Property Market 2020

SozBbz

Mic 1972 wrote: »

Banks do lend more than 3.5 now, the lending process for some reason seems more "flexible" that it was initially. Consider also how many people have taken a loan in the last few years since the economy recovery. That's a lot of money that is currently only borrowed. All it takes is an economy slow down and people struggling to pay mortgages and we are back to the old days again
Personally i doubt there will be another crash, but things will scale down this year. As for the virus, that's such an unpredictable factor, we have no idea how it will impact the world dynamics, but as a general rule, uncertainty is never good for the economy

Banks have always been lending more than 3.5x. I got 4.5x offered to me back in early 2015 when the rules were still new. Maybe the banks were being conservative back then, but I've heard no evidence of them breaching central bank guidelines.

My mortgages are still very affordable. They're nothing like what I would have likely signed up to in 2006 for example.

People only get into trouble if there is a huge credit crunch like in 2008, but this is not a repeat of that scenario. People who have bought in the last few years should be well able to withstand a normal recession. I'm not saying there wont be individual casualties, but on the whole, we shouldnt see widespread negative equity (firstly, because people actually have equity in their homes these days). We've got a skewed view of what a recession looks like in this country because we came from such a low place (backwards and devoid of opportunity in the 80's) and grew all the way to 2007, which had a by product of leaving us exceptionally exposed to the worst economic crash since the 1920's.

Our most recent experience of recession is not what its going to be like every time. We'll all probably live through a few more in our lifetimes, hopefully none as severe as the last.

SozBbz

fliball123 wrote: »

I though the bank only lent 3.5 and than 1 times the salary of the partner on the lower wage?? also has there not been more growth projected in Ireland this year? the unpredictable factor can go be positive or negative and the thing that people seem to forget is that even in the worse recession ever seen in the country back in 2009/10/11 very few were turfed out of the family home, most people lost investments or 2nd properties but the family home was hard to repossess.

I just find the fundamentals are here for house prices to go higher and that people saying they will drop are going on guess work .

Its 3.5x the combines salary of all applicants. And they can go up to 4.5x for a limited % of their loan book. So they're obviously choosy as to who gets the extra. Also if you have any dependants then this is factored downwards accordingly, so not everyone gets even 3.5x.

Yes growth is still forecast, albeit slightly slower than previously. But its still growth. I'd actually argue that we don't want to see rampant numbers like we did during the Celtic Tiger. Slow and steady is ideal.

Obviously COVID 19 is a bit of an unknown and could impact on growth in the short to medium term, but it will eventually run its course. Economically, its explainable and will come to an end, so it wouldnt shake my faith in our economy.

what_traffic

fliball123 wrote: »

But on what basis?? Their is no credit bubble this time, supply is still no where near where it needs to be and will be decades before it sufficiently ramped up.

The bubble is global rather than local, Ireland is so connected with global multinationals if there is a tough recession we are going to feel it for sure. When are the Central banks going to stop printing all that money and buying up those bonds...... Something has gotta give.

fliball123

what_traffic wrote: »

The bubble is global rather than local, Ireland is so connected with global multinationals if there is a tough recession we are going to feel it for sure. When are the Central banks going to stop printing all that money and buying up those bonds...... Something has gotta give.

Well any one who can answer that question to within a year of it happening would be very rich .. but like I say its all guess work

Mic 1972

what_traffic wrote: »

The bubble is global rather than local, Ireland is so connected with global multinationals if there is a tough recession we are going to feel it for sure. When are the Central banks going to stop printing all that money and buying up those bonds...... Something has gotta give.

Yep, that's what i was trying to say. Ireland is a small economy completely depending on the rest of the world, and Europe is not doing too great right now compared to 2-3 years ago

Assetbacked

what_traffic wrote: »

The bubble is global rather than local, Ireland is so connected with global multinationals if there is a tough recession we are going to feel it for sure. When are the Central banks going to stop printing all that money and buying up those bonds...... Something has gotta give.

In the same way those in the renting market are not feeling the benefit in their pocket of the sustained growth, not everyone will be hit in the event it slows or reverses. In terms of Irish property, it is mainly investors who are exposed (especially with commercial property) and it is generally the larger investors most exposed. Home-owners who took out mortgages the last few years are unlikely to end up in negative equity and mortgages taken out in the last boom are almost entirely out of negative equity.

Houses outside of the affordability scale of 3.5 times salaries may need to be prepared to drop their prices significantly over the coming decade regardless of continued growth or a slowdown. Therefore, house price decreases should necessarily be seen as a good thing from this point onwards and will be a key target with government policy, even if indirectly.

ittakestwo

I know of a couple who bought a family house for around 500k in 2014 in Dublin. It needed work and they put another 75k into it and now have it for sale for the same price as the cost to buy and do it up.

My sister and brother in law also bought at the end of 2014 in dublin for 560k in a large estate. Similar houses to theirs in the estate are selling about 550k to 600k.

All statistics will say that dublin has gone up 25% since 2014 but for family houses I dont believe it has. I think a lot of the price rises since 2014 in dublin have been the smaller 2 bed type houses or apartments.

Around 2014 when the economy first showed signs of recovery there had been no building of family houses the previous years. During the boom a lot of apartments were built in Dublin and these suffered huge falls and a lot of growing families got trapped in negative equity in apartments. The boom concept of the property ladder was shattered and most buyers then just wanted to go straight for along term family home.

So around 2014 couples who were in a position to buy were completing over the very few second hand family homes on the market. But since 2014 there has been more of the way of new family homes built in dublin. Also the new A rated homes are very popular and most couples are chossing them over the second hand family house.

I believe this is why there has been minimal growth of second hand family house prices over the last few years in Dublin. Also if the 20k we are building now was enough to slow the house price growth over the last few years what will happen if the number of new builds goes into 30k per year?

fliball123

Assetbacked wrote: »

In the same way those in the renting market are not feeling the benefit in their pocket of the sustained growth, not everyone will be hit in the event it slows or reverses. In terms of Irish property, it is mainly investors who are exposed (especially with commercial property) and it is generally the larger investors most exposed. Home-owners who took out mortgages the last few years are unlikely to end up in negative equity and mortgages taken out in the last boom are almost entirely out of negative equity.

Houses outside of the affordability scale of 3.5 times salaries may need to be prepared to drop their prices significantly over the coming decade regardless of continued growth or a slowdown. Therefore, house price decreases should necessarily be seen as a good thing from this point onwards and will be a key target with government policy, even if indirectly.

so you think properties will drop by over 10%

JamesMason

fliball123 wrote: »

so you think properties will drop by over 10%

The latest CSO figures show almost a 1% price drop in Dublin...the fourth month prices have fallen in a row. There'll be a 10%drop if that trend continues. I'll admit it is impossible to predict the direction of the market. But, there are red flags all over for the global economy to slow down. The healthscare from China will only make things worse. That cannot be denied.

Mic 1972

Assetbacked wrote: »

In the same way those in the renting market are not feeling the benefit in their pocket of the sustained growth, not everyone will be hit in the event it slows or reverses. In terms of Irish property, it is mainly investors who are exposed (especially with commercial property) and it is generally the larger investors most exposed. Home-owners who took out mortgages the last few years are unlikely to end up in negative equity and mortgages taken out in the last boom are almost entirely out of negative equity.

I agree with this. Investors shouldn't take their chances this year
But this alone should reduce demand

beauf

I think there's a bit more to it.

I think family homes (what defines this) have increased but not 25% and only in certain.
IN our areas there are new builds which are basically the same price as older house + extensive renovations.
But the new house will usually have a smaller garden and no garage or space for a decent shed etc.
Older house might be in a mature and/or better location.
Also the price of these is beyond most people, and they can't get mortgages.
The other issues is some locations old houses aren't worth putting in 100k.
As you for 100k more you can get somewhere in a better area. So prices are location capped.
There's also demand. Its not decreasing. its not static. Its increasing, as population increases, and increasing a lot. So its a bottomless cup. (Unless something changes)
Also people are worried about whats coming. No one wants to buy at the peak. Brexit, crashes or sumps.


All these things work together to price cap more expensive properties (like houses). Supply is a factor, but its far from the sole factor as you're suggesting.

Assetbacked

fliball123 wrote: »

so you think properties will drop by over 10%

Anything over €700k, sure, assuming the Central Bank keeps its mortgage lending restrictions. Under that price and no, irrespective of a slowdown, prices can't drop that much as there is so much pent up demand for affordable properties that it would take some massive event like the 2008 property crash to mess it all up but there is no exposure with Irish residential mortgages like before.

I would expect we will see house price growth slowdown or reduction being portrayed in the media as negative but they will rarely note that this is more likely to be a market correction.

nerrad01

I accept the odds of a recession in the next year are higher, but demand on housing is exceptionally high. People still ahve to live somewhere and this demand is only going to get higher, recession or no recession.

Natural increase in population, post brexit and also following the new visa rules for the UK is all going to drive irelands population up.

I cant see how this is going to massively impact house prices, fair enough things might stagnate but with such an overwhelming shortage of housing i cant see them dropping. By the time we actually ramped up supply we would already be coming out of any potential recession.

Mic 1972

nerrad01 wrote: »

I accept the odds of a recession in the next year are higher, but demand on housing is exceptionally high. People still ahve to live somewhere and this demand is only going to get higher, recession or no recession.

Natural increase in population, post brexit and also following the new visa rules for the UK is all going to drive irelands population up.

I cant see how this is going to massively impact house prices, fair enough things might stagnate but with such an overwhelming shortage of housing i cant see them dropping. By the time we actually ramped up supply we would already be coming out of any potential recession.

Demand is inflated by investors too. Once you take investors out of the picture demand decreases and prices go down
The current climate is not good for a property investment, it is good only if someone needs a house to live

nerrad01

Mic 1972 wrote: »

Demand is inflated by investors too. Once you take investors out of the picture demand decreases and prices go down
The current climate is not good for a property investment, it is good only if someone needs a house to live

even if we took investors out of the picture i think we would still be overwhelmingly under supplied that i cant see property taking a massive hit if the economy closes down. Its going to take years of increasing supply to fix that, and if a recession comes we wont

Mic 1972

nerrad01 wrote: »

even if we took investors out of the picture i think we would still be overwhelmingly under supplied that i cant see property taking a massive hit if the economy closes down. Its going to take years of increasing supply to fix that, and if a recession comes we wont

When the economy slows down usually jobs are lost too. People go away and houses become available and lower prices. It happened already before

nerrad01

https://www.irishtimes.com/business/technology/just-8-000-houses-built-last-year-offered-for-sale-on-open-market-says-cif-1.4177876?mode=amp

Some figures for what was previously discussed in the thread.
So 21,241 completions last year and only 8000 for sale.


"Investment funds bought 95% of 3,644 apartments built last year" before they ever went on the open market, so less than 200 apartments went for sale last year. Absolutely ridiculous imbalance.

ittakestwo

Mic 1972 wrote: »

When the economy slows down usually jobs are lost too. People go away and houses become available and lower prices. It happened already before

People seem to be disagreeing on what slow down is. Slow down means economy not growing as quickly as it had been. So the economy which has been growing 4%+( which is very high growth for a developed economy) over the last few years, let's say now falls back to 2% growth the economy has "slowed". But there will be no jobs losses etc. Infact there will be more probably more people working than time before. If the economy is to lose jobs the economy probably needs to contract .

A lot of people seem to have a view well if here is a recession coming it will be similar to the last recession. But it wont. The recssion of 2008-10 was a one in a lifetime event. Ireland was a complete bubble then both banking and construction. But the economy is not now. If there is a recession coming it seems it's coming from a global slow down. But this wont be a pin to a bubble like last time. We are not building 80k houses like last time. The banking systems has not been binging on cheap foreign debt over the last few years and feeding it to the economy which suddenly going to be pulled back out.

Reversal

nerrad01 wrote: »

even if we took investors out of the picture i think we would still be overwhelmingly under supplied that i cant see property taking a massive hit if the economy closes down. Its going to take years of increasing supply to fix that, and if a recession comes we wont

What we think rarely reflects reality. Even without a recession, the evidence does not point to this chronic shortness of supply. A Goodbody report from 6 months ago found that:

"In the four quarters to the first three months of this year, there were 2,500 more units built than sold nationwide, with most of this occurring in Dublin, where new supply was 6,905 and purchases were 5,093. This increase in unsold stock will hit funding for some house builders"

So this pent up demand that people insist would keep prices afloat in a recession doesn't even exist now in the good times. The figure for demand of 35000 per year assumes all of those people can afford to and want to buy. In reality, the current 20,000 a year seems enough, if not too much

Marius34

Reversal wrote: »

What we think rarely reflects reality. Even without a recession, the evidence does not point to this chronic shortness of supply. A Goodbody report from 6 months ago found that:

"In the four quarters to the first three months of this year, there were 2,500 more units built than sold nationwide, with most of this occurring in Dublin, where new supply was 6,905 and purchases were 5,093. This increase in unsold stock will hit funding for some house builders"

I very doubt on this data, there is no such information on unsold properties, it might be that they didn't include Build2Rent or etc in to purchases. It maybe similar case to just month ago all over media about the property sale decrease by 4%:
https://www.irishtimes.com/business/commercial-property/sales-of-houses-and-apartments-fall-4-overall-1.4130984
https://www.rte.ie/news/business/2020/0106/1104554-today-in-the-press/

when it came up I told they don't know what they speaking, and now it can be easily proved that they was wrong, and number of sales in fact went up in 2019. It can be checked on: https://www.propertypriceregister.ie/

Reversal wrote: »

So this pent up demand that people insist would keep prices afloat in a recession doesn't even exist now in the good times. The figure for demand of 35000 per year assumes all of those people can afford to and want to buy. In reality, the current 20,000 a year seems enough, if not too much

This is again more of maid up story, it's nothing todo with who want's to buy or not.

Mic 1972

If demand is so high how come sales have slowed down then? Prices aren't really moving so what has changed?
I do believe the estimate demand of 35,000 houses is an over estimate, but i haven seen the source of the data so I can't comment on it.

Marius34

Mic 1972 wrote: »

If demand is so high how come sales have slowed down then? Prices aren't really moving so what has changed?
I do believe the estimate demand of 35,000 houses is an over estimate, but i haven seen the source of the data so I can't comment on it.

Sales has still increased by 2-3% in 2019. The key element to price decrease by the end of 2019 was affordability and Brexit. July-October, everyone was speaking about Hard Brexit, many potential buyers waited what will happen, at the end of July/Aug Irish stock market falled due to expected Hard Brexit. Afterwards Nov-Jan is the quietest month in Property market. As February is the first months of the active new year season, let's see how the property sales are doing.. I'm afraid we will start to hear again about stories of 30 people coming to the viewing, which was extremely rare in 2019.

enricoh

nerrad01 wrote: »

https://www.irishtimes.com/business/technology/just-8-000-houses-built-last-year-offered-for-sale-on-open-market-says-cif-1.4177876?mode=amp

Some figures for what was previously discussed in the thread.
So 21,241 completions last year and only 8000 for sale.


"Investment funds bought 95% of 3,644 apartments built last year" before they ever went on the open market, so less than 200 apartments went for sale last year. Absolutely ridiculous imbalance.

If investment funds hadn't put up the money what percentage of them 3600 would have been built. A small one I reckon, you need a good few million in funding before attempting an apartment block.
It's a lot handier for a builder to do phase 1 of 20 semi D's , get a few quid in from them to finance phase 2.

Taylor365

Mic 1972 wrote: »

If demand is so high how come sales have slowed down then? Prices aren't really moving so what has changed?
I do believe the estimate demand of 35,000 houses is an over estimate, but i haven seen the source of the data so I can't comment on it.

Sales might slow down if the only stock available is €500k+.

beggars_bush

Marius34 wrote: »

Sales has still increased by 2-3% in 2019. The key element to price decrease by the end of 2019 was affordability and Brexit. July-October, everyone was speaking about Hard Brexit, many potential buyers waited what will happen, at the end of July/Aug Irish stock market falled due to expected Hard Brexit. Afterwards Nov-Jan is the quietest month in Property market. As February is the first months of the active new year season, let's see how the property sales are doing.. I'm afraid we will start to hear again about stories of 30 people coming to the viewing, which was extremely rare in 2019.

Exactly, we were waiting to see what happened with the UK.
And now we've bought a house that was on sale for 7 months

nerrad01

nerrad01 wrote: »

"Investment funds bought 95% of 3,644 apartments built last year" before they ever went on the open market, so less than 200 apartments went for sale last year. Absolutely ridiculous imbalance.

Very Fine Gael

coolshannagh28

Deleted User wrote: »

Very Fine Gael

And very Troika , this was one of the conditions of the bailout ; that we would diversify our rental base away from small landlords to institutions to cut down on risks to the economy . The govt has facilitated this by using tax breaks and over regulating the sector . There is obviously huge disenchantment around this but one upside may be that the exposure to a crash is mainly in New York .

JamesMason

coolshannagh28 wrote: »

There is obviously huge disenchantment around this but one upside may be that the exposure to a crash is mainly in New York .

To be fair, exposure to a crash would be felt in NY, Vancouver, Sydney, Hong Kong to new a few. Do you really think Dublin would be cushioned from a global economic shock?

coolshannagh28

JamesMason wrote: »

To be fair, exposure to a crash would be felt in NY, Vancouver, Sydney, Hong Kong to new a few. Do you really think Dublin would be cushioned from a global economic shock?

No, Dublin is very exposed by its dependence on MNC investment again part of an international quid pro quo , but on the property side a proportion of the risk has been diversified albeit a lot of the property was bought very cheaply.

beauf

coolshannagh28 wrote: »

And very Troika , this was one of the conditions of the bailout ; that we would diversify our rental base away from small landlords to institutions to cut down on risks to the economy . The govt has facilitated this by using tax breaks and over regulating the sector . There is obviously huge disenchantment around this but one upside may be that the exposure to a crash is mainly in New York .

Where did you pull this out of?

The sector is not over regulated. Its one sided regulation, only for the tenants and none for LL. Regardless if they are institutional or not.

Switching from lots of smaller suppliers to fewer larger suppliers is not diversification. I don't see how this improves risk.

Regardless, can you link to this condition from the Troika.