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

Eclectic Econometrics

https://www.boards.ie/discussion/comment/117894430#Comment_117894430

You've correctly stated that inflation was flat but I have seen numerous articles and commentators state this is cooling, as if a JPow press release.

Anyone interested can Google "tradingeconomics united states inflation" it is 5.4% to 5.3% "cooling" ;-)

From the FT today Google "UK inflation surges to 3.2% as food and transport costs rise - Increase is fastest since Bank of England gained independence to set interest rates"

Again, this is being pitched as transitory. I brought up inflation months ago as one possible black swan, it was being pitched as transitory then too. It is transitory like an uncle that comes over for Christmas and still hasn't left come Easter.

Talking of black swans, anyone keeping an eye on the events of Evergrande?

Again, I am not saying we will see a 20% drop in prices etc. On the balance of probability, if I had to stake my life on it, I would say this time next year house prices would've increased rather than decreased. But there are rumblings getting louder and unknown unknowns no one sees coming.

****As always, my apologies for not being able to post links.

Amadan Dubh

https://www.boards.ie/discussion/comment/117894648#Comment_117894648

The inference from me is that they are getting out before inflation kicks in as costs are already running hot and show no sign of slowing. Perhaps an absolute peak in the market though I feel there is road left to run in terms of increases in prices, but there is scope for an almighty correction.

mcsean2163

https://www.boards.ie/discussion/comment/117895334#Comment_117895334

Here's a link

https://m.independent.ie/business/world/evergrande-default-risk-prompts-talk-of-broad-contagion-40851907.html

DataDude

We bid on 5 houses in the period of January - April 2021. Outbid on all 5. €1-€1.5m range.

Over the past 2 months all 5 sales have fallen through and be re-offered to us. 3 we were no longer interested. 2 we are considering. Of the 3 that we were re-offered and not interested in, 2 are still sitting on the market. 1 just resold at €175k below the original SA price.

The two we are considering are currently €100k-€200k below the original SA price (and our own previous bids) from March and have been there for the last couple of weeks.

There’s definitely something unusual going on. Have had 3 different EAs telling us the ‘sale agreed’ fall through rate is ridiculously high at the moment. It’s gotten to the point where I don’t want to get into bidding wars because I’m 70% sure the person I’m bidding against is just going to pull out anyway. Tricky time to be buying.

I have noticed the same datadude.

An awful lot of properties that went sale agreed, even 12 months ago are coming back on. (I'm looking lower than your price range though! )

DataDude

https://www.boards.ie/discussion/comment/117895803#Comment_117895803

We’ve narrowed our search down to primary one area now, and at one time there’d only be 3-4 properties of interest.

Starting to become clear now that the same person was sale agreed/highest bidder on 3 of the houses at the same time. Very hard to trust any counter offers when that kinda stuff is happening!

Fkall

https://www.boards.ie/discussion/comment/117893936#Comment_117893936

26k per site in North Dublin vs 198k in South Dublin

Hubertj

https://www.boards.ie/discussion/comment/117895779#Comment_117895779

That’s mad stuff altogether. Perhaps people cop themselves on when the dust settles. They realise they got into bidding way over, step back, calm down and realise what’s happened Regarding a lot of SA falling through it would be interesting if there is any data on that. I wonder does the likes of IPPI have that in their datasets (if it’s even recorded anywhere).

wassie

Highly doubtful. Sale can fall over for any reason at any stage and I don't see what any commercial value reporting of such would be. I agree though it would be interesting to see is it unusually high or just more evident given transactions numbers are excessively low by virtue of limited supply.

Jmc25

https://www.boards.ie/discussion/comment/117895779#Comment_117895779

+1 on this - albeit at significantly lower prices. I've been to view a couple of houses now that were sale agreed at the start of summer. Bidding much lower now but obviously final selling price remains to be seen.

silver2020

https://www.boards.ie/discussion/comment/117892250#Comment_117892250

The 2020 figures were the gross margin. Dropped considerably due to pandemic. In 2019 their profit before tax was in excess of 15%.

Excessive Senior exec pay comes into it in the context of actual cost of developing homes. Cairn's compensation package for the senior team goes into the millions (and subject to shareholder query last year), but they were kind enough to take a cut last year.

But in the context of the LDA delivering affordable homes, these €1m+ salaries and packages and the 15.6% profit before tax, show that it will not be difficult to deliver homes 25%-35% below the current market without incurring a loss (assuming land is not accounted for). Hence the LDA should be able to deliver its mandate

mcsean2163

Looks like Evergrande tale is escalating.

https://www.zerohedge.com/markets/evergrande-suspends-trading-all-bonds

I'll put it this way. If the vacancy tax gets introduced, a lot of the REITS sitting on empty apartments might get restless. Will there really be a 33k per annum demand for houses once vacancy tax introduced.

I'd say Evergrande is unlikely to be a Lehman event but I wonder what it takes for global property to tumble...?

mcsean2163

Interesting when looking at projected world populations. Africa is projected to have a huge population boom while the Europe is set to go into decline.

https://www.statista.com/statistics/272789/world-population-by-continent/

It's strange to think that house prices in Europe are rising so fast despite a projected decline in population.🤨🤔🧐

Cyrus

https://www.boards.ie/discussion/comment/117898058#Comment_117898058

Glenveaghs net margin, pre tax, was below 10% in 2019.

Amadan Dubh

https://www.boards.ie/discussion/comment/117898172#Comment_117898172

This company should pose absolutely no systemic risk to the West but we know that there are some bond investors who handle pension money of Westerners (i.e. PIMCO and Blackrock) with exposure to Evergrande and are going to have to take a bath as the company has now said it cannot pay the interest on its debt let alone the principle. You even have investors storming the office and protesting, demanding their money back from them! I wonder though, whether there will be a wider issue with the impending Evergrande crash. If there is a wider risk, it could highlight the risks to global property investment by institutional investors (including Ireland investment by these global players).

Liquidity is there until it isn't and I don't know how these institutionals can hold swathes of properties vacant (ie Capital Dock, Landings) without needing any income whatsoever. But it hints that maybe something is working in the background that saves them from having to take haircuts on the rents being offered and actually be able to sustain low vacancy on extremely expensive properties.

Marius34

https://www.boards.ie/discussion/comment/117898172#Comment_117898172

Now that lockdown ended, most of those Capital Docks, Six Hanover Quay, Quayside Quarter (and couple other ones don't remember the names, that has high vacancy) will likely find tenant as early as this year, even without vacancy tax. Vacancy tax will make almost no difference to REITS.

Pussyhands

It would be great if chinese investors in Ireland had to sell to pay debts and they flood the market with properties.

0.1% chance of that though.

https://www.boards.ie/discussion/comment/117898687#Comment_117898687

Many of these were empty before the pandemic. In fact, many have been empty since they were built. Still asking big rents.

Marius34

https://www.boards.ie/discussion/comment/117898716#Comment_117898716

They wasn't empty for long though before pandemic. They were build in 2019, there could be a large number of apartment with internal design and furnishing not completed before 2020.

Pussyhands

The vacancy tax isn't going to make a blind bit of difference. It's a token gesture to make the government look like they're doing something.

I believe that essentially, it's just another property tax so like 400 or 500 euro a year. And people think cash rich REITs, who are currently keeping properties vacant via high rent prices, will be flocking to take on tenants at reduced rates, just to save a few hundred a year?

Unless the vacant tax is in the several thousand, it won't make a difference. These reits are already losing out on 25-35k a year in rental income just to keep their property values high. Even if the tax was 25k a year, they'd still be better off just paying the tax as a tenancy will mean management fees, will mean tax on income, will mean wear and tear.

JimmyVik

https://www.boards.ie/discussion/comment/117898716#Comment_117898716

My company has rented a load of them for when people get back to work.

They are only paying half rent until December though as the apartments are empty.

Pretty sure other companies are doing the same.

AlmightyCushion

https://www.boards.ie/discussion/comment/117898837#Comment_117898837

That last part makes no sense. You are saying they are better losing 25k a year and having their cashflow reduced by 25k a year instead of renting it because they will have to pay tax on the rental income. Even with costs and taxes they will make more than losing 25k to a vacancy tax.

Bass Reeves

https://www.boards.ie/discussion/comment/117898889#Comment_117898889

No he is saying if Reits ate deliberately keeping apartments empty to keep rents high another 500euro in a vacancy tax will hardly discourage it

Pussyhands

https://www.boards.ie/discussion/comment/117898889#Comment_117898889

Scenario 1: REITs do what they do now. They advertise apartment for 4k a month. No one rents because too expensive. REITs are losing 36k cash per year. Property price remains high.

Scenario 2: REITs drop price to 3k per month and rents it. They make 36k per year. Property price drops as linked to yield.

So let's pretend there's a vacant tax of 10k per year (absolutely won't be, it'll be like 500 euro max). REITs can either go for scenario 1, where they lose 36k per year or they go for scenario 2, where they lose 10k per year. Not only is scenario 2 cheaper, but the apartment isn't being used, not tenants not paying rent, no management fees or waste fees etc.

In short, a company not taking in 36k per year because they want 48k per year is essentially spending 36k per year to keep it empty.

ionapaul

BTW anecdotally I also am seeing some of the same things as DataDude mentioned above; looking in the €750k-€950k range in South Dublin. Houses that would have seen bidding wars earlier this year (including our own in a lower price band somewhat accessible to FTBs), now with lower bids and some with zero bids at all after months on the market. Lots of Sale Agreeds falling through, the underbidders pulling out, and as mentioned you'd therefore need to be very, very suspicious of the validity of the bidding at all and reconsider your own bids as a result.

We were previously sale agreed on both sides, and in mid-summer the people at the top of the chain pulled out to go back to the market, looking for more; we lost our own purchasers at that point, fair enough, as we couldn't say now when we'd be able to vacate. Two months later, the house we had hoped to buy is still on the market, recently refreshed on MyHome. Hope karma is a bitch in this case! But I think the same is happening all over; prices have plateaued and are now sinking perhaps, slowly.

The last really crazy bidding war I am aware of occurred over a month ago, nice semi D in Dublin 14 that had a totally realistic asking at the very bottom of our range, and over two days was bid up to the top! I still tell my wife that if I were that seller, I'd be totally sure that it would fall through; I refuse to believe that anyone will pay the price bid for the property, and all the underbidders will disappear likewise.

I know we'd happily sell for less than the highest bid we accepted on our home in March, if our next purchase was subsequently a bit lower than the Spring/Summer prices achieved for that type of house.

Amadan Dubh

As a follow on to the two links posted yesterday with sites ready to go with planning permission for sale, here is another, this time in Donabate. A trend perhaps? I'd be curious as to the specific reasons for selling as I'd only be able to hazard guesses; building cost inflation; likelihood of the government punishing site owners who have planning permission but don't use it; peak of the market; dramatic increase in supply likely over the coming years when these projects would finally be completed?

https://www.irishtimes.com/business/commercial-property/ready-to-go-site-in-donabate-with-planning-for-155-apartments-for-8-5m-1.4675920

Cyrus

https://www.boards.ie/discussion/comment/117899611#Comment_117899611

in one way im glad to hear this (i.e. that there are some brakes on) but at the other side of it its incredibly frustrating for people to miss out on houses because of one bidder bidding on multiples properties (as datadude alluded to)

AlmightyCushion

https://www.boards.ie/discussion/comment/117899204#Comment_117899204

I specifically said it was the last part of his post which makes no sense. This is what he said "Even if the tax was 25k a year, they'd still be better off just paying the tax as a tenancy will mean management fees, will mean tax on income, will mean wear and tear."

He argued that even a 25k a year tax was pointless as they would be better off than if they were renting the place out and paying tax. That makes no sense. Renting a place for X amount and losing some of that rental income to tax and fees will still make you more money than leaving it empty and paying 25k a year in tax on 0 rental income.

AlmightyCushion

https://www.boards.ie/discussion/comment/117899287#Comment_117899287

My post was about the last part of your post which said they would be better off not renting the place even if the vacancy tax was 25k a year.

Pussyhands

https://www.boards.ie/discussion/comment/117900679#Comment_117900679

Yes.

If they're currently losing 36k now, having to pay 25k a year is not a deterrent.

AlmightyCushion

https://www.boards.ie/discussion/comment/117901750#Comment_117901750

In this scenario, they are currently losing 36k but it isn't affecting their cashflow much. In the scenario where vacancy tax is 25k a year they are now losing 61k a year and have their costs increase by 25k a year. If a 25k vacancy tax won't act as a deterrent then why don't we make it 100k a year or a million a year. They'll just pay it and the state will make a load of money.

Pussyhands

https://www.boards.ie/discussion/comment/117901985#Comment_117901985

If REITs cared about cash flow they'd rent out for 36k a year rather than leave it sitting.

AlmightyCushion

https://www.boards.ie/discussion/comment/117902471#Comment_117902471

There is a difference between near 0 cashflow and -25k cashflow. The former is easily accommodated. If a 25k vacancy tax doesn't matter to them. What would? Would 100k matter? Would 1 million matter?

Marius34

REITS as any other business, they care about profits, they care about cash flow, they care about lost revenue. They would care even about vacancy tax, but there is no reason to worry much about it, because simply they won't have large numbers of apartments sitting long term empty. Their main business is to rent them out. It's a myth that they not interested in renting them out.

Yes, Covid lockdowns and Rental Caps together, has brought a real challenge for landlords in city center. But it's mostly over. Those empty Rental blocks won't be sitting vacant for long.

SmokyMo

https://www.boards.ie/discussion/comment/117902634#Comment_117902634

Its a myth they are not interested in renting them out. Is it myth that majority of reit own apartment blocks, especially luxury ones are empty? I would suggest you to go for a walk around.

timmyntc

The thing about vacancy tax is it would (should) be leveraged annually, so REITs would be much more likely to rent out at lower price and take the hit in property value, than pay annual vacancy taxes, which after a few years would equal the amount in equity they stand to lose, were they to lower the rent.

How long they can hold out depends on the numbers, but I would think that such a tax would push some of them to either sell up and realise whatever gains they can now, or lower rents. Not a magic bullet, but it would definitely put the right kind of pressure on REITs and investors to not leave properties vacant.

jill_valentine

https://www.boards.ie/discussion/comment/117902634#Comment_117902634

They have been sitting empty for years. The pandemic just made it obvious because no one could pretend all those people were somewhere else.

If Clancy Quay had ever been anything close to fully occupied, even in the first two phases, it would have a bigger population than a lot of towns. As it is, there are barely enough tenants to keep one barebones Supervalu going.

Marius34

https://www.boards.ie/discussion/comment/117902705#Comment_117902705

It's a myth that they don't want to rent it out. It's a myth that REIT's hold large percent empty outside the Covid times. It's NOT a myth that many were effected with Covid and Rental Caps, and left empty over the past 1-2 years.

Marius34

https://www.boards.ie/discussion/comment/117902780#Comment_117902780

It's again a myth that large percentage of REITS stayed long term vacant prior the Covid.

Pussyhands

They'll find a loop hole to get out of the tax anyways. They'll probably "lease" to a management company for a tiny sum to get around it.

https://www.boards.ie/discussion/comment/117902807#Comment_117902807

Is it?

Not as far As I'm concerned, I work in the city centre and they have been empty long before covid.

Marius34

https://www.boards.ie/discussion/comment/117903375#Comment_117903375

which buildings and what years you are talking about? I have lived and worked in city center for years myself.

Heraclius

https://www.boards.ie/discussion/comment/117903375#Comment_117903375

As far as I know IRES REIT (the largest landlord in the country) has an occupancy rate of over 98%.

https://www.boards.ie/discussion/comment/117903427#Comment_117903427

Oh gosh, I don't know names!

Either side of the quays, and around grand canal docks. There's empty apartments in buildings around there for years. Asking big rents too.

Marius34

https://www.boards.ie/discussion/comment/117903492#Comment_117903492

Many of those buildings are not even REIT's. As well many Multinational professionals, don't stay much at home. I have lived in REIT's (not in Ireland), staying only 50-70% of nights, neighbors probably wouldn't even have noticed that apartment was rented out.

People are making to much assumption, to come up to conclusion that REIT's were holding large percent of apartments empty.

Cristianc

I'm seeing lower prices in areas such as Northern Cross, Clongriffin, Coolock or Ashtown, Cabra and Inchicore. Are these worth considering? I'm not Irish.

Browney7

https://www.boards.ie/discussion/comment/117903492#Comment_117903492

Capital dock is listed as 56% occupied as at June 2021. Kennedy Wilson's overall occupancy for Ireland 'multi-family' units is 92.4% of 2346 units. On a like for like basis (they added properties since the previous year's report), their occupancy for 2,067 like for like units is 92.6% which has declined from 95.9%.

Ires REIT have a very high occupancy rate at over 98%.

JimmyVik

https://www.boards.ie/discussion/comment/117903594#Comment_117903594

My company has rented a heap of apartments down there at half price until December.

They must have them over 6 months at this stage. All empty, but rented.

From other posts on here my company is not the only one doing this either.

Middleage Fanclub

https://www.boards.ie/discussion/comment/117895779#Comment_117895779

DataDude, can I ask if you and / or your friends stuck with their plans to move further out of Dublin to secure a better house, given the move to hybrid working, or have you or they decided that after all, you'd rather live in SCD?

Bubbaclaus

https://www.boards.ie/discussion/comment/117902705#Comment_117902705

IRES Reit reported 98.6% occupancy last year. They are the states largest private residential landlord.