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

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.

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?

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

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.

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

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?