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

Reversal

combat14 wrote: »

looks like only 27-35% of new house purchases are by first time buyers

The point still stands that intervention by funds and the state are driving up prices of new homes. But for the sake of accuracy, the article states that only 27-35% of first time buyers bought new builds, in Q1 2020. Which is quite a different statistic to what you posted.

coolshannagh28

Reversal wrote: »

The point still stands that intervention by funds and the state are driving up prices of new homes. But for the sake of accuracy, the article states that only 27-35% of first time buyers bought new builds, in Q1 2020. Which is quite a different statistic to what you posted.

The state was persuaded by the Troika to adopt the long term rental model hence the red carpet for Funds , home ownership is no longer government policy despite their protestations.
Funds may theoretically own a smallish proportion of housing stock but they are monopolising the market that is in play to drive up rents and prices .
This may not have been part of the govt plan a decade ago but our supine attitude to foreign investment has brought the law of unforeseen consequences into play.

Timing belt

coolshannagh28 wrote: »

The state was persuaded by the Troika to adopt the long term rental model hence the red carpet for Funds , home ownership is no longer government policy despite their protestations.
Funds may theoretically own a smallish proportion of housing stock but they are monopolising the market that is in play to drive up rents and prices .
This may not have been part of the govt plan a decade ago but our supine attitude to foreign investment has brought the law of unforeseen consequences into play.

A decade ago funds had plenty of opportunities to invest in assets other than property. The difference is now that thanks to low yields on every asset class thanks to QE the funds are pilling into property as they can still get a yield with little risk.

I would go so far to say that even if the red carpet was not rolled out to funds 10 years ago we would still see them investing in property in Ireland at the moment. Remember that this is happening in every western country that has under taken QE so the main driver is not the red carpet but it certainly does help encourage it.

coolshannagh28

Timing belt wrote: »

A decade ago funds had plenty of opportunities to invest in assets other than property. The difference is now that thanks to low yields on every asset class thanks to QE the funds are pilling into property as they can still get a yield with little risk.

I would go so far to say that even if the red carpet was not rolled out to funds 10 years ago we would still see them investing in property in Ireland at the moment. Remember that this is happening in every western country that has under taken QE so the main driver is not the red carpet but it certainly does help encourage it.

My interpretation of red carpet is tax free investment I would take that every day The only saving grace is that risk is offshored as property always crashes, but the Funds may be shrewd enough to offload , but to whom ?

Timing belt

coolshannagh28 wrote: »

My interpretation of red carpet is tax free investment I would take that every day The only saving grace is that risk is offshored as property always crashes, but the Funds may be shrewd enough to offload , but to whom ?

The only player besides another fund that they could offload to is the government. I don't see the funds offloading the properties anytime soon as their is no other assets to invest in that will provide a similar yield. Maybe some funds will bet that yields will rise due to inflation but I don't see them rising to such an extend that they will provide a similar yield to property.

PropQueries

coolshannagh28 wrote: »

My interpretation of red carpet is tax free investment I would take that every day The only saving grace is that risk is offshored as property always crashes, but the Funds may be shrewd enough to offload , but to whom ?

I think Micheál Martin answered that question during the week:

"The big player in the housing market at the moment is the State... The State actually through one scheme or another is the big actor now in housing provision and what was announced last week by the Minister [Darragh O’Brien] relates to affordable housing"

To be fair to Ires Reit, developers such as Cairn Homes etc., at least they're adding to housing supply and are actually building housing units.

It seems to me that the Government may be using this Maynooth thing as an excuse to tax the Reits etc. in order to help fill that IMF predicted potential c. €6 Billion corporation tax gap that may be soon coming our way and they aren't all that interested in the FTB being outbid by the funds.

They should really be targeting the funds/investors who aren't increasing supply and who may be hoarding both housing units and development land at the moment IMO

Link to article on Micheál Martin's statements in Irish Times here: https://www.irishtimes.com/news/politics/housing-is-number-one-crisis-facing-young-people-taoiseach-1.4559764

cnocbui

coolshannagh28 wrote: »

My interpretation of red carpet is tax free investment I would take that every day The only saving grace is that risk is offshored as property always crashes, but the Funds may be shrewd enough to offload , but to whom ?

How many property crashes have there been?

Villa05

coolshannagh28 wrote:

The state was persuaded by the Troika to adopt the long term rental model hence the red carpet for Funds.,

The funds were allowed in to to soak up nama property, a potential solution to the current issues would be that there tax free status only applies to construction projects they wholly fund and the tax free status ends after a period of time or when they sell

The Troika objective was to create a sustainable rental market so that people did not feel they had to buy to move on with their lives. In other words affordable fit for purpose alternatives to buying. The IMF and United nations have been highly critical of our policies on housing

Governments priority was to get the banks back everything else is collateral damage of that policy

Donald Trump

Donald Trump wrote: »

You'll be right eventually.


Prediction is no good without a timeframe.

Started already
Did you ever heard about "domino effect "?
The domino are falling already just the "property market" brick did not fell yet.

Timing belt

Villa05 wrote: »

The funds were allowed in to to soak up nama property, a potential solution to the current issues would be that there tax free status only applies to construction projects they wholly fund and the tax free status ends after a period of time or when they sell

The Troika objective was to create a sustainable rental market so that people did not feel they had to buy to move on with their lives. In other words affordable fit for purpose alternatives to buying. The IMF and United nations have been highly critical of our policies on housing

Governments priority was to get the banks back everything else is collateral damage of that policy

Hindsight is great but is after the event.... I bet in 5-10 years time people will be saying how wrong QE was that it introduced massive risks and caused asset prices to be overvalued.... But saying this it is what the country does going forward is what really matters as the past can not be changed.

Graham

Revolution 1917 wrote: »

The domino are falling already just the "property market" brick did not fell yet.

I disagree.

If anything I expect markets/economies to get pretty frothy over the next few years. A post-pandemic mini-boom if anything.

Timing belt

Revolution 1917 wrote: »

Started already
Did you ever heard about "domino effect "?
The domino are falling already just the "property market" brick did not fell yet.

What domino's have fallen already? Is it business impacted by covid where the domino fell on a soft cushion thanks to a global intervention. And yes a lot of these business will not recover but that does not mean that the system has crashed.

Timing belt

Timing belt wrote: »

What domino's have fallen already? Is it business impacted by covid where the domino fell on a soft cushion thanks to a global intervention. And yes a lot of these business will not recover but that does not mean that the system has crashed.

2 banks leaving market already and 1 cutting number of branches.
Nobody will tell you system are crashed and if anybody from officials will he will enjoy life on social welfare next day.

Timing belt

Graham wrote: »

I disagree.

If anything I expect markets/economies to get pretty frothy over the next few years. A post-pandemic mini-boom if anything.

I am not convinced that we will see a mini-boom.... maybe for 6 months or so when the economy opens up. I think we will see 10 years of stagnation with one step forward one step back as countries have used their fire power and have very little left to deal with anything new that will come along. I see major trouble for some of the peripheral countries in Europe as the markets will turn on them like they did before and the ECB will be limited to what they can do to help as they already own the majority of these countries debt and take on more may push them past the tipping point.

Villa05

coolshannagh28 wrote:

The only saving grace is that risk is offshored as property always crashes, but the Funds may be shrewd enough to offload , but to whom ?

Why do you think they were avid lobbyists for the shared ownership scheme to the point of writing an advertorial on the Irish Times

Now a business that was buying up property to rent out wouldn't be lobbying for a scheme that reduces the pool of renters and increases the cost of property unless they had the intention of turning over that property quickly to unsuspecting ftb pent up demand

These funds were in here for the fire sales, they won't be hanging around for the crash and the Government have fallen for it hook line and sink

Timing belt

Revolution 1917 wrote: »

2 banks leaving market already and 1 cutting number of branches.
Nobody will tell you system are crashed and if anybody from officials will he will enjoy life on social welfare next day.

2 banks have left the market because they can't make a profit because the market is to small and small banks still have significant fixed costs which exist regardless of the environment we are in....bank profitability have been cut due to the negative interest rate environment.... This is a side effect of QE and the ECB answer is for banks to merge into bigger banks so they can benefit from economies of scale and survive in the low rate environment. This is not the system crashing this is just a well publicised side effect of QE and the low rate environment.

Graham

Graham wrote: »

I disagree.

If anything I expect markets/economies to get pretty frothy over the next few years. A post-pandemic mini-boom if anything.

Yes I am fully agree with Summer time post pandemic mini boom due with holiday abroad shortage but no more than that.

Cockoo funds has investors same as vulture funds.Once markets will start collapse the investors will take investment out of them and then they will have sell properties.
I think in about 1-2 years time we will see houses sales marathon.

All those media songs about cockoo funds hovering the markets I take as they just trying create property deficit atmosphere and make people hurry buy houses at any price.

But at same time I think cockoo funds started selling them making profit.

I do not believe a single word from any media source.

Timing belt

Villa05 wrote: »

Why do you think they were avid lobbyists for the shared ownership scheme to the point of writing an advertorial on the Irish Times

Now a business that was buying up property to rent out wouldn't be lobbying for a scheme that reduces the pool of renters and increases the cost of property unless they had the intention of turning over that property quickly to unsuspecting ftb pent up demand

These funds were in here for the fire sales, they won't be hanging around for the crash and the Government have fallen for it hook line and sink

unless the government step in and buy on bulk from the funds they will be hanging around.

A fund that is developing properties with the intention to sell has a different business model to a fund that is buying properties to rent out..

The funds that are buying properties or building them from scratch to rent out are looking for yield and guaranteed cash flows over a long period and that is why you are seeing the likes of pension funds investing.

Where as a fund that is financing the developing for properties is providing the funding in the same way banks used to provide the funding before 08 and is a short term investment from the fund.

Timing belt

Timing belt wrote: »

unless the government step in and buy on bulk from the funds they will be hanging around.

Buying properties from funds they only will bring more funds to buy property because they will know that government will buy it at higher price

The government must enter all addresses of property bought by cockoo funds to data base and never buy a single house at original price from there ! This property must be exclude of any operations and could be only bought at price the property was bought from builder minus 20 per cent of original price !

Timing belt

Revolution 1917 wrote: »

Yes I am fully agree with Summer time post pandemic mini boom due with holiday abroad shortage but no more than that.

Cockoo funds has investors same as vulture funds.Once markets will start collapse the investors will take investment out of them and then they will have sell properties.
I think in about 1-2 years time we will see houses sales marathon.

All those media songs about cockoo funds hovering the markets I take as they just trying create property deficit atmosphere and make people hurry buy houses at any price.

But at same time I think cockoo funds started selling them making profit.

I do not believe a single word from any media source.

If the funds are structured right the investor redemptions out of the funds would not be possible in your scenario. We already saw this play out on with commercial property last year and the fire breaks that fund had in place worked and gave them time to adequately shore up there liquidity.

The only real risk is that unlike banking regulation... the regulation in place for funds is light touch and may prove to be inadequate in time and we will hear again about how the central bank was asleep at the wheel.

Timing belt

Revolution 1917 wrote: »

Buying properties from funds they only will bring more funds to buy property because they will know that government will buy it at higher price

The government must enter all addresses of property bought by cockoo funds to data base and never buy a single house from there !

To say the government should not buy and properties from a fund is to wide a blanket... The country needs funds to provide financing for new builds as the banks no longer provide this financing. The alternative is the government builds everything its self or provides the financing in place of the funds. There is a need for funds if the policy is that the market will deliver housing and not the government.

In the above I am not talking about cockoo funds I am talking about funds that provide financing to build in the same way the banks used to provide the financing.

The cockoo funds that are buying up properties to rent out are more than likely doing so with peoples pensions without them even realising it.

Timing belt

Timing belt wrote: »

If the funds are structured right the investor redemptions out of the funds would not be possible in your scenario. We already saw this play out on with commercial property last year and the fire breaks that fund had in place worked and gave them time to adequately shore up there liquidity.

The only real risk is that unlike banking regulation... the regulation in place for funds is light touch and may prove to be inadequate in time and we will hear again about how the central bank was asleep at the wheel.

But look they will never rent those new builds in long future
I am seriously can not understand the logic of purchase when they buy property at top market price and then when recession will come they will lose value of the property which will not even covered by price of rent
I am pretty sure that they selling property bought in 2018 now creating panic trough the media trying get best price.
Or builders them self creating panic trying sell property at highest price possible
And the more I see in media about house crisis the more make me sure that they selling those houses and not keep them for rent
The only renting market left in Ireland is supported by HAP.The only way when is really worth buy house for them when they has long term renters which are supported by HAP.
But this could change by click of the fingers ! The labor from Eastern Europe will back home due with recession same as before and no new will come or government could say we pay HAPs only to working class and not unemployed

Villa05

Timing belt wrote:

A fund that is developing properties with the intention to sell has a different business model to a fund that is buying properties to rent out..

Would you agree that both types of funds operate in the market and that current low rate/ high rents would evolve new business models

Timing belt wrote:

The funds that are buying properties or building them from scratch to rent out are looking for yield and guaranteed cash flows over a long period and that is why you are seeing the likes of pension funds investing.

Would the practice of leaving units empty in high demand areas imply that asset value is more important than yield and cash flows and therefore disposal of assets is more important than total rent roll

The multinationals keep them companies in Ireland due with low tax
But when tax will be the same in all world what the point keep company in Ireland when they could keep office in low paid work force similar tax country anywhere in world ?
That will bring renting market in Ireland way down
I am sure the new legislations will be brought due with Covid once it will be seasonal and people will work from home in any country they like.
Many many things could change property market
I am pretty sure if recession will not hit in 1-2 years time then other things will hit property market.

Villa05

Timing belt wrote:

unless the government step in and buy on bulk from the funds they will be hanging around.

The junior minister for housing mentioned that 60% on new build housing is for social on Claire Byrne live on Monday

This would imply that government/ahb's are the dominant customer of these funds through purchase/long term lease

Should be very easy to sell an asset with a state guaranteed income and the asset has to be returned to the owner in the same condition it was sold

Timing belt

Revolution 1917 wrote: »

But look they will never rent those new builds in long future
I am seriously can not understand the logic of purchase when they buy property at top market price and then when recession will come they will lose value of the property which will not even covered by price of rent
I am pretty sure that they selling property bought in 2018 now creating panic trough the media trying get best price.
Or builders them self creating panic trying sell property at highest price possible
And the more I see in media about house crisis the more make me sure that they selling those houses and not keep them for rent
The only renting market left in Ireland is supported by HAP.The only way when is really worth buy house for them when they has long term renters which are supported by HAP.
But this could change by click of the fingers ! The labor from Eastern Europe will back home due with recession same as before and no new will come or government could say we pay HAPs only to working class and not unemployed

The fact is that we don't know where the top of the market is.... if we have meaningful inflation they didn't buy at the top of the market. There is plenty of room for yields on property to fall and funds to still be happy with their return as there investment is still growing.... If they sold what would they do with the cash? They won't leave it in a bank with negative rates, they won't buy government bonds with negative yields, they won't invest in the stock market as this has already been saturated which can be seen the price to earnings ratio's. They only way they could make money is if the timed it right and sold before government bond yields rise and the stock market crashes as investors pull out of stocks and shares and move back into government bonds. It's a big call to make as if they get the timing wrong they will loose big time.

Timing belt

Villa05 wrote: »

The junior minister for housing mentioned that 60% on new build housing is for social on Claire Byrne live on Monday

This would imply that government/ahb's are the dominant customer of these funds through purchase/long term lease

Should be very easy to sell an asset with a state guaranteed income and the asset has to be returned to the owner in the same condition it was sold

yes it would be very easy to sell to another fund... the point that I am making is that outside of funds the only player with capacity to purchase these properties is the government.

yagan

Timing belt wrote: »

It's a big call to make as if they get the timing wrong they will loose big time.

Or as the old financial adage goes they could just sell in May and go away.

coolshannagh28

Villa05 wrote: »

The funds were allowed in to to soak up nama property, a potential solution to the current issues would be that there tax free status only applies to construction projects they wholly fund and the tax free status ends after a period of time or when they sell

The Troika objective was to create a sustainable rental market so that people did not feel they had to buy to move on with their lives. In other words affordable fit for purpose alternatives to buying. The IMF and United nations have been highly critical of our policies on housing

Governments priority was to get the banks back everything else is collateral damage of that policy

Not just NAMA property they were initially enticed in to purchase tranches of banks bad assets and this allowed them to dip their beaks in the tax free waters ; this emboldened other less aggressive funds who incorporated as REITs to exploit the long term high yield rental market . The smart guys on wall st were also set a stunning example of the opportunities in Ireland by Wilbur Ross with his hugely successful bet on Bank of Ireland after which the floodgates opened.

Timing belt

Villa05 wrote: »

Would you agree that both types of funds operate in the market and that current low rate/ high rents would evolve new business models

yes both type of funds exist in the market and their are even hybrids of both entering the market as the funds chase yield as they are limited in whatever else they can invest in to get the same return.

Would the practice of leaving units empty in high demand areas imply that asset value is more important than yield and cash flows and therefore disposal of assets is more important than total rent roll

No I disagree they are leaving vacant as they believe that they will get the high rent in the future. The yield on property is substantially higher than any other asset class at the moment that it gives them the ability to do so. The funds will settle for a lower yield, market forces will drive this yield down as more and more funds enter the market which can be evidenced by their willingness to pay more for property knowing that they will get the same rent.

There is an interesting research paper on the FRED website which looks at the impact of funds on a housing market and talks through the life cycle of the impact of the funds. The issue in Ireland is that we are not building enough houses which makes the property market inelastic which in turn drives up the prices.... In an elastic market you would see the funds start to exit as more supply comes on line and rent falls.