Irish Property Market chat II - *read mod note post #1 before posting*
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The price is in keeping with properties in the area, earlier this year a property 25% smaller and not is as good condition sold for 415k a few doors up, this is a bigger, nicer home with better/more private garden, plus there is multiple bidders who obviously want it. No surprise then that bids are going up.
Gone sale agreed after 2 weeks, great result for seller, buyer happy to bid, not sure what importance you attached to “corpo” house when link dumping.
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For a start we know it possible to have both a) a record low supply of housing units on the market and b) to have sufficient total housing stock relative to the total population.
We know this is possible because we have counted what is on the market and the total housing and the total pouplation.
To deny it is possible is to claim the data is wrong. Assuming you don't believe the data is wrong, there must another explanation.
For example what is known and well understood in the US as the lock-in effect. This happens when for a variety of reasons people who ordinarily would be expected to sell a house do not so because of specific factors - common in the US because of long term fixed rates, so when rates rise to 5% a homeowner on a 2.5% fixed rate who would otherwise normally trade up decide not to do so in order to keep their low rate.
Generally, the lock-in effect reduces home inventory, which can lead to a rise in housing prices.
In a more typical housing market, first-time buyers purchase less expensive starter homes from people who are upgrading to larger or more expensive homes as they age and, generally, their income grows. When fewer people are willing to sell, that makes it harder for first-time buyers to start up the property ladder and for existing homeowners to upgrade.4 With less supply, prices remain high.
This is self reinforcing, the longer it goes on, the more it clogs up supply, and the more people who own homes who might wish to sell stay put, and extend or renovate in preference to moving.
It started in Ireland as a hangover due to a perfect storm from the cumulative effect of low rate trackers, negative equity, mortgage arrears, lack of repos etc. All of this added up to a huge number of people who ordinarily would have expected to sell their house being unwilling or unable to do so - i.e they were locked in to their current property.
Thus the sale of second hand homes dried up. Initially not the supply because another hangover of the crash was demand alos dried up. Sale is measured by turnover of existing properties which fell though the floor and remains over ten years later at historically low levels.
By the time the demand picked up the lock in effect had clogged up the market, restricting supply of second hand homes, and driving prices up for the few that remained on the market.
Again we know we know these properties exist because they have been counted. We know the turnover is at record low historical rates. We know the circumstances that initially caused people to be stuck in properties for longer than they intended. We know that their is a current boom in extending and renovating from people who are choosing to stay put and improve rather than trade up because they cannot find anything to trade up to. And we know that the sale of second hand homes is at record low rates
All the evidence points to this as a plausible explanation as to why we can have both a) an record low supply of housing units on the market and b) to have sufficient total housing stock relative to the total population.
I am not suggesting we do not need build new houses. I am simply saying that building out projections based on a fictitious deficit of 250k will inevitably lead to oversupply.
Now I have answered your simple question are you prepared to answer this simple question:
How can it be possible that the same simple maths which you presented yourself to reflect housing need in the future - population increase/AHS - does not show a housing need deficit in the present?
If you don't have an answer for that fairly simple question then it would suggest your interpretation of any fundamental facts in the housing market is completely wrong.
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You get a different answer if you work of the 1,836,728 occupied dwellings recorded in Census 2022 instead of the 2.1m and accept that the difference is either vacant or holiday homes that will always exist unless we become a communist country. But you already know this and you just think you have outsmarted the ban on vacant properties.
It really is getting tiresome how you repeatedly bring up vacant properties in a roundabout way by fishing with people because you know if you use the word vacant you will be banned as have been warned enough. Is there not enough traffic on the vacant housing tread to keep you busy?
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The discussion was about whether or not we have a deficit of 250k, and the data shows we clearly do not. Yes you get a different answer on the lower assumed household sizes if you allow for a vacancy %, but it still does not show a deficit. But you already know this.
It is tiresome that every time I post something you wish to derail you accuse me of wanting to bring up vacancy in a roundabout way.
I answered Blut2's question in good faith about the lock in effect, maybe they're interested, maybe they're not, and maybe nobody else is interested, in which case the discussion will fizzle out anyway. If you're not interested why not just put me on ignore?
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The "lock in effect" has a much lower impact on housing markets where mortgages aren't at long term fixed rates like in the US, it doesn't apply to anywhere near the same level here.
More importantly, it also didn't apply to Ireland in any way whatsoever before interest rates began increasing. The ECB only began increasing interest rates in late 2022, the Irish housing crisis was in effect for years before this.
Therefore it very obviously doesn't explain the unprecedently low supply of houses to buy or rent that existed at that time too. Whats your explanation for that time period?
"How can it be possible that the same simple maths which you presented
yourself to reflect housing need in the future - population increase/AHS
- does not show a housing need deficit in the present?"Because your math assumes literally every housing unit in the country is active in the residential housing market, which is completely untrue in reality as anyone could tell you (and people apparently have, repeatedly, in this thread). A very significant number of housing units in Ireland aren't in active residential use because they're:
- holiday/second homes
- airbnbs
- vacant due to issues like probate or being for sale/for rent
- under renovation
etc
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You both seem to agree that a quickly increasing population and an insufficient supply will put a floor on prices, can you explain? The interpretation here seems to be that more people = more demand. Even just within this interpretation you then have to consider downward pressure on wages in several sectors, and inflationary effects arising from this increasing population, i.e., affordability of housing.
The structure of the population will change rapidly due to wider conditions, and in any case, market sentiment will dictate prices regardless of population. Any turn in sentiment, and any turn in prices, will have strong effects on demand. It seems to be a dominant view that people will buy into a declining market but I just don't see this, not least because of job losses in sectors that will be sensitive to any changes in this particular market will make it impossible for many.
Post edited by floorpie on1 -
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The "lock in effect" has a much lower impact on housing markets where mortgages aren't at long term fixed rates like in the US, it doesn't apply to anywhere near the same level here.
More importantly, it also didn't apply to Ireland in any way whatsoever before interest rates began increasing. The ECB only began increasing interest rates in late 2022, the Irish housing crisis was in effect for years before this.
Therefore it very obviously doesn't explain the unprecedently low supply of houses to buy or rent that existed at that time too. Whats your explanation for that time period?
The lock in effect in Ireland started in about 09/10 as stated above due to a combination of negative equity and mortgage arrears, stats on both which made us outliers at a global level. That took a good ten years to wash through and is still entirely done. 100s of 1000s of people affected.
And regarding interest rates, as soon as ECB started aggressively cutting interest rates in about 2011, those on tracker mortgages were better off staying put in the house and mortgage they had in order to keep the tracker with ultra low interest rates.
Rates stayed at insanely low levels until only a few years ago. The cumulative effect of above has caused a lock in effect in the Irish market, and it is self reinforcing.
But if you want a very simple example that casts doubt on your theory that low levels of properties to buy or rent in the market is indisputable evidence of total housing stock shortage, consider Leitrim.
There is nobody arguing that Leitrim has a huge deficit of exosting stock that needs to be built out before we can even stand still yet today on daft.ie there only 8 properties to rent in the entire county and 185 properties to buy.
What's your explanation for that?
Because your math assumes literally every housing unit in the country is active in the residential housing market, which is completely untrue in reality as anyone could tell you (and people apparently have, repeatedly, in this thread). A very significant number of housing units in Ireland aren't in active residential use because they're:
Fair enough, we can do the same calculations allowing for a 5% spare capacity for all the reasons you mention:
Population was 5,149,139 in Census 2022
The total stock of habitable permanent housing in Census 2022 was 2,112,121
Housing stock required to house 5,149,139 people:
@ AHS 2.74 - 5,149,139/2.6 = 1,980,438 -
@ AHS 2.7 - 5,149,139/2.56 = 2,011,382
@ AHS 2.6 - 5,149,139/2.47 = 2,084,671
@ AHS 2.5 - 5,149,139/2.375 = 2,168,058
So the only calculation showing any deficit is an AHS of 2.5, and that deficit is 56k rather 250k. The observed household size of 2.74 and the presumed household sizes of 2.7 and 2.6 show a surplus.
And in order to plausible argue this deficit exists you'd have to claim that the preferred household size is 2.5 rather than 2.74.
This is quite the stretch according to the ESRI research posted earlier. Accounting for the surplus of adults living at home in 2022 compared to 2011, only moves the AHS needle to about 2.7.
How are you getting from 2.7 to 2.5 for your 56k deficit, and then down to 2.4 for your 250k deficit?
The idea that we have a 250k deficit is not as much a fundamental fact about housing as it is often presented.
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I agree that insufficient supply on the market will underpin prices, but the point was more that market sentiment is biggest driver of prices rather than fundamentals.
Current market sentiment is there is zero chance of any price falls because we cannot even build enough houses to cover the shortfall from 2022 - i.e 250k - never mind build enough to accommodate the annual population increase.
There is an argument, as demonstrated by the calculations above, that that market sentiment is driven more by a narrative and herd mentality than fundamentals.
I understand it is not a popular argument but to date nobody has contradicted the data. Any attempt to rebut it is simply to cite the narrative - eg Leo said it, or look at daft, etc etc.
But it matters little what is driving the market sentiment, as long the market remains convinced that prices are unable to fall due to the supply imbalance prices will not fall.
That's what is putting a floor on prices. IMO
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Could you make more sense in what you mean by Leitrim?
You think there's a mass of excess housing in Leitrim is that it
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No one goes in bidding to try and drive up the price
Sentiment means nothing when more than one person wants the same thing and it's even worse because in this case they need it
Sellers can ignore lower bids because they have options
I doubt very much you have ever bought or sold anything
Prices were low in 2010 for the very same reason, few buyers lots of sellers
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More people do = more demand. Because at its core the problem is every human resident in Ireland needs somewhere to live. For as long as our population is increasing we'll need additional housing units. Even more so when our household size is decreasing on top, as it has been for a long time now. And given at present we're increasing by 100,000+ humans a year, thats a lot of housing units.
There is no national downward pressures on wages overall, and there is unlikely to be outside of a serious recession. Individual sectors aren't going to impact the housing market overall.
In addition to that the housing market is not a free market, the state will provide a very large floor. Even if there was downward pressure on wages from a recession the state would still eat a huge number of housing units coming to market each year for social housing in the short/medium term given the current deficit in that department.
The initial point I was responding to was addressing the question of it was better for a potential buyer to buy now or wait. I struggle to see any justification for someone to wait, given both the current state of the Irish housing market, the projections for the future, and the history of the last 50 years of it.
I know I'm very glad I bought when I did a few years ago, rather than listen to the "prices have to fall at some stage" opinions here. As is literally everyone I know whos bought, too. The consistent best choice would seem to be buy as soon as you can, if you're in a position to do so with a good property.
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"And regarding interest rates, as soon as ECB started aggressively cutting interest rates in about 2011, those on tracker mortgages were better off staying put in the house and mortgage they had in order to keep the tracker with ultra low interest rates.
Rates stayed at insanely low levels until only a few years ago. The cumulative effect of above has caused a lock in effect in the Irish market, and it is self reinforcing."
That doesn't make any logical sense whatsoever. The lock in effect occurs when homeowners can't change properties because interest rates have risen since they got their mortgage, so its now in their best interests to stick with their lower interest mortgage rather than getting a new, higher interest mortgage on a new property.
When interest rates are falling, or stable at the lowest level in decades, as they were for all of the 2015-2022 years of the property crisis Ireland that doesn't apply in any shape or form.
"There is nobody arguing that Leitrim has a huge deficit of exosting stock that needs to be built out before we can even stand still yet today on daft.ie there only 8 properties to rent in the entire county and 185 properties to buy.
What's your explanation for that?"
? People trying to find housing in Leitrim will tell you there literally is a huge deficit of housing stock in Leitrim. Leitrim has a population of 35,000 and has 8 properties to rent - how can you not call that a huge shortage of existing stock?
"Fair enough, we can do the same calculations allowing for a 5% spare capacity for all the reasons you mention:
Population was 5,149,139 in Census 2022
The total stock of habitable permanent housing in Census 2022 was 2,112,121"
This is the core of where your figures are just completely wrong. Per the CSO we only had 1,836,728 occupied dwellings recorded in Census 2022. So the "spare capacity" figure is significantly higher than 5%, its closer to 15%. And its not "spare capacity", unless you plan on CPOing all of those homes to force them into the market.
This was for a population of 5,149,139 in 2022, which even at 2.7 household size would give a deficit of almost 100,000 household units. A number which has undoubtedly grown since given our rapid population growth far outpacing housing construction in the intervening two years.
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why not use the actual vacancy rate per cso rather than 5% in your calculations …. Isn’t this the argument you were making about not using CSO AHS…
And with regards Leitrim it’s must be where the banks hid all the investment properties that they were going to flood the market with once prices increased as per PropQueries thesis. 🤣🤣.
On a serious note your talking about 2.8k of houses more than likely on farm land where the last thing you would want are outsiders coming to live and spoiling the existing balance of the local community. The land is way more important than any old house and you never know the people that left may come home to live in the future and live on the family land again.
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Thanks both. I take the point that everybody wants a house, that not enough houses exist for these people, that people are unconvinced that prices will fall, and that these parameters are an indication of sentiment and of a direction of travel for prices.
However this to me conflates "want" with economic demand. If houses are not affordable then demand will necessarily decrease no matter how much people "want" a house.
The assumption I see in these conversations is that if prices decrease, those that who are currently priced out will then be able to afford them, which will sustain the market. But this doesn't account for the negative externalities created by the reduction in demand, and, I think it is generally viewed as irrational to buy into such a market. Yes everybody needs somewhere to live, but nobody wants to be in negative equity either. And I presume borrowing would be more difficult in such conditions.
I know I'm very glad I bought when I did a few years ago, rather than listen to the "prices
have
to fall at some stage" opinions here.I'm definitely not advocating to hold off. If something's affordable then it makes sense to buy. I just can't reconcile that it, e.g., takes two high earners to buy a small, modest ex-council house (per the house in Cabra earlier in the thread), and, that people think this state of affairs must continue indefinitely just because people want houses.
Individual sectors aren't going to impact the housing market overall.
Don't agree with this, see 2007
In addition to that the housing market is not a free market, the state will provide a very large floor.
Yes I agree with this
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since 2007 population has grown by circa 15% while house stock has only increased by 7%.
Regardless of economic conditions people will still need to live somewhere so the demand is not going away unless mass immigration out of Ireland. What would change is people’s ability to buy so you would see more demand in rental sector whether private or paid for by government. But the demand that supports the current prices remains. And in this country you’re more likely to see tax increases to pay for this rather than have the optics of government makes people homeless.
That is if there is a recession which at the moment it looks unlikely especially when there is room to cut rates.0 -
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That doesn't make any logical sense whatsoever. The lock in effect occurs when homeowners can't change properties because interest rates have risen since they got their mortgage, so its now in their best interests to stick with their lower interest mortgage rather than getting a new, higher interest mortgage on a new property.
If you're not familiar with how tracker mortgages work, I am not sure how much I can help here, but I will give it one more try.
From 2011 to about 2022 tracker mortgages were worth their weight in gold as they tracked ECB rates downwards. Many people held tracker rates of ECB +0.75 and it was as close as free money as you'd ever get.
For almost ten years they were paying about 1% interest. And even if interest rates rose, the tracker deal was always going to be better than fixed and variable. Variable rates were obviously based off ECB rates but they never got close to within 0.75.
The banks were keen to get people off trackers, so if you moved house and remortgaged you had to give up your tracker and move to a higher variable or fixed rate.
Unsurprisingly many people chose not to move and keep paying off the mortgage at such low rates.
Or to put it another way, it was "in their best interests to stick with their lower interest mortgage rather than getting a new, higher interest mortgage on a new property". A classic case of lock in effect, in your own words.
? People trying to find housing in Leitrim will tell you there literally is a huge deficit of housing stock in Leitrim. Leitrim has a population of 35,000 and has 8 properties to rent - how can you
not
call that a huge shortage of existing stock?Again I think you're missing the point here. A shortage of property available on the market is not necessarily evidence of a shortage of total housing stock.
Yes Leitrim has 35,000 people, but it also has a housing stock of 18,500.
Apply the very low assumed household size of 2.5 and 5% spare capacity which shows a deficit nationally to Leitrim:
AHS 2.5 = 35,000/2.375 = 14,736
Even with house hold size of 2.5 with ample spare capacity to allow for a health supply for sale and rent, Leitrim has a significant surplus of stock.
This is the core of where your figures are just completely wrong. Per the CSO we only had 1,836,728 occupied dwellings recorded in Census 2022. So the "spare capacity" figure is significantly higher than 5%, its closer to 15%. And its not "spare capacity", unless you plan on CPOing all of those homes to force them into the market.
This was for a population of 5,149,139 in 2022, which even at 2.7 household size would give a deficit of almost 100,000 household units.
With the greatest of respect, I think you're misunderstanding these figures too.
In short we had 2,112,121 units, but because only 1,836,728 of them were occupied you're interpreting that as evidence that we had a deficit of almost 100,000 units?!
IMO that's just madness, and there's no point in me explaining why.
There is no doubt one of us is completely wrong, but we are so far apart in our understanding of the data, I think it's best we agree to disagree.
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I used 5% because that's what the household commission used to calculate of a deficit 250k.
I have no problem with the CSO AHS - I do think removing the additional adults living at home to reduce it from 2.74 to 2.7 makes sense, but apart from that I think it seems perfectly in line with what we know about current demographics and household formation.
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so you think that all the single people in house shares wouldn’t prefer to have their own apartments if they were available?
And there should be no holiday homes in Ireland and as soon as someone moves into a nursing home the house should be sold or rented out.
Or if someone goes travelling for a year or two they must rent out there house
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Sure, an awful lot of them would in an ideal world.
But here's the thing - back in 2010 when rents were cheap and supply was ample, a lot of single people lived in house shares because it costs less. And there were also some who enjoy living with other people. There always have been single people in house shares for economic and lifestyle reasons, and always will be.
Now, I am sure there are more people today than 2011 living in house shares who would be be prepared to pay more in order to live on their own if such a property was more readily available.
But enough to move the household size so significantly that it gets down low enough to show a deficit?
I think that's highly unlikely given the demographics of our household formations:
So, if the average number of adults per household is just under 2, and the most common household is couples with children, do you really think the number of single people currently not living alone who would do so if the property was available is going move the AHS from 2.7 to below 2.5?
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Nail meet hammer; spot on.
Government is propping up the housing market with its deep pockets. This money comes from a precarious source (corporation tax) and from income tax (high salaries related to corporate tax boom). The corporate tax success is largely based on the performance of America, Inc. which seems to also be running out of road with its own economic success. Post-US election will probably reveal some of the economic tricks that have been played on the US people and the insane bubbles which represent the success of America, Inc (eg stock market and passive investing/ETFs ponzi scheme; private markets and valuation fraud). America, Inc declines and Ireland catches some of this blowback, which in turn reduces what the government can spend including on housing. The economic data turns sour and sentiment starts to turn, then the herd moves and look to capitalise on the massive gains in paper value on their houses the last 10 or so years. All of a sudden there are a lot more sellers than buyers. I know a lot of people looking to sell but holding fire due to fear of missing out on a higher price for their house and also due to a lack of supply of something else they can trade up to; I can see them with itchy trigger fingers waiting to pull the button and would probably do so if their own house price started to decline.
Obviously just speculation but for a timeline we mean Q4 2024 onwards for a “cooling” in the housing market aligned with broader economic decline.2 -
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Yes it would move significantly if “affordable” housing was easily available and you know this so now’s your intro to house size….
P.s. Can this be the last time you go through it here as it’s getting quite boring and at this stage I just want to fast track this so you make your point and we can then move on and hopefully not have to repeat next week or week after.
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Well the ESRI disagree with you as they have tested the theory:
We find that Ireland has a high average household size on a cross-country basis. However, this appears to be strongly influenced by demographics, with high fertility rate, younger population and thus high share of households with children important factors in explaining the cross country trends. Indeed, a majority of the differences between Ireland and other countries disappear in a regression setting when socio-demographic and basic economic factors are controlled for.
If you're interested you could read it, and let us know what it is that you disagree with? That might be an interesting discussion.
Or give us some data that shows how all these single people are going to shift the AHS? That could also be worthy of discussion.
Or if you're not interested in discussing any of it, stop quoting my posts asking questions, just put me on ignore and stop wasting your time with the back seat modding?
https://www.esri.ie/publications/household-size-in-ireland-stylised-facts-and-cross-country-trends
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Your initial claim wasn't about tracker mortgages - it was all mortgages - thats a very deliberate moving of the goalposts.
That aside, there are less than 180,000 tracker mortgages in Ireland. Even if a tenth of people holding tracker mortgages were looking to move this year but were 'locked in', it would be less than 20,000 housing units. That doesn't account for the massive shortage of housing units in Ireland.
"Again I think you're missing the point here. A shortage of property available on the market is not necessarily evidence of a shortage of total housing stock."
How on earth can you think 8 housing units being available for rent for a population of 35,000 people is not evidence of a housing shortgage? Thats an almost impressive level of logical incoherence.
"In short we had 2,112,121 units, but because only 1,836,728 of them were occupied you're interpreting that as evidence that we had a deficit of almost 100,000 units?!
IMO that's just madness, and there's no point in me explaining why."
No. The figures are very simple. In 2022 we had 1,836,728 occupied housing units in this country. We had a population of 5,149,139. Our household size is 2.74
5,149,139 / 2.74 = 1,879,247 housing units required to maintain that. Thats a deficit of 43,500 units, at a very base minimum, in 2022.
Ireland's population has grown by approximately 200,000 people since early-2022, while we've built approx 45,000 housing units, when we would have needed at least 73,000 units to house them. Thats a housing unit deficit increase of 28,000 minimum (but likely far higher in reality given the decreasing Irish household size, and the demographic nature of our immigants).
That raises the housing unit deficit to, at a very minimum, of almost 100,000 units. Using your own lowest-possible data.
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Your initial claim wasn't about tracker mortgages - it was all mortgages - thats a very deliberate moving of the goalposts.
Erm, no, it was specifically about tracker mortgages. Second post on this page which you quoted. To remind you:
It started in Ireland as a hangover due to a perfect storm from the cumulative effect of low rate trackers, negative equity, mortgage arrears, lack of repos etc.
So now I've no idea whether you're arguing these points in bad faith, or are just blinkered for whatever reason. The rest of your post is similiarly questionable.
Either way, it doesn't really matter, so for the third time, I don't see us getting anywhere with this, let's just agree to disagree?
Post edited by hometruths on0 -
What was the gap between a tracker mortgage and the fixes on offer during negative ECB rates? Not overly convinced people are putting off moving house over a 1% rate difference tbh
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I think that the point is that in just the same way that Leitrim isn't a real place, that the housing deficit isn't real either.
I do be fed up tripping across vacant and unused houses left randomly all over the place around here.
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he also ignores the real vacancy rate, as calculated by the CSO using leccy meter data due to the census not being that reliable a method of getting vacancy rates
And as it doesn't suit his narrative, he tries to ignore it
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Your defensive quote even says it - "cumulative effect" - while naming various other scenarios which very much are not tracker mortgages.
And again, the number of tracker mortgages in Ireland is a tiny fraction of household units as I posted. And an even tinier fraction would actually be in a position to move year-to-year. And even tinier again would have been put off moving by interest rates. Nowhere near enough to be the cause of the missing tens of thousands of housing units a year from the housing market.
I note you've ignored the real life CSO data when it completely disproves your "there is no deficit of housing units" point though, as you've done before repeatedly in this thread. It would suggest one poster is certainly blinkered alright.
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Your defensive quote even says it - "cumulative effect" - while naming various other scenarios which very much are not tracker mortgages.
Yes, four different factors which all had an impact. I don't think you understand what "cumulative effect" means.
The more you carry on with this, the more you prove the point I was initially making.
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he just ignores it when you point out his mistakes, or doesn't understand it
hard to know at this point
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