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

WTf...Is this the recession thread or the property thread??

True but the current cost is way above the cost of production it was inflated by demand, I know a couple of block manufacturers that are on 3 day weeks at the moment as demand has fallen off a cliff

So people/companies will instead of working in construction they will just give up on their field of expertise? So are we going to see an exodus of construction workers from the industry as stated the construction issues are global so they cant go to the UK, US, Canada or Oz or anywhere else where the same issues will be facing the industry. I agree some places have shut down and may never reopen but what happens when the war is over, supply issues completely gone and energy prices come back down to reality. I can see demand for goods that need construction falling a lot more quickly than the number of people/companies in the construction industry. Proof is in the pudding as I say we will have to come back to this argument in say 18/24 months time.

Just as a precursor to the next 18/24 months already Ireland's inflation is slowing as IMO we are a very expensive country to live in and property in particular is very expensive when compared to wage, things cannot continue to go up and up without wage rising to meet it, at some point people just do without or in the case of property they emigrate.

https://www.irishtimes.com/business/2022/09/30/euro-zone-inflation-at-double-digit-record-piles-pressure-on-ecb/

It's always darkest before the dawn. Dublin economy is dominated by by finance and I.T

Both sectors are facing serious headwinds. Facebook, Google and most recently Apple have raised concerns about the future and it would appear that growth in employment will be slowed if not reversed

Financial markets will be a difficult place to make money under current and foreseeable conditions so we can expect similar here

Med/bio med and pharma should insulate the economy from the worst effects of the recession

There is a realisation that too much money was injected into the system during Covid and asset prices simply need to correct to at least pre covid levels

If you recall property prices stabilised between 2018 and 2020. I think there is a good chance that interest rate rises and slowdown in employment (incoming migration) plus a push in supply will bring us back to those levels at least.

I feel a correction is inevitable and welcome for both homeowners and buyers. A bubble does not benefit either and certainly not the economy

The building will not stop completely. However inœstead of tradespeople working 6 day weeks they will drop back to 4-5 day weeks. Larger companies producing building supplies will reduce output. You will probably see more extensions and smaller projects consentrated on. Trades people will take on smaller or partial cash projects to cut out tax and Vat on there labour costs.

Completions will be pushed out by 6-12 months. Larger REITs projects will continue but again completion date will push out.

If the number of units to be build reduces by 30-50% back to 12-15k units where will the prices even out at

The building costs in Ireland is high with the regulations in place. However refurbishment's are not caught by the same regulations if people can fund it through savings or/and personal borrowing rather than mortgage type lending.

If we go through 18-24 months of limited activity any upturn should see prices rise exponentially as there will probably be a limited availability of materials

Other countries have much bigger capital projects on the go. For example the Brits did Crossrail during the last recession.

They already have 25,000 working on HS2.

"2022 is shaping up to be a huge year for HS2.  There are now almost 25,000 jobs supported by the programme and thousands of UK businesses directly helping to build the railway."

Also companies in Australia are already hiring irish workers.

Ireland will continue to lose a lot of its construction workers due to the lack of any real infrastructural investment.

I dont think so. people cannot afford the prices that are being quoted during any recession its the big ticket items that go first, the car upgrade, the house extension, etc

That is if someone has no other option to sell. If they do have an option they will hold off selling. It’s not like in 08 when people rushed to sell investment properties as it was going to cost them to hold onto.

Concrete block manufacturer's are on a three day week and cannot sell the product they have manufactured. Yes they will lay production workers off. Most people working in construction are either subbies or working for subbies. Very few directly employed. Most will now be reducing there output by slowing down the volume of work they have

Most in the game came through the 2008-16 period. One thing they learned from that period is not to keep going full tilt and finish projects there is no demand for/ that you cannot sell.

Yes they can they can slow projects down by leaving projects at the foundations stage or bare ground stage. They cannot afford to build at a loss better hunker down. Houses are seldom build without contracts being in place. This is the one thing developers learned from 2007-2010. Do not build unless there is demand.

Unlikely they are paying above 4%. Banks have not put there business variable rates up yet. The general concensus is the EU interest rates will max out at between 2-3%. Developers may be on fixed rate borrowing or financed by investment funds. Building at a loss solves nothing.

Yes if labour and materials reduce in price builders can reduce there prices however they will complete anything that is sold before doing that.

Expect completions to slow down between now and year end

If they cant shift the product then there will be a cost to store the products that they have just created. This is like a race now I cannot see wages coming up to meet the current very high prices so high that even those producing them are cutting back on making them. So what is the end game for them, wait for inflation to come down or wait for wages to come up, as most companies in this country will be lucky to avoid hitting the wall let alone pay pay rises so it may be a stalemate for a year or 2 it will all depend on the outcomes of the War, Covid supply issues and the energy issues we are seeing and if there is a supply from somewhere else. Commodities that would go into construction are starting to come down. I was quoted by a builder a ridiculous quote back in May and started spouting about lumber and how it has doubled and it did back then but now look at where Lumber is now.

https://tradingeconomics.com/commodity/lumber

Not closing down but moving to the likes of 3 day week and producing a lot less construction material. This is already happening with Steel and concrete because the demand to buy at elevated prices isn’t there and it makes no sense to produce at a loss

because it’s cheaper not to produce than produce at a loss. Ffs is that really that hard to get your head around

Only if the company shuts down completely is it cheaper and then of course the business is not actually active, as I pointed out there are other on going costs to doing business that don't transfer to a 3 day a week as well as still having to use the likes of energy and raw materials to produce construction for the 3 days that your talking about. Its you thats not getting your head around it, a company cannot stay in that state for a long period of time and also there is reduced revenue coming in also.

Self insure have you anything to back that up (not saying your wrong it would be interesting to see). As I say above - the norms have changed and we are no longer in a period of low inflation or low cost borrowing where a company could suffer losses for a period of time and borrow through it with a guarantee of a stream of customers waiting on the product. A company working 3 days a week still has to manage all fixed costs and the costs of things like energy, labour for working the 3 days a week, this also has a knock on effect of the employee getting a pain in their hole only doing 3 days and then they have to supply a product that globally is stalling - construction has stalled globally. I cannot see any company lasting like they did back in the years of 2010 to 2016 times have changed.

Supermacs, self insure, An Post used to and probably still smdo, as did the ESB and Telecom Eireann. Some companies handle all claims under a certain value and higher value claims are insured and handed over to the insurance company. Most company insurance is related to your turnover.

Fixed costs are miniscule compared to variable costs in the building materials manufacturing business. The cost of cement is an energy dependent costs. Companies involved in it's production will reduce output sharply when production costs exceed market returns. Therefore companies manufacturing concrete products cannot. It cement below the cost of production.

50+% of the trucks that deliver ready-mix and concrete products are independent subcontractors. The delivery of product will be removed from these and redirected to there own trucks.

Remember all these products take up a large area I'd you try to store concrete blocks. You cannot keep production if you cannot store products anyway

As an aside giving a different example fertilizer production has stopped in the EU because of the price of gas. These companies have not reduced output they have completely shut down

Most concrete block manufacturing is automated. The labour element is miniscule it's the variable costs and sales price that matters most

What's the full story in this article?

I kooked up the ad for one of them and the asking was 340k. Houses there regularly sell for just 300k, even recently.

How on earth did a house sell for 850k never mind 1.7m? There's no way a bidding war created such high prices.