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

Interesting piece from the FT on the Irish property market-The article lays out the lack of new property being built relative to the growth in population and that housing is the number one issue facing the country

https://www.ft.com/content/ad969594-cb0e-483d-a761-b50b161fd428

A recession takes care of all that.

Let's see if this is just a temporary thing or the start of a downward trend- The 4X rule coming into effect from Jan 1st (which btw was an awful decision by the Irish Central Bank) can only drive property prices up.

I seen it all before.

Prices will be down 5 percent soon and people will be still saying, "its temporary, because supply".

Then prices will be down 10 percent and we will still hear, "its temporary, because supply". Its called denial.

Before you know it supply will really start to pick up and then prices will continue to drop.

Eventually, everyone will be saying prices cant go up because supply is too high 😂. Thats when its time to buy. Remember, rates are key here, supply is what people who dont know what they are talking about are fixated on.

I clearly said drops will start to escalate early in new year. Do you want me to give you exact dates😔?.

Its all I keep hearing in this thread, "someone else said prices would drop 2 years ago and they didnt, therefore you are wrong". I sold my investment property a few months ago(practically the top) so clearly I have not been saying prices would drop for last decade.

Been in the game a while and learned a lot from last crash.

Not what I said, the biggest driver in prices is rates.

And low rates contribute to the supply issue we have now. Its a circle and its all going to unwind.

You are thinking merely in the lines of mortgatge rates ... which will have a big effect on what people can afford.

But interest rates also greatly effect capital flows and the rates of return investors need on their investment.

The government borrowed 120 billion euro and the only thing the young get from that is expensive rent and expensive housing. You see, the government did not borrow that money to help the young but to increase house prices. It was a case of who gets what. The bankers of course got bailed out instead of jailed. The defaulters got to stay put instead of being kicked out on the side of the road where they belong. This was to keep their houses off the market, as that would have pushed prices down.

A crash in property prices would obviously be good for buyers. If our economy were to nose-dive, and unemployment increased, those with mortgages would default. If that happened, houses could potentially be repossessed and put on the market, thereby driving house prices down. We would however need our government to refrain from borrowing another 120 billion to reblow prices in the property market like they did last time. After all, that money must be repaid by the taxpayer in general, and not the banks that were bailed out or the defaulters who have been living rent free in the bank`s houses since 2008. The government did not want houses to become affordable to young people as it would have meant older people would lose out (via eviction for defaulting on their mortgages). So, to deny the young a chance of buying houses at affordable prices, the government kept houses off the market in order to keep prices high. They did this by enacting laws that made eviction legally very difficult and expensive. It worked out well for defaulters though, they`ve been on the pigs back for years now. Another little trick the government pulled to reblow the property bubble when house prices were still falling after 2008, was to insure a traunche of houses against negative equity (of up to 20%) and this resulted in buyers prematurely entering the market to buy houses, thereby preventing house prices from falling further. In short, the government put a false floor under house prices in this country. The government manipulation and interference in the housing market made house building a lot less viable so the number of new houses being built reduced from over 90,000 per year in 2006 to a much smaller number in recent years. But, new builds or the lack of them are not the problem, just the excuse. You see if new builds were the problem, Leo Varadkar would not have said the cement levy (to pay for the mica scandal) was not such a big deal because it only affected new builds. He is right but he is also admitting his hypocricy in saying so. The 99.99% of existing houses are what determine house prices far more than new builds. And it is that 99.99% of our housing stock which was reblown to high valuations at a cost of 120 billion.

• So, we must repay 120 billion (mainly via general consumer inflation), and in return, we get to needlessly expensive, re-blown-up house prices. If the government simply let house prices crash all the way to the bottom after 2008, they would still be affordable and we would not have that 120 billion to repay.

What about pension funds and reits? If people default due to rising interest rates and government bonds still need to pay their investors, the government will be seen as a riskier bet and their borrowing costs will go up.

That was just the government trying to save itself from it`s own incompetence and mismanagement. Please don`t take this the wrong way but thinking for yourself is a very good idea.

We are 15 years post crash and prices still haven't caught up to where they were at the peak, and we've had a rake of inflation in the interim.

In real terms prices are still way behind the peak in 07/08.

What is your 'true valuation' for property then in terms of salary multiples, cost of construction etc. that the government is stopping us from reaching.

And why are prices similar or higher in many other European cities London, Paris, Stockholm, Milan etc. where the Irish government didn't intervene post financial crash?

Canada and Australia didn't have a major property price crash, which is why the central bank copied their lending limit model.

Both countries with hugely expensive houses in the major cities.

The market interference there was to cap the prices.

They could afford to compete on the rental market. Perhaps some people who are currently homeless could outbid some them but it would simple be a case of who gets what. Those who over borrowed and defaulted are less deserving, not more deserving than the young or the homeless.

That is for the market to decide. The ECB raising interst rates has put a little downward pressure on house prices and our government is trying to counter that by

a) applying the mica levy of cement for new builds

b) easing borrowing limits

c) incentivising lending by allowing the bankers their high pay/bonuses again

It will be interesting to see how it plays out. The ECB is being very reluctant in raising rates because that has the potential of destroying economies and the EU itself. It all depends on what inflation does from here. The ECB and a lot of economist are saying it will come down in late 2023. If it doesn`t, they are in trouble. I see interest rates staying high and will probably go higher.