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

theres been clear insider trading post 08, so it was decided to offload it, relieve the top brass of their positions, the ones actually doing the trading, and now BOI own the majority of it, and according to economist bill black, RED FLAGS everywhere, including in BOI! so watch this space!

Alternative economics theories are off-topic

Very little Chinese investment in Irish property. Not one of the funds that have publicly invested has any Chinese interest.

All you are doing is taking some issue in china and desperately trying to scaremonger people into thinking it it will have serious repercussions here.

The vast vast vast injection of foreign funds here have been large USA, European and Canadian investment/pension funds. The same funds that invest in property in many countries and use the rental incomes to pay out the various pension payments as they become due.

Lower construction costs = lower inflation

which means less pressure to tapper QE and a lower for longer interest rate environment.

In that case, before we get an economic crash or a "reset" to wean the economy off property, we along with other Western countries will see extreme populism become more normalised. Trump and Brexit will seem like sensible, centrist actions of voters if the current high housing cost/extreme inequality situation does not resolve itself by way of a natural correction/crash. At least in Ireland we are going more to the left than the right unlike other countries but even that will cause issues (e.g. as I have said before, SF were openly anti-EU up until recently and they are likely to be the government party in a few years; throw up a United Ireland referendum and then put it in the context of an EU Republic versus non-EU Northern Ireland and our own EU membership could be questioned - it's speculating but the net point is that populism is on the rise and it is directly linked to high housing costs).

You keep talking about weaning the economy of property.... The simple fact is that people need to live somewhere so property is always going to be a large section of the economy as there will always be housing needs (unless we have mass emigration)

You also talk about this as if this is a new problem that never existed before.... Ireland has had many housing crisis over the years and the one thing that was always done to fix it was large scale social housing... Something that is not popular today because people see it as free houses for people that don't want to work.... Any large scale social housing will generate downward pressure on rents and as a result on houses prices.

Social housing historically was delivered to working people with housing needs but over the years it has got the reputation of free housing for people that don't want to work. There was less objection to social housing if it was built on cheap land in "Working class" areas Call it what you want today social housing/affordable housing etc.... but there is a need for it for hard working people who are stuck in a rent trap that are not

If you looked at the housing needs today you would probably find the same people in need of housing people who are working who can't afford a house.

How many people are saying “I can’t wait for the economy to crash so I can buy a house (that I’m too poor to buy now) with my buckets of savings and secure job” ?

And how far does that keep the Irish economy from an actual crash?

Theres a graph to be drawn here but I lack the technical knowledge…

No one claiming the property market could crash can pinpoint a clear reason why they think this can happen and this is seized upon by those claiming that the market is solid as part of their position that the market won't crash.

But, for me, the lack of a clear reason as to why it could crash does not mean it may not crash and I do think (posted recently why) that perhaps we are at a time where "no one can see it coming" as, for most commentators and observers, there is nothing which would cause the market to crash. I have not seen any clear reason myself as to why it could crash but I do observe that there is a sentiment that a crash is not likely any time soon.

So if your point is that a crash happens when no one sees it happening, then I feel we are in that place where right now no one does see any sort of crash coming. It's counterintuitive of course and therefore hard to grasp.

Just because it is not new does not mean it cannot change. My default position is that the factors which lead to the 08 crash have not been addressed, in terms of cheap money flooding into property and the fact it is so expensive and interlinked with the economy that a faltering in the property market would still pose a risk to our wider economy.

Property costs should be tied to income and be at a low level in order to ensure that there is more diversity in the money sloshing around the economy, by way of savings in the bank, spending in the local economy etc. My own experience, up until recently, was with Germany and its rental market, with my observation being that the quality of life in Germany was of a higher standard than Ireland, largely due to the much cheaper housing costs relative to incomes. What I found is that people are generally happier and more well rounded as they are more likely to be able to pay the rent for their own place as adults which naturally brings about a maturity and sense of purpose from the pride that comes from having one's own place. My particular experience with my partner's family, who are by no standard wealthy, is that due to their rents being so low, they actually have quite active lives and have cash to spend on themselves - the lower housing costs offset the less income they receive and allow them more breathing space. Another point on the low housing costs relative to incomes is that there are real communities in Germany across all demographics as even those on lower incomes can afford their own place and have the ability to stay long term there as there is no real incentive to force people out by increasing rent by 4% per year or 90% in 10 years. In Ireland, there are little communities in the 20s and 30s age groups as these generations are more likely to be renters in Ireland and therefore transient and unsettled with their housing; this has implications for our communities. Just look at Sandyford and Grand Canal Dock to see what I mean about a lack of communities, as these are mainly rental communities.

Where we are now, having gone through the pandemic restrictions, with so many people at home instead of going to an office for work, we saw the potential for local communities to flourish as people had more cash to spend due to the restrictions and a lot of smaller, independent businesses in local communities thrived as a result. Significantly bring down housing costs and watch communities bloom once again as those that live in the area will be spending more of that cash.

For those that need some help with their living costs, in turn, the cost to the State of assisting them is also significantly reduced when housing costs are substantially reduced so it is in the interests of society and the State to make housing costs extremely low relative to incomes.

The ironic thing is that the measures to substantially reduce housing costs do not actually cost anything to the State, while attempting to tinker around the edges and work within the current system cost an absolute fortune.

Rents falling will not bring more houses to the market. Supply is what will reduce prices and rebal pressure. The last recession showed that the big winners were those that could afford to snap up cheap property and sit on it until the recovery. Yes maybe if we had a price drop that more people could afford houses but where will the availibility come from. If prices crash builders stop building hint look at the last crash. Outside of the larger urban area's there is still not huge development taking place and site prices are miniscule compared to large urban centers. Two small developments in the area I live in 6 houses in each development, one of the developments has 4 bed houses at 130 sq meters and prices are in the 250-280K mark. This was a Celtic Tiger site that was partially developmed before going into recievership.

Raise interest rates 2 to 3%, taper QE and bring in more meaningful property taxes and you will see the property market bubble deflate at no cost to the State. That is the solution but the political will is not currently there to advocate for this.

The situation is almost identical to the 2008 build up. The shadow banking industry is where the bubble has been created and I can see from our regulator that they have already dropped the ball on this as they were too busy bulking up their enforcement division to fight the last war. In my area, asset management, I can see a very poorly resourced regulator only just starting to poke around in this area and Ireland has a phenomenal level of activity in the shadow banking industry which is where the bubble has been fed. There are investment funds in Ireland, regulated by our regulator, holding US mortgages from the 00s repackaged as debt instruments and only in the last year or so have they copped it to look under the hood and see what is behind the vaguely termed "debt instrument" in which these funds are investing. The shadow banking industry in Ireland is worth over €2 trillion and it is only regulated in Ireland at a very high (ie fund) level but the actual investments of the funds may not be regulated or at least not in a way where the regulator has a clear view as to what the ultimate exposure is to, particularly where the ultimate exposure is taken indirectly.

You use the term "economic growth" but I don't like that term and I think that term is not necessarily a positive thing. Especially when used in an Irish context for the last few years; yes we have had strong "economic growth" but in fact the situation on the ground for individuals has been getting worse each year of this "growth", particularly from 2015; housing costs, childcare, utilities had all increased beyond the CPI 2% inflation reading, but salaries have not shot up to offset it. Even looking back over the last 10 years in Ireland; No meaningful income tax cuts, little to no infrastructure investment, no healthcare or education reform; all the time fretting over public finances yet the economy was apparently experiencing growth? It has been a con, like how the CPI being used as the barometer for inflation, which is a total scam, as it is being interpreted to provide that inflation has not gone over 2% per year for years and years. Yet housing costs have increased 90%+ the last 9 years. That makes no sense and echoes what I have read in 1984 and Animal Farm where the proletariat were told how great everything was in the economy but they didn't really feel it in their day to day lives.

Crashing the property market and aiming to ensure it is disconnected from the real economy is how we get away from a boom and bust cycle. It is the only way to ensure social, political and economic sustainability for the future. The impending Chinese Real Estate bubble popping should be a warning sign to us as to what will happen if we don't wean ourselves off high housing costs (relative to incomes), as the 08 hiccup wasn't enough of a scare, and seek to prevent the property market experiencing massive growth or drops in costs in short periods of time (eg 2008 to 2012 and 2012 to 2021).

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

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

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!