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

wassie

Just read an article published in the Australian Financial Review by Ian Macfarlane who was Reserve Bank of Australia Governor from 1996-2006. It's pay-walled so I have provided an edited transcript below.

Whilst there are some obvious differences from here (such as very favourable tax treat of small property investors), there is a lot of commonality to the current Irish housing crisis and society (and probably the developed world) in general.

Nothing in the article will come as a surprise to most here. But it does articulate quite well that in order to solve the problem, there has to been pain that is unwilling to be administered.

____________________________

House prices must fall for sake of young: former RBA governor

Former Reserve Bank of Australia Governor (1996-2006) Ian Macfarlane nailed it this week when he identified the real economic and social problem fuelled by policymakers over the past decade or so.

Macfarlane wouldn’t be drawn on the RBA changing interest rates, but he touched on a much more pertinent structural problem.

Mr Macfarlane said young Australians should be “squealing louder” as wealth inequality grows, despite near-zero interest rates and record high fiscal stimulus.

He pointed to renewed debate in the United States over the concept of secular stagnation – little or no growth – “despite the most expansionary monetary and fiscal policy in US history”, which he attributed to increasing wealth inequality.

“If most of the increases in national income fall into the hands of the already rich, which is indeed what has happened, it is easy to see why it won’t lead to strong growth in consumption.” Australia’s reliance on income tax was making wealth inequality worse, he said.

.......

“I’m surprised that it’s not a bigger issue,” he said.

“The people who hold all the wealth are the older people – we don’t really tax wealth. The people who depend on income are the young people who have no wealth and our tax system relies very largely on taxing income, so we have a problem going forward.

“I’m surprised that the younger generation aren’t actually squealing louder.”

Mr Macfarlane....pointed to house prices going “through the roof” as the major driver of intergenerational wealth inequality and said “it’s going to be very difficult to resolve”.

“It’s always been an attractive proposition to buy your own house, but we also designed the tax system to increase how attractive it could be and so that’s what’s driven house prices through the roof. This has made this intergenerational inequality of wealth so much bigger,” he said.

But he also blamed voters for failing to support governments in making tough reform.

“Governments respond to what voters want them to do,” he said. “At the moment voters, by and large, are terrified with someone coming up with a policy that will hurt part of the economy, part of the population. Talking about taxation, there’s no way a political party is going to put that forward because it will guarantee they won’t get elected.”

https://www.boards.ie/discussion/comment/119015213#Comment_119015213

agree completely. There is an issue with availability for sure. But there is also an issue of quality. London rents would be similar to Dublin, but the difference in what you get for your money is just staggering. The environment in which you live for the same proportion of your take home is so much better as to be, in my opinion, existentially life and health changing

I genuinely don’t know why young people would not now go to London.

discogurl

This thread is really interesting. Im 32 and got on the property ladder late last year. I bought a small 1 bed in Drogheda last year and I want to share my two cents.

Firstly, the cost of being a homeowner, decorating it, insurance costs, paying your own wifi adds up fast. I was paying 800 for a room in Dublin a few years back and I had an idea that I would be so much better off as a homeowner, reality is I am not

Secondly Dublin, and never wanting to leave Dublin is the problem. I grew up in West Dublin, I seen Saggart as the edge of the world. Now my commute is 90 mins each way to my office on the South Circular Road, but thats only an extra 30 mins on top of the journey to the family home from the office. Also, I kid you not, I and many of my friends had this idea, likely based on holidays to small towns in the 90s, that outside our cities we have nothing. Drogheda is much more Urban, with better facilities and shops and yes avocado toast joints then Tallaght. It even has hipster bars

Here's how I bought, I earn 40,000 a year. I moved home for 3 years. I saved 1700 a month (bar 2 months a year with christmas costs and 1 holiday), I gave my folks 300 towards the bills and lived off 650 a month. After 3 years I had 50,000. I bought a 1 bed for 150,000, though the asking price was at first 130,000. My fees and solicitors cost 5000. I put 30,000 down. I spent 5000 between Power City and Ikea and put 5000 in a deposit towards a car for commuting. The other 5000 is my rainy day fund for anything that may go wrong.

Heres the point, all my childhood friends are renting in Dublin, rooms mostly or living at home. All are complaining yet all can do what I did, and most are saving but would never consider a 1 bed, never consider moving an hour out of Dublin (or even moving to Balbriggan) and will never consider a kip that a few grand in Ikea can add some sparkle to

I had to accept after years of feeling like I was screwed that we are simply the tech capital of Europe, and in Dublin you are in competition with the highest paid people in the most niche industries in the world, from all over the world. We simply cannot live in it like our parents could, just like Londoners accepted maybe 20 years ago. Its not oppression, its simply the impact of being an open global economy.

PommieBast

https://www.boards.ie/discussion/comment/119016253#Comment_119016253

I ended up making that jump, but it was only after 18 months of Irish Covid lockdown had completely wrecked my social and personal life, and I had the advantage of UK family to act as a temporary base. Emigrating is not an easy process.

After seeing how much building was going on around my parents' place I find it hard to believe that lack of building in and around Dublin is down to things like global material cost.

Jonnyc135

https://www.boards.ie/discussion/comment/119016298#Comment_119016298

First of all we'll done on your hard work of saving to get on the property ladder. Comming from the west of Ireland, I would tend to agree I think there is too much focus on Dublin. There is life outside of Dublin.

Personally I do feel sorry for the Dubliners who are being priced out of their home area where they were rated. I think this also has a real negative effect on the community aspect of an area.

One of my main gripes with our government is the lack of Investment in other cities around Ireland instead of pumping every new job into Dublin. Jesus even Stripe and the Collisons couldn't even bring there Stripe office back to Limerick.

L1011

Tech firms don't want to go anywhere but Dublin, though. If they aren't offered Dublin it'll be a different country entirely.

Now, whether we should just offer "not Dublin or no support at all" as the options... possibly!

AdamD

The government don't pump those jobs to Dublin, businesses choose to locate there.

Anyway, our other cities aren't exactly brimming with avaliable housing.

Jonnyc135

https://www.boards.ie/discussion/comment/119016527#Comment_119016527

Could be more of an enticement from our government to MNC to try other locations in Ireland.

L1011

https://www.boards.ie/discussion/comment/119016635#Comment_119016635

There already is. IDA can give more support in regions. Udaras funding available quite close to Galway city centre even.

They don't want to go there. They want to go to Dublin or nowhere in Ireland.

Some of the tech firms coming in are not getting any IDA support at all.

Browney7

https://www.boards.ie/discussion/comment/119016298#Comment_119016298

Well done and some fair points there for sure!

Do you ever intend on getting married or shacking up and starting a family? By not being one of the sacred "first time buyers" any more do you ever think you may be disadvantaged in the future (not getting the new build grant, not subject to 10% rule) or are you confident you'll accumulate enough equity in your one bed and sell when the time comes for the next step in life?

discogurl

https://www.boards.ie/discussion/comment/119016845#Comment_119016845

I dont see myself ever having a long term partner or a family. I have always been more of a lone wolf, and I think thats becoming more common. And I really don't care about equity, moving up ladders, investments etc. I bought a home to live in mostly to avoid the fear of being left out of dry in old age and to live on my own with the security of not being at risk of a landlord sweeping it from under me

Sierra Oscar

https://www.boards.ie/discussion/comment/119016655#Comment_119016655

Fair point. The IDA have invested significant resources in marketing locations outside of Dublin to perspective tech employers. They want to be in Dublin, where all of the other tech companies are based.

combat14

https://www.boards.ie/discussion/comment/119012560#Comment_119012560

we were talking about this in work today ... word has indeed gotten out internationally that there are no houses here .. rents are insane and the infrastructure is just not up to par.. to top it off the highest rate of tax starts at just 35k .. what professional in their right mind with any other option would want to come here .. instead the regular jo-soap masses keep coming and soon we will have to put them into tents ⛺

Bass Reeves

https://www.boards.ie/discussion/comment/119014330#Comment_119014330

No they have a place where site costs are extremely expensive. However the savings are limited. They have a number of disadvantages. They cost more to construct than standard houses.

https://www.boards.ie/discussion/comment/119014504#Comment_119014504

Yes but the higher you go more units per acre the more expensive per unit they cost to construct.

Timing belt

https://www.boards.ie/discussion/comment/119014577#Comment_119014577

You didn’t have funds buying residential property 10 years ago… most landlords would have been individuals with one or two properties so wouldn’t have been classified as CRE

AdamD

https://www.boards.ie/discussion/comment/119017290#Comment_119017290

That doesn't change my point at all though. Sure the higher you go, the cost per unit to build may rise, but the higher you go, the land cost decreases also. The barrier to high rise is planning laws, not cost.

Timing belt

https://www.boards.ie/discussion/comment/119017387#Comment_119017387

This from an old report back in 2020 but it does show that the all in development cost of high rise increases the higher you go even after taking into account the land costs.

Low range = low spec for the apartment

high range = high spec for the apartment

Source: https://scsi.ie/real-cost-of-new-apartment-delivery/

wassie

https://www.boards.ie/discussion/comment/119017290#Comment_119017290

They have a number of disadvantages. They cost more to construct than standard houses.

No offence - but I really have no idea what your trying to say now.

Murph85

Its genius thinking here. Design something with " standards " that most cant afford. Many living in shitholes currently. Maybe some sort of middle ground would be good...

mcsean2163

Lots of tech in Limerick e.g. Stryker, analog, etc. I think by tech you mean Microsoft, Aws, Google, meta, tiktok, etc. i.e. software solutions.

Without pharma which is tech....

Just saw this

https://www.irishtimes.com/business/economy/ecb-policy-tightening-sends-eurozone-borrowing-costs-soaring-1.4869185

rate hike July, mortgage rates to go up and Italy in trouble. We're the most indebted per capita in Europe. We're going to have to pay interest going forward. Some person here said it didn't matter how much we borrowed.

Reforms would take effect in 2023. It would affect 56 Irish multinationals that employ 400,000 people

We're moving to 15% minimum for large multinationals next year...

I hope the person who thinks national debt doesn't matter is correct

Bass Reeves

https://www.boards.ie/discussion/comment/119017591#Comment_119017591

That would seem to be a problem you have. It has been pointed out to you numerous time that apartments are more expensive to construct than houses.

At this stage apartments can only be build if the projects are funded by non bank or developer funds. That is mainly pension investment funds who build to rent.

Apartments unless the site is extremely expensive ( Dublin4 some city center sites) or maybe where you have dense employment like the Docklands are way more expensive that building standard houses in Ireland.

timmyntc

https://www.boards.ie/discussion/comment/119017591#Comment_119017591

SCSI report on apartment costs is here https://scsi.ie/wp-content/uploads/2021/01/SCSI_RealCostofNewApartmentDelivery_final.pdf

Construction costs per apartment increase as you go for higher/denser complexes. Also site valuations tend to be higher for sites "suitable" for high rise, which cancels out any benefits you get from scaling up.

Villa05

Worldwide construction cost comparison for various housing types

https://constructionphysics.substack.com/p/construction-costs-around-the-world?s=r

awec

Some mortgage stats out from AIB today:

• Drawdowns up 17% on Q1 2021
• Highest amount of first quarter lending in 3 years.
• Non-performing loans decreased to 5%, lowest level since financial crisis.
• On track to achieve 3% non-performing target by 2023.
• Green mortgages represent 22% of their lending.

Overall seems to be a positive outlook for the year in their eyes. They announced they'd be doing a share buy-back.

MacronvFrugals

416K a pop, not bad

McGrath group sells 108 units in Cabinteely to not-for-profit charity Clúid Housing

https://www.msn.com/en-ie/money/news/mcgrath-group-sells-108-units-in-cabinteely-to-not-for-profit-charity-cl-c3-baid-housing/ar-AAWVQo0

mcsean2163

Myhome back above 12,000, first time since at least 10 Dec 2021.

dubal

https://www.boards.ie/discussion/comment/119018755#Comment_119018755

Looked at a house last year, went sale agreed in the summer, sold in property price register in September - still sale agree in myhome.ie

timmyntc

https://www.boards.ie/discussion/comment/119018424#Comment_119018424

great read - mad that almost all european capitals can produce cheaper buildings per sqm with higher wages

something seriously wrong here

mcsean2163

https://www.boards.ie/discussion/comment/119018773#Comment_119018773

Mad. I guess the agent forgot to delist? I assumr this has always been the case, so back above 12k is still significant imho.

I'd call the agent if I were you, wouldn't fancy people coming around our house to kick the tyres.

Villa05

https://www.boards.ie/discussion/comment/119018814#Comment_119018814

We pray that lidl and Aldi do construction and carlsberg do regulation