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

BlueSkyDreams · 01-06-2023 11:54am

https://www.boards.ie/discussion/comment/120665339#Comment_120665339

You can find the interview on the Big Tech Show Podcast. It took place at the Web Summit in November.

DownByTheGarden · 01-06-2023 12:02pm

https://www.boards.ie/discussion/comment/120665608#Comment_120665608

Yes this time it will be different :) and builders will keep building when the arse falls out of the market enough to drop house prices significantly.

I dont see it myself tbh.

timmyntc · 01-06-2023 12:22pm

https://www.boards.ie/discussion/comment/120665676#Comment_120665676

Builders will keep building if they can sell houses for more than it costs to build them.

Based on construction costs, and large reported profits by developers its clear there is significant margin for prices to fall and building to still be viable. Not a hard concept to grasp.

fliball123 · 01-06-2023 12:26pm

https://www.boards.ie/discussion/comment/120665621#Comment_120665621

No capacity are you joking they are literally crowing from the rooftops about the surplus we have got last year and over the next 5 years 65Billion is projected if they cant manage to build more capacity with that amount of cash then anyone not able to afford a house currently may as well pack a bag and emigrate. Housing is the number one issue and will be until it is sorted.

DownByTheGarden · 01-06-2023 12:28pm

https://www.boards.ie/discussion/comment/120665747#Comment_120665747

Well theres a shock :)

What will they do when it costs them more money to build than they make. Bearing in mind that breaking even or not much above is not making a profit either?

Surely thats not a difficult concept to grasp either.

DataDude · 01-06-2023 12:29pm

https://www.boards.ie/discussion/comment/120665567#Comment_120665567

Personally, the hassle of even starting to look into that for 1% per year after DIRT really wouldn’t be of any interest whatsoever.

If you were to split the population down. The only people deposit rates actually matter meaningfully to are people with very large cash holdings, no mortgage (as paying down will always be more attractive) and extremely risk averse (or else you’d be investing it rather than holding cash). That’s likely to be 95% older people who are poor with finances. I just can’t envisage a scenario where these people have even heard of Raisin or Bunq bank, never mind jumping through the hoops to set it up. I could be wrong but I think competition will be slow and be amongst the traditional banks (starting already) - not some random foreign bank.

timmyntc · 01-06-2023 12:35pm

https://www.boards.ie/discussion/comment/120665770#Comment_120665770

When is that going to happen? Hard building costs have dropped from the recent high related to lumber shortages and high energy inputs - the only issues really are finance and site costs.

If the state funded development then the finance issue is resolved, and site costs are flexible and will increase/decrease as a function of developer demand.

As the margins get smaller for developers to build, the amount they would pay for a development site decreases. With new vacant site taxes there is more urgency for a site owner to sell also, so they are less likely to hold hoping for a higher price in future.

As an aside, heard on the radio yesterday some industry mouthpiece complaining that land rezoning taxes will mean higher prices for FTBs so they should be gotten rid of... lol yeah right. Heavily taxing any value increase solely as a result of rezoning land will bring prices down. Its only a good thing (unless your excessive margins are at risk)

wassie · 01-06-2023 12:37pm

https://www.boards.ie/discussion/comment/120665765#Comment_120665765

The state does not have the capacity to directly directly project manage large scale construction projects. We outsourced it years ago.

It takes more than just throwing money at it to rebuild that capacity. Essentially you would be creating a whole new bureaucracy.

awec · 01-06-2023 12:39pm

https://www.boards.ie/discussion/comment/120665776#Comment_120665776

I'd say there are a lot of people receiving interest in their Bunq account who are oblivious to the fact they need to declare all the interest they've earned to Revenue so they can be taxed on it!

I actually have my Bunq set up so I don't receive any interest.

Blut2 · 01-06-2023 12:41pm

https://www.boards.ie/discussion/comment/120665430#Comment_120665430

I didn't say I was in favour of this outcome, I said it was whats going to happen. A more interventionist state, of the kind we're going to live in within 24 months, has very little need for developers when the government is chomping at the bit to hire tens of thousands of construction workers to build their own social/affordable housing at scale.

"If projected profits make a site development a risk, then they will postpone that development until conditions improve." - how many developers do you think can afford to not build any sites for the entire length of a government (and possibly a second term), all the while paying 5-10% a year vacant site tax? Very few, the vast majority will be forced to sell their landbanks.

Though for what its worth even in the corruption and poverty ridden Ireland of the 1970s, at a time when our population was half of what it is now, the Irish state still managed to build close to 10,000 social housing units a year successfully. So it is completely possible for the state to be building tens of thousands of social/affordable units per year.

https://www.boards.ie/discussion/comment/120665473#Comment_120665473

Thats much of a muchness really though. The outcome will be the same - if developers stop building, and stop employing, the state will hoover up any workers who become available to work on their projects. As contractors, as consultants, directly employed - all of the above or anything else.

fliball123 · 01-06-2023 12:43pm

https://www.boards.ie/discussion/comment/120665676#Comment_120665676

OK so what do you see then lets be clear the arse has not fallen out of the market, prices are dropping due to prices being unaffordable. The top 50 developers made 10 billion last year so they are a long way from not making a profit. So what way do you think this will play out as I cant see prices rising not with interest rates going higher and higher

fliball123 · 01-06-2023 12:52pm

https://www.boards.ie/discussion/comment/120665799#Comment_120665799

Once again with the amount of cash flowing inwards this could be easily rectified by employing construction experts from outside of the current construction cartel and snapping up construction workers, sites and unfinished works left behind by construction companies who if they are not building will be hitting a wall and laying off staff (I dont see how they can survive the current paradigm they find themselves in). We may well be creating a new bureaucracy but if it was built on a non profit basis new properties being built would be a hell of a lot cheaper and more affordable. Its not like there is a choice, housing is now and for the guts of the last 18 months been the hottest topic among the electorate and anyone stepping up to the plate will have to have a definite plan going forward. To that point its not hard to see that the old guard in government is changing a lot will depend on how the shinners want to go about business and they have built up a head of steam by criticizing the current government and in particular how they have handled housing.

wassie · 01-06-2023 1:33pm

I don't disagree with your sentiment. However creating a state enterprise that effectively competes with the private sector is challenging. Existing contractors I imagine would lobby hard against such a move on the basis of competition policy and the prohibition of State aid. Of course the counter argument is that it is in the interest of the state.

One of the main reasons why most developed western governments have outsourced their project/construction management capability over the last 3 decades is that large scale building simply has become very complex and carries a lot of risk and outsourcing transfers this risk away from the taxpayer. (And it doesnt align with the philosophy of small Govt that has followed). Realistically though the taxpayer is always on the hook in the event a bailout is required in the national interest.

The notion that the state will just swoop in and hoover up the best talent is fanciful at best. Do they start a bidding war for talent, feeding wage inflation?

Besides, as has been mentioned many times here, most actual building work is performed by subcontractors. The layoffs you refer to would need to come from management of contracting firms. Many of the larger firms here are also starting to procure more work on the mainlaind in order to diversify their pipeline of orders so the best talent is not leaving anytime soon.

So if a state run enterprise is not able to attract the best talent, how well can such an organisation be managed & operated and build efficiently. Building at any cost is not an answer.

I like the notion that has been flouted before is to set up a dedicated agency to take social building from councils. That agency can then manage a panel of builders that are allowed to tender for works. Sharing the work around gives builders a reliable pipeline of work whilst the state can still get value for money.

fliball123 · 01-06-2023 1:43pm

https://www.boards.ie/discussion/comment/120666020#Comment_120666020

It wouldnt be competing with the private sector it would be building housing for social and lower paid workers and it would take the heat out of the private market. Existing contractors can lobby all they want as if they are not building then they will only have themselves to blame. Sinn Fein coming in means that the old way of doing business is gone for these guys. The idea would be if these guys don't build they have no wiggle room and will have to let a lot of workers go that is when the state can snap these people up and there is also the option to attract talent globally with visas and a public sector job (with the likes of pensions and all the other perks that come with this)

herbalplants · 01-06-2023 1:47pm

https://www.boards.ie/discussion/comment/120665812#Comment_120665812

Bunq seems to have poor reviews on trust pilot

Jonnyc135 · 01-06-2023 2:08pm

https://www.boards.ie/discussion/comment/120665793#Comment_120665793

Lumber has dropped, not sure on PVC windows insulation or piping, but concrete, blocks, precast, stone fill, tar, roof tiles have not dropped in fact a lot of main suppliers increased their prices for these materials in March and April.

combat14 · 01-06-2023 3:39pm

ecb warning as they mull next rate rise this summer

House prices could face a 'disorderly' fall due to rate hikes

European Central Bank review warned tightening financial conditions are testing the resilience of households, firms, governments as well as property markets

https://www.irishexaminer.com/business/economy/arid-41151808.html

Blut2 · 01-06-2023 3:58pm

https://www.boards.ie/discussion/comment/120666020#Comment_120666020

The issue isn't really if the state will be efficient at house building or not (it very likely won't be). Or that it competes in the employment market (its already doing that). Its more that it looks very likely the following sequence of events will now unfold:

Increasing interest rates, and a potential recession, mean the number of people able to afford current house prices drops dramatically
Our current government, and/or the next SF government, bring in punitive vacant site levies to spur the use of land in high pressure zones, because this is both effective and hugely electorally popular.

Some of the posters in this thread were arguing that developers would then just do nothing, they'd sit on their hands. And as a result no homebuilding would happen in the state, for years on end.

But in reality whats going to happen is some combination of 1) developers start selling more cheaply, eating into their profit margins, because they have to. And/or, at a later date, 2) they shed staff, and start selling off landbanks. Which will then result in the state buying the sites, and making use of any unemployed contractors.

We're in a situation in Ireland in 2023 where the state has effectively limitless money to throw at housing now, and the electorate has incredible demand for it. The only things in the way are getting the contractors and getting the land. So a large number of developers going to the wall wouldn't actually do much to limit housing construction - it would just change the type of housing being built from higher end apartments/housing for profit to social/affordable by the state. But the construction work would still go on.

wassie · 01-06-2023 4:18pm

https://www.boards.ie/discussion/comment/120666055#Comment_120666055

It wouldnt be competing with the private sector it would be building housing for social and lower paid workers and it would take the heat out of the private market.

I think the Construction Industry Federation & its members wouldnt see it that way.

Existing contractors can lobby all they want as if they are not building then they will only have themselves to blame.

Not entirely - Planning & tax reforms are a big part of the problem which is of the Govts making.

Sinn Fein coming in means that the old way of doing business is gone for these guys.

Can I have lotto numbers also please?

The idea would be if these guys don't build they have no wiggle room and will have to let a lot of workers go that is when the state can snap these people up and there is also the option to attract talent globally with visas and a public sector job (with the likes of pensions and all the other perks that come with this).

So you attract the talent in. Then they get picked off by the private sector who are going to pay them a hell of a lot more. Or else they get comfortable in their job for life without the incenctive to be productive.

wassie · 01-06-2023 5:07pm

https://www.boards.ie/discussion/comment/120666842#Comment_120666842

We're in a situation in Ireland in 2023 where the state has effectively limitless money to throw at housing now, and the electorate has incredible demand for it.

We've just left a situation where the state could have borrowed big for effectively zero interest to fund all social housing needs for next couple of decades but they chose not to. Our 'limitless money supply' also needs to urgently fund critical infrastructure which has been neglected also.

The national development plan is already showing to be out of date with regards to population projections and if they dont address housing & infrastructure we are going to be under serious trouble.

fliball123 · 01-06-2023 5:23pm

https://www.boards.ie/discussion/comment/120666842#Comment_120666842

So are you saying that the state would not be allowed compete and build housing at a lower price point than what is being offered. I would love to hear the lobbyists objections to this at a time when we have the worst housing and homelessness crisis ever seen and on foot of a year that the top 50 construction companies made 10 billion. So what can they do about it sure they are already slowing down and in some cases ceasing construction its not like they can go on strike from this scenario :).

laws and planning are both changing constantly.

Sinn Fein are on record time again lambasting the current governments housing policy. If you can find anything on the contrary put it up instead of silly lotto quip. Thanks.

How will any construction worker brought into the country be picked off by the private sector when they will be slowing down, letting staff go and in some cases have ceased building anything? Square that little round hole for me

fliball123 · 01-06-2023 5:31pm

https://www.boards.ie/discussion/comment/120667020#Comment_120667020

in your words "Critical infrastructure" and with regards to our national development plan what do you think number one on that list is. I will give you a clue, it rhymes with Mousing and beings with a H :)

We left a situation where for the majority of the time we were in a covid lockdown no building allowed, hardly worth while borrowing for something that was basically outlawed.

Greyian · 01-06-2023 5:40pm

@fliball123 You keep mentioning that the top 50 construction companies made a profit of 10 billion.

Do you have a source for that?

You linked to this article previously, but it doesn't say the top 50 construction companies made a profit of 10 billion. They had turnover of 10 billion. Turnover and profit are very, very different things.

https://irishbuildingmagazine.ie/2022/06/28/2021-turnover-at-irelands-top-50-contractors-tops-e10bn/

Taking just SISK as an example, turnover in 2021 was a bit below 1.5 billion. Profit, meanwhile, was 19.2 million. That would mean there profit was ~1.3% of turnover.

https://www.irishtimes.com/business/economy/2022/11/24/building-company-sisk-books-more-than-19m-profit/

Profit of 1.3% of turnover doesn't offer a huge scope for reducing prices, unless you can also cut costs too.

That isn't to say that SISK are representative of the construction industry at large or housing developers specifically, but using turnover as a basis for suggesting there can be massive cuts made to selling prices is frankly ludicrous.

I'm not saying that developers don't have scope for reducing prices.

I'm not saying that developers don't take advantage of market conditions to sell houses for far above their construction (and other associated costs) when they can.

But I am saying that basing any kind of argument on what developers will or will not do based on the assumption that turnover and profit are comparable isn't an argument worth having.

wassie · 01-06-2023 7:28pm

https://www.boards.ie/discussion/comment/120667095#Comment_120667095

I didnt say the state would not be allowed compete and build housing at a lower price point than what is being offered. I'm saying a state run building agency would face a lot of challenges, both politically and practically. You could guarantee the CIF would come out all guns blazing.

Its the role of Government to support people & business during the hard times and I think we all sort of have a common view that any downturn presents an opportunity for addressing the housing crisis. Its just how that can be achieved differs.

In my view the state would be better reorganising itself to better utlilse the existing builders in this country with a more centralised approach. This way they can be supported through a downturn keeping people in jobs rather than putting everyone on the public payroll.

We dont need a state run building company. We already have enough competant builders. We need a proper state run procurement agency. You only need to look at the childrens hospital debacle to see how poorly the Irish Govt is lacking in this department. It was quite simply badly procured.

We could take a lead from Scotland. There is currently no national strategic approach for Scottish contracting authorities, so they are developing a National Procurement Strategy rather than a piecemeal apprach by all of the various state govt departments and agencies. This in turn can better support their national strategic objectives.

And yes laws and planning are both changing constantly, but the point is we are not seeing the reforms go far enough to incentivise house building and stop land hoarding. Land prices & utilisation in this country are function of our outdated tax and planning systems. Building costs get a lot of attention, but land costs are a big part of the equation and could be reduced if the incentive was removed to do nothing. The exodus of SLL could be reversed pretty quickly if the Govt so desired.

Sinn Fein are on record time again lambasting the current governments housing policy. If you can find anything on the contrary put it up instead of silly lotto quip. Thanks.

Sorry if I misread you, but in your original post you made it sound very much like its a fait accompli with the Shinners getting in, hence the 'silly quip'.

How will any construction worker brought into the country be picked off by the private sector when they will be slowing down, letting staff go and in some cases have ceased building anything? Square that little round hole for me

Now your misrepresenting me. I was clearly responding to your notion of attracting "talent globally with visas and a public sector job (with the likes of pensions and all the other perks that come with this)". Frankly the idea of construction workers being brought in at a time when staff are being let go sounds absurd.

https://www.boards.ie/discussion/comment/120667123#Comment_120667123

in your words "Critical infrastructure" and with regards to our national development plan what do you think number one on that list is. I will give you a clue, it rhymes with Mousing and beings with a H :)

Try re-reading the last line of my post.....but sure, scold me for making 'silly quips'.

We left a situation where for the majority of the time we were in a covid lockdown no building allowed, hardly worth while borrowing for something that was basically outlawed.

No idea what this means.

FernandoTorres · 01-06-2023 8:12pm

I'm not sure about this narrative of mortgage customers being "subsidised" by the banks. It makes it out like they're doing a public service. There is €159bn of Irish household deposits in the banks. The bank can get 3.5% leaving this on deposit with the ECB while they pay pretty much nothing to depositors. In fact you're charged for the pleasure of having an account.

On mortgages, sure they haven't raised rates as quickly as they could have for new loans but they have passed on the majority to variable and in full to tracker holders which make up a big proportion of the market.

You'd swear they were making a loss on mortgages the way some are going on. The reality is they are going to make massive profits this year. Sure they could make slightly more by passing on more rate rises but they also have a vested interest in keeping the housing market buoyant and forcing out non bank lenders while they're at it.

DataDude · 01-06-2023 9:40pm

https://www.boards.ie/discussion/comment/120667696#Comment_120667696

I think the narrative is not that mortgage holders are being subsided by the banks, it’s that they’re being subsidised by other customers with money on deposit. The banks are doing this for competitive reasons, not charitable of course.

But in some ways you’ve highlighted yourself how good a deal Irish mortgage holders are getting - ‘the bank can leave money on deposit with the ECB and earn 3.5%’

but instead they’re lending it out to Joe Soap for 35 years with huge risks attached for the same rate or less than they can get risk free off the ECB.

Irish fixed mortgage rates are so low currently they don’t make any sense long term and will have to go higher. How quickly - who knows.

FernandoTorres · 01-06-2023 10:18pm

Yeah I see your point but I think what they're giving up on the mortgage side completely pales in comparison with how much they're making on the deposit side. While lending out at 3-4% doesn't seem to make sense now, I don't think it's a huge risk given the small amount of mortgages being written and the yield curve is pricing in rate cuts from next year.

Timing belt · 01-06-2023 11:18pm

https://www.boards.ie/discussion/comment/120666055#Comment_120666055

Every post is “when SF get in” ….believe it or not their hands will be tied by the reality of being in government so there won’t be that much change…They would also need another political party or two to form a government which yet again will mean less change. The only thing that would change is the flow of money and back handers. Being in government is different to sound bites so I wouldn’t expect to much of a change to housing besides it becoming harder for FTB’s as all resource is redirected to social housing so less houses built for FTB’s.