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

wassie

Werent we all talking yield curve inversions 2 years ago?

Not saying your wrong, I too think the signs of SNAFU in the global economy are there. Just a curious observation thats all.

Timing belt

https://www.boards.ie/discussion/comment/118820506#Comment_118820506

The 10 year minus 2 year yield curve has not yet inverted. But As you say once this inverts you are more or less guaranteed a recession.

Just remember when growth slows during a recession so does inflationary pressures and central banks more likely to cut rates or undertake QE to stimulate the economy.

The most likely impact on property market would be a slow down in new builds and if this happens this is when the government needs to step in and build directly to keep the industry ticking over so that they don’t see people leave the industry like after 08

Jonnyc135

https://www.boards.ie/discussion/comment/118820582#Comment_118820582

Hopefully the government does step in and keep building sector going much like the house building programs in the 60s and 70s. My one fear in all this is the houses tied up by the investment funds for high rental income. When demand drops during a recession time and unemployment rises do they off load their apartments/houses as they are not making the returns they thought or rent them for lower rents meaning less REIT investments in build to rents as rent yeilds would be lower. What's your thoughts

Timing belt

https://www.boards.ie/discussion/comment/118820609#Comment_118820609

Can’t see them off loading properties as any recession will only be 1-2 years max. You also need to remember that there are not enough properties so even if someone renting one of these properties lost their job in a recession it’s not like they will be able to easily find alternative accommodation so rather than add to homeless numbers the government would have no alternative but to strike a deal on rent especially if all hotels hostels vacant properties are full due to Ukrainian refugees.

RichardAnd

https://www.boards.ie/discussion/comment/118820427#Comment_118820427

We're a long way from a buyers' market, and the state will move heaven and earth to keep it that way.

Amadan Dubh

https://www.boards.ie/discussion/comment/118817847#Comment_118817847

Our working population is basically being utilised as a readily exchangeable commodity by the vested interests in the housing market who steer policy. The unwashed masses are given two choices by the housing market masters; sit out in the audience and watch the magician's show, believing what they see before their eyes or else going behing the scenes and seeing that the magician is just utilising optical illusions.

The magician of course is the policy maker, the trick is showing a functioning and sustainable housing market. What is seen from behind the scenes is all the lobbyists, housing bodies, NIMBYs, big developers, etc all representing the props used by the magician.

Amadan Dubh

https://www.boards.ie/discussion/comment/118820582#Comment_118820582

How can rates be cut below 0 though?

growleaves

Yield curve inversion is less predictive of a recession now than it was in the past. With QE the Federal Reserve essentially centrally manages the yield curve. Its not an organic market when yields are being manipulated to such an extent.

The yield curve inverted in 2019 without a recession following.

Before that there was only one false signal (a yield curve inversion that didn't lead to a recession) in the entire period from 1955 to 2018.

https://www.cnbc.com/2019/08/23/us-bonds-treasury-yields-rise-as-investors-await-clues-from-powell-speech.html

Timing belt

https://www.boards.ie/discussion/comment/118821028#Comment_118821028

There was a technical recession in early 2020

growleaves

https://www.boards.ie/discussion/comment/118821051#Comment_118821051

That was heavily distorted by the global shutdown/quarantine of society and the banning of many kinds of trade and other economic activity.

Timing belt

https://www.boards.ie/discussion/comment/118821020#Comment_118821020

Negative rates…..ecb rate currently -0.50%

Jonnyc135

https://www.boards.ie/discussion/comment/118820549#Comment_118820549

We were back in 2018 to 2019 and it remains to be seen if we would have slipped into one but the pandemic came and caused a recession of a different making. In fact by allowing the 12-18 month rule it would have been around the pandemic time that the cracks would have began to show.

But that stemmed from trying to rise interest rates by the fed and they actually caused the s@p and Nasdaq to be down over 20%. Once Trump put pressure on the fed to reverse the interest rate hikes the asset bubble that is the nasdaq and s&p started to rise again.

https://www.boards.ie/discussion/comment/118821028#Comment_118821028

I would argue the opposite, it still is a great indicator couple that with the indicator of a energy supply shock and a recession is due in 12-18 months

Amadan Dubh

https://www.boards.ie/discussion/comment/118821117#Comment_118821117

It really is absurd; saving money is a bad thing and borrowing is a good thing. Whatever about investors, this is what is being encouraged for the general population, "don't save your cash, spend it. Don't have cash? Borrow. Just make sure you keep consuming."

When the rate rises trigger the recession, the big question is how hard the liquidity squeeze in the markets will be when investors retreat. The regulators will feel they did their job the last few years by pumping the markets and economies with lots of free money, but a lot of the cash has been squandered (eg by our government on various housing market schemes) or else it did not made it very far around the economy, instead getting caught at the top level (ie in the markets) with little trickle down or much productive application (eg towards energy and food security or big infrastructure projects).

Since our regulators have been totally caught out with inflation, revising projections every few weeks for the last year and still not doing anything to combat it, I think it is almost certain that they will be too slow to react to the recession trends and the jobs lost and liquidity which evaporates will not come back as quickly as it disappeared; neither will these losses be transitory.

Timing belt

https://www.boards.ie/discussion/comment/118821423#Comment_118821423

just look at the money that was distributed via social transfers such as pup being given to the general public.

yes they want you to spend money and borrow this is what generates growth in the economy via money creation.

no one knows if we will have a recession or how bad it would be…. In my opinion the banks don’t expect a deep recession because they are spending like mad and committing to big projects something they haven’t done for the past 15 years. I think any recession that comes will impact certain sectors of the economy more than others and see it hitting farming, retail, pubs restaurant the hardest as consumers cut back and change spending habits

bluelamp

https://www.boards.ie/discussion/comment/118818466#Comment_118818466

Agreed - the market is screwed. Anything that puts further pressure on the housing market marks the end of the government in its current form IMO.

Everyone has finally copped on to how bad the current price of housing is for society. People aren't stupid - it's clear that astronomical prices benefit a miniscule percentage of the population.

Parents are paying huge rents for their kids student accommodation, have kids stuck at home well into their 30s, are watching them delay starting a family & move further and further away from them to afford a home, and a lot will emigrate if this continues.

It's now not just young people who are fed up.

Fine Gael are done (I say this as someone who voted for them). Sinn Fein won't even have to run an election campaign at this stage - Fine Gael have done it for them already.

I'm not sure what a Sinn Fein government will bring (I'd find it hard to vote for them personally) - but it would be very difficult for anyone renting, hoping to buy, or a parent of someone in that situation, to even consider voting Fine Gael.

Jonnyc135

https://www.boards.ie/discussion/comment/118821423#Comment_118821423

Like you I think the borrowing of money to spend to create growth is ridiculous and shows what the western world has became. Years ago profits were used by companies to create growth and expansions, now with cheap credit all they have to do is borrow and do share buy backs in order to create good shareholder returns.

Watching bloomberg yesterday and Mohamed El-Erian who used be the CEO of PIMCO was saying that western central banks (FED ECB) have lost all credibility over the Inflation and there projections. HE stated the markets now don't really care what they have to say or too because it too little to late and their track record to date is do nothing. He said a soft landing now was next to impossible and he either speeds up interest rates and QT and cause a recession or he lets inflation keep running and he said he thinks they'll do the later.

He also was saying the the free market since the financial collapse does not know how to function correctly without central banks interventions like injecting liquidity as seen in 2018-2019 when the banks nearly ran out of money when they tried to tighten and raise rates.

I do believe most of the western worlds growth now is based off borrowed money even take your average joe. They want you enslaved to this system by heaping debt on you debt most probably for fancy cars on PCP that society says you need because your neighbor has got a new one. Realistically the only real big debt burden on anyone should be their house or mortgage, my cousin works in a credit union and she said the loans some normal people have absolutely scandalous, I just wonder with rising rates will this borrow to spend fueled by low interest rates work out.

Higher inflation on the way, how are people affording these ridiculous house prices and continuing to actually live a life? I cant get my head around it. Have wages really increased that much, if so, I'm definitely in the wrong sector.

RichardAnd

https://www.boards.ie/discussion/comment/118821964#Comment_118821964

One of the many analogies made between the West and the Roman Empire is that the currency of the later Roman Empire was incredibly debased. Some Emperors even tried things such as price controls, where goods would have the same price all over the empire. As one can imagine, that doesn't work well when someone had to pay to ship those amphora of wine from Syria to Gaul. Also, Rome at the time had a massive urban population of people who were utterly dependent on the state for welfare and kept quiet with games. Hmm...sounds familiar, doesn't it?

Anyways, there may be a recession in the coming years, or there may not be. What is inescapable is that the infinite growth model with ever expanding supplies of funny-money cannot continue forever. To me, it seems rather clear that we're passing the point where such a system could be said to be enriching for the average person.

https://www.boards.ie/discussion/comment/118822052#Comment_118822052

I get the sense that the post Covid going out and spending money is coming to an end. The pubs around me getting very quiet, even on Saturday night this week was dead, and restaurants starting to look empty. Post Covid release / partying was a temporary thing and I think there will be a sudden and deep tightening up of the wallets across the country and ‘living a life’ will become a lot more basic

timmyntc

https://www.boards.ie/discussion/comment/118820482#Comment_118820482

Its not as simple as "go somewhere safe"

These people need housed, fed, they have energy demands, transportation needs, education, healthcare etc.

So as not to drag the thread off topic, lets focus on housing - where do we find the housing for an extra 200k people in this country??

CorkRed93

https://twitter.com/Keyes/status/1506182510195228679

christ.

AdamD

https://www.boards.ie/discussion/comment/118822052#Comment_118822052

1: Wages have increased. The Dublin jobs market is absolutely hopping, some people don't seem to want to recognise this.

2: Mortgages are significantly cheaper than rent.

This immigration situation cannot help. Even if they somehow do it by using derelict buildings etc. that just removes another possible option we had to solve our own crisis. Nevermind that it pushes even more pressure on the cost of construction

Sierra Oscar

https://www.boards.ie/discussion/comment/118822157#Comment_118822157

Hospitality sector is reporting that last weekend was one of the busiest weekends since Covid began. Not surprising when you consider it was St Patrick's weekend. Dublin City was packed, serious amount of tourists back in the country. Spending in pubs up 49% in February compared to January alone.

Spending will probably fall back, but I don't get the sense we are on the brink of a serious downturn in the hospitality sector just yet.

On wages, anecdotally speaking, my own wife had her performance review earlier this month and received a much higher than expected increase to help match inflation. Albeit she is in an industry where the jobs market is very competitive at the moment, but that's the same in a fair few industries. I suspect when the CSO pay figures are released later in the year they will show that there is significant wage inflation occurring right now.

People's disposable income is still undoubtedly going to take a hit, but for most people they aren't going to be on the breadline. I suspect inflation in the wider economy will continue to fuel inflation in the housing market.

Timing belt

https://www.boards.ie/discussion/comment/118821964#Comment_118821964

Share buy backs are just a more tax efficient way of paying dividends that US shareholders prefer.

The creation of money comes from the borrowing of money whilst the destruction of money happens when loans are repaid. The west has been encouraging people to borrow from the early 80's and have been cutting rates for the past 40 years to keep this going. It's not something that has only happened since the financial crisis of 08 as a lot of people think.

The logic that you always make a good return in the stock market over time only happens because of the money creation (i.e. borrowing). If the borrowing slowed or stopped then investments suffer including pensions so central banks will do all they can to encourage lending to keep the system operating.... This isn't going to change anytime soon. The system will crash as soon as the USD stops being the world currency which will happen one day as there is only so much road to travel...

Timing belt

https://www.boards.ie/discussion/comment/118822168#Comment_118822168

For those numbers the only way they could be housed is with emergency accommodation.... Probably some form of prefabs like they used to have in the 80's for schools. The alternative would be Tented villages in the curragh but with Irish weather and the no of storms we get that would be a absolute disaster.

awec

https://www.boards.ie/discussion/comment/118821501#Comment_118821501

When asked this very question the SF housing spokesman said their policy would be to give the councils money to outbid the funds.

If you think about this even for a second you can see how terrible this would be for anyone trying to buy themselves. If people think buying a house is difficult now, this is only going to make it many, many times more difficult. Increased state activity in the market with even deeper pockets is only going to send prices in one direction.

There is a naivety that things can't get any worse than they are now, anyone who thinks like this could be in for a very rude awakening.

This "Fine Gael are done" or "Fianna Fail are done" talk is totally overblown. Again I think there's a bit of tunnel vision going on in this thread, I would bet the overwhelming majority of FG and FF voters are home owners, likely in the squeezed middle.

There is a great juxtaposition in all of this that nobody wants to really admit. Whatever government collapses house prices is going to win a lot of votes from those trying to buy a property, but is also going to lose a lot of votes from property owners. This is why the housing problem is so difficult to solve.

wassie

https://www.boards.ie/discussion/comment/118822296#Comment_118822296

Hotels are also going to be used in the short term.

Taking IHG group as an example - Holiday Inn & the Crowne Plaza brands - 4 out of 5 hotels are now unavailable to book for accomodation. Thats probably in the order of 1000-1200 rooms

When I enquired why they were unavailable it was simply stated that 'they had a contract'.

This is going to have a direct effect on tourism right at a time when the sector needs it least as we head into summer.

It may serve the hotels to have full capcity and guaranteed income, but when tourists start arriving, they are going to find skyrocketing prices over accomodation that is remaining.

https://www.boards.ie/discussion/comment/118822243#Comment_118822243

Thanks for your reply. Are Mortgages that much cheaper than rent? It seems anything worth talking about in Dublin is €600k to buy, and alot of these properties require work etc. If a couple has €100k deposit saved (if they are very lucky, most wont if they paying big rent) thats a mortgage of 500k, repayments over 25 years average about €2,200. Maybe you wouldn't get much for that to rent in Dublin, I have now moved from Dublin but pre pandemic we were renting a 3 bed in Drumcondra for €1800 a month. Thats assuming no work has to be done to the house and also many will be buying in a location they dont want, but feel they have to get on the 'ladder'.

Timing belt

https://www.boards.ie/discussion/comment/118822306#Comment_118822306

I think a lot of people thinking SF have the answer to Housing will be extremely disappointed if they ever got into power.

As you say they openly admitted that they would be competing with FTB’s on the housing debate a few months back and we’re unable to explain how they would be able to build more houses than any other political party.

It also amasses me that the same people giving out about being the taxed middle class paying for social housing are the same people wanting SF in power to fix the housing crisis but forgetting that SF is a socialist party that will result in a lower take home pay and make it more difficult for FTB to buy as the use the majority of the builders to build social housing.

Timing belt

https://www.boards.ie/discussion/comment/118822343#Comment_118822343

Valid observation

I also think that builders will be diverted to building some sort of temporary housing such as prefabs which will result in a reduction of new property hitting the market.