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

IWW2900

https://www.boards.ie/discussion/comment/119643079#Comment_119643079

Its simple really. Delusional here saying prices cant go down because of supply and cost of rents.

Im saying prices will go down because of rates.

I know who anyone with a clue with will agree with. Ordinary people buy into the narrative created by government, real estate companies and the Irish media.

IWW2900

https://www.boards.ie/discussion/comment/119643144#Comment_119643144

And I know why interest rates are rising, most people here have no clue.

Timing belt

https://www.boards.ie/discussion/comment/119643144#Comment_119643144

How much will they go down and when if it’s that simple

IWW2900

https://www.boards.ie/discussion/comment/119643156#Comment_119643156

Well how much prices go down on depends entirely on how aggressive and adamant central banks are. But it is clear they wont be shifting gears any time soon. What people dont realize is that QT hasnt even started yet.

It is clear to have a correctly functioning economy they need rates to go up and pull the excess out of the system and we are long overdue a recession.

Dav010

https://www.boards.ie/discussion/comment/119643144#Comment_119643144

Link please. You are posting BS. There is not one poster/expert, whatever you want to call them, who has said a crash can’t happen.

IWW2900

https://www.boards.ie/discussion/comment/119643189#Comment_119643189

Listen, I have been saying for weeks in here that the only thing that matters is interest rates, and people just keep going on about rents and low supply.

Its clear most people dont understand the market.

byrne249

https://www.boards.ie/discussion/comment/119643156#Comment_119643156

I believe it's generally accepted that a mortgage rate increase of 1% equates to approximately a 10% drop in purchasing power

I would add, A 0.5% mortgage rate drop over the last four years equated to a lot more than a 10% rise on the flip side so who knows, maybe they only drop 1%.

Timing belt

https://www.boards.ie/discussion/comment/119643177#Comment_119643177

You didn’t answer the question. I thought you said it was simple…let’s make it easier if rates jump to 3% tomorrow how much will house prices fall and how long will it take.

Also you are 100% wrong in saying QT hasn’t started yet…it started 6 months ago.

Dav010

https://www.boards.ie/discussion/comment/119643202#Comment_119643202

Again, which experts said a crash can’t happen. It’s a simple question based on your statement.

Interest rates are not “the only thing that matters”, it is not as simple as that.

Dav010

https://www.boards.ie/discussion/comment/119643220#Comment_119643220

Do you mean 10% drop is disposable income by any chance? I cannot find any reference linking 1% rare increase to 10% drop in price, what is your source for this?

byrne249

https://www.boards.ie/discussion/comment/119643258#Comment_119643258

Apologies, You are 100% correct. It's your purchasing power it affects. So like I said, may have very limited effect.

I can't post links. I heard it on Newstalk recently. But MymortgageInsider have an article stating a 1% Mortgage rate rise = 11% decrease in buying power.

Timing belt

https://www.boards.ie/discussion/comment/119643220#Comment_119643220

I would agree with that logic if there was no central bank rules in place. And would expect to see this happen in the likes of the USA, NZ and Australia.

If they weren’t there then as rent went higher so to would have house prices (if the 3.5x limit wasn’t in place). This can be seen right across the western world where price to income ratio keeps growing and house owners have borrowed right up to the max of their affordability level. As rates rises they have less disposable income and renting becomes a cheaper option so house prices drop.

although house prices are very expensive in Ireland the fact that mortgage repayments are cheaper than rent tells you that people that have borrowed have been restrained by the CBI rules because if they weren’t in place they would be able to make mortgages repayments that equaled rent. Only when rent is cheaper than mortgage repayments will we see drops in house prices that will be sustained.

IWW2900

https://www.boards.ie/discussion/comment/119643318#Comment_119643318

Again, missing the point. Rents are high mainly because interest rates have been so low. You still dont see the common denominator, interest rates.

Your logic is like saying the sun will always shine as long as the grass is green.

Timing belt

https://www.boards.ie/discussion/comment/119643350#Comment_119643350

Rents are high because of low rents explain that logic? Is it because when rates are low landlords can borrow more ?

IWW2900

https://www.boards.ie/discussion/comment/119643230#Comment_119643230

I never claimed to know how much prices will fall and I wont partake in such games.

What I can tell you from past experience, is that the reality of the market usually takes time to reach the normal people. But markets are sentiment driven, once sentiment has shifted, prices can drop quicker then most people foresee.

IWW2900

https://www.boards.ie/discussion/comment/119643363#Comment_119643363

The whole market is propped up by investors. They invest in property because it gives good yield. Prices go up because more money is available to more people. Because prices are going up, more people are willing to pay higher and higher amounts.

As interest rates rise and prices drop, investors see much safer forms of investing as being an option again. This amplifies falling property prices as investors dont want to take risks in assets when they can put their money to work risk free.

Rising rates reverses everything and falling prices amplifies the biggest factor in markets, sentiment. When prices are dropping people are much more careful and stop buying.

Timing belt

https://www.boards.ie/discussion/comment/119643396#Comment_119643396

What safer asset do you see investors shifting to?

==> Cash looses value due to inflation

==> bonds/debt loose value with interest rate hikes

==> Stock market I wouldn’t consider safer than property

Yes sentiment is a driver no one is arguing there but there are also fundamentals that underpin an asset value and see it trade within a certain price range.

jimmybobbyschweiz

https://www.boards.ie/discussion/comment/119638929#Comment_119638929

My you are getting very defensive and defiant as the sentiment on this thread shifts. Let me point back to the market sentiment graph and look at what happens around the denial stage.

My prediction is as follows and I will hang my hat on this;

- Last COVID restrictions end - give the economy a year to get back on its feet as the government supports will take some time to unwind.

- After a year, government supports will be gone and some of the cash savings and access to borrowing will be reduced for businesses so then the zombies will start to topple.

- After a year, COVID savings of individuals are down significantly and businesses start to wind up meaning the economy has shifted. The outlook is poor and the data comes through a couple of quarters later (Q3 2023) confirming what we all have sensed; a frail and declining economy with perhaps a technical recession (the real recession has already begun in 2022).

- With house prices the data lags the economic data. For example, transactions concluded months ago will only appear in transaction data today. Therefore, even though anecdotally late autumn and through winter 2022/2023 there are stories of a chilled market, we won't have transaction data for the period until Q2 2023, but the data confirming a decline in the market will be published in Q3/Q4 2023, Q1 2024, reflecting transactions concluded in spring and summer 2023. From there onwards I see the decline continue.

- The only qualification to the above is if the magic money printers go into overdrive again and rates drop significantly. If only there was some reason to do this (I won't say more on that but to note that previously I have said that the ECB are looking for any reason to keep the printers going full power).

awec

https://www.boards.ie/discussion/comment/119643396#Comment_119643396

How are these investors going to sell their properties if nobody is buying?

awec

https://www.boards.ie/discussion/comment/119643463#Comment_119643463

Sentiment on this thread shifts?! 😂

The sentiment of this thread, and all of it's predecessors, has been "this time next year you'll get a half price house" since about 2014. Dead cat bounces, bear markets, bull markets, asset bubbles, tax changes, Joe Biden, Donald Trump, OECD, China, the MNCs are all leaving, people are going to go work in Poland, we've had it all. The exact same posters have been banging this drum under their various guises for nearly a decade now. A few have been going even longer than that.

If the sentiment of this thread was ever anything other than abject doom I would fall off my chair. If it's set to rain next Wednesday you can be sure there'll be an explanation on here as to how this spells disaster for the property market.

Cyrus

https://www.boards.ie/discussion/comment/119643063#Comment_119643063

I love when a rereg comes back to predict the same thing they have been predicting for the past 5 years, warms the heart.

no one here has said prices can’t fall, you made that up while whipping yourself up into a frenzy.

Timing belt

https://www.boards.ie/discussion/comment/119643463#Comment_119643463

I’m not getting defensive or defiant lol… I’m just asking you to give a prediction which you have so thank you.

I haven’t be tracking the asking price for new houses have they stabilised or at least a slow down in price increases?

jimmybobbyschweiz

https://www.boards.ie/discussion/comment/119643483#Comment_119643483

The same problems persist in the underlying plumbing the last 20 years and lessons haven't been learned in Ireland. It has literally been government policy, the same party that has been in power the last decade, to throw good cash at the demand side of the property market in order to inflate prices. I, like others, are shocked at how this has still been possible but it makes perfect sense in an era of artificially and unsustainably low rates and easy borrowing - that era is now over so it's time to grab the popcorn as "growth" (relevant for debt:GDP borrowing servicing ability) is going to be lower and populism is stirring a once in a lifetime change in the Irish political scene with potentially neither FF nor FG in power in a government in the next two years.

jimmybobbyschweiz

https://www.boards.ie/discussion/comment/119643516#Comment_119643516

I don't unfortunately have that data to hand.

Another sort of side point to make along the lines of MNC activity stalling is in relation to the finance industry in Ireland; a huge employer of course but it is clear to me that, notwithstanding the labour shortage this year, it is a bloated sector and has thrived on the accommodative policies of the Western central banks. Ireland's regulator is a crumbling, underresourced entity that is driving business out of the country at a time when it should be making more of an effort to take on more investment activity. There is a massive liqudity mismatch in so many funds that our regulator has no insight on; as the central bankers' accommodative policies end, we will see these funds get shaken down, fees being reduced and slower new business, all pointing to a bit of a hit to the IFSC economic activity generated to the State. This will also hit demand for property as it materialises next year. Very quickly demand is there and then it isn't, so watch the MNC growth plans being shelved and our finance industry take a knock.

There'll definitely be demand for Revenue employees and insolvency experts though, for those looking for a career change!

RichardAnd

https://www.boards.ie/discussion/comment/119641662#Comment_119641662

Why do you think that the only way to reduce rents is to build more? Supply is but half of the problem. The elephant in the room is, and I know that this is controversial, immigration. Now, let me be clear that I have no issues with immigration, but we cannot pretend that there do not have more people than homes at the moment.

Ironically, it is often the immigrants themselves who suffer from largely uncapped immigration. I have good friends from Romania who are living in appalling accommodation, and they can find nothing else because it would seem that for every bed, there are plenty of potential occupants. These people came here trying to improve their lives, but the Irish state has funneled them into being rent cattle in what I would deem as modern tenements. I would also add that the people whom I know personally are very well read and educated souls who know precisely what is happening and why.

This is a major crisis, and it cannot be solved without honestly addressing all of the issues.

Dav010

https://www.boards.ie/discussion/comment/119643740#Comment_119643740

And yet they stay, why?

It is easy to blame foreigners, but that is to ignore that for ten years the rate of Irish people emigrating has slowed due to improved employment prospects. There are also more Irish immigrants returning to live in Ireland than there are leaving.

https://www.cso.ie/en/releasesandpublications/ep/p-pme/populationandmigrationestimatesapril2021/mainresults/

Also, at the risk of pointing out the obvious, when you say there are more people than homes, that does suggest supply is not meeting demand. While none of us know for certain what the future holds, what we know today is that we have full employment, so there is capacity in the jobs sector for those people, there just aren’t enough homes to put downward pressure on rents.

IWW2900

https://www.boards.ie/discussion/comment/119643510#Comment_119643510

Weird statement, dont assume to know me.

I have been in property for 20 years. I only became bearish when it was clear we had big issues that needed big rate hikes.

Cyrus

https://www.boards.ie/discussion/comment/119643885#Comment_119643885

I don’t need to assume anything. Just read your posts.

Bass Reeves

https://www.boards.ie/discussion/comment/119643520#Comment_119643520

What cash has the government thrown at the building side.

The 30k tax rebate for HTB. It targeted at FTB it available to nobody else in the market. Shared equity scheme again FTB it's only available to with the exception of divorced people.

Do we remove these from the equation if we do will houses reduce in price by more than these are worth. I very much doubt it.

After that you have LA buying or renting properties for social housing. They have developed this method of procurement of social housing to prevent the getto's that were build in the 70's & 80's and the stigmitization that came with these.

In another post you stated that investors were supporting the market. Yet investors are exiting the market. The RTB is indicating that 3-4k units net are leaving the rental market every year and not being replaced. For how long will that continue and when it stops will these houses be replaced by new builds.

And we still have the elephant in the room of short term vacancy which is no longer being rented because of unbalanced regulations

jimmybobbyschweiz

https://www.boards.ie/discussion/comment/119644441#Comment_119644441

Yes, exactly, the money isn't been thrown at building (IE increasing supply) and is instead going to buyers and renters in order to push up prices.

The small landlords leaving is a direct aim of the FG government as it reduces supply and pushes up prices. Thousands leaving every year is not sustainable for the market and the anti-small landlord measures need to be undone - I don't think FG are in the business of helping the little man unfortunately.