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

Every man and his dog can also see that interest rates have fallen over the last couple of decades also. Affordability is not just about the price, it’s about the mortgage repayments. I don’t think mortgage repayments on current prices is vastly different than the past when interest rates were substantially higher, when compared with wages at the time.

I would agree that people who purchased between 2010 and 2016 or so are definitely insulated. I don't agree in terms of the rental element simply because there is not enough supply. Rental prices won't drop by any significant amount because of there are multiple people looking to rent and those with most resources will automatically get to rent.

The reduction in commercial rent in Grafton St (or any other) over the last 18 months is as a result of Covid. Firms who own these properties are paying tax on these rents, these taxes are funding our social welfare supports (amongst other tax revenues). We will only know if the average "joe" will be impacted when the economy actually opens up. We are not in normal times.

Part of any economies success (and by extension the people in it) is impacted on confidence in economic outlook. if firms don't have confidence they are less likely to invest in expanding their business, this leads to reduced demand for labour.

On the rental element; this is where our property bubble has been inflated - the amount of totally unaffordable new properties on Daft the last few years just sitting vacant is not something which can be classed as sustainable. These investors are holding 1 bed/2bed apartments at €2k/€2.5+ p/m empty for months and even years (Kennedy Wilson). There is a dubious acceptance that this is somehow tolerable as these are deep pocket investors and "things will recover once covid subsides" but this thinking that there is a "recovery" from covid seems to look back to pre-covid rather than forward to post-covid. What this translates to, for me, is that these newly renovated/developed apartments blocks sitting empty are effectively the empty bags or the road runners having run off the cliff, together with commercial properties. Your eyes don't lie and it is like seeing into the future observing all the empty buildings. The pandemic is an accelerator of change but for definite to think of "going back" to pre-pandemic activity in certain sectors, like commercial property or high end rentals, is to be trying to catch a falling knife.

I see in the news today, once again, covid is blamed for stock market anxieties and underperformance. This is like when Brexit was blamed for the housing market slowdown in 2019 in Ireland. There is a blissful ignorance to any argument which seeks to point out that actually maybe things aren't all rosy purely because they may just be overvalued. We could be walking eyes wide open into a significant correction and this view is bolstered by what I am reading in property market industry pieces and in general stock market commentaries; which seems to be not just downplaying but totally ignoring any sort of risk related to overvaluation. There is practically an expectation that things go up a little or a lot YoY, but no entertaining the possibility of things may be going down consistently for a few years. I don't mean to by hyperbolic but the whole investing world has gone mad and seems to me to be blinded by greed and selfishness - Wanderer78 describes the FIRE sectors as eating themselves at this point; for sure it does have a feeling given property and markets have uncoupled from the real economy where they should have at least some correlation - but they don't.

In Germany we have a new coalition with the CDU taking a backseat (likely a long-term backseat as their support in younger generations is waning every year and shows no sign of recovering) and this new coalition is planning big reforms which tie in with younger people's (i.e. the majority) wishes; legalising cannibas, more aggressive climate goals and reforming the housing market by targeting 400,000 new builds per year (100,000 of which will be social housing) as well as reducing the rental increase cap from 15% over 3 years to 11% over 3 years. They are targeting less fluctuations in housing and living costs YoY for people. This marks a huge change from pro-lobbyist and pro-business, traditional CDU. We will see similarly aggressive goals from our SF & Lefty Friends coalition in a few years - which, surprising to many, will actually have popular support among the majority of people. The change has already been happening but property indicators of course typically lag politics and the general economy so we have not seen the change yet but the indicators are there.

If there was no demand for the new build apartments (incl. student accommodation and short-term accommodation like hotels) to rent in the last 3 years, there will never be demand for them without the rents dropping significantly. I think it is a scam of some sort that they are being held empty despite being very expensive to build and there seems to be something sustaining the investors which enables them to make zero return for a long time on these investments. Maybe it is the "book value" accounting voodoo that means they can claim to hold an asset worth a certain amount based on projected full occupancy at high rents, which causes them to persist with brand new ghost buildings? Rent collection above 90% and occupancy at seemingly high levels is what is published in the investor reports but what does not seem so clear is whether the number of apartments being marked as "rentable" is being kept artificially lower than the number of apartments that could in fact be rented. As I said, your eyes don't lie and a walk around these developments in the evenings shows this. My point is that the "shock" has happened but the typical indicators used to assess the property market are lagging, as is normal as property is illiquid and slow moving to transact in.

We have had the drop in inward migration and the increase in cost of living is already eating into disposable income and is projected to get worse (the ECB once again fumbling around its inflation forecast and needing to revise it again as it is not fully grasping the situation - I mean, it shouldn't need to constantly change its short-term projections if it had a grasp on the situation https://www.ft.com/content/d789f624-5097-4809-a0e0-2541056b7e63 ).

The Central Bank's projections for price rises to keep occurring for home buyers seems likely for the next few months at least; I mean, supply is being restricted as best as possible with covid uncertainties and delays in breaking ground on projects combined with the low interest rate/hyper QE environment which is still going hell for leather, so of course it's easy to see the link.

I think property prices rises will continue for a few years rather than months because there will be no change in rates till at least 2023 (as per speeches from ECB) and it will take time for meaningful supply to come online.

Here is the extract from the central bank report on construction costs that was published yesterday.

The private debt although it's serious worry around the World, and it feels like adds to overheating, it's probably not the highest if we compare with GDP terms.

Economic corrections do not improve things for property buyers, except for investors and cash buyers.

Of course it’s not covid spooking the market… It must be because people don’t want to go on holidays that all the airlines/cruises and travel related companies are the biggest losers today with share prices falling 1O+%….absolutely nothing to do with covid and new travel restrictions!!!

Are short term bookings not part of Travel?

The VIX is only at 28% and not up in the 60% like when Covid first hit... It has't even hit the levels of volatility that it saw when the other covid Variant's news hit.

The stock market is up 15% from a year ago.... share prices falling 2-3% is not going to lead to Investors loosing money so badly that they will need to have a fire sale on Irish property.

Even if the stock market dropped 15% by the end of next week the lower yield on government bonds as investors seek safety in liquid assets will make the yield on property look more attractive.

So it's like last March 12 months Chicken Licken is running around screaming the sky is going to fall in. It looking for s few turkeys to run around with it screaming it as well.

Yes funds suffer when stock markets fall. But funds seldom leverage into shares so o e of two things happen.

They sell off share and look for safer places for there money gold, government bonds or cash deposits. Most movement is caused by some investors ( individuals who hold pensions) switching from higher risk profile funds to lower risk funds.

Most pension fund investors in Irish property are chasing yield not capital appreciation. The investment is from lower risk funds not those chasing higher returns.

The REIT's that have invested in Irish funds will have taken a long-term investment. The return on investment is what they are looking at. So unless we get mass migration out of Ireland they are not going to panic about a Chicken Licken flapping about. As well a section of there investment is covered by longterm lease's to LA and blue chip corporate companies. You could see money making be in more than a risk of it moving out

Pension companies do not invest in property short term and do not leverage when they do.

The markets move quickly and the drop has been felt most in the Travel Sector which has nothing to do with the US debt celling or Black Friday. To be honest I had to read your post twice just to make sure you were not being sarcastic.

Have you read any of the news in relation to the new variant it is meant to be more transmissible than the Delta variant and has already spread around the world with cases in the UK, Germany, Belgium, Netherlands. I agree that it is to early to know the full effect of it but the WHO and all the scientists are worried about it which is enough to get the travel market spooked and fears of more global lockdowns. If it does result in this then you are looking at a global slow down which will reduce the chances of any rate rises and increase the likelihood of more QE.

Yields on the 10 year Tbills dropped by 10bps yesterday and will drop further if there is more bad news in relation to variant. The economic data coming out of the states next week was expected to be strong but the market won't care about that if the no of cases of the new variant start showing up all around the world or does not respond to the vaccines.

You may not like QE but it has saved millions of jobs and a very sever global recession that would hurt everyone's pocket.