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

Timing belt

https://www.boards.ie/discussion/comment/118102511#Comment_118102511

What % of people have bought a house in the past year that have higher mortgage repayments compared to the majority of home owners who have benefited from lower rates. It is a very small % impacted.

Likewise you talk about childcare costs which I agree are crazy but that again is different for everyone.... someone who has granny or grandad looking after the children does not have creche fees. When my kids were small before going to school childcare costs were crippling us and was our largest expenditure even above rent and the cost of running a car put together.. But now they are in school this has fallen massively and is way more manageable. Yet again how many people as a % of families are needing to pay creche fees.

Your post shows the perception of inflation because it is real to you but not everyone will be impacted the same.

C14N

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

I think the problem with asking the "man on the street" is that your answer can vary greatly depending on which man you happen to ask. It's also hard for people to really know exactly how much extra they've been spending, even if they keep meticulous budgets. I couldn't tell you how much my spending has gone up or down since this time last year, and even if you know, it's hard to know whether it's down to price increases or change of lifestyle (e.g. I probably spend more in restaurants in a month now than I would have done in a month in 2020, but I didn't go to restaurants much at all in 2020 so couldn't really say if the prices have changed).

Timing belt

https://www.boards.ie/discussion/comment/118102570#Comment_118102570

Whether people like how they measure CPI or not it is the most reliable way of measuring inflation in the overall economy. It may not best way of measuring an individuals inflation as people will spend differently as you pointed out and this is exactly the point that I was trying to make.

hometruths

https://www.boards.ie/discussion/comment/118102580#Comment_118102580

An individuals perception of inflation is totally irrelevant. Nothing to do with what CPI is trying to measure.

So yes even if childcare costs rocket, individuals may save on childcare costs because their kids start school, but that individuals savings should not be factored into inflation calculations. That's totally misguided.

By that logic you could argue inflation was falling because some people's transport costs dropped after they sold their cars, because they could no longer afford the petrol prices rises.

Their costs may have dropped, but they did so because of rising inflation.

Timing belt

https://www.boards.ie/discussion/comment/118102708#Comment_118102708

I think you are totally missing the point I was making.... maybe I was not that clear.... At any point in time only a small % of the population will be impacted by rising creche costs.... The fact that it decreases because kids go to school is irrelevant as any point in time you will only have x% with childcare costs and therefore it is given the relevant weighting in the CPI.

An individual may have a perception that inflation is way higher than CPI because the inflation may be real to them e.g. the may have childcare cost and paying rent etc... But that does not mean that inflation in the wider economy is higher than the published CPI figure.

dashcamdanny

https://www.boards.ie/discussion/comment/118101089#Comment_118101089

I completely agree. Its a temporary measure. The bank will insist in stable employment in order to facilitate a new mortgage as 150 will not be enough. After a new property in purchased , I should have a big house, small mortgage and other employment on the horizon.

But its not without its pain.

hometruths

https://www.boards.ie/discussion/comment/118102768#Comment_118102768

Fair enough, I may have got the wrong end of the stick. I was none too clear how you were disputing @Amadan Dubh 's comment:

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.

That would seem to be a pretty universal truth to me.

Sure any particular individual due to their own circumstances may have seen their costs rise substantially more than 2% per annum for the last few years.

But do you know anybody who believes the general cost of living increases across the board have been less than 2% per annum for the last few years?

Timing belt

https://www.boards.ie/discussion/comment/118102839#Comment_118102839

I don't think anyone will have actually sat down and calculated their personal inflation or will even know what they spend their money on last year as opposed to this year and this is why the best tool for measuring inflation is the CPI because they calculate the % percentage that average person spends on a particular good and service and also track the price change.

Amadan Dubh

https://www.boards.ie/discussion/comment/118102930#Comment_118102930

Even if you just look at childcare, insurance, housing and energy costs, it doesn't seem like these expenses are given sufficiently broad representation in the CPI based on how much they impact on the cash that people have in their possession and how many people that consume these services. These probably account for well over half of household expenses for the average family. I think it was only the other week that energy bills climbed 9/10% on top of the increases which we experienced earlier this year in our energy services, so either inflation is not relevant to measure cost of living increases or else there is something wrong with CPI (fair enough, I was a bit David McWilliams' hyperbolic by describing it as a scam).

This is a side discussion to property really, so to loop it back; I think the wage increases that are coming will be far higher than CPI-inflation would indicate they should be to keep up with the cost of living, which will in turn push the CPI (and cost of living) higher until interest rate rises/QE tapering happens, which will likely cool asset prices should it happen.

Villa05

https://www.boards.ie/discussion/comment/118102930#Comment_118102930

How do they do it?

Do they say 60% own home and 40% rent so the cost of housing is adjusted pro rata

Timing belt

https://www.boards.ie/discussion/comment/118103134#Comment_118103134

Families that have kids under 14 years of age is only about 10 -14% of the population so childcare costs would not be a normal household expense for the average family.

But as you say to keep this on track and related to property.... If you expect wage inflation higher than CPI then it is fair to expect house prices to continue to rise and not fall as people will have more disposable income..... Personally I don't see this happening as most companies will use CPI to calculate wage increases for the average worker..... Obviously there will be a bell curve where a small cohort of employees will get a larger increase because of performance while there will be another cohort that won't get any increase but overall it usually tends to correlate to the CPI

Timing belt

https://www.boards.ie/discussion/comment/118103242#Comment_118103242

The following link explains how it is calculated

https://www.cso.ie/en/interactivezone/statisticsexplained/consumerpriceindex/whatisthecpi/

Also remember that about 1/3 of properties are owned outright, 1/3 with a mortgage and 1/3 in some form of rent whether it is in the private sector or social housing.

Amadan Dubh

We are moving ever closer to a blanket rent freeze in the country - but this is just more useless tinkering rather than solving the actual issue that rents at the moment are on average far too high for the actual renters themselves to be satisfied - and there doesn't seem to be any accompanying statement from the minister that these measures will serve a purpose in the overall, declining rental market by temporarily halting the continued increase in rents while supply comes on stream which we hope will drag down average rents. The government will blame the likes of SF when these half-measures don't fix the problem as the populists were the ones calling for them, but it does seem clean that this constant, around-the-edges tinkering is what is going to ensure SF have a good chance of being in power very soon.

I noted elsewhere that Goodbody's analyst commentary in relation to i-RES REIT already flags for investors the risk posed to real estate by a SF government. The fear of SF will do more to alleviate the housing crisis than anything SF could actively do themselves to fix the crisis!

https://www.thejournal.ie/housing-minister-to-bring-rent-cap-legislation-to-cabinet-5589968-Nov2021/

PROPOSED LEGISLATION THAT would cap rent increases to a maximum of 2% or the level of inflation as measured by the harmonised index of consumer prices, whatever is lower, will be brought to Cabinet this week, the Housing Minister has said.

C14N

https://www.boards.ie/discussion/comment/118108012#Comment_118108012

This really does feel like they make these plans up as they go along. It's barely a few months since they already changed the law from capped 4% increases to tracking the inflation rate, and now they want to change it again. They haven't even seen how the current change will pan out. And if they're going to argue that it's too urgent to wait, why wasn't it urgent in July when they changed the rules last time?

Bubbaclaus

https://www.boards.ie/discussion/comment/118108094#Comment_118108094

Because the annualised inflation rate went from 1.5% to 5% in that period of time. It changed the game and suddenly.

Amadan Dubh

https://www.boards.ie/discussion/comment/118108180#Comment_118108180

It was clear to me at the time that the investors lobbied to prevent a rent freeze and instead suggested to link increases to the CPI, referring to past performance of the CPI but knowing full well inflation was coming - gaslighting the government. The government either incompetently or nefariously then implemented the CPI-linked rental increase legislation.

They are digging their heels in to not implement blanket rent increases but it's almost certainly where we'll end up with the populists banging on the gates and the situation not getting "better" (better = rents decreasing).

SmokyMo

Rents control / caps do not work. There are many empirical studies which showed it had the opposite effect. It will constrain the supply further plus many other issues.

I wonder is SF purposely stoking the 'social fire' to completely wipe out FFG. Playing gvrmnt to introduce such measures to completely suffocate them with housing crises.

From what I ve seen, I fail to find anyone from government parties who has some critical thinking ability or imagination. Hence why everyone from lobbyist to developers to now SF are running rings around them. Or maybe its corruption disgusted as incompetence.

Amadan Dubh

https://www.boards.ie/discussion/comment/118111237#Comment_118111237

No way are SF that adept to know that these populist measures will have the opposite effect and therefore will wipe out FFG!

I'd err on the side of corruption over incompetence with our representatives, especially Pascal Donoohue; it is sinister to have that dough-eyed, softly spoken man in such an important position which bends over to corporate interests the whole time.

PommieBast

https://www.boards.ie/discussion/comment/118108012#Comment_118108012

There is no time left to buy from tightening up rent controls. Looks like a lot of landlords who saw tenants voluntarily leave last year decided to keep their properties off the market until they had chalked up the two years of vacancy that permits an unrestricted rent review, but an unconditional freeze will make this cohort sell up as well.

As for the bit about the fear of SF, it makes me think about my rather tongue-in-cheek comment about SF deliberately crashing the market.

SmokyMo

Fed confirmed tapering beginning this month. Rates hikes will follow. Market closed on high. Might just be the opposite of 'taper tantrum', some speculate itll be market melt up. Rates are going all the way up. Whatever CBs say for their projections for rates you know its gonna be double of that.

Sierra Oscar

https://www.boards.ie/discussion/comment/118116546#Comment_118116546

The Fed are strongly indicating that they will not move on interest rates until the taper has been completed - i.e. July 2022, so there is still some distance to go. Although I don't think they'll get that far without being able to increase rates. An imminent increase does not seem to be on the cards all the same.

Interestingly though, there is an indication that mortgage lenders could start pricing in modest interest rate rises in the coming months well in advance of an official rate hike. That will have an impact on the market. Similar is happening in the UK market right now.

Amadan Dubh

https://www.boards.ie/discussion/comment/118116546#Comment_118116546

The ECB have no plans to do the same which means they will persist with their policy that has successfully stoked populism in the EU and will continue to do so; the low interest rate, grey-haired pillaging of the future wealth of younger generations.

Looking beyond the housing market when it comes to assessing consequences of this economic inequality sustaining policy, populism will continue to grow not just in Ireland but across the EU and that will bring its own problems when we already struggle with the US and Russia attempting to destabilise the EU.

Unfortunately, there are a lot of older EU citizens benefitting from the current low interest rate policy and they are also disproportionately holding the positions of power which explains why the ECB persists with a policy directly linked to creating this sensational asset bubble to beat all bubbles. There is no competence in the decision to persist with low interest rates and hyper-QE; it is inept or corrupt, perhaps a bit of both, but it seems that they are too wedded to the current policy that they cannot see a way out of it. Who will suffer? The citizens of the EU being held hostage to this policy. The battle against inflation is already lost.

The IT even had an article discussing it today which is the first time I have seen any media publication in Ireland bring the issue up which means a lot of Irish people probably aren't aware of the link between ECB low interest rates and our own economy and property market.

https://www.irishtimes.com/business/economy/is-the-era-of-super-low-interest-rates-coming-to-an-end-1.4719323

Villa05

Do the low %rates not pilfer senior citizens savings in a 5% inflation environment and rising

Amadan Dubh

https://www.boards.ie/discussion/comment/118119339#Comment_118119339

They are between a rock and a hard place; big portions of the economic system will crash if interest rates rose meaningfully but the political consequences of doing nothing cannot be ignored. They need another covid I think (maybe the significant climate focus the past few months is a smokescreen/passing of the QE/low interest rate baton?).

Timing belt

https://www.boards.ie/discussion/comment/118119016#Comment_118119016

One of the aims of QE is to generate inflation in the economy on the back of economic growth!!!

There would have been a bigger crash than 2008 if the central banks didn't step in and undertake QE. The ECB have already started tapering there asset purchasing programs

https://www.ft.com/content/576861c4-1c1a-43f6-b35b-02298f3ac551

Saying that Grey haired people benefit at the expense of younger people is BS.... It is people with money to invest and that are willing to take a risk that have benefited (And may be the same people that will suffer if/when a correction occurs) If a Grey haired individual as you put doesn't want to risk his money by investing in overpriced assets and keeps his money in the bank he is actually loosing out.

Amadan Dubh

https://www.boards.ie/discussion/comment/118119397#Comment_118119397

How is it BS? The 2016 census told us only 30% of 25-34 year olds owned their own home, which has undoubtedly gotten worse I'm sure. It doesn't mean deliberate action was taken by the individual old people but action taken has resulted in a disproportionate benefit to them as asset owners when you compare the increases in wages since then (which is essentially the only wealth of non-asset owners).

The big question is how the hell are the central banks going to deflate this gigantic asset bubble now?

Timing belt

https://www.boards.ie/discussion/comment/118119492#Comment_118119492

If a house is a home it makes no difference what the value of it is (with the exception of property tax). If they sell to buy another property there is no benefit as the new property has increased in price. They may have some benefit if they downsize and move to to a cheaper neighbourhood but that doesn't happen that often due to the costs involved. All that matters is the cost of purchasing it on day one not what it's worth today as the home owner has not benefited unless they plan on selling the property and moving to a different country with lower house prices.

The central banks have no intention of deflating asset prices. They have been cutting interest rates for 40 years which has pushed up the price of assets. The QE program is not a change to this policy and is only an extension of it because they are no longer able to reduce the central bank interest rate any lower.

History of the last 40 years has told us that a very small interest rate rise puts the brakes on the economy but over the longer term that they will need to continue to cut rates (or undertake QE) to keep the economy ticking over.

I fully expect that once the central banks will start issuing new "Green Bonds" to develop a more environmentally friendly infrastructure to be able to meet emission targets. This although not called QE will have the same effect and will result in low rates for a long time to come.

yer man!

This is all getting a bit scary now, tried to getting a viewing for a new development in Adamstown for this weekend, I was apparently too late in replying to their email on Tuesday, despite me only being a few minutes after it got into my inbox. Been searching for a property for a year now and after this new builds are pretty much out of reach for me. I make a six figure salary and cannot afford a new 3 bed house. I’ve lost hope honestly, I and all my friends are just ready to burn this place to ground at this stage. Ideas of having a family, a dog, plants in a garden, a driveway, can’t see this happening.

Amadan Dubh

https://www.boards.ie/discussion/comment/118119587#Comment_118119587

The central banks are like the drug manufacturers with money being the drug they have manufactured. Imagine this scenario where the drug manufacturers (central banks) were working on a covid drug which they managed to create and distribute to the market which seemingly had solid demand for it and therefore requested more and more of it. The supply of the covid drugs was made on credit but the drug manufacturer didn't care as it felt it was doing an altruistic deed by supplying the market with this covid wonder drug. However, when the covid drug manufacturer thinks it has made sufficient covid drugs to meet the demand of the market what happens if the covid drug manufacturer realises that the market it supplied its drug to was actually just a small group of people and therefore the demand it was meeting was many times smaller than it actually should've been meeting? The covid drug manufacturer has been operating on a "use now, pay later" basis and is not really geared up to ramp up supply dramatically as a result until it gets paid. But there is a whole portion of society still at risk from covid and another sector oversupplied with covid drugs. The right thing for the drug manufacturer to do would be to call in the debts of those who already received the covid drugs in order to ramp up supply to get more covid drugs out to those who were left behind, whilst also restricting further supply of the covid drugs to that oversupplied sector. However, central banks are not doing this and instead are continuing to supply the saturated sectors with covid drugs at the expense of other sectors of the market. And it gets worse; the oversupplied sector of the market then resell the covid drugs to the rest of the market making quite a bit of money for itself. As well, the government starts to buy from the oversupplied sector, competing with private individuals, in order to get covid drugs for the desperate, undersupplied sectors of the market. The oversupplied sector commands authority with the government's and claims to speak for the market as a whole. Since it has a good set up, it advocates for more of the same.

Where and how does it end?

There is no way whatsoever that we can have stock markets and house prices continuing to rocket the way they have done in recent years without something giving. The only way I see current prices staying the same or increasing further is if wages significantly increase or if more levrage is allowed in the market. We are again hitting the affordability ceiling which starts to filter into economic growth and negatively impacts it as housing money is dead money, not frequently recycled into the economy and sloshing around, never at rest.

Timing belt

https://www.boards.ie/discussion/comment/118121218#Comment_118121218

Sorry but you totally lost me except for your last paragraph...

If you are saying central banks are printing money then this is not 100% correct as all QE is just a maturity swap of liquid assets. e.g. where Financial institutions sell bonds with a long maturity to the central bank in return for cash reserves that have no maturity.

The majority of the reserves remain with the financial Institutions and don't get out to the wider economy unless they lend this to individuals and companies. This is why QE has not generated any meaningful inflation in the wider economy. The inflation that we are seeing in the wider economy is because governments are spending on Covid in the form of Pup and stimulus cheques. As this Government spending falls away we should see inflation decrease as money is no longer getting out to the wider economy. This is why central banks are saying that inflation is transitory and why banks and financial institutions expect rates to be lower for longer as the pressure to taper/raise rates due to inflation falls away.

What is pushing asset prices higher is the fact that the central bank is buying Bonds which is reducing the supply which is pushing Bond Prices higher (And the Yield lower). Insurance companies and Pension Funds own a significant amount of bonds which have now increased massively in value and are able to sell these and use the cash to invest in other asset classes that have a higher yield than Government Bonds. As the value of assets rise people see this and greed drives them to invest pushing assets higher again and the upward spiral continues.

To bring this back to property I thought you might be interested to know that believe it or not Irish Property was deemed to be undervalued by the ESRB in their sept 2021 risk dashboard based on their calculations of price to rent, price to income etc.

hometruths

https://www.boards.ie/discussion/comment/118121331#Comment_118121331

To bring this back to property I thought you might be interested to know that believe it or not Irish Property was deemed to be undervalued by the ESRB in their sept 2021 risk dashboard based on their calculations of price to rent, price to income etc.

Certainly an interesting finding by the ESRB, but the dogs in the street know it is utter nonsense to claim Irish property is 20% undervalued.

coolshannagh28

https://www.boards.ie/discussion/comment/118116546#Comment_118116546

The Fed last tried tapering in 2013 but quickly backed off when markets wobbled and treasury yields soared , QE is a drug that the economy has become dependent on and tapering will not work , neither will raising interest rates . The Fed is trying to find wriggle room as inflation soars but the market is so toppy that anything negative could collapse it.

houseyhouse

https://www.boards.ie/discussion/comment/118120668#Comment_118120668

I understand you’re disheartened. This isn’t the best time of year to be trying to buy, and supply of new builds is down more than usual thanks to Covid restrictions on building over the past couple of years. There should be a big jump in supply of new housing next year. Is there a reason you’re focused on new builds? Where I live they tend to be a lot more expensive than similarly sized second-hand houses.

I don’t know how much things have changed in the last 12 months but I was buying last year and I had a couple of estate agents selling new estates call me back months later because there were a couple of houses where the sale has fallen through.

Bass Reeves

https://www.boards.ie/discussion/comment/118121218#Comment_118121218

And who will win if your prediction is correct. It will not be Joe Soap.

We are entering a period similar to the 70's where Inflation will be driven by energy costs. This in turn will cause wage increases ( probably below rate of inflation bit still above present wage increases). Central Banks will not be able to prevent inflation without a substantial recession so may well accept inflation above 2%. You may well see inflation in the 3-5%/year bracket.

C14N

https://www.boards.ie/discussion/comment/118120668#Comment_118120668

Is there a reason you're so set on a new build specifically? I was in the same boat previously, especially given how attractive the HTB payout is (assuming there are a few in Adamstown going for under €500k), but new builds are just very hard to come by and very competitive. The only one that I had found that even qualified was the Clay Farm development in Leopardstown, which was delayed by months, ended up exceeding the HTB limit when it did come out, and then I had the same result as yourself anyway where I applied 3 minutes after the emails went out and still didn't get to view.

It's like entering a raffle just to try and view one; the odds are against you. My partner convinced me we should give up and just look at second-hand ones and we had a lot more success there. It's still very competitive, but at least you aren't 100% at the mercy of the luck of the draw, and there's more to look at too.

yer man!

https://www.boards.ie/discussion/comment/118122490#Comment_118122490

Other half is dead set on a new build only, desperately trying to convince him to consider other options but it’s proving difficult. The other reason is that we’re buying from abroad to move back to Ireland which is another whole layer of stress. We have the mortgage approved, which is about to run out now and the HTB ready to go but just cannot get accepted to view anything remotely in our price range. We were going to just move back and rent for a while but that’s just a no go.

cnocbui

https://www.boards.ie/discussion/comment/118018935#Comment_118018935

Cash buyers. My ex picked up a 2 bedroom house within walking distance of Limerick centre for €100 K in 2014.

Timing belt

https://www.boards.ie/discussion/comment/118121427#Comment_118121427

The estimates for valuation was at the end of 2020 and we have seen prices rise 10% so far this year so there must be some truth in the ESRB calculations.

cnocbui

Any cashed up money bags on here looking for a unique fixer-upper in a remote location with more privacy than most people could handle? An agreed sale has taken 11 months so far, and the buyer is dicking around saying 3-4 weeks until they will sign. I signed my bit about 5 weeks ago.

hometruths

https://www.boards.ie/discussion/comment/118122566#Comment_118122566

How on earth does a 10% rise this year validate the calculations? That's ridiculous.

There is as much truth in this as there is in our GDP figures. Totally disconnected from reality.

cnocbui

Sydney is up 30% for the year.

https://www.boards.ie/discussion/comment/118122735#Comment_118122735

It’s a global problem for sure. Worse in some places even than what we are experiencing

Villa05

https://www.boards.ie/discussion/comment/118122073#Comment_118122073

Would it be in the interest of OPEC, Russia et Al to have runaway oil prices thereby speeding up the green conversion

Or

Is it that they feel the game is up and greening will occur so milk it now while we still can

Bass Reeves

https://www.boards.ie/discussion/comment/118123089#Comment_118123089

Oil prices are not rocketing because of OPEC supply prices it carbon taxes applied by the countries they are used in that is causing most of the inflation in petrol and diesel. Yes Gas is pushed by demand as it is the only alternative to nuclear with wind and solar. And if you have nuclear you do not need wind or solar.

timmyntc

https://www.boards.ie/discussion/comment/118122566#Comment_118122566

In fairness, the fact that a bubble continues to inflate is not proof that there is no bubble - in 05 and 06 prices continued to rise, but that didnt mean it was undervalued.

JimmyVik

https://www.boards.ie/discussion/comment/118123365#Comment_118123365

Its mad isnt it. The world is going to have inflation caused by taxes.

Bass Reeves

https://www.boards.ie/discussion/comment/118123571#Comment_118123571

Over the last ten years most inflation in this country was caused either by government regulations or government of taxes.

cnocbui

https://www.boards.ie/discussion/comment/118123933#Comment_118123933

Don't worry, Mr Reeves, I can assure you that USC is only a temporary emergency measure and will be lifted shortly, just as soon as the crisis is over.

Bass Reeves

https://www.boards.ie/discussion/comment/118123974#Comment_118123974

Usc has nothing to do with inflation. Indirect taxes and charges cause inflation, Vat, carbon taxes, cart tax etc.

Villa05

https://www.boards.ie/discussion/comment/118122520#Comment_118122520

2nd qtr 2014 was the bottom of the market in Limerick