Property Market 2016

The_Conductor

It was explained to the meeting with the Construction Industry Federation- that this is a short term mechanism to unblock supply side issues- and *not* an invitation to construct to a newer higher ceiling price.........

Supplyside issues are what the Minister is trying to address- its not that he is trying to sop a lumpsum at First Time Buyers which will promptly be eaten up as they compete against one another for limited supply...........

We need more supply- at reasonable price points- what is key here- is how the scheme is structured- so it brings property onto the market- without inflating the price of it.

Its also said to be set at 5% of a purchase price- to a maximum of 20k- and it applies to properties up to 600k in 2 of the Dublin LA areas.

The devil is going to be in the detail- and we're not going to see that until at least budget day............

Villa05

The_Conductor wrote:

It was explained to the meeting with the Construction Industry Federation- that this is a short term mechanism to unblock supply side issues- and *not* an invitation to construct to a newer higher ceiling price.........

Is there any indication that this will be focused on areas where there is a shortage of supply.

If it is not I suspect it will only result in building on commuter belts well outside demand areas which is not what we want

The_Conductor

Villa05 wrote: »

Is there any indication that this will be focused on areas where there is a shortage of supply.

If it is not I suspect it will only result in building on commuter belts well outside demand areas which is not what we want

It will definitely result in further development in areas like North Kildare/West Dublin- but short of tearing up the rule book on building heights, densities etc etc- you're not going to get meaningful levels of development in areas convenient to Dublin/Cork/Galway City Centres.

Its thought that the new Docklands scheme in Dublin- in conjunction with what looks increasingly likely to be a hard Brexit- may be the impetus needed to get high spec units in Dublin City Centre going (it even looks like Galway may get Financial jobs out of the mess).

You and I know where you or I would like to live- this scheme is not going to result in targetted development- it'll be a scatter gun approach- and even then, market forces will dictate prices for high demand areas (hence the 600k ceiling for Dublin properties- falling as low as 200k elsewhere).

The Minister is already trying to control stupidity such as the Sallins project- and has shown he is happy to over-rule ridiculous rezonings etc by councils. Perhaps his new found enthusiasm for sanity- may be sufficient to make developers think twice before they invest time and money in projects that are never going to get off the ground?

air

This grant is sheer laziness by the government once again, throwing taxpayers money at the problem instead of making proper long lasting changes such as a site value and / or vacant property tax. Will we ever learn?

riclad

The government could help first time buyers by raising the density and the maximum height for apartment buildings in citys and certain urban areas.
And by maybe giving grants or tax credits to self build co ops .
This would require maybe some changes to current regulations or making it easy for councils to give empty sites to housing charitys,
so it probably won,t happen.
A small grant to first time buyers won,t make much difference in a place like dublin.
Theres a problem with many local authority house,s being empty for months,
just waiting for basic repairs .

Hollister11

One of the my mates bought an apartment in town for 200K in 2011, he sold it for 500k and few months back, and just spent 1m on a house in howth. Lucky fecker

EmmaMurray2016

Hollister11 wrote: »

One of the my mates bought an apartment in town for 200K in 2011, he sold it for 500k and few months back, and just spent 1m on a house in howth. Lucky fecker

Wow good for him. Lucky fecker is right

handlemaster

where are dublin prices going over the next few years? On Daft asking prices look flat

asteroids over berlin

handlemaster wrote: »

where are dublin prices going over the next few years? On Daft asking prices look flat

Flat? Please explain.

They will be going up and up and up!

The_Conductor

asteroids over berlin wrote: »

Flat? Please explain.

They will be going up and up and up!

Dublin price rises have moderated far more quickly than the rest of the country- they are however still rising (current 12 month total is between 5 and 6% for the greater Dublin area). Price rises nationally- are vastly outstripping those in Dublin.

Trends- are difficult to call- particularly given our dysfunctional market- and more than anything else- the remarkably thin volumes on the market. If/once new builds get up and running again- and volumes begin to approach 'normal' levels (typically 6-8% of the housing stock being on the market per annum)- then perhaps it'll be easier to call whats going to happen.........

The joker in the pack- continues to be the abnormally high percentage of cash sales that continue to be a defining feature- alongside the low levels of first time buyers.

Supply- once it gets up and running- will determine the market.

Johngoose

I admit that the housing/rental market is very strong at the moment.But Brexit will affect things here.Already a mushroom growing plant has closed in Tipperary,as they traded mostly with u.k. The euro is currently trading at 90p sterling.The weak pound will send Dublin shoppers to the North of Ireland for bargains,especially for Christmas.We will get less tourists from the u.k. this year. The motor industry here will be affected by Irish people buying cars from the u.k. I heard of an oil+ gas company in Ireland closing,due to drop in oil prices, so things mightn't be as rosy in the garden as people think.Also it is approaching 9 years since the crash,is it possible another downturn is on the cards? Recessions have come every ten years or so in many countries, the concept of recession is relatively new here.Apparently stress testing of Irish banks was not carried out with Brexit in mind.

Johngoose

The government are crazily fuelling the property market with gimmick after gimmick.They started with the condition that you would pay no capital gains tax on houses bought during a certain time frame. Then they "capped" rents for two years, making every landlord shove up his price.Now they are giving first time buyers this new incentive which will shove up asking prices.The property market is just a crazy train heading for disaster.

Harvey Normal

Bob24 wrote: »

I thought one goal for the scheme was to encourage the construction of affordable housing. Having an upper limit of 600lk seems like an admission that affordable housing for the middle class is not on the table for the Dublin area ...

How can it encourage affordable housing it it pushes up new build prices by 20k?

Harvey Normal

The_Conductor wrote: »

He doesn't want it to be cash-upfront, as he believes that would simply mean asking prices would rise by a commensurate amount. The tax rebate would be drip fed over a 2 year period (according to leaks)- how it would work is being kept under wraps though..........

If so it won't have that much affect. If you bid the extra 20k you will need it on closing day. Some people might be ok with that and getting back the money in tax but you still have to have it.

The_Conductor

Harvey Normal wrote: »

If so it won't have that much affect. If you bid the extra 20k you will need it on closing day. Some people might be ok with that and getting back the money in tax but you still have to have it.

Thats it though- you do not have the extra 20k to bid with- it comes down the road after the fact. If you have the extra 20k to bid with- you simply increase prices by 20k across the board- and no-one (other than developers) are any better off)..........

quadrifoglio verde

The_Conductor wrote: »

Thats it though- you do not have the extra 20k to bid with- it comes down the road after the fact. If you have the extra 20k to bid with- you simply increase prices by 20k across the board- and no-one (other than developers) are any better off)..........

Who would then have a greater incentive to build increasing supply.
I'm really scratching my head as to how this policy is going to increase supply and get developers building at a price they can make money
If they were making money at current levels they'd be rolling out new builds left right and centre but they're not

Bob24

quadrifoglio verde wrote: »

Who would then have a greater incentive to build increasing supply.
I'm really scratching my head as to how this policy is going to increase supply and get developers building at a price they can make money
If they were making money at current levels they'd be rolling out new builds left right and centre but they're not

Correct. Either the policy is as The_Conductor described and it will be a nice sweetener for some FTBs but won't address the supply issue, or the grant / tax credit can be used towards the purchase (or even as a deposit) and in that case the chosen way to address the supply issue is to inflate prices using taxpayer's (and possibly FTBs') money.

Neither sounds like a great way to solve the housing crisis to me ...

OfflerCrocGod

quadrifoglio verde wrote: »

Who would then have a greater incentive to build increasing supply.
I'm really scratching my head as to how this policy is going to increase supply and get developers building at a price they can make money
If they were making money at current levels they'd be rolling out new builds left right and centre but they're not

Builders are making a profit, in Dublin, at current prices. It just takes time to build houses. You don't just decide to build 200 houses and they are up the next month. Supply is ramping up but it will take a few years for the built-up demand to be satisfied.

Q&A

Perhaps i missed something but how will a post-purchase tax rebate (FTB grant) work given the Central bank rules. Surely a FTB still needs to meet the deposit requirements. They still need to stump up the deposit in advance of purchase.

If the mortgage rules still apply surely the only people getting the rebate are the last that needed it (those that can currently transact anyway).

The_Conductor

OfflerCrocGod wrote: »

Builders are making a profit, in Dublin, at current prices. It just takes time to build houses. You don't just decide to build 200 houses and they are up the next month. Supply is ramping up but it will take a few years for the built-up demand to be satisfied.

The hold up in builders ramping up construction- is not whether (or not) they're making a profit- its whether they can finance the construction of developments or not. At present the only finance available to developers is at extortionate rates (of between 15 and 20%)- lending institutions do not want to lend for property construction- come hell or high water.

If the government wanted to ungum the situation- they would come up with a lending scheme for developers- perhaps taking an equity stake in developments which they could release as the principal on the loans was repaid.

The other issue is there is a large cohort of people who all want to live in central urban locations- and a finite amount of development capacity in these locations. Unless there is a root and branch reform of planning regulations and development rules- its not going to work...........

draiochtanois

This post has been deleted.

Zzippy

The_Conductor wrote: »

The hold up in builders ramping up construction- is not whether (or not) they're making a profit- its whether they can finance the construction of developments or not. At present the only finance available to developers is at extortionate rates (of between 15 and 20%)- lending institutions do not want to lend for property construction- come hell or high water.

If the government wanted to ungum the situation- they would come up with a lending scheme for developers- perhaps taking an equity stake in developments which they could release as the principal on the loans was repaid.

Is that accurate? It's incredibly high, higher than overdraft and equivalent to credit card rates!

riclad

One example ,if you drive down the river road ,finglas ,theres, loads of empty land ,sites on both sides of the road.
Theres a few apartment blocks on that route .
But There,s space there for 1000,s of houses to be built ,
and it would be easy to install water and esb connections in that area .or Look at all the empty space between blanchardstown and cabra .People would buy houses there if the price was right .
i.D Agree the problem is a lack of finance eg builders should be able to borrow at 10 per cent .

ThisRegard

Ramming in houses where there's any bit of green space is not the answer either.

Gandalph

Zzippy wrote: »

Is that accurate? It's incredibly high, higher than overdraft and equivalent to credit card rates!

Nah mezz finance would even cost that (none that I've seen anyway, could be some cowboys out there trying to flog those rates though).

Even with financing it's hard to turn a decent profit in this market. Land values combined with the VAT on new builds is a killer. Houses are not exactly flying out the door in the GDA, even new builds. The banks have no problem financing central mid size developments from reputable developers, it's not very expensive either.

The_Conductor

Zzippy wrote: »

Is that accurate? It's incredibly high, higher than overdraft and equivalent to credit card rates!

Its not quite credit card rates- but were you or I to walk into any high street branch of BOI/AIB (or any of the others) and ask for a personal loan for a car- we'd probably be quoted 11-12% (yes- they do actually get away with this high!). A developer on the other hand depending on the project could be 16/17/18/19/20%.........

CIF did a study released about 6-7 months ago- which showed that finance now accounts for up to 40% of the construction cost of a property.

Lack of finance- is gumming up the works- however the government want to deal with it- taking equity stakes in individual properties if they like, or whatever- they need to ungum the bottleneck.

I feel dirty beating a drum fighting developer's corner- this though is the one, unhighlighted, bottleneck- that has the potential, as part of an overall solution, to make a big difference, that no-one seems to be talking about.

I'm actually baffled how or why its not getting air-time...........

Shedite27

The_Conductor wrote: »

Its not quite credit card rates- but were you or I to walk into any high street branch of BOI/AIB (or any of the others) and ask for a personal loan for a car- we'd probably be quoted 11-12% (yes- they do actually get away with this high!). A developer on the other hand depending on the project could be 16/17/18/19/20%.........

CIF did a study released about 6-7 months ago- which showed that finance now accounts for up to 40% of the construction cost of a property.

Any idea why? With negative interest rates it's in bank's interest to not hold money. Any money lent at any rate is bonus territory for them. Or is it a follow on "revenge" at the developers for all the defaults over the past decade?

Bob24

The_Conductor wrote: »

Its not quite credit card rates- but were you or I to walk into any high street branch of BOI/AIB (or any of the others) and ask for a personal loan for a car- we'd probably be quoted 11-12% (yes- they do actually get away with this high!). A developer on the other hand depending on the project could be 16/17/18/19/20%.........

CIF did a study released about 6-7 months ago- which showed that finance now accounts for up to 40% of the construction cost of a property.

Lack of finance- is gumming up the works- however the government want to deal with it- taking equity stakes in individual properties if they like, or whatever- they need to ungum the bottleneck.

I feel dirty beating a drum fighting developer's corner- this though is the one, unhighlighted, bottleneck- that has the potential, as part of an overall solution, to make a big difference, that no-one seems to be talking about.

I'm actually baffled how or why its not getting air-time...........

Those are interesting and surprising (to me) figures.

I think more of this is needed to address the crisis. If we could have clear view of lets say for a 400k apartment sold in Dublin, what is the cost of land, the cost in taxes, the cost of labour, the cost of parts and equipment, the cost of financing, margins, etc ... it would be easier to pinpoint what is inflating costs and preventing developers from building/selling at prices which fit within the Central Bank's macro-prudential rules for a good number of households.

Zzippy

The_Conductor wrote: »

Its not quite credit card rates- but were you or I to walk into any high street branch of BOI/AIB (or any of the others) and ask for a personal loan for a car- we'd probably be quoted 11-12% (yes- they do actually get away with this high!). A developer on the other hand depending on the project could be 16/17/18/19/20%.........

CIF did a study released about 6-7 months ago- which showed that finance now accounts for up to 40% of the construction cost of a property.

Lack of finance- is gumming up the works- however the government want to deal with it- taking equity stakes in individual properties if they like, or whatever- they need to ungum the bottleneck.

I feel dirty beating a drum fighting developer's corner- this though is the one, unhighlighted, bottleneck- that has the potential, as part of an overall solution, to make a big difference, that no-one seems to be talking about.

I'm actually baffled how or why its not getting air-time...........

I had heard that banks were reluctant to lend large sums, and were now lending piecemeal i.e. lend enough to part complete and sell some houses, lend the rest to complete the development once sales pay for first lot. I certainly hadn't heard of interest rates that high...
Even at 15-20%, it's hard to understand how that could eat up 30-40% of the cost of a house. I can't see developers drawing down finance and then taking 2 years to build when interest rates are that high. I'd take anything from the CIF with a pinch of salt...

sweetie

Zzippy wrote: »

I had heard that banks were reluctant to lend large sums, and were now lending piecemeal i.e. lend enough to part complete and sell some houses, lend the rest to complete the development once sales pay for first lot. I certainly hadn't heard of interest rates that high...
Even at 15-20%, it's hard to understand how that could eat up 30-40% of the cost of a house. I can't see developers drawing down finance and then taking 2 years to build when interest rates are that high. I'd take anything from the CIF with a pinch of salt...

It's like the banks want house prices to rise! Oh wait....