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

Carrot really at this point I think all of the carrots are gone, I mean how much more carrot do they need already First time buyers grants, help to buy grants, rebuilding Ireland home loans, 3 to 1 going to 4 to 1 with regards to mortgage lending ratios, not to mention the favorable rental rates local councils are paying for REITS and other investors to buy and rent to the local councils, then HAP so those on the lower wage can rent then of course the corpo tax rates....All of which have aided in upping the price of our housing market. The carrot has been tried and tried time for the stick we need a real upping of vacant site taxes 10% a year would see these boyos building or selling and getting someone else in who can do it cheaper. Sinn Fein have been very vocal about developers and how they will be dealing with them and it isnt carrot.

Almost all projects are done on a phased basis its very rare to see development x 200 houses all built together, normally they do it blocks of 20/30/40 sell these then use the profits to build the next lot so regardless of the commencements the most recent lot of houses built (completed) will be under huge price pressure put it this way the norm has been phase one house A costs X and Phase 2 House B costs X + 5%/10% this will be reversing. Also Selling prices are decreasing (no maybe about it) and if interest rates hikes keep going up (another 2 before the end of July) we will definitely be in a recession by the end of the year

I dont think we are far from an exodus from the Irish banks. The Irish have big deposits earning nothing, eventually people will wake up and start pulling money out.

Imagine if someone like Revolut were to offer a fixed term deposit rate.

If people start pulling money out, banks would be forced to start upping there own deposit rates and their mortgage rates which could squeeze affordability further.

Really depends on whether they want developers to build. If developers aren’t confident about profit/sales, then they will not build, that is the reality.

I really don’t get the enmity some have towards developers, they are business people like any other. Even if they do build in phases, they won’t want unfinished sites because sales dried up or costs are too high. If there is a recession looming, plenty of business owners will be carefully weighing up whether now is the right time to be investing.

I think the issue here is for the vast majority of people, they don’t have ‘that much’ on deposit. Even if you had €20k. If you could manage to get even a 2% return from a bank. That’s €250 odd after DIRT. Hardly worth the hassle.

For those with bigger sums to invest (typically older). They won’t trust the likes of Raisin or Revolut (and I’d tend to agree with them).

People can already get nearly 3% on Irish government bonds if they just call up Davy and get them to administer it (there is some cost but it’s still well worth it). But the reality is the vast majority don’t bother because it’s just not worth the hassle/they’re not financially literate enough to look into it.

I really doubt the Irish banks are too concerned about a run on deposits seeking higher yield at this stage.

The banks are using the low deposits rates they are paying to subsidise mortgage rates. They are still awash with deposits and the lack of competition means they are not afraid of people moving funds chasing rates.

Pretty odd statement to throw out with the disclaimer, "as far as I remember". According to Raisin bank they are guaranteed by the EU Directive 2014/49/EU. Irish banks guaranteed by the central bank of Ireland. Call me paranoid, but I dont trust any financial institution.

"They arent paying higher interest rates for the craic". I believe they are just passing on rates on offer by other European Banks. E.g. several banks in Italy, France, Germany offer these rates to their customers.

Dont get me wrong, I wouldnt stick all my cash in Raisin, but I wouldnt stick all my cash anywhere.

Yes all very valid points. The only thing I would say is while build costs might only be 37% of the total cost. Most of the other factors are also inflating significantly and are in some shape or form linked to wages (site development, marketing, professional fees). Wages in the construction sector are rocketing no doubt. Finance costs could also conceivably have doubled or worse.

That said, you are right on value of the land and this is ultimately the ‘floating variable’ that links the cost of building a house and the price it can be sold out.

House prices could drop much more than 20% and remain viable in places like Greystones assuming land values fall (which they should).

It’s the parts of the country where land values are lower because sale prices are much closer to total construction costs where the concern would be.

The issue is from an interventionist state (ie SF government) point of view it doesn't actually matter if the developers don't build. If developers stopped building all new construction next year, and say a 5-10% vacant property tax was brought in as a result, they would be forced very rapidly to sell their vacant sites to the state rather than let them sit there idle for potentially years.

The state would then build social/affordable housing on said cheaply bought sites, using the construction workers who are no longer employed by the developers.

The state has no lack of finances for building social/affordable housing bear in mind - it literally has billions of euros sitting, unable to be spent, for just this use. The issue is getting construction workers right now. So developers going out of business, and suddenly a lot of construction workers being available for hire, if anything solves the problem rather neatly.

The developers/contractors will rub their hands with glee at the mere thought of what you posted.

Not wholly relevant to the subject matter, but with respect to bank strategies, what do people think the traditional irish banks will do to contend with Revolut?

Revolut are planning to offer mortages before the end of next year, with significantly reduced application and processing time and lower mortgage rates for customers due to lower processing costs.

I dont know what kind of scale they will offer their product at, but surely it has the potential to be a game changer in a small market like ireland.

Is it not the case that the 3% vacant land tax has been evaded by approx 50% of land owners?

If so, if SF increased it to 5% or 10%, would owners still be able to evade it with ease?

Also, the vacant property tax of 0.3% seems incredibly low.

Why is this not increased?

It always amazes me that even in very expensive and high expenditure areas of Dublin you will see some commercial buildings sit idle for literally years. Right on the main street.

Surely that kind of practice should be made unviable for the property owner.

Well it may take a bit of time but it will have to be passed on if rates continue to rise. The thing is with the first time buyers mechanisms, it would mean that these guys would have to see a serious drop in property price to realise any kind of negative equity for example with the 30k FTB to start you off you would need to see a fair drop in price to realise a loss. Having said that there will be a lot of FTB now looking on at price drops and may well actually for the first time in a decade think this time next year I could get a place cheaper. Also the banking stress tests and mortgage repayments will take people out of the demand via affordability. We will also see more government interference in the market and I will put money on one thing the government will introduce tax relief on mortgage interest next budget another way to keep prices from falling.