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

Villa05

https://www.boards.ie/discussion/comment/117918662#Comment_117918662

Everything is related to the 08 crash as the response to same was to super inflate assets through money printing and 0% rates so they become extremely vulnerable to the next crash

fliball123

https://www.boards.ie/discussion/comment/117922002#Comment_117922002

https://www.boards.ie/discussion/comment/117922002#Comment_117922002

Eh increase interest rates ??? no thanks Ireland already has one of the highest interest rates when it comes to loans and mortgages in the OCED - so no we should not be raising interest rates - this could lead to people not being able to afford their current mortgage and in this country we dont do "family home" repossession, also this would mean the loans needed to build a house would increase in cost and that will get passed on to current and future buyers. More meaningful property taxes, already a lot of people have paid 8% stamp duty which is what the base was pre 08 and then property tax on top - I think we pay more than enough already for a roof over your head this is before trying to pay a mortgage and seeing a good wedge of your income tax go out to pay for those who cannot house themselves so no thanks and good luck to any political party doing this a it will kill them off with one stroke of the pen.

How can you say 2021 its like 08 - The current situation is no where near the same as 08. Banks will not be the determining factor if we do go into a crisis it will not be because of the banks. 4 big differences between now and 08

2008) 110% mortgage offers where the norm. V.S: 2021) The banks are forced to adhere to the LTV 80/20 with 20% deposit or 90/10 for FTB and 10% deposit.

2008) People being able to leverage equity in one property to get a loan for another one. VS: 2021) This is not done now banks adhere the new rules which means someone looking at an investment property need 20% deposit.

2008) The building of housing units were more than what we needed back in 08 and where built in p1ss poor areas leading to ghost estates and oversupply. VS: 2021) We have no where near enough housing units built for our population due to a building slowdown and our population growing by over 1/2 a million in that time.

2008) The banks process was easy to con, you could get loans of family members to bump up your deposit. VS: 2021) If the bank see you with say a 5k or 10k incoming transaction into your savings and that is being used to get a mortgage they want to know where that came from and if its a family member that family member have to write a letter stating this and also stating that they have no financial ownership rights to the house being bought. Just to further this the banks are still forced to adhere to the LTV 80/20 with 20% deposit or 90/10 for FTB and 10% deposit. I have just been through the process and believe you me the banks make sure every box is ticked with regards to your application, including having to get documentation resubmitted due to corona, so every 10 weeks or so the documentation was out of date and had to be re-sent , so if your loan offer was for 6 months you had to do this multiple times. So the banks are not so shadowy they have to jump through the regulation hoops.

Our property market will never be decoupled from the real economy as its nearly always going to be the biggest purchase an individual/couple will make in their life. Ergo your property/mortgage and what you pay for both will always feed into what your working/saving/spending activities are on an ongoing basis.

silver2020

For some people reading this, it would scare the bejaysus out of you and you'd avoid buying a propoerty.

I bought in 2006 and do not regret it. I believe I did better than someone buying the same house in 2013.

I paid 565k - mortgage of 470k

Current value is probably 480k

Value in 2013 was circa 360k (a similar house sold for this price in 2013.)

I got the better deal and here's why

If I rented from 2006 - 2013, even at a depressed rent, it would have cost €100,000

I got a 0.8% tracker, so mortgage payments since 2012 have been hovering just under €1750. The person buying in 2013 has had an average rate of 3.5% and their mortgage (say €310,000) is almost €1600/month. So monthly payment is only 10% difference (shows the importance of the interest rate)

Going forward, they should be at 2.4% interest, but I'll still be at 0.8% (both assuming rates stay the same).

I got substantial mortgage interest relief especially in the early years when the mortgage was 4% for a couple of years. This was worth over €40,000

I now have 10 years left and we will be mortgage free when I'm 57. The person who waited and bought in 2013 will actually pay more back to the bank that I will have done, so the cost incl interest will have been higher for them than me

So forget the doom and gloom merchants - the only question is, can you afford the repayments. Fix for a decent amount of time (I'd look at 10 years) once you can get a rate under 2.5% and plan to stay in the house for 10 years+. Thus you won't be worried or concerned about what the markets are doing and you won't be paying rent. €400k @ 2.5% on a 30 year term is €1540/month. Even looking over the past 30 years, that type of repayment is very affordable for most couples - even if the combined salary was €70,000 (net would be circa €58k and mortage would be about 30% of that)

Yes, prices may go up further and they may fall back. But the 2008 collapse was a once in a lifetime event worldwide and frankly, such a collapse simply is highly unlikely to re-occur

Amadan Dubh

Shocking revelation in the Indo; it turns out that linking rent increases to inflation is going to backfire as inflation is projected to go to 3% from basically 0%.

This is total corruption and O'Brien is at the heart of it. It was so obvious that linking rent increases to inflation was a compromise to the lobbyists as it should've been rent freezes which were introduced. It was too obvious to be incompetence on the part of O'Brien that inflation was going to rise this year. If it turns out that rent increases start happening across the board I think the political pressure will be unanimous to introduce rent freezes in the coming weeks or months. It's populist but understandable to demand such measures.

We really need an election in this country as the post-pandemic route for the government needs to be clear in terms of the mandate they have been given by the electorate. Allowing FF and FG have the reins for the massive spending plans is going to enable them to enrich those that need enrichment the least, filling their boots one last time. To not have an election before embarking on their spending campaign is a disgrace.

https://www.independent.ie/business/personal-finance/rent-hikes-as-housing-plan-backfires-and-inflation-rises-40871403.html

Rent hikes as housing plan backfires and inflation rises

Hundreds of thousands of tenants face further rent increases linked to soaring inflation after Housing Minister Darragh O’Brien’s policy backfired.

Mr O’Brien is coming under pressure to act just months after the moves he made to keep a lid on rapid rents were introduced.

Renters were promised changes introduced in the summer would lead to lower rent increases under his rent pressure zone legislation.

A change was made where annual rent rises are now based on inflation instead of set caps.

But since then, the inflation rate used to determine rents in rent pressure zones (RPZs) has shot up to 3pc.

iColdFusion

https://www.boards.ie/discussion/comment/117919000#Comment_117919000

The potential issue I see is all the Chinese construction material suppliers who might go under due to debts owed by Evergrande and its sub contractors exacerbating the massive cost inflation we are seeing in these materials at the moment but who knows really, if the Chinese construction market slows considerable maybe that will free up more materials for Europe and reduce prices!

Villa05

https://www.boards.ie/discussion/comment/117922183#Comment_117922183

If base rate Interest rates at 2 to 3% would crash the world economy it just goes to show the extent of the asset price bubble we are in.

Interest rates at that level would be close to all time historical lows. If they were introduced to fix the financial crash of 08 why were they not tapered to prevent another asset price bubble greater than the subprime crisis

fliball123

https://www.boards.ie/discussion/comment/117922815#Comment_117922815

The reason why we would see a collapse would be more for the countries who are currently borrowing at near 0% to pay for corona all loans have to be rolled over in the mid term and if those loans come back with 2/3% interest on top of what your paying you would see a lot of countries heading into bailout/IMF/ countries defaulting on debt territory. You can forget about the average Joe who took a 200/300k mortgage out as all bets are off

coolshannagh28

https://www.boards.ie/discussion/comment/117922815#Comment_117922815

This is bang on the money , central banks are running out of tools to keep the rollercoaster on the rails , nobody knows the time or the cause but a trigger will cause a crash at some point. Interesting to note now around the anniversary of 9/11 that it was that action which initiated this increasingly desperate economic cycle.

Amadan Dubh

https://www.boards.ie/discussion/comment/117922815#Comment_117922815

Yes, I agree. To me the responses provide reasons to "do nothing" and just accept the current situation. It is defeatist and very short term, backward looking as it assumes that the way things have been done is how they should continue to be done. As you say, the big question is why is current economic prosperity so fickle that mere 2/3% interest rate increases would crush people?

Rental market inflation has been on average at least 4% per year for a decade and renters get on with it - this equates to hundreds of euro extra per month in rents. It is just not sustainable that we allow such volatility in the renal market - particularly when we are dramatically trending towards being a majority rental nation in the next 15 years - this will then be reflected in how our government makes decisions as the majority of people in this country, in 15 years, will celebrate when housing costs decrease so there will be votes gotten where political parties seek to quench the housing market - this is inevitable as I see it, but what I don't look forward to is the brainless, populism which will accompany such measures (e.g. rent freezes, banning corporate ownership of property etc.)

Mad_maxx

https://www.boards.ie/discussion/comment/117920617#Comment_117920617

https://www.boards.ie/discussion/comment/117921815#Comment_117921815

https://www.boards.ie/discussion/comment/117892229#Comment_117892229

The biggest threat to either the property market or the economy in general is a SF led government, that is now a real possibility

Ireland is a very open economy, a Marxist party in charge would change this perception utterly

accensi0n

https://www.boards.ie/discussion/comment/117922789#Comment_117922789

"Renters were promised changes introduced in the summer would lead to lower rent increases under his rent pressure zone legislation."

Well, 3 is less than 4. :D

JimmyVik

https://www.boards.ie/discussion/comment/117922940#Comment_117922940

The main reason landlords are leaving is constantly changing legislation.

Here it is about to change ... again.

You need stability to invest in anything. Property is anything but.

New legislation every time a minister has ready brek for breakfast instead of corn flakes.

oh, its ready brek this morning, must come up with more legislation for the afternoon.

fliball123

https://www.boards.ie/discussion/comment/117922939#Comment_117922939

Well I think the shinners will be in for a surprise when they try to pay for what they are promising, big difference between talking and walking if they get in I can see them lasting no longer than 2/3 years. I will predict that now. Its like what mad Maggie Thatcher said. The problem with socialism is you eventually run out of other peoples money. With what we are on the hook for already, the collapse in 08, bailing out banks, paying for covid, collective bargaining, bench marking and our welfare state and that's before putting a cent into other capital expenditure projects. The money is simply not there to achieve what they are trying to implement.

Timing belt

https://www.boards.ie/discussion/comment/117922815#Comment_117922815

The world economy would crash over night if rates got raised to 2-3% without growth because governments would be hit hard by the increase in debt servicing costs and would be forced to cut spending and increase taxes to pay for it.... this would lead to a large recession which in turn would lead to a loss of jobs and a need for more spending for the newly unemployed.... Add on top of that the fact that asset prices would crash which would lead to lower consumer confidence which would deepen the recession.... And to top it all off pensions schemes would be left with a massive deficit due to the falling asset price which would need to addressed which yet again would take money out of the economy make matters worse.

All this pain just because someone thinks that they will be able to buy a house cheaper when in reality they would be no better off than they are today unless they were able to buy a house outright with cash.

Saying that this all started in '08 is rubbish... rates have been cut for the past 40 years so it's noting new.

fliball123

https://www.boards.ie/discussion/comment/117923005#Comment_117923005

totally agree the people who usually do well in a crash are those with cash. People hoping for a house cheaper during a crash will have to look at how their financial position will be if this happens as well as the fact that the banks will tuck their balls between their legs and simply stop lending.

This morning I was quite alarmed listening to Ivana Bacik and her proposals. It has set me thinking how soon should I sell up and invest more in stocks etc. Maybe to part invest in corporate letting. Whilst I am a small time landlord, I have strong beliefs in social justice and would not be a traditional FF/FG supporter; yet I fear what SF has in store and would prefer a more nuanced approach to the rental market that would incentivise landlords to provide long-term quality stable lets. The revenue take on lettings is enormous and government has not seen fit to risk changing the economic model any time soon.

JimmyVik

https://www.boards.ie/discussion/comment/117923078#Comment_117923078

By the time SF are finished you will own your property and be responsible for all costs and repairs and be taxed even more heavily on it.

Yet you wont be able to ever get it back or sell it on once rented. Unless you can find another victim to take it off your hands then.

cnocbui

https://www.boards.ie/discussion/comment/117921603#Comment_117921603

Sorry, could you please explain why rents should be less than the cost of finance?

Apartments cost more to build by floor area, than houses and are usually fairly high up in people's idea of rental accommodation formats.

cnocbui

https://www.boards.ie/discussion/comment/117922792#Comment_117922792

What construction materials are coming from China? Bricks, cement, sand plasterboard, paint, Kingspan insulation, timber, slates?

Not everything comes from China, despite some perceptions to the contrary. Construction materials are usually bulky and heavy and it tends to be more economical to have local supplies just in terms of transportation costs.

Amadan Dubh

https://www.boards.ie/discussion/comment/117923150#Comment_117923150

I'm only explaining why incomes should be linked to rents as that is where we need to look if we want to keep most market participants happy and achieve a better chance of equilibrium in the market, with less of a risk of boom/bust cycles.

Why should rents take up a larger percentage of salaries each year, at the rates they have been climbing since 2012? At what point does it become unacceptable as the economy cannot grow due to the black hole of property sucking so much from the productivity in the economy?

Amadan Dubh

https://www.boards.ie/discussion/comment/117923178#Comment_117923178

Fair point but I think the poster is speculating that the costs of Chinese supplies could plummet which would render it too good to turn down for our own construction industry.

Amadan Dubh

https://www.boards.ie/discussion/comment/117923001#Comment_117923001

The Irish government debt now stands at €240bn - where do you think that money came from? It was €109bn in 2009 but the government thinks that the percentage of government debt relative to GDP somehow makes this sustainable. It is a con and there is a literal magic money tree supporting our economy since 2008 so the ship of questioning the costs of SF plans has long sailed.

iColdFusion

https://www.boards.ie/discussion/comment/117923178#Comment_117923178

I can't comment on those particular materials but alot of the Mechanical and Electrical fitout items such as cables, lights, sockets, conduit, pipework, sanitary ware, heat pumps, solar panels etc come from china, so this has a big effect on larger projects such as office blocks but has started to add 3-4k onto the average house fitout alone.

Timing belt

https://www.boards.ie/discussion/comment/117923247#Comment_117923247

Unfortunately it's not a magic money tree and any debt issued needs to be repaid or rolled over... The only reason that governments can borrow at low rates is due to QE which is controlled by the ECB and not the Government

Amadan Dubh

https://www.boards.ie/discussion/comment/117922939#Comment_117922939

David McWilliams says to wait a few years before making a big purchasing decision, especially as a FTB, but his rationale is for supply reasons; that the increase in supply will give people a better choice of home. But I think the bigger reason to hold off a few years is to wait and see if SF and friends are going to be given the keys to the asylum, it is going to be significant to our society and our economy, particularly this Ireland, Inc. reputation.

Timing belt

https://www.boards.ie/discussion/comment/117923287#Comment_117923287

Well if SF get into government there will be an increase in supply due to people emigrating once they implement their economic policies and increase taxes.

Amadan Dubh

https://www.boards.ie/discussion/comment/117923280#Comment_117923280

But that's the point; this debt is just going to sit on the ECB balance sheet perpetually, roll over or else just be written off at ECB level.

Just think about €240bn, as it is right now, how can we ever repay this? It is inconceiveable that it will be serviced let alone repaid ever.

Amadan Dubh

https://www.boards.ie/discussion/comment/117923309#Comment_117923309

There will be a certain level of panic-selling as well, by investors but also homeowners who fear what will happen, before anything actually happens, which will add to supply.

https://www.boards.ie/discussion/comment/117923122#Comment_117923122

Harks back to Dev’s rent restrictions in times long past but that continued right up to when I started working.

Mad_maxx

https://www.boards.ie/discussion/comment/117923001#Comment_117923001

They will refuse to leave government

cnocbui

https://www.boards.ie/discussion/comment/117923247#Comment_117923247

Irish debt is completely untenable, especially if you work out it's around €85K per taxpayer. It's one of the minor issues that makes emigrating seem like a good idea. I suspect deposit haircuts will be the inevitable solution the Irish civil service arrives at in order to maintain their employment levels and conditions.

Ireland can not afford it's civil service, but that never seems to be a topic anyone acknowledges or even is prepared to raise. The fact we have that debt level and are about to award an across the board pay rise for the civil service, tells you the prison is being run by the inmates and so there is literally no mechanism for fixing the problem. A cancer eventually kills it's host because of self interest. The national children's hospital is going to cost at least 68% more per bed, than an equivalent facility built in Perth, down under.

The country is circling the plug hole, but the potential victims are all looking at each other and not external frames of reference so are oblivious to the motion and the impending danger.

Marius34

https://www.boards.ie/discussion/comment/117923327#Comment_117923327

It doesn't need to be repaid quickly, it's more about ability of sustaining it, and slowly reducing.

PommieBast

https://www.boards.ie/discussion/comment/117923287#Comment_117923287

The problem is people have already been waiting that "few" years. I don't see how things won't get substantially worse before they get better.

cnocbui

https://www.boards.ie/discussion/comment/117923309#Comment_117923309

With any luck I'll have made my escape by then, or shortly after, due in large part to the economic policies and existing taxes.

I hear Sinn Fein will be riding around the streets of every town and village, standing in the back of .50 cal equpped technicals, dressed in long robes with tea towls over their heads, randomly straffing buildings and shouting 'Allah, akbar!'.

I don't like any of them, I honestly don't think SF can possibly be any worse than their forbears. It's their employees you got to watch out for.

wassie

https://www.boards.ie/discussion/comment/117923261#Comment_117923261

But a lot of these price rises for materials & equipment is not due primarily to increased costs at the source. Material shortages & higher prices are linked to transportation delays and Brexit. Over the last 18 months, an unlikely series of mishaps, freak weather events and other strange occurrences have combined with the pandemic to decimate global supply chains. Reduced demand in China may well have a dampening effect on prices, but not by much I suspect.

AdamD

https://www.boards.ie/discussion/comment/117923377#Comment_117923377

If you're suspecting deposit haircuts you're living on a different planet to the rest of us

Wanderer78

must have been a change in forum policies over night, thought this stuff wasnt allowed to be talked about here!

Timing belt

https://www.boards.ie/discussion/comment/117923327#Comment_117923327

The debt will only sit on the ECB balance sheet perpetually if they never taper the QE. If the ECB taper's its QE it will buy less of the debt it holds when it comes to being rolled over. The impact of this is that the government need to :

a) repay the difference which reduces their finances which equals a reduction in spending or tax increases which in turn slows down the economy and inflation.

b) they issue new debt to the market which results in an increase in supply which results in a in the debt having a higher servicing cost which yet again result in a reduction in spending or tax increases which slows down the economy and inflation.

This is why tapering has the same impact as an interest rate rise.

Villa05

https://www.boards.ie/discussion/comment/117923005#Comment_117923005

Of course the bubble bursts when it gets super inflated. What I'm asking is why rates were not increased slowly to relieve the pressure on the bubble.

People continuosly say this is not like 08. To me it looks eerily similar just that the money is using a different vehicle. Last time it was the banks. This time it's the central banks. Now we can't take the punch bowl away because the house will blow up.

Wanderer78

https://www.boards.ie/discussion/comment/117923697#Comment_117923697

most of our money is still coming from the private sector, globally that is, and most of this money keeps flooding into asset markets, as soon as its created in particular property and land. we re still experiencing this problem, even here in ireland, as credit is the primary money used to build, and purchase property and land

Timing belt

https://www.boards.ie/discussion/comment/117923697#Comment_117923697

The central banks are trying to relieve the pressure by tapering their QE. The issue is that if they do to much they will create a recession.

You must remember that It's not about house prices but the wider economy.

enricoh

Dunno where I read it but someone was saying Ireland is basically a version of Barcelona soccer club.

Barcelona bankrupted themselves paying big wages to the players.

Ireland is bankrupting itself paying top dollar welfare rates, ps wages + for forever homes.

The government was told the pension age needs to increase, they've decided instead to increase the pension next month!

They've totally inflated the rental market with hap and a hefty slice of all new builds are being hoovered up with government money through councils, charities etc.

If the worldwide corporation tax changes come in paddy is looking rather exposed debt wise.

Jmc25

https://www.boards.ie/discussion/comment/117923309#Comment_117923309

I think anything SF do in power will be moderate, even in comparison to what they're currently advocating in opposition.

There'll be a furore amongst the establishment when they get in and that will quickly die down when people see their policies are akin to many centre left parties in Europe who have successfully governed over decades.

I don't envisage people selling their homes and moving abroad because of anything SF would do when in power.

AdamD

https://www.boards.ie/discussion/comment/117923879#Comment_117923879

Except Barcelona football club are not bankrupt and will essentially be fine in a year's time when they've run a full annual cycle with fans in stadiums

Lots of idiots quoting their wage/turnover ratio when their turnover was based on a year with 0 stadium income, and they've since reduced their wage bill.

fliball123

https://www.boards.ie/discussion/comment/117923247#Comment_117923247

It all has to be paid back and as pointed out if our interest rates go up by even 1% the tax payers are on the hook for another 2.4 billion per year and we get sod all for it. So it has not sailed we are still in the midst of covid and like buying a house the cost of the repayments only kick in once you have moved in and start paying a mortgage. If you or the shinners think we will be able to borrow at the same rates once covid is gone they are in for a shock.

Wanderer78

https://www.boards.ie/discussion/comment/117923879#Comment_117923879

this is actually completely untrue, central banks can in fact never truly run out of money, as they can simply create it, as private sector banks do, the limits of money creation comes down to factors such as inflation and the amount of debt an economy can take, both public and private debts.

funnily enough, you ll actually find, the majority of welfare money goes straight into private sector bank accounts upon receivership of this money, as it is spent into the economy, this is why pup payments where absolutely critical, and still are, by reducing welfare money, we in fact reduce the amount of money available for the economy, reducing economic activities.

all economies are now exposed due to the rapid rise in debts from covid, but again, since central banks can never truly run out of money, inflation is our main concern in regards these new debts, too much, and the cost of living sky rockets, too little, and we cant maintain our debt services, both public and private debts, private debt being probably the most risky

Mad_maxx

https://www.boards.ie/discussion/comment/117923879#Comment_117923879

FF were never a party of ideas but they are so out of them right now, raising the state pension is all they have left to try and stop the electoral leak

mcsean2163

https://www.boards.ie/discussion/comment/117924335#Comment_117924335

The EU is more than just Ireland. Eastern EU countries in general are prudent while we are absolute maniacs. The last time the Troika appeared and this time we are the most indebted per capita in the EU.

Not a good look.

coolshannagh28

https://www.boards.ie/discussion/comment/117924335#Comment_117924335

This is the view central banks have taken on QE to keep the barbarians from the gate , its the only tool left in their repertoire and they will keep pumping till it bursts or their bluff is called.

Amadan Dubh

Not to be sensational but are we seeing some dumping of commercial property going on right now? I've noticed a lot of ads for commercial properties in the media. These are from the last week;

https://www.irishtimes.com/business/commercial-property/opportunity-for-investor-or-owner-occupier-in-sandyford-for-5-65m-1.4676980

https://www.irishtimes.com/business/commercial-property/opportunity-to-refurbish-and-extend-on-molesworth-street-for-12-5m-1.4676943

https://www.irishtimes.com/business/commercial-property/sligo-shopping-centre-on-the-market-for-5-7m-1.4676984

https://www.irishtimes.com/business/commercial-property/office-block-with-waterside-view-in-dublin-8-for-23-5m-1.4676950

https://www.irishtimes.com/business/commercial-property/airbnb-s-european-headquarters-for-sale-at-41-5m-1.4679753?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Fcommercial-property%2Fairbnb-european-headquarters-seeking-41-5m-1.4679753

https://www.irishtimes.com/business/commercial-property/modern-office-building-in-northwood-campus-for-10-75m-1.4677005

https://www.irishtimes.com/business/commercial-property/prime-dublin-investment-opportunity-near-baggot-street-for-18m-1.4677014

https://oakandelmhousesandyford.com/en/page_149165.php

https://www.irishtimes.com/business/commercial-property/park-west-office-block-for-3m-offers-net-initial-yield-of-8-2-1.4672550

https://www.irishtimes.com/business/commercial-property/tallaght-offices-for-5m-offer-significant-potential-for-rental-growth-1.4672595

https://www.irishtimes.com/business/commercial-property/dublin-docklands-investment-guiding-at-1-8m-1.4672486