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

It comes from institutional investors on the bond market. The NTMA raise funds on behalf of the State but its the private market that funds the Bonds. Ireland inc has a good credit rating which is why we can issue Bonds at 0% interest rates as we are seen as almost risk free to institutional investors.

Public debt comes from the private market, the only difference between public and private debt is the status of the borrower. The funding comes from the private sector.

We need to reduce our costs to increase employment and attract foreign investment. One of our highest cost is our welfare system. Everything is connected and if we make welfare more attractive than working then people will logically choose the most beneficial to them.

If this happens the income tax generating revenue disappears and people become net beneficiary of state spending. Again I ask how to fund this?

To bring this back on topic the above is one of the reasons the housing sector is in the mess it is. Its not the only reason but it is one of the main reasons.

The main buyers of Irish gov debt are mainly financial institutions that are required to hold liquid assets due to ECB regulatory requirements.

e.g.

if there is an increase in deposits in the European banking system there will be an increase in demand for Irish government debt as the banks are required to hold HQLA of which gov bonds will account for a large portion. 9 times out of 10 they are not buying the gov bonds for returns but because they have to keep their banking licence.

For the past 10 years the ECB have been buying Irish debt and as a result providing cheap finance. This will fall away and go in reverse as the European economy grows and as a result the yield will go higher as the financial institutions regulatory requirements will not be enough to buy all the debt so they will need to increase yield to attract investors. In reality what will happen is that as yields go higher to attract investors this will increase the cost of credit reduce the money supply and cool the economy and if there is not genuine growth in the economy that increases the money supply to counteract the impact of the increase in the cost of credit the ECB will be forced to slow down QT, cut rates or even step back in with more QE.

Bringing this back to housing the Government would be crazy not to borrow to resolve the housing crisis if it meant reduced rent and lower houses prices in real terms (i.e. taking cpi inflation into account) as this would increase the disposable income, reduce the cost of living and make Ireland more competitive on the job front. At the very least not have housing as the reason why companies would not invest in Ireland.

The real issue is that no matter how much money you throw at the issue it will not get resolved immediately as there are constraints to the number of houses that can be built and supply will take the best part of 5 years to meet demand (assuming no massive unemployment or changes to emigration/immigration). Also if the government are throwing money at the housing market to fix it needs to be value for money as any investment like this needs to have a tangible benefit (e.g. x saved in HAP payments, reduced rents, increased disposable income etc)

There is noting wrong in borrowing to improve a situation and reduce further borrowing down the road. Where it becomes an issue is when you are constantly borrowing to pay day to day running costs as that is not sustainable over the long term.

The tough decisions were made back in 2020 when government stepped in with expenditure to stop the economy going into recession and leaving a trail of destruction that would take ten years to fix.

If they had followed previous governments responses with austerity they would have cut all expenditure and increased taxes which would have made a bad recession even worse.

yes and before the pandemic the government debt to government revenue was falling. On the Bond market Ireland had similar yields to the stronger economies in Europe (with the exception of Germany) which was unthinkable 5 years prior to that.

The issues with housing all derived from the fact house building more or less stopped after ‘08 and when supply need to pick up it didn’t because it takes time to get the engine running again. In an ideal world the government would have stepped in an built social housing to keep the engine ticking over but it didn’t have that luxury as the IMF and Europe were shoving austerity down our throats.

The RPZ legislation is a double edged sword... without it we would be seeing rent increasing in double digits the past few years and with it we see a reluctance to cut rent because once they do they will be stuck with it for years to come.

Even if the RPZ was not in place I believe that we would still see the same level of vacancy in the rental market because the institutional landlords have deep pockets and can sit it out till someone rents the properties as they have no alternative in this housing market. The only time you will see them reducing rent is when there is a over supply of rental properties and the pendulum swings back in favour of the tenant.

The rumours on the BER rating is global.... you just need to look at the UK where they are looking at setting a minimum efficiency rating for office blocks in order to meet their green goals. The same no doubt will happen here and will extend into the residential market. It is the no different to the green tax on fossil fuels as the governments try and change peoples behaviour. just like the price of diesel or petrol going up hurts peoples pockets no doubt this will also do the same.

Are you also capturing rentals in the data?

I had a back of a fag packet attempt at a calculation a few months back when there were around 1000 ads for rentals that in fact when you remove grossly unaffordable and student places, in reality there was closer to 600 actual ads for rentals available in the whole city. A city where a company like Facebook could say it wants to add 600 jobs in a year. Wfh is a good cover for the collision course our housing situation is due to have with our attractiveness for companies to call people back to Dublin to their offices, but it is pretty obvious that there won't be meaningful immigration to Ireland for a while with the ongoing rental situation.

From the program they stated that of the units currently in planning. Roughly two thirds are apartments with the remaining been houses.

At a minimum you would expect 30% of houses to end up in social/affordable or in the hands of investment funds given their declared intentions to expand in both financial and geographical terms in the country

Given that developers have suddenly decided that apartments are more expensive than houses and that private buyers won't touch them. The current system is completely against the private buyer in terms of both buying, but also in terms of driving up current rents

The land and construction lobby have very quickly wrestled back control of policy and the result is the most expensive social housing in the world paid for by perspective first time buyers. So the fruits of there hard work is used against them by there government.

Let's not try to paint a picture that ffg is on the side of hardworking people trying to provide housing for themselves. The facts show the complete opposite

Gov don't claim to build 33k this year but to have an average of 33k per year over 5 years.

Cork City is crumbling in places. Huge blocks of Limerick are cordoned off for a project that's been talked about for 20 years. Lots of empty unit mainly caused by dounut planning policies. Former landmark commercial units lie empty

Using what we have more efficiently is always better for your pocket, environment

What could be done to bring back unused properties to the market?

Carrot

Allow ftb grant to be applicable to long term empty units

Pool ftb and seai grants to help bring units back to acceptable standards

Pool state resources such as councils, bord Failte and others to help reinvigorate Town centres. Convert closed businesses to housing. These towns would have spare capacity in their schools, this could save the state in other budget departments. Seen on Irish Times today Ballinrobe has 199 vacant units and 0 rentals.

Remove extortionate charges for reconnection to services. Very few services charge you to be a future customer.

Stick

Hefty tax if empty after a (to be determined) period of time.

If after a period of this tax the property remains empty, introduce a compulsory selling order.

We need to be taxing waste more and productivity less

I don't disagree that we need to use the housing stock more efficiently..... but that still does not explain how 40k of properties can be delivered...

I agree with your logic except for one point and that is that the housing market is inelastic at the moment as there are constraints on how many properties can be built.... if this can be built up over time then yes the increase in supply makes property more affordable.

There was an interesting working paper on the topic that looked at the US housing market and the impact of institutional investors and QE on the housing market that would support what you are saying in a market that has capacity to build.

https://s3.amazonaws.com/real.stlouisfed.org/wp/2020/2020-047.pdf

The issue is not the money the issue is the capacity to build.... even if you are able to build a house cheaper it doesn't mean you can build more of them.

I get that there is a big protest vote and can understand why but I have serious questions about the SF plan as it doesn't stack up. I tuned in to the debate expecting Eoin to explain how he could make his plan work but instead all that came across was someone that was unable to answer questions.

Average salary for a tech worker is 130k?

Dublin is finished. As well as an awful housing situation Ireland also has a nasty reputation for its immigration services. And lockdowns. The next census (postponed from 2021) will be interesting..