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

It depends on what you define as 'Interest Rate'.

Will rates increase?..... yes most definitely but the ECB rate increases will be small as I don't believe this is the tool that the ECB will use to cool the economy.

If you are looking at what people generally refer to as the ECB rate which is the Deposit facility rate I don't see this rising above 1% in the next 3-5 years. If it was to rise to even 1% it would be a major interest rate hike. The reason for saying this is that you need to look back and see where this rate has been historically and understand that changing the deposit facility rate as a monetary policy tool has not been used much since 2008 due to the zero bond nature of rates during the period.

i.e.

Instead the ECB have been using QE to implement monetary policy to influence market rates. To understand this you need to understand how QE works and that it is not 'Printing money' as some people believe it is. The ECB buy government bonds and Blue chip companies bonds which reduces the supply in circulation and thereby pushing the yield lower. The debt markets then reprice all debt as a result which results in lower rates for debt. It produces the same effect as a interest rate cut to the ECB deposit facility rate.

QE is a more powerful tool as it is not just short term interest rates that are manipulated (like a change to the ECB deposit facility) but they can influence long term interest rates by buying longer term bonds. This is important to understand as they have a tool to influence the full yield curve where as a change to the ECB rate only changes short term rates. Why is this important? It is important because they have a tool to prevent an inverted yield curve which normally the first sign of a recession. (i.e. short term rates are higher than longer term rates)

As debt becomes cheaper it encourages individuals/companies/governments to borrow more and in doing so create 'New Money' to replace the old money that is being destroyed when debt is repaid. If the money supply increases it is because individuals/companies/governments have borrowed more money than is being destroyed. whether the mechanism to lower rates is an interest rate cut or QE is irrelevant both are tools used by the ECB to spur growth in the economy or to cool the economy if they increase rates by either raising rates or undertaking Quantitative tightening (QT).

If the ECB were just to increase the ECB rate to cool the economy and inflation we would end up with an inverted yield curve which would be very dangerous to future economic growth. Instead I believe the ECB will undertake QT as the main driver to cool the economy with only moderate increases to the ECB rate (to impact consumer sentiment and their expectations of inflation)

A prediction made by DCC's head of housing policy and research Dr Dáithí Downey in 2020 that the cost of HAP annually by 2025 will equal that of the children's hospital (1.7 billion) would seem to be fairly accurate considering the current trajectory!

The government has always been a big player in the property market. If you look back through history the government have always been a big player whether it was building social housing or whether they are providing rental support. This is not going to change anytime soon nor will it change depending on which political parties are in government.

If the Government provide social housing instead of HAP it still impacts on the housing market as resources are diverted away from the private sector to build social housing. It's not like the countries ability to build more houses has increased.

People that give out about HAP are generally the same people that give out about social housing saying that the government are giving out houses for free. At the end of the day without government assistance to provide housing whether it is is social housing or HAP a large portion of society will be unable to secure somewhere to live and we would have the equivalent of Trailer parks like in the US along with all the social problems that come along with that.

SF want to massively increase social housing spending by borrowing more, want to buy up more private houses for social housing and want to remove HTB for people wanting to buy their own homes?

If he government provides social housing it results in people moving out of private rented accommodation but results in less private housing being built. It's simple!!!!!

As for accusing of gas lighting, all you are doing is trying to move the focus away from what I am saying.... This is something that I have noticed a lot with your posts this year where you come on and say Ukraine will crash the economy or interest rates will rise by 6-7% and when you are challenged on it you ignore and post something different to drive the conversation into a different direction because you are unable to explain the logic that has lead you to make such crazy claims.

I don't think deflection is the appropriate way to describe a refusal to concede or an agreement to disagree on a topic. On the Ukraine point, I am just saying that interest rate rises are already needed but I speculate that to introduce them now would be to admit that they misjudged and got it wrong on inflation to date, so instead there will be a new reason or augmenting of the energy crisis reason to justify the change in tone around interest rate increases which I am confident will occur with the ECB in the coming months. On interest rate rises, I was just referring to mortgage interest rates being at 4-6% between 2005 and 2008 and that currently mortgage rates are around 1-3% so when the ECB gets finished with its interest rate increases of anything from 1-3%, this could translate into variable mortgage rates of similar to what we had in 2005 when the boom got boomier.

100% HTB should be scrapped! Long time ago. This has been argued for extensively. Scheme only drove prices up and vast majority already had enough for deposit.

I dont think that what SF wants based on what their housing spokesperson says. But my original point still stands.

i'd likely vote for them (unless they keep up this property tax facade) as i cant be arsed even pretending FF/FG will try anything better themselves. SF will have all their ideas but they'll need time to change things and when people dont see new gafs for sale for 150-200k SF popularity will fall and theyll be out on their ears. Irish housing system is such a mess its hard to see any gov fix it in short term tbh. Depressing is about where Im at with it all aswell.

If there is little capacity to increase new property due to a shortage of labour it will not result in more housing being built as the constraint is still in place.

Over the long term a increase in social or private houses being built will attract more labourers but it will make no difference in the short term.

HAP is one of the greatest rackets ive seen. Im sure government will come up with something nearly as insane in years to come but its hard to see it beat

I'll be voting SF, not because i want to, but because any other vote is a vote for FF/FG.

Nothing really competes with those dinosaurs, the ones in the dail and those voting for them.

HTB distorts the market by serving to increase the cost of housing. Its essentially a subsidy and a prime example of Govt intervention on the demand side when supply is the issue. Anytime a subsidy is handed out you will see an equivalent price adjustment, negating any tangible benefit. Unfortunately the Govt is beholden to maintaining high property prices. Industry will feed you plenty of BS of why its needed because its basically free money in their pockets.

Ahh here the government are throwing billions at buying up homes for social housing and funding HAP but helping working people buy their first home by claiming back some of the tax they have already paid is a step to far?

Do we actually want people to be able to buy and build their own homes or is the plan to get the taxpayer to pay for everything forever?

As for driving up the cost of housing you need to talk to someone building their own home who obviously isnt out to make any profit, material costs and building regulations have driven up costs consistently for years, it's far more expensive to build a minimum compliance house now than it would have been during the boom, there was no need for heat pumps, air tightness, triple glazed windows or mechanical ventilation back then.

Im 100% sure scrapping HTB will cause more harm than good to the housing market and increase costs to the taxpayer.

Near me, things have only just recovered from the last crash to the point market values reflected the cost of supply at the start of the pandemic and people have started to build houses again.

It has taken the buyer of my property 12 months to get finance and to the point the bank will grudgingly hand over the money.

You need to remember that back in 2005/06 the ratio of new houses to population increase was 1 house per person leading to a oversupply of properties.

The ratio today is something like 1 property for an increase of 4.2 people in the population and as a result we have a massive undersupply of properties.

Comparing the housing market today to 2005/06 just because prices are rising or as you like to put it 'booming' is misleading as there is no comparison and it is a totally different market today

• credit supply restrained by central bank rules
• massive undersupply of properties,
• the average LTV of properties on the bank books now is something like 50% compared to being up in the 90's back in 2005/2006.
• Liquidity now provided by central banks or provided by repo transactions as opposed to unsecured inter-bank lending back in 2005/2006
• The risk of a credit crunch where banks stop lending has become a remote possibility in a downturn thanks to higher capital requirements and the introduction of countercyclical buffers. Back in 2005/2006 it was more or less guaranteed that in a downturn bank's would need to cut lending due to lack of capital on the banks books.

So what will be the cause of this crash that you predict will be coming our way?