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

Villa05

https://www.boards.ie/discussion/comment/122062886#Comment_122062886

I understand and sympathise with all of your well made points.

However the solution for all income groups is to ramp up supply that serve all income groups

This week we announced cheap loans @ 3.5% for existing homeowners to renovate there homes. Could we not do something similar for those with no homes.. According to the developers the labour is present to ramp up output and of course there is no shortage of land

The solutions are simple, what's necessary is the will to remove what's blocking the solution from being implemented.

I'm afraid that giving subsidies to those on a 100k salary adds to the dysfunction rather than doing anything to solve the problems

DataDude

https://www.boards.ie/discussion/comment/122066181#Comment_122066181

This is more arguing the merits of demand side supports altogether. Without going down the rabbit hole of the economics, I think it’s fair to say there are absolutely reasonable arguments to made for and against them. I think it’s a reasonable position to hold that they should be scrapped altogether (although not one I personally subscribe to)

The bit I couldn’t understand is why you’d carve out a section of society (single income households/single people), and discriminate against them when they already have a tougher time as it is buying a home, typically contribute more in tax and receive less in other supports (child benefit etc.)

Bass Reeves

It wouldn't have anything to do with the weather I wonder. Son has started building arrived back to this when steel was supposed to go in in early March, delayed concrete by a week. We soldiered on many did not. Subfloor in awaiting the blocklayer to come back

IMG-20240305-WA0001.jpg

IMG-20240305-WA0000.jpg

Bass Reeves

https://www.boards.ie/discussion/comment/122067573#Comment_122067573

What the government has done is give supports to first time buyers. It has loaded the market in there favour. Some are upset by this as its making it difficult and expensive to get extensions, upgrades etc done. As well it limiting the supply of larger houses

The Student

https://www.boards.ie/discussion/comment/122066181#Comment_122066181

Builders/developers won't build unless they get the profit they want and the market decides what that is.

They can't get finance at a reasonable figure to actually build. Giving low cost finance to those who want to buy is all well and good but who pays for financing these low cost loans?

No matter what people think I am sure there are aspects of building that we can't control (anything we need to either import or any input where there is a shortage).

It never ceases to amaze me how many people completely ignore simple economics. For example let's look at the rental sector for a moment we have a housing crisis, so we make the rental sector toxic for a landlord resulting in some (not all) selling up because of this fact.

But the property does not cease to exist! Correct but you are under utilising existing stock. Logic suggests give the landlord a short term break to encourage them to stay giving breathing space to increase the number of properties built/renovated (remember increased supply is the answer).

Why should someone on €100k not get a subsidy? This person is most likely contributing between €30k and €40k in income tax, PRSI, usc etc. Do you think their earnings are received from doing an easy job?

timmyntc

https://www.boards.ie/discussion/comment/122069167#Comment_122069167

You have addressed the failings of demand side schemes in your post, and then at the end question why it's a bad thing to subsidise 100k earning buyers?

If you want to make it easier for low earners to buy housing, whether they be single or a couple, you should spend state money to increase supply.

Throwing money at demand led measures is a zero sum game, it just means a different group win and another lose.

Supply led measures actively expand the pool of available housing, demand led measures expand the pricing of existing housing.

Villa05

https://www.boards.ie/discussion/comment/122067573#Comment_122067573

Its not aimed at being discriminatory. If we are in a position where the top 10% of income earners and probably the top 5% of the First time buyer pool need subsidies to buy a basic necessity we need to stop and immediately change what we are doing. Surely it's the definition of dysfunction

Focus on supply and stop demand side measures

There were over 30,000 first time buyers last year. Only about 20% of new builds are making it to the for sale window at the auctioneers about 6,000 annually, let's assume that 50% are purchased by first time buyers that's 3,000

Despite 10% in your back pocket and the offer from the state to cover a further 20% of the price, 90% of FTB's are buying from the non subsidised 2nd hand market.

Could it be anymore emphatic that what the government is doing is a failure and is only driving up the cost of new supply thus hindering all income groups in achieving home ownership

DataDude

https://www.boards.ie/discussion/comment/122069262#Comment_122069262

If the government gave a developer €30k for every new house they built (supply side) or give the buyers of the house €30k to give to the developer (demand side), they largely have the same economic effect for both parties. The demand side incentive stimulates the supply.
You’re over simplifying it.

The benefit of demand side is it’s easier to be targeted towards a certain cohort (first time buyers). This comes at a cost to everyone else because prices excluding the grant do go up a bit. But that’s the point, it lowers prices for FTBs. It increases prices for everyone else.

Mr Hindley

I haven't been monitoring this so closely since I finally managed to buy somewhere last year (thank God!), but FWIW, these are my latest stats on supply, based on total properties of all types listed for sale on Daft.

Donald Trump

All subsidies/schemes etc. are merely a boon to those that are selling houses. Whether that be builders/investors/otherwise. They exacerbate the issues.

The current market is inherently inelastic

Villa05

https://www.boards.ie/discussion/comment/122069396#Comment_122069396

That's a poorly thought out measure

State is buying from developers hovering up a lot of new supply. The developer is paying possibly 10% for finance and charges a margin of 15%+

Suppose the state can borrow at 4% (saving 6%) and contract out to a builder removing developer margin (saving 15%), build on state land (saving 10%). Build to rent and remain in state ownership (remove Vat saving 13%)

Call the Scheme the Covid dividend in housing for front line workers that kept the country ticking over. Expand depending on success

Workers are in affordable rents and can save for there own place negating the need for demand side subsidies (saving billions). They are closer to employment centres improving efficiency and aiding the avoidance of fines for environmental pollution. Housing becomes a state revenue generator rather than billions being spent annually making the situation worse.

High income earners have a greater supply to choose from and those in the top 10% can probably obtain a better home in a nicer location on a single salary without any need of assistance

DataDude

https://www.boards.ie/discussion/comment/122069522#Comment_122069522

Things like waiving VAT, giving land for free, are just state subsidies in another form other than cash but have the same economic effect to the developer and same cost to the state.

Trying to eradicate private sector margin by state contracting directly isn’t done because the belief is the private sector does things more efficiently.

If demand side state subsidies to first time buyers are such a clearly awful idea, why do so many countries do it?

DataDude

https://www.boards.ie/discussion/comment/122069482#Comment_122069482

The market maybe somewhat inelastic in the short term due to supply bottlenecks, but over the long term it behaves fairly rationally.

Plot house prices on a chart against number of houses built over the last 20 years. I think you’ll find the relationship is remarkably strong.

Donald Trump

https://www.boards.ie/discussion/comment/122069603#Comment_122069603

"inelastic" is not the same as "irrational"

The majority of people stretch themselves as far as they can when buying a house. If they want a particular house and can afford and want to pay 300k for it, but the state suddenly hands them a free 50k to put towards it, then a lot of people will now be willing to hand over 350k for that same house.

If you have enough people getting their 50ks, then all houses will similarly jump.

DataDude

https://www.boards.ie/discussion/comment/122069627#Comment_122069627

Yes which is the point. You put €50k into a cohort of buyers pockets but not all. Prices go up, but by less than €50k because not all buyers have that amount.

For the cohort you target, houses get cheaper. For the cohort you don’t target, houses get more expensive. On aggregate house prices increase which then stimulates more to be build in the medium term.

This is precisely the aim of the scheme - more houses get built, houses are more affordable for FTBs, non-FTBs lose out.

Blut2

https://www.boards.ie/discussion/comment/122064833#Comment_122064833

Absolutely, those figures show quarterly completions going back years and there is substantial variation across the year down to weather, holidays etc.

But the worrying thing is Q1 year on year completions went from 6716 to 5841. Thats comparing like for like - the same time of year.

At a time when house building needs to increase by circa 100% per quarter (we need to be at close to 15,000 per quarter, averaged across the year so - so probably close to 10k in Q1), dropping by almost 20% is the opposite of what need to be happening.

Donald Trump

https://www.boards.ie/discussion/comment/122069647#Comment_122069647

It's a bit like increasing the minimum wage for the lowest rung civil servant. They might be the focus, but everyone else lifts as well.

For people already "on the ship" so to speak, the rising tide lifts them anyway for trading up etc. (not exact but near enough). The bottom of the ladder ultimately sets (or feeds up into) the other prices too. And what you have in this country is a scenario where nearly everyone getting onto that bottom rung is getting the handout. Those that aren't, are not significant enough to cause any real deviation.

If I'm happy to pay 300k and Paddy is happy to pay 295k for the house, I will win it. If we both get a handout of 50k, then I will still win it, but at 350k. If the handout changes to 100k then I might decide instead to let Paddy have it and I can go down the road to get the nice house that Jimmy was bidding 450k on last week. Happy days for me. Except that Jimmy now also got the 100k.

Such subsidies are only an advantage if not many people get them or if there is a real oversupply

The Student

https://www.boards.ie/discussion/comment/122069262#Comment_122069262

Who finances the reduction in costs to increase supply? If you want properties to be energy efficient etc who pays the cost of achieving this? Do you force suppliers costs down to reduce prices? Do you think businesses and private sector workers will continue to supply goods and services in a market where prices and by extension income is falling?

Not everyone can afford property you cant force a square peg into a round whole no matter how much you convince yourself you can.

We are not all the same, life is not fair, we dont all get what we want etc but thats llife.

DataDude

https://www.boards.ie/discussion/comment/122069683#Comment_122069683

Agree with all of this. There was over 50k houses sold last year. Around 7k of them had HTB.
That 7k is undoubtedly massively concentrated in new build 3bed semi-Ds sub 500k so expect it would be pushing prices up here…which is precisely what government want to stimulate more of them.

It’s inflationary impact elsewhere is likely to be fair less significant

timmyntc

https://www.boards.ie/discussion/comment/122069698#Comment_122069698

Finance costs alone and availability of finance for developers is a major cost for building. The state is running big surpluses at the minute, we can afford to offer very low interest rate loans to developers to stimulate construction.

This takes the risk off developer and onto the state (who can take land/assets as collateral in event of default), less risk = more activity given the possible profits remain the same (or higher actually due to lower loan repayments)

The Student

https://www.boards.ie/discussion/comment/122069854#Comment_122069854

Asset values be it land etc only have a value when they are sold.

So let's look at our recent history were developers had massive loans to financial institutions and they went bankrupt and the banks had to take a " haircut" on the debts of the bankrupt developers. The assets the developers had were not worth enough to repay/act as collateral for the debts.

What you are saying in theory "should" work but in practice won't.

The Student

It never ceases to amaze me when it comes to posters and basic economics. Everything has a cost be it a financial one and opportunity cost etc.

Private business is there to make money nothing more nothing less and if you try to control a market it reacts, that's what business is.

Simple economics since the beginning of time suggests if supply increases price falls, for supply to increase there must be something to encourage that increase. If a market is dominated by a small number of large suppliers or buyers they can have a significant impact on the operation of the market.

Villa05

https://www.boards.ie/discussion/comment/122069597#Comment_122069597

Its for build to rent therefore not free, rather utilising state assets to offset spending elsewhere and derive an income from often idle land.

If the private sector is so efficient why do costs increase substantially each year. Under my plan private sector also builds

Would such countries also have severe housing problems

Dav010

https://www.boards.ie/discussion/comment/122070020#Comment_122070020

If you ran a business, you wouldn’t ask why costs of doing business increase.

The Student

https://www.boards.ie/discussion/comment/122070020#Comment_122070020

Because thats what all businesses do they maximise profit. Remember one businesses output is another's inputs.

Villa05

https://www.boards.ie/discussion/comment/122070040#Comment_122070040

Housing is 30% of the inflation basket figure. Tackle that successfully and you go a long way to improving competitiveness, something a small open economy should be watching very carefully

timmyntc

https://www.boards.ie/discussion/comment/122069973#Comment_122069973

The global financial crisis, and the crash in Ireland saw demand for property plummet to almost nothing, which is why asset prices didn't cover the cost of outstanding loans.

That is a million miles away from where we are now.

The Student

https://www.boards.ie/discussion/comment/122070776#Comment_122070776

Ok I will just say "soft landing"

Villa05

Bit of a link dump but relevant to why ftb are buying 2nd hand properties over new homes

Apparently the uninterferred market is cheaper than so called "affordable" new homes market

Surprise!

https://archive.ph/2nJS2

FernandoTorres

That article is fairly ironic in that it goes on about how misleading it is to call properties affordable by comparing it to second hand listing prices without any regard for the fact that listing prices are completely misleading in themselves. Pretty much nothing in Dubin will sell for near its listing price these days, making the whole comparison nonsense!