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

Dav010

https://www.boards.ie/discussion/comment/119644689#Comment_119644689

FG aim is to force LL out of the market? What are you basing that on? It would seem to be political hari kari to intentionally make the housing crisis worse. Reducing LA supports for renters may have the effect of lowering rents somewhat, and even make more units available to private renters, but it would be at the expense of those who have no hope of being able to pay the reduced private rental rate. No politician anywhere in the world would introduce policies aimed at throwing the poor out onto the street.

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

Finally someone talking some sense...

Dav010

https://www.boards.ie/discussion/comment/119644779#Comment_119644779

You should raise your threshold a little.

L1011

I may have to remind people that the tolerance for chicken licken posting, particularly that which moves goalposts and dates out constantly, is extremely low here.

Realistic discussion can be as pessimistic or optimistic as you want, but we've history of people giving their claimed reasons as to why the sky will fall in +3 months, for many months to years at a time, barracking those that disagree with them and disrupting everything

RichardAnd

https://www.boards.ie/discussion/comment/119643776#Comment_119643776

They stay because the money that they send home makes a difference, I suppose.

Let me be clear, I am not blaming foreigners. We have to separate the calling out of high immigration with xenophobia.

Villa05

More details on David McWilliam’s theory that high interest rates kills the investment fund business model. If what he says pans out it will certainly be another huge opportunity.

The state could buy back those apartments they have long term leased at fire sale prices. Need to be wary of being suckered into buying them before a firessale with the funds having former politicians and public servants on their payroll

https://play.acast.com/s/the-david-mcwilliams-podcast/with-interest-rates-going-up-housing-market-is-heading-down

Villa05

https://www.boards.ie/discussion/comment/119644779#Comment_119644779

There does appear to be a bit of denial and group think on rates

Of course demand exists, but most of that demand was priced out, rising rates and inflation plus stricter mortgage criteria is unlikely to help those priced out of raising the funds needed to buy

Will be interesting to see what shared ownership will do. From its initial proposal to implementation prices have risen to practically neutralise it as a tool to Stoke demand

timmyntc

In theory rate rises will increase mortgage rates which will decrease purchasing power for new houses. In practice we are not yet seeing that, for 3 reasons:

1) Irish mortgage rates are already well above EU average and ECB rates. So the last few ECB rate rises have barely impacted the cost of bank borrowing in Ireland for mortgages.

2) Irish banks hold massive deposits from customers - prior to the ECB rises (from negative rates) it was actually costing them money to hold all this capital deposits. That is no longer the case, so now Irish banks are operating a lower cost than when we had negative ECB rates.

3) Due to the large amount of deposits Irish banks hold, they can finance significant lending using these deposits and not having to borrow at the interbank rates, so again, cheaper finance from the bank POV.

So all these mean that Irish mortgage lending is shielded for now from ECB rate rises - we are not seeing a significant decrease in purchasing power yet.

timmyntc

The idea that rate rises make rental yields less appealing is valid, however keep in mind that Irish rental yields are above 3% for a lot of apartment complexes - this is still very attractive for funds. It will take significant rate rises for Irish rental yields to be viewed as unattractive.

Can the ECB (or EU members) sustain the kind of rate increases necessary to make Irish rentals an unappealing prospect for investors? I doubt it.

jimmybobbyschweiz

https://www.boards.ie/discussion/comment/119644703#Comment_119644703

What am I basing that on? Really? They have been in power for a decade and have introduced the measures which have resulted in swathes of small landlords leaving. It is as simple as that and I don't understand how you could question whether FG introduced the measures which resulted in small landlords getting shafted.

Personally, I believe they did this as the institutionals had their ear far too often and had too much influence on the policies that worked against small landlords.

jimmybobbyschweiz

https://www.boards.ie/discussion/comment/119644967#Comment_119644967

Their is a risk premium though on rental yields that isn't there with bonds. So yields don't need to drop to the level of bond yields, the gap just needs to be less than the risk premium to make bonds more attractive!

RichardAnd

https://www.boards.ie/discussion/comment/119644889#Comment_119644889

McWilliam's always struck me as a bit of a charlatan who says the right things to get an audience.

However, I agree with you that that if a firesale on former investment fund property were to take place, the state would almost certainly sign the taxpayer up to buying the assets at top rate prices.

If it were not obvious before, it should be be now; there's a club, and we ain't in it.

Villa05

https://www.boards.ie/discussion/comment/119644967#Comment_119644967

Alot of these funds are American. They have lost significantly on the euro collapse against dollar and yesterday you could get 4% from the US treasury on a 2 year bond

Villa05

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

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

Again ghettos were never built in Ireland. The evolved into ghettos through poor policy, notably in 1984 council House residents were offered a 5,000 pound grant to purchase their own home if they surrendered their tenancy.

This was the single biggest factor in the ghettoisation of council estates, nowhere was that more evident in our own home city

5k was a huge sum of money to help buy a home in 1984. If I'm not mistaken 20k would have purchased a house back then

Had they instead offered the tennant to purchase there existing tenancy at replacement cost. These estates may not have suffered the fate that awaited them.

Timing belt

https://www.boards.ie/discussion/comment/119645077#Comment_119645077

Bonds aren’t risk free…especially in an inflationary period. Even government bonds which are deemed the safest are at risk of loosing value as rates rise.

Let’s not forget that bonds have an inverse relationship with yields. To mitigate against the risk you need an IRD or asset swap which dramatically reduces the overall yield.

looking at the yield on bonds and comparing against property yields is only relevant if you assume no more rate rises and are willing to take the risk if not you need to hedge and include the cost of that.

Timing belt

https://www.boards.ie/discussion/comment/119645169#Comment_119645169

Let’s not forget it was David McWilliams advice that was acted on to guarantee all deposits on Irish banks…The advice that escalated a situation that sucked deposits out of Uk banks and accelerated the collapse of banks and left the government with massive bill.

Dav010

https://www.boards.ie/discussion/comment/119645068#Comment_119645068

I am not disputing that the effect of their policies has negatively impacted the market, but you stated that was their aim to drive landlords out of the market and push up prices. You claim they did this intentionally rather than it being an unintended consequence of tenant focused legislation?

You think the investment institutions benefit from blatantly anti-landlord legislation which limits what they can charge and makes it extremely difficult to remove errant tenants and/or end tenancies? Your viewpoint seems to be contradictory.

Can you share some insight or policy document where it shows that they intended this to happen? I’m assuming you have something to back up your statement.

Or is it more misguided speculation on your part?

RichardAnd

https://www.boards.ie/discussion/comment/119645858#Comment_119645858

That's true. Has he ever addressed that on his podcast since or it is just "the thing we don't talk about"...

Villa05

https://www.boards.ie/discussion/comment/119645169#Comment_119645169

In fairness to him he first touched on this scenario in xmass 2021. This episode prompted me to move my pension to cash and postpone AVC to the end of the year. Public service broadcasting at its best. It includes an interview with Paul McCully of Pimco

https://play.acast.com/s/the-david-mcwilliams-podcast/199-the-central-banks-have-spoken-what-does-it-mean

jimmybobbyschweiz

https://www.boards.ie/discussion/comment/119645169#Comment_119645169

The pre-crash state bailout to these funds has already happened with the council's and charities using State funds to take on 20/25 year leases at 85% of a ridiculously inflated market rent.

High house prices and rents are government policy!

Dav010

https://www.boards.ie/discussion/comment/119646089#Comment_119646089

Jesus wept. They are taking out leases at market rate, not because they want to, because they have to. The alternative would be an exponential increase in homelessness if those tenants are unable to afford to rent.

Villa05

I think it'll cost a person more to not listen to DM than to listen.

The calibre of his guests speaks volumes of the respect he gets from his peers

Cyrus

https://www.boards.ie/discussion/comment/119645991#Comment_119645991

unless you are near retirement age trying to play the markets with your pension funds is a folly.

Villa05

https://www.boards.ie/discussion/comment/119646267#Comment_119646267

Are you playing the markets or are the markets playing you?

growleaves

https://www.boards.ie/discussion/comment/119645937#Comment_119645937

Yes investment institutions do benefit from this overall because they operating at a large enough scale that they can some absorb bad tenants and lease at lower profit margins while small competitors are driven out of the market. Then they gobble up market share.

Even a medium-size real estate operation like the Healy Raes (who own 13 properties?) could survive as long as they didn't get really unlucky with say 10 bad tenants at one time.

This concept of bigger corporations' methods they use to cannibalise smaller businesses is something that Irish people are not as familiar with this though it happens in multiple industries as in the US. So you think it is some kind of conspiracy theory because you perhaps haven't been exposed to it.

WalMart and Jack Welsh's absorbtion of smaller shops all over the US is seen as a model by many corporate chains. They can absorb higher labour costs so push for rises to minimum wage, that's just one example.

More recently corporate farms in the US have driven down prices deliberately by flooding the market with goods so smaller operators can't compete. Then they buy smaller farms out and scoop up their assets (farm machinery etc) at knock-down prices.

It is just corporate capitalism in action. A web of regulation benefits bigger operations generally.

It does not strike me as implausible that lobbyists and TDs have a thumb on the scale. Though of course it can't be proved. Do you believe they are driving SMEs out of the market "by accident"? That's an unfortunate thing to do by mistake!

Marx even has a chapter on this in Das Kapital (written in the 19th century), saying the swallowing up of the petit-bourgeois (small business owners) by a larger ownership class is inevitable over time.

Cyrus

https://www.boards.ie/discussion/comment/119646386#Comment_119646386

there is a risk of trying to be too clever.

Villa05

https://www.boards.ie/discussion/comment/119646527#Comment_119646527

The risk of being in is much greater. Don't fight the fed works both ways

Most pension funds are passive, and esg focused not a place you want to be right now

MayoSalmon

https://www.boards.ie/discussion/comment/119645955#Comment_119645955

Not sure if he did a podcast on it though...

https://www.independent.ie/business/irish/banking-inquiry/bank-guarantee-was-the-only-decision-says-david-mcwilliams-31026335.html

argolis

https://www.boards.ie/discussion/comment/119616748#Comment_119616748

Everyone keeps quoting these low Daft rental numbers. 330 is not the true figure. When the numbers get low enough, anyone wanting to rent out a decent place is not going to list it on Daft. You'd expect to be inundated and if you were to have a public viewing you'd be risking crazy queues, crazy people and social media attention. I imagine what most landlords do now is check their work/social circles first, which has a good chance of success because demand is so high.

After that, most landlords would approach an agent. They either ask the agent, or the agent will suggest, if they know of any tenants that they can recommend and there's also a very good chance this will succeed because so many landlords on their books are selling up.

I say this with my own experience of selling a now ex-rental and out of curiosity asking the agent if I did want to continue renting it, would they have any tenants they could recommend, which they did. I suspect this off-market activity is widespread.

When rental stock comes back up, this sort off-market, unmonitored activity will probably die down and boost the "public" Daft numbers.

Timing belt

https://www.boards.ie/discussion/comment/119647254#Comment_119647254

He generated a bank run in the UK when over night billions left Uk banks and flooded into Irelands banks. Then once the Uk banks were in difficulty it caused panic with the Irish banks.