comment/118101418#Comment_118101418

CPI-measured inflation might paint a picture of what it is intending to show but it does not show the whole picture with respect to the cost of living. I mean, if you believe that the cost of living increases have been below 2% each year for the last few years then I think it is clear that cost of living and inflation are two different things.

It's like how debt:GDP is used to paint a picture which is the opposite of what is seen in reality; government debt has soared since 2008 but by using debt:GDP, it looks like our debt has become more manageable than when it was far lower. Cuckoo stuff.

The net effect is that the man on the street can tell you more about the state of the economy as it impacts the man on the street than officially used metrics can.

Timing belt

https://www.boards.ie/discussion/comment/118102223#Comment_118102223

The impact of inflation is not the same for all people as people spend money differently.

e.g

If you are a renter and rent is going up 4% per annum then yes you will think that cost of living is increasing but if you are a home owner who has just refixed their mortgage at a lower rate for 5 years and now has lower repayments you would think different.

If you are a smoker or drinker you will think cost of living has gone up due to tax increases etc... but a non-smoker/drinker will not be affected by this.

Saying that the man on the street knows better than the published CPI figure is even misleading as there is a good chance that the man on the street that you are talking to mixes in your social circle and has a similar lifestyle to you due to age, work. interest's etc.

Don't get me wrong I am not saying that there has been no inflation there has and there has been more of it than we have seen for quite a while but the headline figures are based on year on year changes which can be misleading as there was deflation in 2020 which makes the figure look larger as a year on year %. If you compare it to 2019 prices have only risen by 2.7% over a 2 year period.

With regards the government debt... it has in fact become more manageable as a lot of it was refinanced at very low or negative rates.

Amadan Dubh

https://www.boards.ie/discussion/comment/118102491#Comment_118102491

It's not just renters; anyone who bought in the rising market is experiencing higher mortgage repayments due to extra borrowing needed to buy the more expensive property. Childcare, insurance, housing and energy costs have all soared beyond the headline CPI rate so I question what it is the CPI is measuring that it stutters along below or slightly above 2%? Maybe if you water down or ignore energy, childcare and housing you can claim inflation is low?

On the government debt being manageable point, I really don't see how that is the case. The absolute figure is totally unrepayable and we now only seem to focus on the interest and how manageable that is.

timmyntc

https://www.boards.ie/discussion/comment/118102491#Comment_118102491

Government debt is manageable until its not. All well and good borrowing loads at 0% until the rates rise and you arent getting 0% anymore.

The thing about CPI is it measures a broad set of goods and services, which is good and bad. It sees the impact of price changes in a number of sectors, but the overall figure can be skewed by a select set of goods. Clothing & Footwear fell almost 8% between December 19 and 20, which was what drove the overall CPI index to decline in 2020. While transport costs may have dropped slightly (less than 1%), in 21 they jumped by much more than that.

Demand for clothes and footwear havent nearly recovered to 2019 levels, but prices for everything else has skyrocketed in that time. While CPI average doesnt look that bad across 2 years, most people would feel things have gotten significantly worse. The squeezed middle might not buy that many clothes, but they would be hit by the significant increases in just about every other sector.

Clothing has fallen another 3% YTD, while transport has jumped 11%. Most people are not rejoicing at the cheap clothing, as the transport and other inflationary costs easily dwarfs the gains in odd sectors like clothing. The average person is much more than 2.5% worse off across the last 2 years.