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

Mr Hindley

https://www.boards.ie/discussion/comment/120171152#Comment_120171152

Yep - things definitely seem to be hotting up again. I'd say there's a cohort of new buyers entering the market, but v little new supply coming on; maybe that will change in a month or two, and the tech redundancies will start to bite, but as a prospective buyer, I have a sinking feeling. I think that properties that are badly overpriced are still not shifting, though.

Donald Trump

https://www.boards.ie/discussion/comment/120171342#Comment_120171342

Do you not understand the difference between funding (or buying) a development, and actually constructing it?????????

Your post is nonsensical. Now you are bringing in landlords and "small developers" when the previous posts have been about "builders" getting access to subsidised loans. Is it actually builders that you want to get these subsidised loans, or is it speculators and "developers" (i.e. middle-men who don't do the work and who will just want a cut for having subsidised loans flow through them for your development that is already contracted in your example to be bought by the state after the actual workers lay the blocks etc)

What are these projects that the "small builder" is getting pushed out by the investment funds of because of this 7% rate? Is it the one-off bungalow in Leitrim that all the investment funds are mad to get, or maybe the 200 apartment block in Dublin that the "small builder" wants to finance?

You still haven't answered the simple questions I asked. Can you tell me what rate of tax on an investment fund would allow the small builder to afford a 7% loan. And then what rate would allow the builder to afford a 10% loan?

BTW, the reason there is indeed better competition in groceries is that the State doesn't support uneconomical actors like the small independent corner shops. That is the whole point. They can either survive on their own or they are replaced.

Bass Reeves

@Donald Trump give it a rest. The government subsidizes loads across small business areas at present. Admittedly it generally on a smaller scale. For the last two years there has been several schemes ran by the banks where subsidized lending that works out below 3% for up to a million euro.

Before Christmas I heard an economist on the radio who was adamant that the present situation with small building finance wasa serious impediment not just to house building but also to prices as a few large developers were controling the market.

Commercial lending that during the low interest period was 6%+ is not viable. Present rules means banks will not find such builders unless they can find 40-50% of project themselves as well as the site.

Larger developers are not interested in smaller sites unless it's for apartments. There is many sites sitting out there ( especially brown field sites) that are only capable of having 10-50 units.

Small builders cannot even finance the stage development of these sites. This is a serious impediment to smaller urban as well as large urban development. With interest rates rising these builders are now looking at 10% finance. The reason being that bank lending rules are not compatible with this.

A small builder required 3-5 million a year is facing a 3-500k annual interest bill. This could be over 15-25 units. That could be adding 12-15k+ per units over what would be normal lending elsewhere in the world.

The more I hear you rattle on the more I think you have a very poor reality of what works on the ground. You seem to have some ideology issues with what will work to solve problems.

This gives you a poor understanding of what is needed to bring house prices down or getting them build. It also is apparent in you attitude to the rental market.

Donald Trump

https://www.boards.ie/discussion/comment/120171759#Comment_120171759

Not everyone is entitled to have everything handed to them easy. People have to take responsibility. It is the real world. In business you make decisions and you live by them. You don't bull into things and then whinge for a bailout or subsidy if you make a mess. It may have been your experience that things were handed to you, or if they went wrong, that someone bailed you out, but that is not how things work in general. So you can't expect that. There are plenty of people managing their businesses and able to cope. It would be better to give the efficient ones something rather than the amateur-hour chancers who can't manage. If some mickey-mouse operation isn't able to run itself, then let the workers go and work for a better run operation. Else all we have is Healy-Rae-king-of-the-village-cute-hoor shite and have everyone else subsidising them.

Maybe some of your builder buddies who are paying the lad sweeping the site 60k+ a year could take a look at how they are running their businesses before asking for subsidies (that is what you said wasn't it, for a fella to commute to work on a building site he needs 800 a week more than he would get locally. So 20k minimum wage + your 40k gets him up to 60k. Real world as you say. Or waffle as people with common sense would say.).

The solution to your worry about vacant sites is a properly enforced vacant site levy. No more being held to ransom by fellas just because they have a few connections but don't have the ability to do what they are supposed to. We've had interest rates as low as they can realistically be for years. If lads weren't able to get stuff done in those times, then the rates are not the problem. Pandering to inefficient and incompetents is just facilitating them to stay sitting there in everyone else's way.

Mr Hindley

Here’s one that’s gone more than a third over the asking price in the last couple of days: https://offr.io/property/13-marks-alley-west/5183

combat14

How high could rates go?

That is the question.

With two more half percentage point increases in prospect, a base rate of 3.5% looks likely by the early summer.

https://www.rte.ie/news/business/2023/0129/1352270-more-interest-rate-hikes-in-prospect-almost-certainly/

very difficult for would be house buyers to budget when rates keep going up .. house price affordability is dropping all the time

Villa05

https://www.boards.ie/discussion/comment/120171633#Comment_120171633

Your completely muddying the water of my points which are simple.

Supply is the issue, in order to help resolve supply ensure the playing field is level so all that have the capability to supply can do so.

2 simple actions that can save money or/and be revenue positive for the state

Reduce cost of finance for developing housing be it small building operations or investment funds, one would imagine that those funds had access to low cost finance.

Implement the Northern Ireland method of compliance to regulations which is much lower cost for all participants, but encourages participation from smaller building operations/developers, whatever you want to call them.

The tax issue on investment funds is anti competitive. One entity can operate paying little or no tax on profits while the other is subject to full taxation on profits. This has helped in aiding the exodus of small builders and landlords from the sector inhibiting supply capacity.

Funds become the dominant provider in the market becoming price makers as opposed to price takers. Our regions become starved of supply, and no, I'm not referring to bungalows in Leitrim, Rentals just can't be got in Limerick City/suburbs for the demand that is required

Donald Trump

https://www.boards.ie/discussion/comment/120172674#Comment_120172674

The funds are irrelevant. They are not competing with your "small builder".

When you talk about "builder" you appear to mean "small developer". To me, a builder is the person I get to build my house. I have my site, I get the planning permission, then I get a builder in (depending on how far down the road I want to go in terms of direct labour). I give him money in stages. Or I buy a site and get permission to build a retail outlet on it and I get a builder in to build it for me. . The builder can also be a "developer" if he wants, but he doesn't have to be.

Breaking it down to the most simplistic argument, there are three numbers.

A: The price paid for the site

B: The cost to develop the property

C: The price obtained when selling.

Profit to the "developer" is C - (A+B).

Now if we have a system whereby if C decreases, or if B goes up, that we bail out the person so that they can always still make a profit, then the result of that is that they don't have to care about what they pay in "A". But "A" is where they have control. If they are always going to be bailed out, then all they need to do is keep outbidding each other at that stage.

Villa05

A quick search of Daft this morning returned 4 available properties for rent in Limerick City prices at 2,500 p/m

I double checked to see if there were any filters in the search

One was in Mount Kennet, 10 years ago, you'd get 1 there for 500 p/m

cute geoge

The simple fact is small builders have completely stoped building houses/apartments in the country towns .It is far cheaper for buyers to buy s/h house then a new build so what reason would builders start building houses to lose money.The stock of these 2nd houses seem to be increasing in value still as supply is dwindling for a large part these were excess houses from the celtic tiger era.I predicted last december for prices not to drop because of lack of supply and we could see 5-10 % rise and i put my money where my mouth is by buying an investment apartment before christmas .

J_1980

https://www.boards.ie/discussion/comment/120172429#Comment_120172429

350k for an F rated 70sqm dump with no garden in a not great area.

id rather live in a B rates turn key apartment

Villa05

The funds are irrelevant. They are not competing with your "small builder".

@Donald Trump The investment funds are very much relevant as they are not only building shared ownership, miniature flats and overpriced rentals for dissappearing IT workers there also building office blocks and hotels

In doing so they are employing small building operations that may otherwise be building small housing development's in there localities. Now we are facing into a potential recession with an oversupply of office space, hotels as the most expensive social housing, apartments that nobody really want, nevermind afford. Workers are being moved from the office to homes they can't afford

The incentives and tax breaks given to investment funds has completely distorted the market and resulted in the wrong type of supply. Does this sound familiar from the "Celtic Tiger"

I'm from Limerick most of our building workers are in Cork and Dublin, hence the rental situation in Limerick

Donald Trump

https://www.boards.ie/discussion/comment/120172759#Comment_120172759

If a developer paid too much for a site, then that was their own bad decision. What you have going on here is a slowing down because they are anticipating something coming that will help their pockets.

As things currently stand, they are allowed to sit there and do nothing and hold everyone else to ransom. There are no repercussions.

Timing belt

small Builders(developers) are like corner shops they are unable to compete against the bigger shops that can benefit from economies of scale.

you need to remember that all the big developers that went bust in ‘08 started as small developers but were able to grow as you had dedicated teams in banks competing with each other to lend them as much money as they could and we all know how that ended.

Since 08 banks don’t finance developers directly because of the cost of capital in doing so (this is global and not just Ireland) and instead the funding comes from investment firms whereby investors put money into the fund and then the bank lends to the fund but has limited risk due to the structure. Small builders(developers) don’t normally have the connections to access this finance and even if they did the investment funds wouldn’t be really interested as it is small fish.

On top of that most small builders don’t want the risk of becoming a small developer where they could end up loosing everything if the project went south. Most are happy instead to be hired by a bigger developer and do the work without the risk.

A small builder could easily buy a second hand house and redevelop it to a good standard and BER rating and sell it on but they don’t because there is not enough profit in it for the risk that they would need to take. Even if you take the cost of finance out of the equation they won’t take on the risk as they will be waiting at least a year to be paid and the attraction of being paid monthly or regularly without risk is more attractive to them.

Donald Trump

https://www.boards.ie/discussion/comment/120172815#Comment_120172815

So, if I understand you correctly, what you are saying is that Investment funds give loads of small builders employment, which means that there is less competition for the ones that remain building their own small developments? Your conclusion that that reduced competition means it is more difficult for the remaining ones to make money would go against every economic, and logical, theory.

Investment funds are irrelevant. They are not outbidding this mythical small developer trying to put up a few local houses. Their tax rate has no impact on what the small developer can afford to pay in interest.

Donald Trump

https://www.boards.ie/discussion/comment/120172840#Comment_120172840

small Builders(developers) are like corner shops they are unable to compete against the bigger shops that can benefit from economies of scale.

That was the point I was making. We don't subsidize corner shops, so why would we subsidize small developers. Subsidizing your corner shop isn't going to make your groceries cheaper. It might do the opposite if you do it enough so that the bigger shops lose some of their economies of scale.

In my area, you will be waiting a good while to get a builder to come and build a house for you. They are not sitting at home twiddling their thumbs. There is plenty of work for them. I'm talking about self-builds where the owner will be paying in stages.

And yes, regarding the investment funds, I was also trying to make that point. They are only finance. They are not competing with the "small builder".

Villa05

https://www.boards.ie/discussion/comment/120172870#Comment_120172870

No they are soaking up available labour/businesses to construct units that maximise profits

shared ownerhip

student accommodation, that no student can afford

premium priced apartments for IT workers who are probably being let go and leaving the country or lower paid employment

office space that is not needed and hotels that have become expensive social housing.

Housing that has become hotels airbnb

The result being that we have loads of supply that is either too expensive or no longer needed. This practice has inflated the price of land

I have no issue with a business attempting to maximise profits, but it needs to be balanced by what our economy needs. A business is always trying to maximise profits, but this gets amplified when those profits are tax free.

These extra profits allow the business to hire former politicians to be lobbyists to get more planning for units that maximise profit but not necessarily what the economy needs. This lobbying cost gets added to the price if property

Suddenly we have an oversupply of property we don't need and incredible deficiency in housing we need.

Misallocation of labour through tax breaks. Labour moving away from what's needed to what's most profitable because of the mirage tax breaks have created. Result Imbalanced commercial/residential market

Villa05

https://www.boards.ie/discussion/comment/120172840#Comment_120172840

you need to remember that all the big developers that went bust in ‘08 started as small developers but were able to grow as you had dedicated teams in banks competing with each other to lend them as much money as they could and we all know how that ended.

Is the process of learning, throwing the baby out with the bathwater? The process I outlined was done for decades prior to the celtic tiger without issue

Is it necessary to lend to every new development? Does the process need a continuous overdraft or a kick-start?

What did we learn from the last crash? How to do it right? Or How to find new ways to blow up the bubble?

J_1980

https://www.boards.ie/discussion/comment/120171152#Comment_120171152

bids coming in on Sunday too, 5% above already after first open Saturday.

market will be crazy by Spring time.

most sellers are landlords getting out. Once that dries up there will be no supply.

Villa05

That was the point I was making. We don't subsidize corner shops, so why would we subsidize small developers. Subsidizing your corner shop isn't going to make your groceries cheaper. It might do the opposite if you do it enough so that the bigger shops lose some of their economies of scale

We are still getting our wires crossed.

To bring your analogy to the housing sector. It's the super rich large provider that's being subsidised through tax breaks and small provider is being handicapped by expensive unnecessary regulation that can be provided much cheaper for all participants by following the Northern Ireland model not to mention being far more effective

dontmindme

https://www.boards.ie/discussion/comment/120173269#Comment_120173269

We are still getting our wires crossed.

Are you new here?

Villa05

https://www.boards.ie/discussion/comment/120173299#Comment_120173299

Hint taken

Donald Trump

https://www.boards.ie/discussion/comment/120173269#Comment_120173269

The investment fund is putting money in. More money flowing into the system means, ironically, cheaper finance. Do you understand what an investment fund is? Think of it as a more sophisticated version of you and your buddy pooling your money into a pot and using that pot to buy something rather than you each buying a smaller version for yourself. The pot itself isn't taxed. However you will be taxed on profit you take out of it. Your buddy will be taxed on the profit he takes out of it. The pot itself isn't taxed.

You appear to want all inefficient small developers to be subsidized with cheap money that they don't have. All they would be bringing to the table apparently is a sense of entitlement. That would be a great gig. I'll decide in the morning I want to be a developer. I'll set up a company. The State will give that company interest free loans. I can get an actual builder to build me some houses; which the State can have already contracted to buy off me. I'll just take my 20%, thank you very much....real public sector mentality.

DRedSky

https://www.boards.ie/discussion/comment/120173247#Comment_120173247

I doubt it with rates going up and up and another ECB 0.5% increase next Thursday.

In fact even all the worst case (gloomiest) “expert” predictions were for a modest low single digit increase if any at all.

The estate agent i spoke with was saying that the supply will go UP soon as people are generally only going to start selling/moving again in mid February onwards, she said hardly any supply any year hits the market just before/after xmas.

So just calm down a bit and don’t be stressing yourself, it’s not unusual for there to be a low amount of properties hitting the market early January so if some house goes 5% above asking it doesn’t really mean a jot, it’s eager buyers without the customary Springtime increase in properties hitting the market yet, we’ll have a clearer picture from the numbers in a months time.

Also time for the interest rate increases to take some effect too. Sure BOI only increased theirs a few days ago and by some 0.75

Timing belt

https://www.boards.ie/discussion/comment/120173232#Comment_120173232

Banks won’t lend to developers they will only lend to investment funds where their risk is substantially reduced. The investment fund is providing the finance to build. And just to be clear I’m specifically talking about financing to build not BTR or property funds that are buying property. like it or not that is what has happened since ‘08 all around the world due to the lessons learned from the crash.

FedoraTheAura

https://www.boards.ie/discussion/comment/120173698#Comment_120173698

Absolutely. Even those that want to keep the property market going up are saying there’ll be less than 5% increase this year, at the highest end.

Houses on the market now have in many places been up for months and are the only places available. The market is always slow at the end of the year.

I think a lot of potential buyers were waiting until Jan to get larger mortgages with the easing of lending rules. I was out the door looking myself the day after I got my new AIP. Perhaps people starting bidding wars are panicking now and will regret it down the line if prices continue to drop in Dublin.

Then there’s the potential pitfall of whether they’ll even be able to get the mortgage they’ve been quoted with banks increasing rates.

dontmindme

I'm looking at a house that has been on the market since early December and I've viewed it twice. On the first visit the estate agent tells me that an offer below the asking has been submitted but has been rejected outright - I wasn't sure from the conversation if it was the agent or the vendor doing the rejecting. Anyhoo, Christmas came and went and I viewed the house again and got a proper appraisal of what would need doing which would probably cost around 50k (hopefully) so that was that - did I consider any value could be had from it or not was now my decision. I ring up the estate agent the following week on a different phone number with a view of making an offer, and on my initial opening enquiry to him as to the current state of the sale, I was informed that the property had only just come on the market and they were still getting it prepared. The only thing I could take from this was that the EA was trying to disguise the fact that they'd yet received no offers?

Rang another EA about another house that I've seen on myhome the last six months or more, that when initially enquired about was sale agreed, so had been ignored all along in my searches until I see it again the other day and see the ad only recently refreshed. So I ring the EA and she tells me the sale had fallen through and it was back on the market, and that it was one of many where she presumed the initial AIP terms didn't materialise and where buyers had to reconsider their offers. As it transpired, the house went sale agreed a day or two later at under the original sale agreed price from last year.

ApeEvolved

Has anyone done the maths on how much sticky rate hikes could add to the end price of the home.

I think people are underestimating the fact that we are talking 6 figures on average homes.

ApeEvolved

https://www.boards.ie/discussion/comment/120173247#Comment_120173247

Its going to be an interesting year alright.

I think if prices are to stay at these heights it will have to be funds and government buying up properties. People on mortgages simply wont be able to pay and there is the impending danger of more redundancies.

Something very dangerous is brewing in the populations consciousness now, the injustice of the working class not being able to afford a council house. I think that could move government policy more then anything.

theboringfox

Low rates increased asset prices globally. When they rise they have the opposite effect. Theres lots of people claiming that Irelands scenario is different because of supply. That will mitigate the fall but there will be a fall. Rate rises only hitting home now