"Scarcity drives year-on-year rents up for the first time since 2007"

Snakeblood

Zamboni wrote: »

Could anyone help me out and list the artificial variables that are preventing the property market (sales and rental) operating freely?
So far I have minimum mortgages of 150k, rent allowance, ghost estates in Nama, new FTB stamp duty. i.e. Witholding supply, reducing demand, artifical bottoms etc
Are there other obvious intereferences I am leaving out?
Thanks

Affordable housing. Soclal housing.

Mr. Loverman

ronanlyons wrote: »

I would caution against believing house prices can go down for ever.

Straw man alert... I don't think anyone has said they believe house prices will go down forever...

In fairness to you though you have consistently been one of the more "honest" economists who work for a property related company.

man.about.town

mathie wrote: »

An in-depth analysis of the Daft Report by an economist vs observations by a casual punter taking a stroll around a few streets?

+1

Victor

Folks, a bit of civility please.

hinault wrote: »

You're becoming a tad fcuking tedious, mate.

Language, Timothy!

ronanlyons wrote: »

Clearly, you have your mind made up about what Daft is and does. Careful, they own boards.ie so if you're the conspiratorial sort, you might want to worry about hired goons knocking on your door late at night!

Ronan, I was going to comment on you intellectually beating people up, but literally beating them up isn't good either.

---

Someone commented than Ronan was shilling daft. I'm not sure if that is possible.

While I am willing to hear voices, I think its a good thing for Ronan to take part in this conversation and therefore he is welcome.

johnnyskeleton

mathie wrote: »

http://www.ronanlyons.com/2011/02/08/scarcity-drives-year-on-year-rents-up-for-the-first-time-since-2007/

Does this make any sense?

Hasn't he peddled that line before? It's almost a yearly bit of spoof at this stage:

http://www.ronanlyons.com/2010/02/16/stop-the-press-rents-go-up-in-january/

Yawn!

Supercell

I think the most important question is why the "churn" has doubled and if this is leading us into a tautology of thinking. Churn has doubled therefore its reasonable to assume that rents are rising -> yields are improving -> bottom of the market etc

However one could also argue that the churn has simply increased because people are choosing to rent rather than buy now for several years whereas many would have by now taken the plunge and bought leading to lessened demand.

I guess only the PRTB could answer the all important question here - Is the total rental stock falling , rising or stable right now?, without that figure then false conclusions or self fulfilling spurious tautologies likely result.

Personally, I thin,k yes rentals are likely to rise in the near future but with increased taxes, huge unemployment, market fear and bust banks it's far to early to call a halt to the bust as early as end 2011 or 2012 (maybe Q4 - finger in the air guess).

pennypocket

Ronan, is this market stabilisation a temporary or long-term phenomenon in your estimation? It just seems reasonable to suggest that if you included the 'long-term factors' that you say you didn't deal with in your analysis the picture could be somewhat different.

Zamboni

Is it possible we are just coming to the artifical floor created by social housing and rent allowance?
Or would that be signalled by an increase in landlords accepting RA tenants?

The maximum RA in my area is around €1100 funded by you and me.
That is more than a lot of actual taxpayers/renters can afford to pay.
Absolute madness.

mathie

johnnyskeleton wrote: »

Hasn't he peddled that line before? It's almost a yearly bit of spoof at this stage:

http://www.ronanlyons.com/2010/02/16/stop-the-press-rents-go-up-in-january/

Yawn!

Well spotted.
Maybe its an annual phenomenon due to Christmas or something?

If in doubt blame the Catholics

ronanlyons

johnnyskeleton wrote: »

Hasn't he peddled that line before? It's almost a yearly bit of spoof at this stage:

http://www.ronanlyons.com/2010/02/16/stop-the-press-rents-go-up-in-january/

Yawn!

Hi johnnyskeleton, did you read both posts? I'm going to claim that I don't often toot my own trumpet but it's clear from what's happened that I was right a year ago! Read that Feb 2010 post and read the one from this week: one made a prediction, the other confirmed that it happened. So while many doubted it at the time, rents did stabilise following that strong January showing.

@Zamboni
Your question is about prices rather than quantities. You could very well be right, particularly for the 1-2 bed segment. The equilibrium rent could be maintained artificially high by RA. I guess the point I was trying to make here is that even if the price is off, there looks to be a balance on the quantity side of the market. It's about balance between the number of people and the number of properties, not necessarily the price they trade at.

@pennypocket
Good question. Essentially it comes down to this: if you think there is some shock to the system coming down the line, e.g. NAMA is holding up not just some but a significant number of properties (relative to the overall market) which will come on to the market faster than demand, then that will push down rentals. Shock means here something that's not already factored in - so if people are factoring in three more tough years already, that might not have a big impact on rents.
The point of the blog post was in the absence of any such shocks, Dublin (and the other cities) are not as awash with rental properties as some might have you think. The long list of factors someone posted earlier are reasons why house prices might fall - most of them (the obvious exception being emigration) do not affect the underlying need for accommodation and thus some of those factors may even - at least temporarily if people opt to rent not buy - increase demand for renting.

Kosseegan

ronanlyons wrote: »

Ask your parents or someone who had a mortgage in the 1980s: houses are never cheap, relative to your income, so don't wait around expecting them to be so.

Houses were cheap in the 80's. A friend of mine had a 3 bed house in a private estate in Lucan bought in 1985. After tax relief the mortgage cost about £32 (40 euro) a week. That was the price of a bedsitter in Rathmines at the time. The big difficulty was accumulating a deposit and money for cost of purchase. Banks lent hardly at all for private houses. Building Societies were very conservative. Most demanded 20% on deposit for a lengthy period before considering an application at all. Two solicitors had to get 1% each for the conveyance. There was stamp duty of 4% to be paid on the house price as well as stamp duty on the mortgage.
The result was house prices were low and very affordable when a deposit was built up. Couples that time spent years saving and living very frugally before buying.

mathie

Kosseegan wrote: »

Houses were cheap in the 80's. A friend of mine had a 3 bed house in a private estate in Lucan bought in 1985. After tax relief the mortgage cost about £32 (40 euro) a week. That was the price of a bedsitter in Rathmines at the time.

Do you know what percentage of salary was the mortage?

How would the price of a 3-bed in Lucan compare to a bedsit in Rathmines now?

Cheers

ronanlyons

mathie wrote: »

Do you know what percentage of salary was the mortage?

How would the price of a 3-bed in Lucan compare to a bedsit in Rathmines now?

Cheers

Table 1 and Figure 4 of this paper might help:
http://www.esri.ie/pdf/QECSA0604_Duffy.pdf
As a general rule, the typical mortgage costs 25% of disposable income and while it fluctuated, the figure in 2004 was not wildly different from the figure in the 1980s.

MuffinsDa

ronanlyons wrote: »

Table 1 and Figure 4 of this paper might help:
http://www.esri.ie/pdf/QECSA0604_Duffy.pdf
As a general rule, the typical mortgage costs 25% of disposable income and while it fluctuated, the figure in 2004 was not wildly different from the figure in the 1980s.

Away with that fancy academic talk. My short walk in Ballyfermot proves that you are totally wrong, haven't you seen them "signs"?!

fred252

Ronan,

Off topic a bit: my parents were trying to sell their house at the height of the bubble. months later they asked the estate agent to remove the ad as they had decided to wait until the market recovers (they don't really need to sell). recently i noticed the house was advertised on myhome at the original asking price (about twice what its worth now). i told my parents they should have it removed as it would be skewing statistics. (among other reasons)

Is there any reason why an estate agent would want to advertise a house at an inflated price that would never sell?

Zamboni

fred252 wrote: »

Is there any reason why an estate agent would want to advertise a house at an inflated price that would never sell?

Just my 2 cents

EA's are ultimately the main data inputters on daft/myhome websites.
Daft/Myhome get economists to do reports on that information.
Those reports generate media coverage.
That media coverage can influence people perception of the market.

Ergo, EA's may place/duplicate/inaccurate adverts to ultimately present an untrue picture to the public.
Websites don't care as they generate advertising income and are profit driven business.
Economists get paid to do a report based on information given (regardless of the quality of the input from EA's)

Kosseegan

mathie wrote: »

Do you know what percentage of salary was the mortage?

How would the price of a 3-bed in Lucan compare to a bedsit in Rathmines now?

Cheers

A bedsit in Rathmaines now costs €450 a month. Repayments on €250k about €1K per month.

Repayments out of net takehome in the 1980s about 25%.

ZYX

Kosseegan wrote: »

A bedsit in Rathmaines now costs €450 a month. Repayments on €250k about €1K per month.

Repayments out of net takehome in the 1980s about 25%.

Can you still get bedsits?

Comparing areas of Dublin 30 years ago to now is pointless. The city has changed massively. Its population has increased by about 33%. 30 years ago Lucan was firmly out in the country. Cows grazed in the fields of Lucan. Not many cows grazed in Rathmines.

ronanlyons

Zamboni wrote: »

Just my 2 cents

EA's are ultimately the main data inputters on daft/myhome websites.
Daft/Myhome get economists to do reports on that information.
Those reports generate media coverage.
That media coverage can influence people perception of the market.

Ergo, EA's may place/duplicate/inaccurate adverts to ultimately present an untrue picture to the public.
Websites don't care as they generate advertising income and are profit driven business.
Economists get paid to do a report based on information given (regardless of the quality of the input from EA's)

@fred252
If your parents don't want to sell their house, the ad should not be up there. End of. They should have strong words with their EA about that. As to why the EA did it (beyond laziness or forgetfulness), clearly zamboni hasn't talked to an EA for a long long time! Their goal now is the sale, not the price, so the EA would be hindering the chances of a sale with this tactic. More likely is the belief on the part of the EA that your parents would change their mind and thus they kept the ad up on myhome rather than take it down and have to pay for a new one (myhome charges on a per ad basis, daft incidentally doesn't).

@zamboni
It's worth digesting the point above: i.e. often the battle now is EAs trying to convince sellers that their home is "only" worth €250k and not the €500k that so-and-so got four years ago. Your way of thinking about the typical EA was probably spot on in 2007, but this is 2011.
Also, on a more technical note, leaving an ad up would not skew the statistics. Asking price indices are based on the ads posted in particular month, not all ads up in that month, so there's no chance at all your conjecture is right.

Zamboni

ronanlyons wrote: »

Also, on a more technical note, leaving an ad up would not skew the statistics. Asking price indices are based on the ads posted in particular month, not all ads up in that month, so there's no chance at all your conjecture is right.

It was my inner Jim Corr talking.

Kosseegan

ZYX wrote: »

Can you still get bedsits?

Comparing areas of Dublin 30 years ago to now is pointless. The city has changed massively. Its population has increased by about 33%. 30 years ago Lucan was firmly out in the country. Cows grazed in the fields of Lucan. Not many cows grazed in Rathmines.

Bedsits are still available and in fact easier to get than years ago when there were queues for them. I am talking about affordability and putting the amounts paid into the context of the time. Lucan had many housing estates years ago. Newer areas have been built since. Celbridge was being built at the time as was a lot of Leixlip. It was not a remote country area like Stepaside was.
The point is that because of conservative lending policies houses were affordable. Repossessions were very rare. Houses could be bought at 4.5 times annual rent. It was not unusual for a creative refurbisher to get a 30% yield out of a pre '63. The people in the worst position at that time were tenants. They were paying very high rents for their accomodation and often couldn't save a deposit in consequence.

BofaDeezNuhtz

ronanlyons wrote: »

Wow, hang on a sec there. Who brought up my personal brand? You did. You have plenty of strong opinions about it - it's presumably only fair that I do too. I am an academic economist, hired to compile the most accurate report I can for daft, who want to be accurate with their reports because that's what they believe will reward them in the long-term. Market-denying is just not an option, because people will see through it.

I'm not sure what your blind spot is with market churn. I'm not doctoring figures, I'm making sure we're comparing like with like. Do you honestly believe that a stock of 15,000 properties on the market in the UK is the same as in Ireland? Because that's the logical implication of your line of reasoning: churn doesn't matter. That's simply not true. How 15,000 properties sitting on the rental market is interpreted will be completely different in a market that churns 100,000 a month than in a market that churns just 1,000. Ireland's rental market has moved from one that churns 7,000 to one that churns 15,000. That matters.

You mention some downside risks as if I haven't thought about those. Clearly, they matter - as do the factors I mentioned at the end of the blog post in question. Generally, though, I don't do predictions, certainly not in any sort of official capacity for Daft, as the report is about what happened, not what's about to happen.

For those who are interested in what I actually think will happen, here's a quick overview:

• Rents in the cities to largely stabilise, with perhaps some further fall off in the 1-2 bed segment, when NAMA/ghost estate oversupply comes on to the market, coupled with weak demand from mid-20-somethings
• Rents outside the main cities to fall another 5% or so throughout 2011, and possibly into 2012 if active oversupply persists
• Yields on residential property (that's the rent-house price ratio) to slowly correct back up towards the 6% mark... this means house prices falling 55%-60% from the peak.
• Dublin prices are already about 50% off the peak, so house prices in the capital might level off as early as second half of 2011 or else in 2012
• House prices outside the main cities are down only perhaps 35% from the peak. That, plus significant oversupply generally in the non-city markets - coupled with weak demand due to weak jobs growth - to mean a more prolonged adjustment (perhaps as long as another seven years in some counties) but probably ultimately of the same scale, i.e. down 55-60% from the peak.
• (Other cities to be somewhere between Dublin and the non-city parts, probably closer to the Dublin scenario.)

Theboinkmaster wrote: »

Ronan

Unfortunately I find your posts full of nonsense. You work for DAFT therefore you are not impartial and are a vested interest. You want activity to return to the market so please stop pretending otherwise.

You keep talking about peak prices - this is completely irrelevant. House prices to level off in Dublin in 2011 and 2012?!?! You're actually having a laugh mate. Please explain why you think house prices in this country will not continue to plummet when:

A) Income taxes will rise substantially for everybody
Significant Property taxes will be introduced for owners
C) Significant Indirect tax increases- VAT/Excise
D) Interest relief for investors will be further reduced from current 75%
E) Rent Allowance will be decreased by some material percentage
F) Personal Insolvencies will increase when the law is changed in their favour
G) Continued downward wage pressures-or no pay increases at least till 2013
H) As competition in Banking is reduced then mortgage margins will rise
I) Emigration will continue by current and future potential homeowners
J) NAMA releasing finished properties onto the market mopping up demand
K) ECB raising interest rates to normal levels, ie by 1.5%-2.5%
L) Property owners/investors in tight financial straits will be forced to sell
M) People realise that property in Ireland is still expensive vs other countries
N) More builders are put into receivership and properties are sold at large discounts
O) Rising fuel prices decrease disposable income and discourage commuting
P) The Croke Park aggreement falls apart and public sector pay falls
Q) Unemployment rises and
R) Deflation or very low inflation causes debt to have to be repaid in full rather than inflated away at lenders expense.
S) Stiffer regulation forces banks to provide mortgages with more caution
T) Interbank lending to Irish Banks does not return to precrisis levels and the Banks have to price margins very conservatively-A given
U) Building costs decline further as NERA is disbanded and new build houses can be profitably sold for less.
V) Development land has plummeted so land costs can lead to further downward pressure on prices of future developments.
W) Commercial rents continue to decline and contagion negative pressures apply to residential rents leading to lower property asking prices
X) Contrarily the current booming birth rate will provide demand in 25 years time-for subsidised housing at the least

Sooooooooooooo...

Who was right

fash

Suzuki_TL1000R wrote: »

Sooooooooooooo...

Who was right

Now now- this is precisely why Google lost a "right to forget" case ;b

Barely There

ronanlyons wrote: »

Generally, though, I don't do predictions.)
[/LIST]

That would be a wise course to follow in the future.

johnnyskeleton

Suzuki_TL1000R wrote: »

Sooooooooooooo...

Who was right

Well, if the issue in this three year old thread was whether ronan lyons was correct to say that rents were on a steady rise for 2011 he was wrong, as they dipped back down towards the end of the ear. If he was predicting that we had reached a period of rent increases from then on he was a little early, as this only really started to hallen in 2013. As to his reasoning, he had some of it right (in my view), but low interest rates, ecb bond buying and a government led plan to restrict supply to the market by not repossessing and letting nama sit on rental property are (again in my view) the most significant factors

gaius c

Suzuki_TL1000R wrote: »

Sooooooooooooo...

Who was right

Poor form really. Ronan is happy to put his name to his commentary unlike us anons and rather unusually, he's prepared to engage with critique of his work online. For this alone, I think he deserves a certain amount of respect for that.

He was wrong. Boo hoo. Lots of the people who got the bubble completely wrong are still pontificating away on matters economic, etc and will continue to do so from the safety of their ivory towers.

omahaid

I see nothing wrong with looking at old predictions to see who is talking through their rear end and who actually knows what they're talking about.

GavMan

gaius c wrote: »

Poor form really. Ronan is happy to put his name to his commentary unlike us anons and rather unusually, he's prepared to engage with critique of his work online. For this alone, I think he deserves a certain amount of respect for that.

He was wrong. Boo hoo. Lots of the people who got the bubble completely wrong are still pontificating away on matters economic, etc and will continue to do so from the safety of their ivory towers.

A lot of his prediction was based on the assumption that Supply would improve (via NAMA).

That hasn't really happened to a large extent.

markpb

omahaid wrote: »

I see nothing wrong with looking at old predictions to see who is talking through their rear end and who actually knows what they're talking about.

An inability to predict the future doesn't mean that someone is talking through their rear end. Can you confidently say that you are always right when predicting the future? Because if you do, there are several south american tribes that are looking for a new deity to worship.

omahaid

I'm not paid to predict the future, am I? Some people have better insight than others, some people here confidently state such and such will definitely happen and it turns out to be BS. Nothing wrong in my opinion in being able to tell the bluffers from the bright people.