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

Timing belt

https://www.boards.ie/discussion/comment/120772385#Comment_120772385

Banks are not paying for deposits and instead using the increased margin on deposits to subsidise the margin on the loan book.

You also need to take into account that we have an inverted yield curve at the moment where overnight money gets a better return than further out the curve. This is because the expectation is that rates will be cut in the future due to a weaker economy.

newmember2

https://www.boards.ie/discussion/comment/120772419#Comment_120772419

Approvals up, prices down

Please stop with this utter nonsense, more demand/money only sends prices one way. You are possibly over-lapping two sets of figures weeks or months apart. Record approvals would certainly account for the sudden surge occurring in the last 4 weeks or so - in demand and in selling prices. Was at a house viewing last night in Dublin, thirty to forty interested parties there.

DataDude

https://www.boards.ie/discussion/comment/120773134#Comment_120773134

You’re way oversimplifying. Mortgaged FTB demand is only a piece of the puzzle. You’re ignoring that

• institutional demand has likely fallen by ludicrous amounts due increases in risk free rates

• upsizing demand has likely fallen as people don’t want to give up locked in low mortgage rates

• speculative investment, general sentiment is likely waning as global housing markets turned late last year/early this year.

• Cash is now longer yielding 0/negative making property investing less attractive to Joe soap.

• US dollar has weakened significantly vs the Euro hurting the purchasing power of wealthy expat buyers returning to Ireland who have been a SIGNIFICANT factor pushing up prices at the higher end during the last two years.

• private FTB demand is also impacted by levels of skilled inward migration. Possibly slowed due likes of Meta etc. reducing their size

• supply is increasing through higher completions, landlords exiting, possibly more vacant units coming into use as holding derelict property is expensive with risk free rates at 3%.

Mortgage approvals for FTBs have been pretty steadily climbing every year for donkeys years now. House prices have been falling for several months.

These are both facts from very reputable sources of data.

It most certainly is not ‘nonsense’. If it were as easy as more approvals = higher prices then we wouldn’t have so many diverging opinions on the housing market.

the.red.baron

https://www.boards.ie/discussion/comment/120773237#Comment_120773237

surely completions are years from balancing out year on year increases in demand

every landlord who sells is another person desperate to buy

was their really speculative investment? I mean there was buy to let investment obviously, but that is long term

JohnnyChimpo

"• upsizing demand has likely fallen as people don’t want to give up locked in low mortgage rates"

I think this point is very underappreciated. When you consider also that any new purchase probably comes with some renovation work, and labour and materials are currently crazily expensive and scarce, this is going to be a big drag on the non-FTB market. Possilby also on the FTB market, but to a much lesser extent because they effectively have no alternative

DataDude

https://www.boards.ie/discussion/comment/120773301#Comment_120773301

Yeah not sure on completion numbers vs demand. There’s hugely varying numbers on that, usually coming down to different assumptions of net migration and changes in household size. We had an article posted here earlier saying we have no supply issue at all!

Whether outright speculative or not, I’ve no doubt people were happy enough holding onto a vacant house for a few years until a child may use it for college, possibly buy one for some potential future need even doing a bit of AIRBNB on the side. This was encouraged by negative deposit interest rates which people just hated paying.

Wasn't a bad option to have a property sitting there going up 10% a year when the alternative was cash you’d be charged for holding. It’s now very expensive to hold onto an asset which is yielding 0.

the.red.baron

https://www.boards.ie/discussion/comment/120773561#Comment_120773561

its widely circulated on demand versus supply

look at both the housing and the rental market which is even worse, so whatever article that is is just obviously wrong

no one is holding onto a vacant property to the 10-20 years it might take to get to college without using it and if they are they aren't doing it at the supposed top of the market, you would rent it, in fact due to supply issues you'd be mad not to due to the rent, obviously there are risks, but you can be choosy on who you rent to and this drops the risk right off

there might have been nothing to be gained on savings but there are other methods of investing

the.red.baron

https://www.boards.ie/discussion/comment/120773528#Comment_120773528

up sizing is usually done on a needs basis

the people who have locked in at a fixed rate have mostly done it over maybe 2-3 years

id say it would be down the list if you needed to upscale

what makes you think you would need to renovate any new property? If you stay in place your choices are put up with it or say extend your own place

DownByTheGarden

https://www.boards.ie/discussion/comment/120773725#Comment_120773725

Most people up-sizing are more financially comfortable. A lot even with little or no mortgage. Like the idea of moving from the starter home theyve had for years to something a bit nicer etc. GEtting any sort of exctension nowadays is cost prohibitive so its easier to just move to an already done bigger house to get the space you want if your current one doesnt do it for you anymore.

DataDude

https://www.boards.ie/discussion/comment/120773725#Comment_120773725

A lot of people move up the house value chain out of desire rather than need. I know for us, if in 5 years when our fixed rate is up, if mortgage rates were still 2/3%. We’d probably take our savings and buy something more valuable (smaller house though). If mortgage rates are 5/6%, we’ll clear the mortgage instead and not trade-up.

So there is definitely a cohort of potential trader uppers who’s demand is variable in a different way to the need of FTBs who are sort of forced buyers these days.

Another fact often overlooked. Nearly 40% of house buyers in Ireland do so without any mortgage at all. So a material proportion of the demand over here is completely detached from mortgage approval data.

https://extra.ie/2023/04/08/property/a-third-homes-bought-with-cash

the.red.baron

https://www.boards.ie/discussion/comment/120774600#Comment_120774600

Do you have kids? That's the real driver of trading up, apartments to houses etc, the property ladder

Loads of people move house and that is a big portion of cash buyers

Everyone trading down as an example, everyone of those entire estate bought out by reits

hometruths

https://www.boards.ie/discussion/comment/120773640#Comment_120773640

Here is an archived link to the article which removes the paywall so you can judge for yourself whether it is wrong

https://archive.is/UAC8U

In essence his point is:

Confronted by this evidence, why is there such a widely-held conviction that Ireland’s property market is undersupplied?

i.e the chronic undersupply narrative is so strong that it is blinding us to looking at potential other causes and thus solutions.

When these articles crop up occasionally they're roundly trashed and the authors ridiculed, the comments here being a perfect example.

But I think these guys are genuinely trying to raise awareness of the possibility with the best intentions - they're trying to raise a warning flag of the consequences of getting this wrong. If the chronic undersupply narrative is even a little shaky we could move from undersupply to oversupply very quickly.

If that happens the same people who are trashing those now as idiots cribbing and moaning, will be the first to say "Hang on, how come nobody saw this coming, why weren't we warned this was a possibility, where's my nama etc etc."

We've been down exactly the same road before.

the.red.baron

https://www.boards.ie/discussion/comment/120774669#Comment_120774669

Right if there is no undersupply why are there so few places for rent and spiralling rents so bad they needed rent controls

Why are the numbers of houses for sale so low at a historical level

He even says there was undersupply in past but no explanation as to when this was magically fixed without adding any stock to the market

There was historical oversupply and it's been reversed

Like why is is he picking out figures for housing building and comparing it to 10 years ago when the market was at the very bottom of the post Celtic tiger slump with no building, which is the whole problem in the first place

Vacany rates are great when they aren't in leitrim

And saying houses haven't gone up in real terms when inflation is sky high yet incomes are flat

DataDude

https://www.boards.ie/discussion/comment/120774644#Comment_120774644

No kids. But we have more space than we’ll ever need, so our potential future housing demand will be purely based on unnecessary stuff like a fancier location or more land. We’ll never need to move, but with might anyway if conditions are right for us to do so (cheap debt would be a big part of this).

I agree with you that for most, upsizing is due to needing more space. But there are lots and lots of people who contribute to housing demand just cause they can now afford to live in Dalkey or somewhere nicer than they currently are.

I think that type of demand reduces significantly with higher rates (likely already has) and hopefully to the benefit of the FTBers getting mortgage approval.

On the flip side, higher rates should encourage downsizing as people feel they can actually do something with the extra cash they generate.

newmember2

https://www.boards.ie/discussion/comment/120773237#Comment_120773237

Mortgaged FTB demand is only a piece of the puzzle.

Yes, and the biggest piece - up to 70% of house buyers are FTBs. Increase the number of FTBs and with all your other buyer types in decline and that percentage may be even greater and as you say, FTBs have little choice. Talk to an EA, there is no denying the latest surge.

the.red.baron

https://www.boards.ie/discussion/comment/120774750#Comment_120774750

Your trading up demand to move from one house to another has little effect on demand though

It's people entering the market that does

hometruths

https://www.boards.ie/discussion/comment/120774718#Comment_120774718

As I posted earlier there is undersupply right now regarding what's available for sale or rent that is actually on the market.

His point he root cause of that problem is not necessarily the fact that enough new houses have not been built over the past decade and the danger of only seeing that as the root cause is that we build too many houses in the future.

the.red.baron

https://www.boards.ie/discussion/comment/120774831#Comment_120774831

He says there's no undersupply there was one it's magically been fixed

He gives no evidence for this

Students can't get accom filled by refugees

Hotels full of em

How he thinks the undersupply has been fixed when the number of completions has been si behind the curve is mad

DataDude

https://www.boards.ie/discussion/comment/120774814#Comment_120774814

https://www.boards.ie/discussion/comment/120774822#Comment_120774822

I’m not close enough to market to speak to very live trends. You have some people on here saying demand is soft where they’re looking, others say it’s hot. The data seems to indicate prices have been falling for a while but may have picked up very recently - some have said this just the usual summer increase which will die down (hopefully).

I don’t think the piece on SSB not mattering is true. If we completely ignore supply and assume this is constant. Aggregate demand is just the total amount of money being pumped into housing across FTBs, REITs, SSBs, Govenemsnt etc.

When people move up the value chain they increase the amount of their money in the overall market, increasing aggregate demand. When people downsize, they pull money from the property market, reducing aggregate demand. We also have a major underutilisation problem in Ireland where people generally live in houses beyond their requirements (worst in Europe I believe)

Roughly based on recent data that I can see

35% Cash buyers

40% FTB mortgaged

25% SSBs Mortgaged

So absolutely acknowledge the 40% FTB mortgage people are seeing increased aggregate demand which in isolation would push up prices. They are also largely not sensitive to rate increases as long as banks will lend to them (which they are), as rent is so much more expensive regardless.

However the other 60% of demand is likely to have a material component of ‘non-essential’ demand which will be reduced by higher interest rates (kinda the point of higher rates I guess. Kill demand for everything).

I’m hoping the increased demand in the 40% is outweighed by the reduced demand in the 60% (less active REITS, less upsizing, more downsizing) which would allow a continuation of more FTBs getting loans approved for houses without an associated increase in price. That’s the best outcome we can all hope for.

hometruths

https://www.boards.ie/discussion/comment/120774750#Comment_120774750

I think the overall impact of people moving up/down/sideways and whether that is out of necessity or desire is not discussed enough.

You say you won't need to move but you might like to anyway if conditions are right. And I think that would be fairly typically of the majority of homeowners in Ireland. That sort of conversation about what one might like to do in five years time will be happening with regularity in households across the country.

Obviously part of conditions being right is you see the right house in the right location. Assuming you don't hate where you are now (do you?!) you'll need to see something for sale that is a significant improvement on what you already have.

And if the market is as it is now in 5 years time, pickings will be pretty thin on the market. If the market is the same you're unlikely to sell and think well I'll rent in the area I want to move to, something will turn up eventually, because there is nothing available to rent either!

So there is a decent chance even if financial conditions are right - interest rates and earnings etc - that you'll stay put for a little longer, that's the path of least resistance.

The same logic applies to the people who might wish to move on from the house that you would love to buy if it were on the market. It's not on the market because they're in the same boat. They're looking around to buy but they don't really need to, and they don't they see anything that offers a better prospect than what they already have. Renting is out for them for the same reasons. So they stay put a little longer too.

And the same will apply again to the people who would love to buy your house if it were on the market. Granted, they might have a slightly more pressing need for additional space, but it is unlikely to be an essential driver. There's nothing for them to buy, renting is not an option for them either. So they stay put a little longer.

This is exactly what's been happening in the market for the past 7 or 8 years for the people who had been having the we might move in 5 years time a decade ago.

Of course these people represent pent up demand, that's widely recognised and discussed. Much less discussed is the fact that they also represent pent up supply.

The more people who decide to stay put a little longer, the bigger the knock on effect of pent up supply and demand.

But the same can happen in reverse. If something occurs to reverse that trend even slightly, or at least halt it, then the knock on effects work the other way. The more people who decide I won't stay put a little longer, I'll put my house on the market now and see what happens, then the more others will do the same.

That cannot happen fast enough in my opinion!!

the.red.baron

https://www.boards.ie/discussion/comment/120774912#Comment_120774912

You are incorrectly equating people's demand to move with new people coming into the market

The demand is not the same

One person moving make space but they take it up somewhere else, it cancels out

If no one new entered the market the demand would look very different

Normally rental is flexible and can absorb some demand but it has imploded

So what has taken the slack is massive increase in the age of people buying and the rest staying at home with parents, that is a crisis, it's kicking the can down the road

The demographics are all in place already for the demand

handlemaster

I though prices were stabilizing in Dublin . But glancing at Daft it looks like prices have jumped the last few months. Are properties been offered at higher prices and the selling peice is actually lower ?

Bass Reeves

https://www.boards.ie/discussion/comment/120772146#Comment_120772146

I think too many people do not understand the structure of our workforce.

Historically people had a Jon it entailed 40 hours over week and that was that. Traditionally people like students were often paid cash. Because of the change of nature of business payments all pay is now virtually all recorded.

Now if someone starts to work at 16/17 years of age they are on the system. They actually start on the less than the minimum wage. An U18 year old starts on 70%, @18 it's 80%, @19 it's 90% to where @20 you get the full rate.

Often these are on low part time hours and they drag down the average and median wages. Apprentices and interns also effect the statistic. We have over 250k college students in this country and the vast majority are working only 20-30 hours a week at the minimum wage or lower in some cases.

The nature of retirement has changed as well with many people now working part-time. The HSE is constantly recruiting retired nurses to work part time 15-20 hours/ week.

It's amazing the amount of people on the OAP I know that are working part-time, school bus drivers, machinery and truck drivers, clerical staff in companies. I know at least two retired women that do accounts for small businesses that take 1-2 days a week. Both work from home.

Add to that the amount of contract work out there ( not just the RTE example) but plumbers, electricians, blocklayers, painters who's earning are not accounted for in the median wage statistics as they are some traders.

DataDude

https://www.boards.ie/discussion/comment/120774950#Comment_120774950

Yes agree completely. I think I’ve seen the mentality of ‘I’ll just stay put’ being particularly strong in the older cohort who should be looking to downsize. These are in theory the people to kick off the required chain of events to allow more efficient use of the existing housing stock.

That mentality is definitely significantly influenced by ‘sure where would I move to. There’s nowhere nice’ as you’ve said…but also, and I’ve had this conversation with my own family last year.

’but sure if we downsize I’ll have €500k in cash and the banks will be charging me to mind it (my parents are very risk averse so wouldn’t do equities outside pension despite my protestations)…and sure the house is going up 8-10% a year tax free, why wouldn’t I just hold on for a while?’

I’m hoping the mentality changes if they can soon get 2/3% off the bank and the house is falling in value each year!

Timing belt

https://www.boards.ie/discussion/comment/120774905#Comment_120774905

If you go back over this thread you can see all the posts that immigration will never be as high as it what was pre Covid….that prediction was way off the mark.

We also had posters claiming that there was no housing crisis and it was just media hype because there was enough vacant property to house everyone.

yes we could end up with an oversupply if the population declined rapidly due to lower immigration and high emigration.

I don’t think anyone will argue this point but you need to look at the probability of this happening which is quite low without a Major Economic Event leading to mass job losses. yet we have full employment at present.

DataDude

https://www.boards.ie/discussion/comment/120774992#Comment_120774992

All very true and good points. I think previous figures mentioned median household income of c.€45k?

Two minimum wage workers working full time 37.5 hours a week would bring in €44k a year these days!

I doubt many aspiring first time buyers aren’t couple working full time, so €45k is very much the lowest amount a FTB couple could be earning rather than the median which is distorted by all the factors you outlined.

hometruths

https://www.boards.ie/discussion/comment/120774952#Comment_120774952

One person moving make space but they take it up somewhere else, it cancels out

The idea it makes no difference appears to have become a very common misconception.

A healthy turnover of existing homeowners trading up/down/sideways is an important component of a functioning property market in ensuring an efficient allocation of housing stock. This used to be well understood.

One biggest problem, far greater than undersupply, is the inefficient use of existing supply.

hometruths

https://www.boards.ie/discussion/comment/120775019#Comment_120775019

I agree that releasing the elderly demographic would make a huge difference but I wouldn't put the blame on them quite so squarely! In fairness to them, there is nowhere for them to go either! I've said here before I think that introducing state backed bridging finance for downsizers with 100% equity could be an enormously helpful move to get the ball rolling. That's a carrot, I certainly wouldn't use a stick on them.

I think a bigger problem is the mortgage arrears - removing the threat of repossession as an incentive to pay your mortgage has had a catastrophic effect on clogging up the market and decimating turnover.

As we discussed earlier people sell either out of desire or necessity. In a functioning market a certain % would be selling out of necessity because they could no longer afford the mortgage payments as comfortably as they could when they signed the contract.

This base level of turnover provides a good selection of different types of properties in different areas - those who are selling out necessity are keeping the wheels of the market oiled which begets supply from those who are selling out of desire.

We've removed that from the market entirely. And as with so much of property transactions it has the opposite effect in the other direction. We've created a block of just over 100,000 properties which by definition are the most inefficiently allocated, and they are stuck. They cannot sell until they die. As most of these properties were bought in 05/06/07 that's unlikely to happen for a while yet!

That's where I'd lay the blame!

hometruths

https://www.boards.ie/discussion/comment/120775020#Comment_120775020

We also had posters claiming that there was no housing crisis and it was just media hype because there was enough vacant property to house everyone.

Guilty as charged!

We also had posters saying interest rates would not rise meaningfully in our lifetimes!

Sierra Oscar

https://www.boards.ie/discussion/comment/120775168#Comment_120775168

We also had posters saying the collapse of the property market would be well underway by early 2023 - what was it, the Residential Property Price Index is six months behind the curve or something?