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

RichardAnd

https://www.boards.ie/discussion/comment/122391560#Comment_122391560

I'd argue that this is already happening. No one with any sense is holding a large amount of cash for any length of time because they know inflation is eating the value.

Personally speaking, I'd be happy to paid in silver coins….or MTG cards

Greyian

https://www.boards.ie/discussion/comment/122390565#Comment_122390565

Saying it took hundreds of years to get to 17 trillion, but has nearly doubled ten years later is fairly meaningless though.

Between 2014 and 2023, there was a jump from 17,824 billion to 33,167 billion. 86% increase in 9 years.
If we compare 9 year periods going back (each time from the beginning of the following period, so 2005 - 2014, 1996 - 2005), 86% increase over 9 years is by no means an outlier.

Start Year	End Year	Start Value	End Value	% Growth	Annualised %
2014	2023	17824	33167	86.08%	7.14%
2005	2014	7933	17824	124.68%	9.41%
1996	2005	5225	7933	51.83%	4.75%
1987	1996	2350	5225	122.34%	9.28%
1978	1987	772	2350	204.40%	13.17%
1969	1978	354	772	118.08%	9.05%
1960	1969	286	354	23.78%	2.40%
1951	1960	255	286	12.16%	1.28%
1942	1951	72	255	254.17%	15.09%
1933	1942	23	72	213.04%	13.52%

I've only gone back to 1933, as the data in your link only went back to 1929, so we can't go back another 9 years.
So of the ten 9-year periods, 2014 to 2023 would be the 4th lowest for % growth.

Edit: Posted before being finished.

To link all this back to the property market, this all really indicates that with a long term outlook in mind buying as soon as possible is the best option, as the cost and value of your debt will decline over time while the nominal price of property will increase.

Timing belt

https://www.boards.ie/discussion/comment/122391398#Comment_122391398

my point is that a large majority of that debt relates to the grossing out of the balance sheet due to QE and this portion is meaningless (I.e gov owes itself this debt)

Technically all QE is a maturity swap from long term cash to short term cash which results in the equivalent of a interest rate cut and stimulates the economy…..overstimulate and you have inflation under stimulate and you have a recession.

The only extra cash that makes its way into the real economy is what was spent by way of fiscal spending whether it be investment in infrastructure etc or stimulus cheques. I’m not saying this aspect is meaningless but the numbers are a lot smaller and not as sensational.

Villa05

Trump promising to cut corporation tax to 15% if elected. source twitter

Might want to work on new competitive advantages like, maybe, housing

SpoonyMcSpoon

House prices up more than 8% in the 12 months to May 2024;

https://www.irishtimes.com/business/2024/07/17/house-price-inflation-jumps-to-82/

Mahklouf doing exactly as he is supposed to with his looser borrowing policies for home buyers. It seems counter intuitive to allow for such inflation while there is a broader fight against inflation going on in the Eurozone. As inflation in the wider economy cools, housing is inflating to levels which become more unsustainable the more inflation cools. Unsustainable because it means that, as salaries don’t rise as much, people can’t borrow as much and therefore further growth in house prices can only be sustained with more leverage and that is of course a dangerous game. It seems we are at the point that house prices are only climbing because of more leverage being introduced to the market and that is not a good policy which we already know.

floorpie

https://www.boards.ie/discussion/comment/122394950#Comment_122394950

Unsustainable because it means that, as salaries don’t rise as much, people can’t borrow as much and therefore further growth in house prices can only be sustained with more leverage and that is of course a dangerous game.

Speaking of leverage, on Morning Ireland yesterday an interviewee spoke about earnings multipliers for mortgages, who said that the rules are bent at a bank's discretion under certain conditions. The LTI criteria seem to be bent for high earners where bonuses and other income sources apply over a certain number of years.

Naturally enough banks would be aware of the risk profile of an income stream, but nevertheless it seems irrational to me to have more permissive lending based on historical high earnings, where that historical period spans a stock market boom.

Looking at a Central Bank report from 2016, it seems to show a significant increase in defaults as LTI increases: https://www.centralbank.ie/docs/default-source/financial-system/financial-stability/macroprudential-policy/policy-documents/2016-review-of-residential-mortgage-lending-requirements.pdf?sfvrsn=86c4da1d_12

Does anyone have any insight on these practices? For example, what sources of income and collateral apply here to increase LTI (I hope the answer isn't 'rental income' and 'properties'), or, are there any breakdowns from the Central Bank on lending by LTI?

floorpie

https://www.boards.ie/discussion/comment/122395338#Comment_122395338

Answering my own last question, I see a very insightful report from Central Bank on this, here:

https://www.centralbank.ie/financial-system/financial-stability/macro-prudential-policy/mortgage-measures/new-mortgage-lending-data

Direct link:

https://www.centralbank.ie/docs/default-source/financial-system/financial-stability/macroprudential-policy/mortgage-measures/data-on-new-mortgage-lending/new-mortgage-lending-data-2023.xlsx?sfvrsn=b933601a_8

Buy-to-let lending is far lower than I would've thought.

timmyntc

https://www.boards.ie/discussion/comment/122395350#Comment_122395350

The risk profile of buy to let makes it a very poor investment. Add on the eye watering interest rates for a BTL and it very quickly becomes not worthwhile. Much better returns elsewhere

Donald Trump

https://www.boards.ie/discussion/comment/122395370#Comment_122395370

If you are borrowing money for it, then you need to compare like with like. i.e. compare the interest rate for a BTL mortgage with the rate you'll get for a personal loan to buy the alternative (or even secured against that alternative).

For someone who has the cash - then yes, put it in a diversified portfolio. But if all you have is 100k, and the choice is between buying a BTL with a mortgage, and investing that 100k today in something else …… do you think you'll be able to buy that house in 20 years with the proceeds from your 100k invested into something else? (at the future price of course). Bear in mind too that you will have some additional CGT from you other investments that you won't have with your property.

Villa05

https://www.boards.ie/discussion/comment/122394950#Comment_122394950

What the government is doing is the main driver of house prices. The majority of ftb are buying 2nd hand homes. The driver of prices is new builds, this is where the majority of market interference is

Padre_Pio

https://www.boards.ie/discussion/comment/122395818#Comment_122395818

The majority of FTBs buy second hand homes, but also I believe the majority of new homes are bought by FTB to benefit from HTB.

amacca

https://www.boards.ie/discussion/comment/122393046#Comment_122393046

I believe I'm not informed enough to fully understand some of this post

Just by way of clarification..does this mean that a large majority of govt debt is a direct result of quantitave easing...because in order to introduce more liquidity to the system govt bonds (debt) have been purchased from itself...or EU doing it for countries in EU?

Therefore its introduced more money but just by borrowing from its future self?

And a lot of this extra money doesn't make its way into the real Joe bloggs economy because its spent on investment in infrastructure etc so it doesn't have nearly as big an effect on inflation as people think?

Something along those lines?

Just to argue for the sake of it (i might learn something)...does it not mean that govts don't really have to tighten their belts due to the put it on the never never aspect of it....or at least prolonging the day of reckoning indefinitely...and that has a big influence on inflation as they will only squeeze majority of voters out of necessity......but at some stage the piper will have to be paid?