House Prices

All we ever hear about regarding housing is 'supply' 'supply' 'supply'

What we do not hear is the other side of economics, demand!

The root cause of the increase in property prices and rents is demand based price inflation, the question we must now ask is this, what is causing this excess demand in the market? Since real estate is a demand driven market we must take into consideration the demographic factors, these include birth rates, deaths, immigration etc.

Birth rates are not exceptionally high. Deaths are generally stable. Immigration is the only factor that is not stable and not predictable, we have no idea how many people will arrive into Ireland from one year to the next as such it is impossible to adequately plan for housing supply. The Irish government know this, the Central Bank know this and the real estate investment trusts know this.

The only people who appear ignorant of this are the Irish people who have to suffer the negative consequences of this ongoing, compounding issue.

It's long past the time to start having a mature discussion about these factors without the typical attempts to shout down genuine debate with screeches of 'racist' 'nazi' that approach does nothing to address the problems.

Falling house prices are a problem because people borrow to buy houses, and they find themselves in negative equity.

But loans don't increase with inflation - if you borrowed €500,000 to buy a house, and inflation since then has been 15%, your loan doesn't "hold its value" for the bank by rising to €575,000 - you still only owe €500,000 and, so long as your house is worth at least €500,000, you're not in negative equity.

Sure, viewed as an investment your house hasn't held its real value. But that's a risk attendant on any investment. The failure of your house to appreciate in value in the way you hoped it would, or even to hold its real value, is of course disappointing for you. It hasn't proved a great investment. But, not to be brutal about this, that's a bigger problem for you than it is for the rest of us. We are not in the business of underwriting, or caring very much about, your investment return. The failure of houses to appreciate in value doesn't create the same kind of societal problems that large-scale negative equity does. So, from a public policy point of view, the return of house values to their nominal 2007 level is significant.

Some quarters would claim that immigration is the elephant in the room. But it's not. The reason it's not talked about it is very simple - if you shut it down, you shut down the economy.

It would work great at dropping house prices. And also at sticking everyone on the dole queue.

People don't immigrate in a vacuum. There's a reason we had basically zero immigration in the 80s. There's a reason why nobody talks about emigrating to Venzuela.

Immigrants are attracted by the promise of work. Ireland has a lot more work open than we have people available to fill it, therefore we need and attract immigrants.

Shut down immigration, and we have nobody to fill the work available. What happens then? It goes away. Take one recent example; Workday and their 1,000 jobs. We tell Workday that they can't fill that with immigrants, and very quickly they will realise they can't fill them in Ireland. So they move the 1,000 jobs elsewhere. Which means they put on hold their plans for a new HQ. And they pause all hiring in Ireland. So within a short space of time, we have lost not only 1,000 potential jobs, but 500 actual jobs between construction and support services.

Immigrants, realising that they can't bring their families in, and will have trouble switching jobs, start to leave, taking their jobs and their income tax with them. Companies see their workers fleeing, and the companies go with them.

Before you know it, yes we've got loads of empty houses, but we've also lost 500,000 direct and indirect jobs supplied by multinationals, €20bn in income tax and €10bn in corporate tax.

@Sam Russell wrote:

It's more complex than that really though. Ultimately there is only so much construction you can do in an economy. At the moment we're relying on private companies to build our public housing stock. It's not really possible to click fingers and decide the state is going to build 10,000 homes this year, without impacting the rest of the market. The nature of a public contract is that the sector will clamour for those contracts, leaving private building starts floundering. It is also likely to increase the cost of private building by squeezing the availability of resources. Even if the state decided to spin up its own construction department, it's going to suck up workers from the rest of the sector and monopolise access to building materials.

The current situation where all public housing stock is provided by private construction is obviously not perfect but it does find a balance, provided that it is stuck to and has no escape routes or loopholes.

It's really a hard one to say, and it's not something we can really do much to fix short-term. We've already tried rent control measure and protections against bogus evictions. But in a market like this, they can be easily worked around because landlords don't really have to care; there's a queue of new tenants no matter what they do. Perhaps absolute rent fixing may work - that is, within each rent pressure zone you have a fixed rent based on the property type, square footage and no. of bedrooms. This would certainly help with the affordability issue, but not the supply issue. For every landlord who decides to exit the market due to fixed rents, someone buys the apartment, and you're not actually adding any supply to the market - you're just making it even harder for renters to find somewhere to rent.

Even measures aimed at tackling property speculation are of limited use - how many liveable properties in the country are actually sitting empty at the moment?

Ultimately IMHO, short of tanking the economy, there is very little that any government can do to tackle the property problem that doesn't involve just waiting for supply to catch up. We were on our way towards supply meeting demand by 2023, but Covid scuppered all that. And it hasn't just been set back by two years, it's created all sorts of supply chain issues that are still causing havoc. If it was just us, we could ramp up resources, we could ship in workers by the container load. But it's not just us. The entire western world is experiencing the same problems.

Realistically - assuming no major external factors - we should settle in for at least 3 more years of this before we see any path towards a "normal" property market emerging.

Do we throw €10bn at construction, remove VAT on materials, incentivise visa for foreign construction workers? Will this actually improve things, or will we remain stuck in the same problem while developers just pocket the €10bn? Because this has generally been our experience when meddling in the market; no more supply, no reduction in prices, but huge profits for developers.

The real racists are people like you who consistently go out of your way to crow bar race into every discussion surrounding immigration. The vast majority of immigrants to Ireland are white. We need to pause all immigration regardless of race until such a time as the housing shortage is rectified. How you went from that to 'kick all non whites out' is frankly insane and exactly the type of hyperbole I was referring to.

How exactly would you go about stopping immigration give that:

1. The EU has freedom of movement
2. Our economy is massively reliant on young foreign workers. Some sectors would actually collapse without immigration (our healthcare system for one)

its more than immigration ..

its the vulture funds (and to a lesser extent county councils) buying up property en masse left right and centre often off the plans leaving virtually nothing for first time buyers ...

Again, real estate is a demand driven market, not supply driven. The ONLY reason vulture funds have any interest in Irish property as an asset class is due to the excess demand in the market. Vulture funds are not creating the problem, they are capitalising on it, the property they acquire doesn't vanish, it still goes to market the only difference being the investment trusts take the profit rather than private landlords. Excess immigration is driving excess demand, this is the root cause.

Have you any evidence of this or in particular of any EU country enforcing this?

Nonsense. One of our largest industries is the tech industry. It is entirely dependent on foreign workers. We simply are not producing enough graduates in this area to feed the demand of all of the companies here (hence the larger than average wages in this sector).

If you stopped migration the healthcare industry would collapse within a few years (possibly even sooner). We don't even need to be hypothetical about this. The UK have completely restricted inward migration since Brexit. They have had to made a big exception for healthcare workers though. They even lowered the required salary for these workers from £25k to £20k in order for them to get visas. The Philippines is quickly becoming one of the largest country for immigrants due to this phenomena.

As for the graduate healthcare workers leaving the country. Junior Doctors have been treated appallingly in this country for a long long time. Long before migrants started to prop up the system. You've basically put it together backwards to suit your own theory here.

There’s people moving to Ireland there’s people move out of Ireland too.

immigration isn’t the big factor driving price up.

ireland and Almost a lot of other counties just don’t have enough house supply.

people in my parents generation live in much smaller house, or built their own house through several years, living in half built house, less entertainment, less holidays, less expenses.

our generation have way more to spend, expensive clothes handbags iPhone tesla, 2-3 abroad holidays annually, kids are spoilt w Xbox whatever.

then we all wanna big house… in good condition…of course our affordability on house is lower.

in Shanghai, HK, Tokyo, London, it needs several generation’ savings together to be able afford a proper house.

becoz the supply/demand is so unbalanced. The population is so big in those cities and the density is unbelievable in HK.

in Ireland it’s not that bad yet. After all there is only 4m population.

but if they don’t build more houses it could turn to worse situation. But I don’t think it will ever get as bad as those big cities.

I think we can agree that bringing more social housing stock on-line is a higher priority for the nation than John & Aisling getting their dream kitchen extension done.

Also, while some of the properties may have been let get into such a state of disrepair that it'd be more effort to renovate them than to build new stock, that won't be the case for a significant amount of such property (or indeed existing units above/behind commercial units in our towns and cities that the councils should be seeking to purchase) so bringing such units back into use is actually a more efficient use of the limited skilled labour available...

You think? I'd have thought the private couple looking to get a small project done would be at a serious disadvantage to a public body tendering for a months long project to renovate a number of units. The public sector aren't always great at getting the best bang for their buck but it's a fairly straight-forward procurement job.

I made this point in a recent thread. My parents bought a house in 1996 for £40,000, which is €50,800. That same house is about 300k now. So that house has increased by almost 600% in 25 years but salaries haven't increased by that amount.

Thats because its a lot easier to buy a house now. I know that wont go down well but there are more people who can buy a house now than there were back then, even though there are a hell of a lot who cant.

Back then it was very hard to get a mortgage. Also nowadays the buying power is doubled because it is expected now that both parties of a couple are earning the money to buy a house.

So you are in competition with much more money for the house you want. This is driving up prices.

I suspect if we didnt have immigration, wages were lower, and women hadnt entered the work force, house prices would be a lot lower nowadays. So a lot of things have changed to effect the price of the house you want to buy.

Yes buying power has increased and believe it or not wages have increased. Now you even double the wages that are buying the house too.

So something mus feed those increased wages in the construction sector too - that would be higher house prices. Also regulations have an effect. Regulations ALWAYS increase the price of whats regulated. Dont know how this isnt understood before they go in with harsher regulations all the time.

You could buy a house with a single income back in the day because noone with higher income was competing with you. Now you will find that there are huge double incomes competing with mr and mrs average salary. There is only going to be one winner there. And when you get two people with huge incomes competing, well then anyone on a lower income can just say goodnight.

But there are a hell of a lot more people on very high incomes now than there were in the 60s and 70s.

I first saw house prices really take off in the mid 90s. It was around this time too that i noticed that most couples also required childcare because it was more normal now that women and men worked to afford to pay their way.

The easiest way to drop house prices is actually to have a policy of one job per married couple. I vote that all men must be mad redundant today :)

In what decade could a couple with one income buy a house?

Bear in mind that a newly built house 30 years ago was nothing like a new build house today. The house built then is a shed in comparison to a modern house today; not a scrapof insulation in it, windows which may as well not have been there for the draughts coming through, one double socket in most rooms. The standard a modern house is built to is way beyond houses of the past. Any comparison of other factors (income, interest rates, etc.) also has to be cognisant of the fact that the product has also changed massively.

Also, incomes rising effects both sides of the equation. The purchasers income has risen but so has the income of everyone involved in the design and building of the house. In the past, much of the work was done by a few "jacks of all trades" (and masters of none), now there are many more specialised tradesmen. Scaffolder is a trade now with specific training, scaffolding used to be thrown up by lads and only with the intention of it standing for however long their job would take and no longer.

A big difference now too from the 'old days' was that Social Welfare now takes 30% of the budget (I think). Probably before housing costs are counted.

Years ago the social welfare budget had not much more than the OAP and children's allowance. As it costs at least €1 m per 3 houses or €1 bn for 3,000 houses it is easy to see why the Govt finds it difficult to satisfy the demand for houses. Current figure is probably €400,000 per house.

yup, and by doing so, has turned our markets into a right mess, the fundamentals of these ideologies is to gradually create an anarchic society, and its working!