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

https://www.rte.ie/news/business/2024/0827/1466914-cso-earnings-and-labour-costs/#:~:text=Preliminary%20figures%20from%20the%20Central,the%20same%20time%20last%20year.

With all the concerning news of late on both rent and house price increases it’s at least some consolation that wages are powering upward also. CSO published today

Just had a look there and in the last 6 years (since 2018):

Average wage increase: 30%
Average house price increase: 37%
Average rent increase (new tenancy only): 43%

Can’t help but feel a lot of the dramatisation of things could be cooled if media presented things as:

Real house prices have increased at an average rate of 1.1% annually since 2018 and average rents have increased at 2.1%.

Instead we get upward red arrows and ‘PRICES EXCEED CELTIC TIGER PEAK. UP 8% this quarter’ from Irish Times. Trying to create a sense of panic it feels like.

I think the strike action is confined to commercial sites, residential is unaffected for now

you do realise that banking is only a subset of the finance industry. And funds another subset of the finance industry are providing finance for housing developments….so don’t know why you are saying finance aren’t allowed do their job.

Finance are not allowed to do their job? sorry what now?

PAYE, PRSI and USC tax take going through the roof too as people move into higher bands.

People aren't taking home 30% more; add in COL increases on top too.

PRSI is a fixed percentage so it doesn’t need to be indexed to keep pace with inflation. If you have a fixed 4% tax rate on all income. A 30% gross pay rise equates to a 30% net pay rise. Thats how the maths works.

Income tax credits will be up c.20% after the next budget and income tax band cut off up c.25% so there has been a slight increase in effective income tax rates but it’s not massive.

USC is slightly more complex. Likely reduced burden for lower income workers due to the rate reductions and indexation. Increased burden slightly for higher income workers due to non indexation of 70k band.

Overall the tax burden on incomes has gone up slightly but not much, so net incomes will have also risen by pretty close to 30%.

‘Cost of living’ has gone up 21% since June 2018 - net wages have definitely substantially outpaced this.

i.e. people on average have experienced a significant improvement in their net income relative to living costs and therefore have more disposable income (in real terms, so this increase is over and above the 30% increase in nominal terms they’d have experienced if col had been equal to wage inflation).

It’s another example of how hyperbolic media reporting playing into the negative Irish psyche means people have no perception of economic reality.

It’s a fair point on the FHS. I’m on the fence about whether it’s good or bad, I can see both arguments. As a scheme however, I think it’s primary purpose is pretty clear - given Ireland has some of the highest rental yields in the world and some of the more restrictive lending limits from banks, we are extremely susceptible to the pitfall of

‘Sorry FTBer, I’m not letting you buy this place because you can’t afford the €1,700 mortgage (fixed rate), so instead this 70 year old person is going to buy it cash and rent it to you for €2,500 and increase it by 2% a year for the rest of your life’

FHS primary goal is getting people out of a rent trap and into home ownership (at whatever cost)…because politically, once people own a home. They’re more likely to vote FF/FG - irrespective of how much debt they’re in (actually probably more likely the bigger the debt as they need to protect the economy at all costs then!).

Agreed, but it’s par for the course with any lobby group. Law society, insurance Ireland, vintners association, farmers association…there may at times be small hints of truth buried in the spiel of nonsense…up to public (and politicians) to challenge sensibly.

I think you are ill informed if you decide that only political decisions influence something like the house building sector, which has so many moving parts, and which can be influenced by so many factors. To think that way, would indicate that you think political will alone can solve the problem, without economic or societal influence.

Maybe you have some idea of how political will alone is the answer, how do you think politicians could build 100k houses?

Genuine, workable, creates a 2nd tier more affordable buying option. Affordability is retained in the home rather than recycled and lost in the private market

Bit of a cave in by SF under pressure from FFG party of home ownersship narrative populism and magic money tree economics.

We need to focus on affordable but profitable rentals as our young people are finding it impossible to start life here and are leaving hence the doubling to over 10,000 that have left for Australia in the last 12 months

Its difficult and costly replacing 10k well educated with 30k whom may not speak our language

https://bpfi.ie/publications/bpfi-mortgage-approvals-july-2024/

More positive, albeit somewhat confusing news. July sets the new record for FTB mortgage approvals* since 2011 (by a large distance too) and SSB at all time highs also. 3.3k FTBs vs previous high of 3k. Difficult to objectively argue that the trajectory here is anything but extremely positive.

The average approval value also set another new record. Total value of FTBs mortgage approval was €1.01bn in the month. Previous all time high was €926m, and had never been above €870m other than that.

Given the incredibly low levels of stock for sale, you’d wonder what they’re all finding to buy.

*A mortgage approval is defined as a “firm offer” to a customer of a credit facility secured on a specific residential property. A mortgage approval arises when the lender issues a formal offer of mortgage finance to the customer (whether it be in print or some other durable form) for a specific residential property

This is precisely it, and it's the root of the problem. Building on the level required to house that many people is probably not even possible, and even if it were, why would we want to do that? The situation in the UK is getting to the point there the Green Belt around London is to be used for housing, and this comes from a government that claims to be concerned about the environment.

If I may be indulged in some philosophical language, I will say that this globalist pipedream of infinite growth is going to destroy Europe. Ireland is not the property of people who are currently here. Rather, it is our responsibility to maintain this land for the future. What is happening here is that the country is being turned into a globalist economic hub that has as much identity as a Starbucks outlet.

As far as I can see the only drawback from a buyers point of view is it limits your potential for enjoying the upside on capital gains on your property

 The owner never truly owns their home, the don’t own the land, they aren’t free to sell at market price

This is the whole point of having a 2nd tier market.

There's not much point in the state subsidising affordable housing, if it can be sold at market price and end up on Airbnb a few years later.

Reduces the risk of boom bust housing policies. Look at @DataDude figures posted this morning. Mortgage approvals up 20% by value (if I'm reading it correctly). Would buyers take on this level of risk if there was an alternative less risky product. The scheme is a more prudent approach and in doing so, makes the private market less risky by pulling away demand

The property appreciates at the level of wage inflation. This provides scope for an inflation linked investment product much sought after by pensions. This allows the market to open up to prudent investors rather than speculators that drive boom bust cycles