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

Demands increase from all sectors. Even on wage-earning people, except maybe not from low income ones.

stem wages up 11% q3 2021 ytd

It doesn’t take a genus to work out wage increases like that plus covid savings and a short supply have all contributed to the jump in house prices

Once again this had a lot to do with the over correction after 08 prices dropped by 50 - 80% so prices had to rebound. There was no way a house should of been selling for less than it cost to build and yet that is what was happening back in 2012.

2pack called the bottom in Dublin and Galway long before stats revealed, it updated the thread as it spread.

Also revealed the empties in the bubble by combining stats from various sources

Absolute legend.

For everyone of those stories you have the opposite in 2012 people were not buying when prices were down 50 to 80% thinking prices were not going to come back up and didnt buy then prices started flying up from 2013 onwards. I bet they wish they bought in 2012

if you are paying market rent and you are in a situation to purchase and the only way you will be financially better off is if house prices drop in value by at least 5% per year for the period you are waiting. And that is assuming that prices remain constant and don’t increase. Which is highly unlikely in a inflationary environment where wage increase as a result. The average wage in Ireland increased by 3.8% per annum for the year (Q3 2021). That means that an average buyer can borrow 3.8% more as the LTI rules are on gross pay. In a market with low supply and high demand that will house prices will increase by at least this amount if house prices kept pace with wages.

This means that house prices would need to drop by 8.8% to breakeven if you continued to rent for a year based on the assumption that houses prices stayed in line with wage increases which would be a conservative view seeing as there is such a shortage of supply.

with regards moving to a country that would value them then you will need to exclude most of the developed world as according to BIS stats the aggregate house prices increased in developed economies was 12% (Q2 2021 YTD) so it's not just a Irish phenomena.

The traditional places for Irish to emigrate to had the following increases in house prices for the above period:

source: https://www.bis.org/statistics/pp_selected.htm?m=6_288_596

How did they line up to more fundamental levels when you had excess supply and very low demand.

You keep talking about rents dropping by 50% but realistically how is that going to happen unless the government can build mass social/affordable housing to reduce the dependency on HAP and free up rental properties or we have mass emigration out of Ireland.

Would you be happy to see the government build social housing instead of paying HAP even if this was at the expense of first time buyers who would be impacted by less properties coming to market. The point I am trying to make is that unless overall supply can be ramped up very fast and we can build all the houses we need in a year or two there is going to be a shortage of properties and some cohort of society will end up worse off by just focusing on one group in isolation.

Even if the big MNC's left I don't think rents would drop by anywhere near 50% as people working in these industries are more likely to have purchased a house as these are the workers on higher pay who are able to get mortgages (assuming that they are able to save a deposit)

Can you name the countries that have adopted such solutions?

Don't know how reliable these stats are, but Irish cities and London stick out like a sore thumb

Rents in Northern Europe cities

You keep saying supply is the answer and I agree but I maintain that supply will never be sufficient in the current environment as the establishment have no interest in dramatically increasing supply if it would result in 20/30/40% drops in rents and house prices (this should be the outcome of any supply increasing policies, to disagree would be to support the status quo). Even looking at the housing for all plan, it is pathetic and no where near enough, but it shows that the government don't want to "fix" the crisis (ie increase supply and materially force down rents and house prices). The State building its own housing instead of using the institutional lobbyist policies of HAP etc is what is needed as a start and existing 20/25 year leases terminated. If the current government don't act now, it will be Shinners and friends in only three years who will be implementing policies and you can be sure that our established big MNC employers and international investors won't take this political change lightly.

There are so many red flags in the housing market and again it comes back to the wider economy and how it can be sustainable to have our public spending at such high levels when it is funded by more and more debt. This is current expenditure which is already funded by debt. How are we supposed to significantly increase our public investment in building for the future? Where will the extra billions upon billions come from? There is no longer scope to raise taxes on individuals, that possibility has evaporated with soaring inflation including housing costs. However, a significant correction in housing costs would free up a lot of cash to put to more productive uses as part of our building back better for the future.

i listened to an episode of odd lots https://open.spotify.com/episode/0J2YSvNrTk4xSROjepAmnS (bloomberg pod) yesterday on american housing. supply issues and a hot market over there too, similar to here but a lot is being put down to people who bought new homes holding onto their old one as a rental asset. that isnt happening here as much i suppose given all we hear is small landlords are fleeing the market, was an interesting listen anyway.

The ECB and the euro is in deep trouble. The whole project has never really been stable and I think we will see something dramatic like a Brexit happen as the ECB tries to be all things to all members despite dramatically different economies within the eurozone. They are like a captain on a sinking ship with inflation, waiting for it to sink and hope help arrives rather than trying to do anything themselves. Meanwhile the BoE and Fed are far more expressive about the need to raise interest rates and cool the runaway inflation being experienced. The problem with the ECB is that raising interest rates will crush some eurozone countries but not doing it punishes the more prudent eurozone members.

We had a presentation in work this week which set out quite clearly that the markets did the work last year and the year before in terms of generating profits and that it has to be seen as exceptional and not something to get used to. Essentially a correction is to be baked into future expectations in order to plan to mitigate any such correction. There are so many zombie companies barely making profits that have ridiculous valuations. So much fraud and risk and unrealistic valuations, the question is where the pressure points are that start releasing first. Unlike a bubble that simply goes pop, this bubble goes pop multiple times as it deflates.

Can you tell me if the eu's percentage is more balanced across the population over irelands?

We would have much higher homeownership rates up to 2007 plus we also have more people per home and smaller homes.

Huge difference in housing costs over those that own and rent.