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

The canary is long dead. Back in the spring I was speaking to my then-manager about how many remote workers were refusing to come back to Ireland, let alone Dublin. The delayed census will make interesting reading..

Your definition of conspiracy is severely lacking.

You've equated belief directly with conspiracy which is totally wrong. Conspiracy is a real thing, conspiracy theory is an unproven allegation of conspiracy, hence its a theory and not just a conspiracy (which implies fact in the absence of "theory" qualifier).

Furthermore, a theory is as yet unproven, neither proven true or false. "Conspiracy theories" can and do turn out to be true.

Anyways it is far more likely that government action deliberately inflated rental prices than a string of accidents, especially since FG manifesto circa 2011? said they wanted to increase property prices as part of the recovery. Encouraging REITs and others to invest in Irish property was a FG policy as a way to buoy prices, and in doing so that pushed rents up too as REITs became some of the largest landlords in the state, and investors were encouraged to buy irish property for its rental yields. Rental yields which are tied to property prices paid for the asset, because if the rent drops then they wont get their desired yield, and if yield falls so too does asset price.

I have a feeling this is why the big tech MNCs have "delayed" the return to the office proclamations in Dublin, if they have not already offered full WFH forever. It is not that half the staff won't come back but instead that a meaningful number have decided that they won't come back to Dublin if they are told they need to come back. Losing 5-10% of people would be bad enough in the current, tight labour market. I have a few different friends who work in some of the larger tech companies (so of course this isn't really my own experience) and they all know of a few people who moved to their home EU country during the pandemic and won't be back ever.

I look on Daft this morning and search for general "Dublin (county)" rentals, seeing there are 1,029 in total available in the whole county (down from 1,700 in early/mid- August). The dearth in availability of rentals even with most workers still fully WFH would mean that any sort of a push to get staff back will push up rents even further and that small collection of rentals available will drop even further. The American Chamber of Commerce gave a reaction to the Budget yesterday;

As if housing wasn't already enough of an issue for companies, income tax is cited as a fairly big barrier to hiring and staff retention, but the government doesn't seem to have any appetite to materially reduce the income tax burden on workers. It's sad that the big companies are the ones who might finally tip the government into action as it should be enough for the average person (who actually votes) to be able to prompt action, but this is where we are heading; slower/no growth in multinational activity in Ireland rendering our "balanced budget" notions impossible without significant cuts to spending and tax increases.

Unfortunately people never learn from their mistakes.... The crash in 2008 was brought about by banks lending to much and generating a bubble in the housing market. The solution to fixing this was to introduce new regulation that meant that banks needed to hold more capital for risking lending such a real estate financing or investing in financial assets to ensure that banks did not lend to much to inflate financial assets. The logic of this all makes sense and from looking at banks balance sheets this appears to have worked. But it also had an unintended consequence of reducing the capital that is required to build new housing that was required to meet population growth and as a consequence generated a housing shortage.

In order to address this housing shortage the solution was to get the capital to build new houses from Funds. The logic of this makes sense whereby you have investors with excess cash pooling it together in a fund to provide the required capital to build the required housing.

However this quickly developed into a situation where funds were used for speculative investments whereby they issued Debt to invest in financial assets (As opposed to providing capital for the creation of the assets) which increased the value of the financial assets because by issuing the debt they created money and you then have a situation where more money is chasing the same financial assets which in turn leads to asset inflation and more people investing in the fund which creates more money which leads to higher asset prices. This spiral continues with the funds sector growing year on year. This money creation by the funds is unregulated unlike the money creation in banking following the 08 crash.

So all that has happened is that the speculative lending has moved out of the banks due to regulation to hold more capital for risky lending and into the funds where the regulation does't exist.

When you incorporate QE into the mix you end up turbo charging the funds industry as you have more and more people looking for an alternative to keeping their savings in a bank account and getting a zero return. This results in a massive increase in Debt around the world accompanied by a massive increase in asset values the exact same as we saw during the 08 crash.

Will this result in a similar situation to 08 is the big question?

Back then we had banks that were to big to fail and needed to be bailed out... They are now more secure and risky lending is not being undertaken by them. So the question is will central banks bail out the funds in crisis or will it let them go to the wall.

Significantly lower rents would also have the effect of redirecting a lot of peoples take home pay into actual productive parts of the wider economy enticing people to spend, especially retail and hospitality which is on its knees.

Consider maxing pension contributions to avoid tax

I think they already have been bailed out. On a small scale, HAP leases are almost like a pre-crash bailouts for some investors. But on a bigger scale the ECB bond-buying since 2015 has possibly found its way into the portfolios of investors. I noticed this first with one large fixed income asset manager of an Irish fund with billions of mortgage backed securities in its portfolio dating from the 00s in the U.S., these were essentially guaranteed MBS by the Fed's QE. I know there are transparency issues with the ECB's QE programme but would not be surprised if it is similarly buying "bonds" connected to property investors.

But an issue it is nonetheless.

It shows that there is a common cause which is external to Ireland and therefore the risks which could cause a crash cannot be managed in Ireland.

And their lending has been more prudent. This time it will be the Pensions funds in strife as they have been duped into buying these overpriced assets.

What makes you uneasy.....it's all very Irish to me.

Kind of like this was....

How do you know if you have sufficient capital.

Maximum Exposure to 1 asset class in 1 jurisdiction is extremely high risk.

This is what Irish banks are plus we still have significant arrears from the previous bust

we ve been doing everything we can do to promote another credit fueled property boom, lets hope that doesn't happen, or else....

.... but you can see, our current government is refusing to take the reins here, its hardwired to push our economy towards a more credit fueled one, which will more than likely have the same affect as the last time, i.e. increasing property prices....

very true, but again, our economy is currently perfectly primed for such a boom now, our primary government parties have completely failed to understand the fundamentals of the previous boom bust, they ve maintained implementing policies to create this situation, this is highly dangerous for us all, including for current property owners, landlords etc. there will probably be intense pressure placed onto the central bank to relax rules soon, hopefully we dont go full retard on this one!