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

JimmyVik

Something I have noticed since covid started.

Bad news about the virus. Stocks fall a lot.

After a few days people realize that this is just the same sh!te we have been living with for the last while. Stocks go back up even higher than they were before.

Thats the cycle. Watch them go back up over the next few weeks.

Then at the end of that you can only have good news when its all over.

People are used to this virus now, and will be fine living like they are now for a bit yet. Then when its all over well its time to party for the whole world.

And you know what, this doesnt effect property prices unless there is a lock down that halts construction activity or the process of house selling.

It wont effect rents because the government influence on rents via ill thought out rent controls is the major manipulator of that market, viruse or no virus. And all those controls are doing is raising rents and reducing supply. Its definitely reducing the supply of reasonably priced rentals.

Villa05

I don't think rent controls are a huge issue in supply of rentals moreso the imbalance in taxation on rental income with wealthy providers paying 0 and local individual/small providers paying up to 50% in tax on rental income.

This allows the wealthy provider an unbelievable competitive advantage coupled with the ability to monopolies the market especially high demand areas.

It has been quiet clear for many years that the private market cannot cater for the majority of new housing need therefore the state/ahb's need to be equipped to provide sufficient housing at affordable prices for workers at or very close to break even cost. If managed correctly this should be a revenue stream rather than a cost.

The current system of sourcing social housing from the private sector is the key driver of rental inflation and as a policy is the economic enemy of the state. Those that continue to pursue it should be removed for blatant incompetence

Amadan Dubh

I think the demand is already significantly impacted; WFH and migration are two significant factors in demand as a result of the pandemic that have not baked into asking rents yet. The government is ensuring the market is propped up but we don't live in a socialist country so the government does not have the power to support it indefinitely. Long-term social housing leases set a floor at 85-90% of current market rents as if that is somehow sustainable when looked at against salaries. There is nothing which would indicate those rents are even sustainable when looking at the median salary in this country, particularly with the cost of living already shooting up and groceries expected to rise next year in cost. There is a dam holding off a significant pressure release but it doesn't seem like it can hold forever and I sense something is going to give - call it a correction or a crash of some sort. There's so many red flags everywhere and fraud and high risk is prevalent in mainstream companies and economic transactions which are symptoms of excess. The latest ESMA risk report (European-level markets and securities regulator) has the level of risk across markets and securities at its highest level.

https://www.esma.europa.eu/sites/default/files/library/esma50-165-1891_risk_dashboard_no_2_2021.pdf

On the undervalued/overvalued rents, it reminds me of the EC report the other week claiming, based on certain assumptions, that Irish housing was undervalued. The IT published an opinion piece over the weekend arguing against the assumptions and models used by the EC to come to this conclusion.

https://www.irishtimes.com/business/economy/irish-house-prices-undervalued-shows-how-misleading-stats-can-be-1.4740982

Ever hear the one about the statistician who drowned in a lake, average depth 12in? Averages can be elucidating; they can also be infuriating.

CSO data suggest house prices rose by 2.3 per cent between 2005 and 2020 while average incomes, over the same period, rose by 32 per cent. The yo-yoing effect of the crash and the acceleration in property values post-2013 lie hidden beneath the surface of these numbers.

However, if you push back the base year to 2000, capturing more of the Celtic Tiger era, and using approximate data from the Department of Housing – as the CSO house price numbers don’t go back that far – house prices rise by 84 per cent while average income rises by 102 per cent over the 2000-2020 period.

The arbitrary nature of these examples may – in part at least – explain how the European Commission can produce a report indicating that house prices here are 17 per cent undervalued. It’s not that bean counters in Brussels are living in a parallel universe, it’s just their snapshot of the Republic’s housing market – they look at the period from 2013 to 2021 – is too narrow and they are using average household income variables that hide huge disparities and don’t bear the same relationship to housing that they once did.

Without getting into the nitty gritty of data underpinning the report, the findings regarding the Republic only makes sense if you abide by aggregate income variables and long-term ratios between income and house prices, which are no longer relevant.

Last week, Central Bank governor Gabriel Makhlouf, while publishing the regulator’s latest financial stability review, said “the fundamental problem we have is not the price of houses, it’s the supply of houses”.

It’s hard not to view that as an incomplete analysis. Few would disagree with the supply angle, but do we really believe that the current uptick in supply – even stretched out over five or 10 years – is going to deliver affordable price points?

wassie

You wouldnt be wrong in your observation about equities this year.

This was as of end of last week.

Markets in Asia/Pacific closed with signs of calm. Futures contracts for the S&P 500 index traded 1 per cent higher by late afternoon on Monday in Sydney, indicating a gain for the Wall Street benchmark when markets open in New York after the 2.3 per cent fall on Friday.

Drawing any kind of conclusion in property from short term movements in stock markets is irrational.

Marius34

https://www.boards.ie/discussion/comment/118238629#Comment_118238629

"WFH and migration are two significant factors in demand as a result of the pandemic that have not baked into asking rents yet"

WFH did have impacted the rents price, the rents outside cities increased in double digits:

"This has led to rental prices in Dublin increasing 2.7% on a year-on-year basis.

The increases were even steeper across other cities with a year-on-year jump of 6.9% recorded in Cork, 8.3% in Galway, 8.9% in Limerick and 10% in Waterford.

The average rent nationally now stands at €1,516 per month. This is a spike of 6.8% and marks the 36th consecutive quarter where rents are higher than they were in the previous twelve months.

Excluding the cities, the average rent across the country stands at €1,153, an increase of 11.9% on last year. In Mayo, Roscommon and Leitrim rents rose by over 20% on a year-on-year basis."

https://www.thejournal.ie/daft-rental-report-all-time-low-5596453-Nov2021/

Amadan Dubh

https://www.boards.ie/discussion/comment/118238685#Comment_118238685

But we are still in an environment of severe social and economic restrictions - wfh policies are generally not finalised for the long-term as of yet and migration is artificially restricted due to government interference. Only ten years ago we had net emigration; a lot of the talk of demand remaining strong relies on us to have significant immigration over the coming years - that is not a given. Post-pandemic restrictions it remains to be seen how migration will look to Ireland, but it is clear there is no "going back", things have changed and we don't know what will happen post-covid.

Marius34

https://www.boards.ie/discussion/comment/118238723#Comment_118238723

We don't know the future, but we see that pandemic/wfh already had made impact in asking price outside cities, with double digit increase.

JimmyVik

https://www.boards.ie/discussion/comment/118238685#Comment_118238685

WFH has very little effect on rents. Landlords leaving the market, rent controls that have made it financial suicide to lower rents, people trying to buy a house before the price outpaces them, people building up deposits since the pandemics started, and things like that have way more of an effect on house prices than the mumblings about WFH. All leave less places to rent. Add to that the annual lies about the amount of actual new house finishes and the fact we are nowhere near meeting demand.

Marius34

https://www.boards.ie/discussion/comment/118238784#Comment_118238784

so why do you think rental prices went up much more outside Dublin? than in the City?

JimmyVik

https://www.boards.ie/discussion/comment/118238958#Comment_118238958

Well it has been made crystal clear in the last year to even people who had their heads in the sand, that it is financial suicide not to put up the rent to the max you can. Also talk of the whole country being an RPZ and indefinite tenancies has spurred landlords into action. That action being, upping rent to the max, or getting out of the market if they cant up it.

All of this has had the effect of removing the lower priced properties from the market, which has the effect of increasing the average. And as those owners of the lower priced ones that are oeft, become able to sell over the next few years, this is going to continue.

In the last year or two it has become blindingly obvious to landorlds that you either cash in now while prices are high enough for you to get out, or you get stuck locked on lower rent forever and end up broke and trapped.

Marius34

https://www.boards.ie/discussion/comment/118239056#Comment_118239056

"even people who had their heads in the sand, that it is financial suicide not to put up the rent to the max you can"

people try to put rent price to the max regardless if it's in the city. In Dublin landlords equally try to the max what they can get. If in Dublin lower end properties would leave the market, the average would have gone up as well.

Timing belt

https://www.boards.ie/discussion/comment/118239208#Comment_118239208

Or the lower rental properties have already left the market meaning the impact on average rent in dublin is different to outside dublin

JimmyVik

https://www.boards.ie/discussion/comment/118239208#Comment_118239208

There are many actors here, and WFH is a very minor one, if at all.

Villa05

https://www.boards.ie/discussion/comment/118238958#Comment_118238958

Can we be sure it's just a WFH phenomenon, maybe it's just that Dublin is unaffordable to most workers not just the WFH cohort.

Pretty much the same issue in the noughties in that workers are pushed further away from their place of employment. This then has a domino effect on the areas they move to ie the affordability issue is spreading from the cities to going nationwide.

The market is now being printed for maximum pain for the next recession

Marius34

https://www.boards.ie/discussion/comment/118239228#Comment_118239228

It could well happen, but that's would be a gradual phenomenon, and I don't believe it's isolated to the city and to particular year, it's rather a national gradual problem.

As well based on the logic from previous comment's that would mean that rents in past year outside city stayed mostly stable, it just that the quality of homes for rent outside cities on the market are better than in previous years. Which I don't think that it's the case.

Timing belt

https://www.boards.ie/discussion/comment/118238629#Comment_118238629

The ESMA risk dashboard is not showing risk in the markets at the highest level…If anything it is showing a lowering in risk from the start off the year. Yes valuations are higher but volatility, credit and liquidity risk are all way lower. And the risk of contagion is way down and that would be the one that would most likely have an impact on house prices.

PommieBast

https://www.boards.ie/discussion/comment/118238723#Comment_118238723

The results from the delayed census should make interesting reading, as it will reveal how many people are still officially in Ireland but are actually working remotely from overseas. I think it will be a lot as noises I hear is of people still leaving rather than coming back.

https://www.boards.ie/discussion/comment/118239056#Comment_118239056

I also wonder how many landlords have decided to try and chalk up the two years needed for RPZ caps to expire. March 2022 is not that far away...

Amadan Dubh

https://www.boards.ie/discussion/comment/118239419#Comment_118239419

Is red not the highest level?

mcsean2163

https://www.boards.ie/discussion/comment/118239557#Comment_118239557

Ireland is an attractive place despite being so unaffordable.

https://www.worldometers.info/world-population/

World population continues to rise, I meet Brazilian's, Nigerian's, Indian's etc. happy to be in Ireland. We're not actually that bad.

We could easily position ourselves to be attractive to people/ students looking to work/ learn in an English speaking country with high wages. No reason to think our population is not increasing and could easily increase by 50% over the next 30 years.

Bass Reeves

https://www.boards.ie/discussion/comment/118239557#Comment_118239557

Taking two years out would make no senses. Technically you can only charge the market rent after that. Most larger LL and REIT's will have kept there rents up anyway. A smaller LL who had a vacant property during early COVID is unlikely to have left such a property empty when tenants started renting again. Smaller LL are often more dependent on the property for income or part of there income

Villa05

Does the new rental legislation fix the landlord issue raised yesterday?

Can they now raise to market rents where they were caught by rent pressure zones in the past?

Villa05

https://www.boards.ie/discussion/comment/118243340#Comment_118243340

Many small landlords would own the home outright, were it empty for most of covid it would make sense to leave it empty to reach that 2 year threshold and charge market rate when it is reached.

Amadan Dubh

There is a narrative that inflation is only temporary. But what people don't realise from that is that the price rises which occurred during the temporary period don't end, it is just the rate at which they increase which slows down. The translation for that is reduced spending power until wages climb up. If you are getting the same salary as in 2020 you are going to be poorer this year. As such, wage increases will be demanded or else the economy will start to grind to a halt with people not being able to spend as much cash. Of course wage increases will fuel further inflation. It's all spiralling upwards and the cat is out of the bag.

Eurozone inflation at its highest in 25 years. The ECB is revising its inflation forecasts every few weeks as it cannot grasp fully what is happening. This is troubling to say the very least when they are supposed to be responsible for ensuring price stability. If this new covid variant is treated by the ECB as requiring further QE and low interest rates or just a reason to delay taking action, inflation will continue to get worse and anyone can see this. However, with a lawyer and baby boomer at the helm of the ECB, it's unlikely anything will change and the bubble will inflate even more.

https://www.irishtimes.com/business/economy/euro-zone-inflation-soars-to-highest-rate-on-record-1.4742824

Timing belt

https://www.boards.ie/discussion/comment/118244691#Comment_118244691

You need to look at what is driving inflation at present which is mainly energy and ask would people consume less energy by cutting peoples disposable income by raising rates. The answer is probably not as they still need heating and fuel for transport.

Ireland's estimate of inflation for November is estimated at 5.4% up from 5.1% last month and when you strip out the base effect the inflation would be 4.4% which is still very high but mainly driven by energy costs.

bleaks

Did anyone who has been looking for over a year find an increase in supply at the start of last year, compared to the end of the previous year, or is there any stats available on that?

fliball123

https://www.boards.ie/discussion/comment/118238629#Comment_118238629

You talk a good game with regards to property price migration will be a plus figure next year and WFH will mean people buying away from the traditional hot spots but the infrastructure out in the sticks is still poor and as long as the gap (that is currently huge between supply and demand) with regards to property remains then prices are not coming down. Sorry to p1ss on your theory but there is bugger all evidence of the supply vs demand issue that is currently pushing prices up higher being corrected.

fliball123

https://www.boards.ie/discussion/comment/118245634#Comment_118245634

Well I have kept an eye on myhome for years and over the last 18 months it has not gone up more than 13k properties available country wide went under 12k at one point and currently its 12188. So the dial has not moved with this regards. Be interesting to get an idea of mortgage drawdowns vs new builds for 2021 when the info is available.

keoclassic

https://www.westmeathcoco.ie/en/ourservices/yourcouncil/councilnews/seekingtopurchaseturnkeyagreements.html

Government Still keeping prices up in westmeath anyways.

enricoh

With Fianna fail back at the steering wheel the only way is up for house prices baby!

Renting is totally unaffordable now for working couples due to the governments hap. When buying a house now working couples have to outbid the council, the charities, the approved housing boards, the funds buying to lease to the council.

The government was the third most indebted in the developed world prior to covid and I'm pretty sure we've spent the highest per capita on our response to covid - we may be in second place already!!

The whole thing is ready to blow again imo but house prices went up 12% this year- so don't miss out n panic buy now!

fliball123

https://www.boards.ie/discussion/comment/118246876#Comment_118246876

copy and paste the last 2/3 years people like yourself will be right eventually, still zero sign of the gap between supply and demand narrowing, prices are only going one way till this is dealt with.

enricoh

https://www.boards.ie/discussion/comment/118246903#Comment_118246903

There'll be no sign of demand narrowing when government dough is buying so much housing. Let's hope those nasty bondholders pay no attention to the governments debt levels. They have a habit of spoiling the party I believe.

fliball123

https://www.boards.ie/discussion/comment/118246952#Comment_118246952

Our debt levels have been through the roof for well over a decade now, what do you think is likely to change now with regards to bondholders? I mean if the fact that we are still in the middle of a pandemic and that we are still suffering fall out following on from Brexit has not spooked them what will and with all of that uncertainty prices went up 12% this year? So tell me what will the straw be that breaks the camels back? Could it be as with most commodities that are there to be bought and sold their behavior when there is a supply shortage prices go up and/or a surge in demand (and we have the perfect storm of having both). As I say prices wont be going south any time soon. Throw in net migration inwards last year of over 55K, it will be interesting to get a stat for 2021. Throw in the fact that births are still going up faster than deaths even with a global pandemic killing people in this country and you have to ask where are all the extra houses needed for these people not to mention the large amount of new houses needed before 2020? Throw in the number of house completions this year is no where near solving the housing crisis

https://www.cso.ie/en/releasesandpublications/er/pme/populationandmigrationestimatesapril2020/

https://www.cso.ie/en/statistics/birthsdeathsandmarriages/vitalstatistics/

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

enricoh

Corporation tax changes and Ireland becoming less attractive to MNCs as a result could well be the straw. The MNCs tax n high wages keep the show on the road here.

Net inward migration of 55k last year and half the businesses in the country closed? - only in Ireland! Well true, that'll help keep the 'crisis' going, new blood for the homeless industry etc etc

cnocbui

For another thread, I recently calculated that Ireland's national debt stands at just over €150,000 per taxpayer. I am not including the 37% of earners who pay no income tax.

I have been extremely nervous of Ireland's debt levels for at least a decade. I just hope I can get out in time. Now we have Powel saying inflation is not temporary so debt is going to start hurting soon. Good thing that Ireland is so lightly taxed and the Government can just push harder on the Revenue peddle to open the tax throttle a bit more to maintain speed up that debt mountain. /s

I suppose housing demand will decrease as soon as Fed acts on interest rates and the ECB copy them.

Timing belt

https://www.boards.ie/discussion/comment/118247457#Comment_118247457

You do realise that the nominal amount of debt of the country could fall if rates rise as the market price of the bonds will drop and the government could buy back the debt at a large discount.

fliball123

https://www.boards.ie/discussion/comment/118247319#Comment_118247319

So you reckon MNCs making over 750 million a year having to pay an extra 2.5 % on their earnings will make them run for the hills? I cant see it happening. If you think Ireland are in a little bubble of inflation and prices rising you need to open your eyes, property price rising is a global phenomenon and the price hikes on other things such as building material and fuel is also been seen globally so will it be a case of out of the frying pan and into the fire for MNCs then?

fliball123

https://www.boards.ie/discussion/comment/118247457#Comment_118247457

Any chance you can show us your calculations not saying your wrong just interested in how you are calculating this?

cnocbui

https://www.boards.ie/discussion/comment/118247601#Comment_118247601

As posted in another thread:

Irelands national debt is €248,828,484,716

https://commodity.com/data/ireland/debt-clock/

There are only 1,651,900 taxpayers, since 37% of earners don't pay tax: https://assets.gov.ie/86995/006fad3c-ebb5-4b0e-b067-92f8102d6e43.pdf

So the debt is actually €150,632 per tax payer.

Bass Reeves

https://www.boards.ie/discussion/comment/118248194#Comment_118248194

I would not really worry if that is right. At present interest rates are virtually zero or negative. Ireland restructured a lot of there debt over the last 2-5 years. There is an awful lot of it on 10 or 20 year bonds not maturing before the late 20's. At 0.25% and an awful lot it is below that the 150k/, tax payer is costing 375/year.

The big thing if inflation rises is to try to balance the books straight away. If I was the government/NTMA I would not repay those bonds until they were due.

ittakestwo

https://www.boards.ie/discussion/comment/118247045#Comment_118247045

There was a net immigration of 28k and a natural population increase of 27k in the year to April 2020. This led to a total population increase of 55k in the year to April 2020. Both these fell compared with the year to April 2019.

The average household size is 2.5 people. If the population let's say did increase by 50k a year then we should just need to build 20k houses a year. This is is obviously taking that no previous house become derelict. Obviously with a migration from rural to urban over the last few decades and falling house hold size in Ireland ment we should have always been building more than population increase divided by 2.5. But now are household size are at developed country norms and WFH will slow down the urban rural migration, perhaps 30k a year is enough longterm to meet demand.

In economics terms accommodation is what they call price inelastic, which means a small shortage of something can have a disproportionate increase on its price. The big prices increase recently are partly to blame for the lack of building over the last 10 years. Obviously the construction industry was crushed in the downturn. But now we are getting to normal building output. A decade of building between 30k to 40k house which it looks like we could achieve will help sort out the problem. Within 20 years Ireland's death rate will be the same as are birth rate. Since 1991 are fertility rate fell below the replacement rate of 2.1, Currently it is at 1.7. Ireland is getting old tho we are still relatively young compared with our European neighbours.

MacronvFrugals

Allianz pauses investments in Irish residential property market

However, Allianz’s Irish insurance arm lobbied against the move on the basis of the potential reputational risk from the negative public commentary around large institutions owning and renting properties here amid a housing crisis, and being cast as a so-called cuckoo or vulture fund.

Allianz is one of the country’s biggest general insurers, with more than 700,000 customers, according to its website.

Allianz’s decision has been communicated to parties in the property sector here, with the German company ceasing engagement on potential investments.

https://www.irishtimes.com/business/construction/allianz-pauses-investments-in-irish-residential-property-market-1.4743297

Amadan Dubh

It's not surprising but it could just be the start of the political/reputational risk manifesting. Considering the words used to describe SF by those of a certain generation, often reflected in mainstream media opinion pieces and by our FF/FG politicians, will it be a surprise that other institutionals in a few years get spooked and think SF are some sort of mish mash of a communist, terrorist, fascist party? It will probably be self-fulfilling that SF will affect our foreign capital investment prospects given the attitude to them by so much of corporate Ireland and the establishment in this country.

It looks like the foreign and economic policy of just doing whatever corporate U.S.A. wants is going to backfire for Ireland medium term when there's nothing left over after our MNC gravy train is not as lucrative as it has been.

Wanderer78

https://www.boards.ie/discussion/comment/118249661#Comment_118249661

our use of mnc's to modernise our economy has worked, but its now time to move on, its clearly obvious that this approach is now coming to an end, but most arent going anywhere, most will remain here, we need to change with this change, we need to become cleverer with the use of them here, along with the revenue they create

https://www.boards.ie/discussion/comment/118248194#Comment_118248194

what does that mean? It’s not like those 1.6m income tax payers are going to have to stump up €150k each? There are many other taxes. The absolute number surely is meaningless without context, and trend and share of overall taxes

PommieBast

https://www.boards.ie/discussion/comment/118248194#Comment_118248194

To me the 37% non-payers stat in itself is pretty appalling, but that is something for the politics thread rather than here..

fliball123

https://www.boards.ie/discussion/comment/118248194#Comment_118248194

https://www.boards.ie/discussion/comment/118248194#Comment_118248194

Have you taken away what would be garnered in non-income related tax and taken it away to give a proper idea of what the income tax payer is paying??

fliball123

https://www.boards.ie/discussion/comment/118249096#Comment_118249096

https://www.boards.ie/discussion/comment/118249096#Comment_118249096

SNIP - multiple charter violation

cnocbui

https://www.boards.ie/discussion/comment/118251945#Comment_118251945

Are you talking about the Government revenue? If so, I think that's probably somewhere in the second link.

Pussyhands

Stock market taking a beating based on US fed seemingly intent to increase their tapering and interest rate increases. If the decline continues and inflation stays as is, rates will increase. This makes property less attractive for investment and speculators.

Timing belt

https://www.boards.ie/discussion/comment/118253827#Comment_118253827

Stock market is taking a beating because of Covid and the introduction of restricted travel again and the fact that it is highly likely that countries will go into lockdown again. This can be seen by investors pilling into the safety of Government bonds which results in lower yields. The news from the fed has been priced into the market for weeks/months as they have very strong forward guidance so not to spook the markets.

Even if the Fed raised rates 2/3 times in 2022 the rate would only be 0.50%-0.75%. The yield on Irish property is around 3.75% at the moment so I don't think it will cause a big slow down in property.