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

As much as I'd like to see property prices decrease i think the pent up demand (despite ever increasing interest rates) will keep prices high and drive them higher- albeit at much slower rates than recent years.

I'd love to be wrong though.

The banks are the gateway to credit, will ftb be able to save enough monthly disposable income to qualify for 4x… how strict are the banks going to get in the current climate is the question.

5% soon - when is 'soon?' January? February? Mid 2023?

'Then down 10%' - Again, when will that happen? second half of 2023? 2024?

You really are throwing a lot of vague certainties around in your post without an actual substance behind them.

It is almost certain house prices will fall at some point in the future, nobody is really debating that. It's the same as folks saying stock markets will crash in the future, of course they will - it's the very nature of the thing.

As someone said earlier in this thread, a stopped clock is still right twice a day. Make vague statements about the future without any timeline and of course it'll eventually happen.

The UK is going to be a bellwether for us as their interest rates hit what we may well get to in the next 6 months, in the immediate aftermath of the Kamikwaze mini-budget. Supply is a massive issue there too.

UK year-on-year house price growth HALVED and prices dropped 2.3% in October-November alone, and a lot of these came from sales agreed before rates skyrocketed.

House prices are determined by supply and demand yes, but also the state of the economy, availability of credit, interest rates and sentiment of buyers.

I think worst case scenario for buyers is prices flatline (which is a real-terms drop with inflation) but more realistically a 5-10% drop is on the cards for 2023. Anything over 10% would mean we’re in a major recession and prices didn’t even drop over 10% per year during 2008-2012.

So when rates increase and money becomes way more expensive to borrow and build compared to recent years this is going to result in developers and builders increasing the supply somehow? How do high interest rates contribute to supply?

No capital flows is exactly what Im thinking about, specifically the ones involved in developers getting their funding for the massive supply increase the country needs. If the interest on these loans goes from an insignificant level ~0% we've seen in the last few years to a significant percentage that is a massive increase in building costs right there before you even get into all the other cost increases of recent times, Im wondering how you expect that to increase supply vs a near zero interest environment and yield these -20% drops in house prices you're predicting?

Just a note on this, of the nearly 30bn used by the Government to bail out the three remaining banks, the Government made a 2bn profit on BOI and just under 4bn remains outstanding on the other two, if they sold their shares in both, that would possibly cover the outstanding amount.

As the bulk of most people’s wealth is tied up in their property, allowing properties to plummet further and have mass repossessions would have been catastrophic for any government, people could not buy those lower price properties because they had no jobs, no access to lending and no confidence in the market. It is a fallacy that some like to present, that a recession will drive down prices and more people will be able to afford homes, but recessions usually mean job losses, wage cuts, banks less likely to lend etc, so less people will be able to buy homes, the ones who will? People with large savings, cash buyers, the people who are able to buy now will be able to buy better and more.

There is no doubt the Government made mistakes, galactic sized ones, but we now have full employment, a huge number of high paying jobs, a good economy, inward investment etc, just 10 years after the country went through a catastrophic meltdown. They must have got somethings right.

even if house prices totally crashed in ‘08 the prices would have rebounded and be as expensive as today assuming the economy recovered the same…if it didn’t recover then the only hope of getting work would be to emigrate. It always fascinates me how people think that they won’t be affected and will still have the same job and pay when wishing for economic carnage

Is construction hopping like it had a year ago?

Yes well one of the reasons the government reblew the property bubble was so they could say NAMA made a profit. Had they done nothing, those NAMA assets would have had to be flogged at their true and fair market price at a loss to the banks that owned them. Borrowing billions to reblow a property price bubble and then selling your reblown properties into the very bubble you borrowed to reblow is an act of monumental stupidity. The borrowed money originated from the ECB printing press and we will all pay for it in the for of consumer price inflation.

A lot of young people who have been spending a fortune on rent would own their own homes by now if the government had not favoured stupid/irresponsible people who over borrowed and couldn`t repay the bank, over young people today who were guilty of nothing. Young people have no wealth tied up in property, they had to use whatever they earned to pay high rent to a landlord who would probably be paying rent himself (to his tenants who would be property owners) if the government had not cynically favoured him, over them.

In a free, unmanipulated market, property prices fall until they find their true value. If unemployment is high, property prices fall and keep falling until those who are employed or who have a lot of savings can buy.

Our inward investment and low employment were not achieved in a normal economic environment. The government borrowed to stimulate and that leads to malinvestment. 2023 will see these malinvestments surface all over as insurers issue margin calls. Also the ultra low interest rate environment will guarantee inflation increases. Recent ECB moves are nowhere near enough because true interest rates are negative relative to inflation.

On the government discriminating against the young, didn`t the pay under 25 year old dole recipients half of what over 25s received. That was blatant discrimination. Whatever one might think of the dole, discrimination is discrimination.

Why on earth would you be fascinated? The government did not borrow all those billions to give to the multinationals or local businesses. They borrowed so that the banks could afford not to kick out defaulters, thereby keeping those properties off the market and keep prices high. The government also borrowed tens of billions to keep public sector pay high and avoid state sector redundancies but that was only to keep those people in a position to borrow more or to continue paying their mortgages. This is also what I mean by malinvestment, the non productive sectors contribute nothing to the wealth of the nation.

In fact, the only reason the government eased lending criteria and allowed bankers their bonuses/high pay again was because they will do anything to stop the air coming out of their precious property price bubble. Rising interest rates (however inadequate) will do that.

ESRI report on Irish property had prices something like 10-15% overvalued mostly due to the Covid period increases.

Since that we've had pay increases in response to inflation.

Property is valued based on the price of construction, salary multiples, rental yields and demand vs supply.

If people are going to speculate it would be helpful to be specific on which are dropping and by what percentage etc.

We are not in the crazy leveraged days of 2008, central bank lending rules were tightened to avoid that.