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

Amadan Dubh

https://www.boards.ie/discussion/comment/118543403#Comment_118543403

Sure, two main reasons;

1. State Actions To Prop Up The Market

2. The Everything Bubble.

1.

Again I have to point out that the costs of housing have been inflated by State actions. Policies to drive tens of thousands of small landlords out of the market, putting a floor on rents with RPZs, paying hundreds of millions in rental supports, HelpTheBrickie, tax breaks for institutionals and a very friendly approach to the needs of institutionals who only care about maximising profit. At the same time there is a refusal to take meaningful action to dramatically increase supply which shows that the government is manufacturing this situation. The rationale for acting as a whale in the housing market was perhaps noble ten years ago in order to try to help mortgage holders to get out of negative equity, but it was come at a cost to certain sections of society. Therefore, I question the medium to long term sustainability of the State's actions to inflate the housing market when we see that in 2016 an estimated 80% of 25-34 year olds did not own their home (which is likely a similar percentage of a wider age group 5 years later) - how will these people be taken care of if they are long term renters, with little cash put aside for pensions and no house of their own to ensure financial security on retirement? Quite simply, the government's actions are unsustainable and may have appeased voters of the past but I only see it going one way in the future as there is quite clearly an a demographic divide in the housing debate.

2.

I can see you obviously have a banking regulatory background but there is also the wider economic picture where property fits in as well and what is being referred to as the everything bubble for a reason. Rather like 1. this everything bubble comes from the actions of central banks like the Fed and ECB who are literally propping up their respective financial systems, even buying the debt of what are effectively zombie corporations that ordinarily would be allowed to fall. My own area is the funds are and while it is regulatory as opposed to being at the coal face of investments, it is pretty easy to see how the asset bubble grew and I don't believe it is sustainable, there is a lot of cheap money, high risk and fraud in the system which now sits off the balance sheets of banks and instead flows around the less regulated funds area.

kneejerk

Supply and demand is not the basic rule of our economy or our housing market.

Fed QT will impact us all. ECB can hold for a bit but rate rises are now priced in so they are now needed.

You can draw your own conclusions after that

Villa05

@Timing belt

Thanks for the detailed response. Why do the FED feel the need to raise rates by what now looks like 1.25%. Does QE stop when rates are increased?

ref inflation The US has been open for longer than than the EU so are further down the inflation effects of reopening? Are they the canary in the coal mine for inflation expectations for the EU in the coming years. The EU also has the Brexit effect plus strife in Ukraine to potentially add to rhe inflation effect.

If the ECB were just to increase the ECB rate to cool the economy and inflation we would end up with an inverted yield curve which would be very dangerous to future economic growth. Instead I believe the ECB will undertake QT as the main driver to cool the economy with only moderate increases to the ECB rate (to impact consumer sentiment and their expectations of inflation)

timmyntc

https://www.boards.ie/discussion/comment/118543403#Comment_118543403

I dont think anyone is disputing that demand outstrips supply - to do so would be stupid.

But just like how last time we had credit fuelling rising prices, today we have government doing the same on the lower end of the market (purchasing homes for social housing), investment funds buying to get rental yields above the bonds of the day, and schemes like HTB which do nothing other than inflate asking prices.

When supply cant meet demand, prices will rise - but the extend of that rise is dictated by other factors - usually whoever has the deepest pockets. In this case, the state & institutionals do. Prices can rise and rise because of these, far beyond what most buyers can afford - so if something where to happen to those big buyers, prices could drop without any additional supply (or us coming anywhere close to having "sufficient" supply in the market)

iColdFusion

For everyone saying HTB is bad, do you honestly think house prices would drop and supply would increase if it was removed?

Are you seriously in favour of locking FTBs out of housing to keep them renting or living with their parents well in their 30's to teh benefit of 2nd time buyers who already have a home but would like a fancy new one?

Seriously people look at the stats of how high rents are, how low home ownership is for 25-35 year olds, how high social housing lists are, how many billions the government plans on spending building houses for people and tell me again HTB isn't needed to help alleviate all that.

All I get is a "Let them eat cake" impression from people who clearly already have their own homes and can't see removing HTB will increase social housing requirements, reduce demand ,and as such supply, of new houses and will have a clear knock on effect for years to come with couples putting off having families which will come back to bite everyone come retirement, €30k is a very small amount of money to help working people get a home and start a life together.

Wanderer78

https://www.boards.ie/discussion/comment/118544081#Comment_118544081

...the issue with increasing the supply of money towards the purchase of property is exactly why we are where we are, we have to stop this madness of doing everything to keep driving up prices, and increasing the money supply is one of the main reasons for this....

timmyntc

https://www.boards.ie/discussion/comment/118544081#Comment_118544081

HTB doesnt help anyone - the net effect is that property prices are inflated across all new builds, and the first time buyers end up just as badly off as they were before HTB came in. When you have a supply issue, schemes to give buyers more credit will only inflate prices.

iColdFusion

https://www.boards.ie/discussion/comment/118544130#Comment_118544130

https://www.boards.ie/discussion/comment/118544158#Comment_118544158

Except the statistics don't support HTB inflating prices or that FTB's don't need it at all, its 2nd hand buyers throwing their cash around and the government house buying reducing private sector availability:

https://www.cso.ie/en/releasesandpublications/ep/p-rppi/residentialpropertypriceindexnovember2021/additionalindicators/

RichardAnd

I've been lurking here for a while now, and I thank the sageful posters here for their insights.

There was an interesting article in the Independent yesterday, postulating that Ireland is back in boom-land.

https://www.independent.ie/business/irish/the-boom-is-back-as-economy-to-grow-strongly-for-years-says-central-bank-41279009.html

I've heard similar things said on other Irish media sites too, and it's the first time that I've heard of a post-Covid boom. What do people think of this?

My own two cents is that this may be an attempt to classify the post-Covid inflation as a boon (not a typo!). The state has unleashed billions into the economy in the last two years, and the country is simply awash with cash. Is this the source of the growth. With regard to housing, prices will obviously continue to rise.

It seems that the next few years will almost certain see the prices of just about everything rise, and we could be back to the days of the early 00s with rampant building of housing and massive levels of consumption. I suppose that's great for some people, but after the last boom came crashing down, many people were left with massive levels of debt, unemployment soared and the country was left covered with card-board quality houses. That may not happen again, but we'll see.

I personally think that we're charting a course that is going to lead to ruin. We constantly hear about sustainability, but what exactly is sustainable about the building of thousands of "houses" every year? Furthermore, what's the end-goal? All I see here in Dublin is the constant construction of utterly hideous, soulless buildings. I don't exactly feel warm and fuzzy inside when I think of the world that will be waiting in 20 years' time.

theboringfox

That graph does not show HTB is not an issue. I do not like HTB but it is not biggest issue. Single biggest issue driving house prices is mortgage interest rates falling. Has improved peoples repayment capacity and made a mortgage cheaper than renting. A mortgage being cheaper than renting is a brand new phenomenon that never existed 10 years ago. All of a sudden it makes huge financial sense for people to buy and not rent. That was not the case for me in my 20s and early 30s. My own mortgage that I took out in 2016 dropped 20% as monthly outgoing due to rate reductions ... And it would reduce further based on current rates available. I am also someone needing to extend or buy again so I hate this market and would love to see house prices become more affordable

Timing belt

https://www.boards.ie/discussion/comment/118543557#Comment_118543557

The state has always been a major player in the property 0market and this is not something new that has just happened after 2008. Pre 2008 the use of stamp duty was used to increase/reduce demand. Every-time there was been a housing crisis (and there have been quite a few in the past 100 years) it has been resolved by the state undertaking large scale social housing projects.

I don't understand how you can assume that it was government policy to increase house prices to get people out of negative equity... Yet again there is a difference between cause and correlation. Houses were not being built because the cost to build a house was higher than what you could sell it for which is the main reason we have a chronic undersupply today. This shortage in housing pushed up prices and once it hit a stage that you could sell a house for more than it cost to build, houses slowly started to be built. Ideally during this time the government should have stepped in and built social housing and in doing so kept the house building sector alive to prevent a housing shortage but lets not forget that the country had the IMF and EU pushing austerity down the countries throat so this could not happen.

In regards to home ownership ages yes this has fallen in the younger age group and one of the factors that has driven this is that a higher percentage are undertaking 3rd level education and as a result only get financial secure at an older age. If you went back 20 years a lot more people would have gone into trades at a younger age and as a result were established at a much younger age. I am not saying this is the only reason but it is one of a number of factors including the time it takes to save a deposit.

I can see whatever government is in place wanting to winding HAP up but they won't be able to do that until there is a sufficient supply of housing whether it be due to a surplus of private rental accommodation available driving rents lower or the delivery of social housing. HAP is not going to be taken away overnight by any political party. The only way I could see it being wound back is if the government gets into difficulty and is unable to service its debt which in the short - medium term is highly unlikely.

My background is in financial services and not specifically in banking regulation so I fully understand the wider picture and the risks that exist in the financial markets. It is worth noting that the areas that are less regulated is down to the fact that they have a significantly lower systematic risk to overall financial system and the wider economy. And this is the key point they are not systematically important and if they go tits up they will not bring down the financial system. Back in 2008 governments need to bail out banks because they were systematically important.

I would agree with you that there would appear to be a bubbles out there and some of them are in property markets but I don't see a bubble in the Irish property market as there are fundamentals that can explain the current prices. When these bubbles pop Share prices and investments may fall and it could turn into a blood bath and central banks will stand and watch and will only intervene if it spills over into the real economy creating unemployment or a risk of a recession. Likewise any major impact on the Irish housing market would only be felt if a market crash spilled over into the real economy and if it did central banks would act accordingly.

In regards to zombie companies and the FED/ECB bailing them out do you have an example of a specific company or are you just talking about the general fact that the low interest rate environment is bailing them out.0

iColdFusion

https://www.boards.ie/discussion/comment/118544482#Comment_118544482

Its sky rocketing rents and a lack of rental properties that are driving people to want to buy, mortgage rates aren't that low here really and not a major consideration for the majority of buyers looking at sub €350k properties.

mcsean2163

Any thoughts on this.

https://www.myhome.ie/residential/brochure/10-burnaby-manor-the-old-burnaby-greystones-wicklow/4565652

Seems a lot for s small 2 bed or am I missing something?

Villa05

https://www.boards.ie/discussion/comment/118544365#Comment_118544365

I believe we have one of the lowest turnover of houses in the world, it's highly unlikely that existing homeowners are driving prices higher.

People buy houses to live In and their passed down the generations, therefore people buy houses to live in while government pump them into an investment vehicle.

Therefore the population believe houses are homes, government have turned them into investment vehicles.

Also that graphic you posted states that FTB are buying used over new at a ratio greater than 2:1 meaning two thirds are foregoing htb or that new prices are out of their reach

DataDude

https://www.boards.ie/discussion/comment/118545026#Comment_118545026

Being priced on location alone, just off Saint Vincent's Road. Move it 300 meters in any direction and you could knock €150k off the asking - at least.

awec

https://www.boards.ie/discussion/comment/118545026#Comment_118545026

This is a highly desirable location. Very short walking distance to Greystones main street, but still tucked out of the way so it'll be quiet.

fliball123

https://www.boards.ie/discussion/comment/118543375#Comment_118543375

and how many extra properties will this 27k construction workers need to built to be housed?

Villa05

https://www.boards.ie/discussion/comment/118546334#Comment_118546334

Have you morphed into another poster not seen for a while 😁

We need supply, let's get in workers to build, oh no we can't, where will they live,

OK, let's continue to sit on our hands

Amadan Dubh

https://www.boards.ie/discussion/comment/118545026#Comment_118545026

G4 always commands a premium.

Joking, but that is a nice mark-up since 2017 where it is listed on PPR for €437,000.00 - 43%.

MacronvFrugals

https://www.boards.ie/discussion/comment/118546563#Comment_118546563

The markup reminds me of this one in HC

Sold September 2019 - 450k

On the market now - 725k

61% rise or €8,430 per SQM

Granted its a period red-brick in D6W but still

https://www.daft.ie/for-sale/semi-detached-house-275-harolds-cross-road-harolds-cross-dublin-6w/3690873

timmyntc

https://www.boards.ie/discussion/comment/118546334#Comment_118546334

so long as they all build more than 1 house each during their time in the country, its all good

fliball123

https://www.boards.ie/discussion/comment/118546530#Comment_118546530

No just highlighting the problem we will be inundated with foreign migrants once covid is gone we will be back to the trend of over 50k people a year coming into the country which was the norm just before covid. Ireland is an attractive place to live and to work. It has it down sides but when your coming from the third or second world and you want to learn English , get a job and progress our country is a beacon for people from all over the globe. This is before our birth vs death rates are taken into consideration we are a nation of breeders and we are living longer this is also feeding into the issue of housing. So your once off 27K construction workers will be small potatoes when it comes to housing but where do they go to live when they get here??? I am not slagging your suggestion just asking the question. I think we need a hell of a lot more than 27k construction workers to solve our current and future housing deficit by the way..

fliball123

https://www.boards.ie/discussion/comment/118546774#Comment_118546774

Thats assuming that they are all going to leave?

Villa05

https://www.boards.ie/discussion/comment/118546907#Comment_118546907

I get what your saying, but we are allowed choose who we can let in from outside the EU. If 27k construction workers wish to come in to add to the existing pool of 130k, great, give them a 5 year visa, more than likely we will need them long term as there is an age issue with the current pool so we'll need more workers to pay their pensions.

As for where we are going to put them, an extra 27k construction workers could boost output enough to house them all so we have a net gain after 12 months.

I don't see anyone ringing up eli lily to tell them to cancel their plans for a new facility in Limerick because we don't have any houses for the workers

mcsean2163

https://www.boards.ie/discussion/comment/118546907#Comment_118546907

Emigration massively affected our population demographics. Not to be morbid but deaths per year will increase considerably over the next 40 years.

https://www.cso.ie/en/releasesandpublications/ep/p-cp3oy/cp3/assr/

The population hump from 80s children is now likely in the 40s age bracket from the 216 figures.

Timing belt

https://www.boards.ie/discussion/comment/118543916#Comment_118543916

The alternative of the state buying private houses for social housing and competing with FTB’s is providing HAP until such time as the the state can build its own social housing. And once the state starts building social houses it will create extra demand on building resources which will push up the building cost unless the state import builders which would in turn put upward pressure on rents.

With regards institutional investors most of these are pension funds or are REITS that will package up cashflow and sell on so that they can buy more property. I just don't see a situation where these big buyers will exit the market and sell existing properties. Rising rates will mean that property will become less attractive as yields on other assets rise so we may see a slow down in the buying of new properties but I somewhat doubt that this will happen to an extend that it would cause a fall in prices.

Timing belt

https://www.boards.ie/discussion/comment/118545278#Comment_118545278

FTB's are buying used houses because there is not a sufficient supply of new houses.

I think that a lower turnover of houses is due to the fall in house prices after '08 because before then the talk was always about getting on the ladder and trading up overtime. The no of former house owner buying whether trading up or down or sideways is still twice the no of FTB.

Source: CSO HPA02 - Residential Dwelling Property Transactions

Timing belt

https://www.boards.ie/discussion/comment/118543882#Comment_118543882

The FED is raising rates fast and at the same time undertaking QT but as Powell said the other day the will closely monitor the situation and adjust accordingly if needed. To me that was saying that if choke growth to much whilst fighting inflation we will ease off or reverse some of the changes if the US economy starts to go into recession.

The US will have phased out the purchase of new QE by the end of march. Which put in English is that will stop growing their balance sheet. Once QT starts they will start reducing their balance sheet by either selling back to the open market or by not buying (or reducing) new debt when the existing debt comes to maturity.

I don't believe that one area re-opening earlier is the canary in the coalmine as any inflationary pressures from reopening would be temporary.

The US economy is in a different place to the European economy. The US are at/or close to full employment and this along with the fact that they don't have to go through a pay review process with unions means that prices in there labour market change quickly and I would put this down to the main factor driving inflation in US at the moment.

The EU is not at full employment (I think it is 7-8% in Europe compared to 4-5% in the US and UK) and the fact the workforce has a significantly higher Union participation means that there is not the same upward pressure on wages as in the US. I should add that I believe the Irish economy is more in step with the US economic cycle as opposed to the EU due to the amount of US FDI in Ireland. Brexit has generated inflation in the UK way more than it has throughout the EU and any strife in the Ukraine will push gas and oil prices higher which will impact all countries a like and not just the EU.

Timing belt

https://www.boards.ie/discussion/comment/118544130#Comment_118544130

How do you stop the supply of money from going into property. Introduce further legislation to to restrict the amounts people can borrow for house purchases? Is that your solution?

hometruths

https://www.boards.ie/discussion/comment/118545278#Comment_118545278

I believe we have one of the lowest turnover of houses in the world, it's highly unlikely that existing homeowners are driving prices higher.

This is the root of the problem, and I'm consistently amazed it does not attract more comment.