Irish Property Market 2020 Part 3

Timing belt

Villa05 wrote: »

Amazing that in one of the most open economies in the world, the only thing banks will lend against is property

Banks will lend against a multitude of assets it is just that for majority of people the property is the only asset that they have to provide security.

Villa05 wrote: »

Can anyone guess what asset class is in an unsustainable bubble as a consequence of this?

The Stock Market as rates are so low retail investors are borrowing to invest in shares.

Sierra Oscar

Timing belt wrote: »

I don't see the same property price rises in the Irish house prices because of the central bank limit which is preventing banks from lending more. What we have in Ireland is a liquidity trap where the QE is sitting with the banks and they are unable to lend it out due to the central bank rule and the banks risk appetite.

The Irish market has seen small prices rises due to increase in disposable income from WFH which has enabled a lot of first time buyers get a deposit together and the increase in HTB which is making this sector of the market very competitive but the majority are buying new homes so it is not leading to increases up the housing chain.

My prediction for house prices in 2021 will be to remain flat unless there is financial contagion when the stock market goes pop once the economic data fails to deliver or some stock market fraud hits confidence.

You're assuming that everyone looking to buy property is subjected to the lending limits imposed by the Central Bank. The reality is that institutional investors have cash on hand and are investing in property. They don't need mortgages and thus the Central Bank lending criteria don't even come into the equation.

Institutional investment has been curtailed with Covid-19 as investors adopt a wait and see approach. However I fear that with the latest onset of QE and the pumping of serious amounts of cash into the monetary system, a great deal of this will inevitably find its way into property. It is what happened following the use of QE as a tool to combat the last financial crisis. The housing crisis is very much a global phenomenon and not limited to Ireland. The use of QE has played a huge role in pushing up property prices. The additional money has to be invested somewhere. I fear that the liquidity trap you raise will eventually see money making its way into property, again.

I'm speaking anecdotally now but with some personal experience. I'm heavily involved in the management company for the development that I live in for many years now. 250 + apartments and houses in a desirable location. I know who has purchased every single unit in the development in recent years.

The number of institutional investors purchasing units is staggering, I'm talking 85% + of all units in the development sold. Some of the units don't even make it to market. These are all being used for rental and young couples looking to buy their first home aren't getting a look in. This is a development that traditionally has a high percentage of owner occupiers since construction but that's changing.

Also when I say institutional investors, I don't just mean the large REIT's that are widely known. It also includes much smaller investment entities associated with specific investment schemes. Some are shell companies of very wealthy persons, others are associated with specific pensions schemes and so on. They're not using mortgages to fund their purchases.

The number of units being purchased by the council, which seemingly has a vast balance sheet and can outbid any buyer through the guise of an Approved Housing Body, is staggering.

The end result is not a pretty picture for first time buyers or young people in general. They're competing with organizations which have serious cash on hand to purchase what they like.

Timing belt

Sierra Oscar wrote: »

You're assuming that everyone looking to buy property is subjected to the lending limits imposed by the Central Bank. The reality is that institutional investors have cash on hand and are investing in property. They don't need mortgages and thus the Central Bank lending criteria don't even come into the equation.

Institutional investment has been curtailed with Covid-19 as investors adopt a wait and see approach. However I fear that with the latest onset of QE and the pumping of serious amounts of cash into the monetary system, a great deal of this will inevitably find its way into property. It is what happened following the use of QE as a tool to combat the last financial crisis. The housing crisis is very much a global phenomenon and not limited to Ireland. The use of QE has played a huge role in pushing up property prices. The additional money has to be invested somewhere. I fear that the liquidity trap you raise will eventually see money making its way into property, again.

I'm speaking anecdotally now but with some personal experience. I'm heavily involved in the management company for the development that I live in for many years now. 250 + apartments and houses in a desirable location. I know who has purchased every single unit in the development in recent years.

The number of institutional investors purchasing units is staggering, I'm talking 85% + of all units in the development sold. Some of the units don't even make it to market. These are all being used for rental and young couples looking to buy their first home aren't getting a look in. This is a development that traditionally has a high percentage of owner occupiers since construction but that's changing.

Also when I say institutional investors, I don't just mean the large REIT's that are widely known. It also includes much smaller investment entities associated with specific investment schemes. Some are shell companies of very wealthy persons, others are associated with specific pensions schemes and so on. They're not using mortgages to fund their purchases.

The number of units being purchased by the council, which seemingly has a vast balance sheet and can outbid any buyer through the guise of an Approved Housing Body, is staggering.

The end result is not a pretty picture for first time buyers or young people in general. They're competing with organizations which have serious cash on hand to purchase what they like.

Yes I agree that institutional investors will benefit from QE and will invest more in property as it has an attractive yield for low risk. I don't think there is any other asset class with such a favourable risk/reward in the current climate.

Without a adequate supply of housing stock this will continue as first time buyers will need to continue renting and will be priced out of the market. It will only change when the supply is delivered and rents fall and institutional investors invest elsewhere.

It is a crazy situation where you have :
1)people spending substantially more on rent that they would on a mortgage
2)The government spending more on rent via HAP that it would on building houses and renting them out so in turn they could build more houses.

I know the government don't want to build as they do not want the debt on their books but there is a lot that they can do (if they were willing) to boost supply or to lower building costs by reducing tax on specific FTB houses.

In other countries I have seen FTB Estates which had tax on the build substantially reduced and in the property deeds they had a clause that the properties could only be purchased by a FTB.

Even if the original owner sold the house and upgraded to bigger house they were could only sell to a FTB which meant that the price of these properties were always affordable to FTB's. These don't even have to be estates but could be x amount of houses in a new development similar to the social housing requirements.

JimmyVik

Sierra Oscar wrote: »

You're assuming that everyone looking to buy property is subjected to the lending limits imposed by the Central Bank. The reality is that institutional investors have cash on hand and are investing in property. They don't need mortgages and thus the Central Bank lending criteria don't even come into the equation.

Institutional investment has been curtailed with Covid-19 as investors adopt a wait and see approach. However I fear that with the latest onset of QE and the pumping of serious amounts of cash into the monetary system, a great deal of this will inevitably find its way into property. It is what happened following the use of QE as a tool to combat the last financial crisis. The housing crisis is very much a global phenomenon and not limited to Ireland. The use of QE has played a huge role in pushing up property prices. The additional money has to be invested somewhere. I fear that the liquidity trap you raise will eventually see money making its way into property, again.

I'm speaking anecdotally now but with some personal experience. I'm heavily involved in the management company for the development that I live in for many years now. 250 + apartments and houses in a desirable location. I know who has purchased every single unit in the development in recent years.

The number of institutional investors purchasing units is staggering, I'm talking 85% + of all units in the development sold. Some of the units don't even make it to market. These are all being used for rental and young couples looking to buy their first home aren't getting a look in. This is a development that traditionally has a high percentage of owner occupiers since construction but that's changing.

Also when I say institutional investors, I don't just mean the large REIT's that are widely known. It also includes much smaller investment entities associated with specific investment schemes. Some are shell companies of very wealthy persons, others are associated with specific pensions schemes and so on. They're not using mortgages to fund their purchases.

The number of units being purchased by the council, which seemingly has a vast balance sheet and can outbid any buyer through the guise of an Approved Housing Body, is staggering.

The end result is not a pretty picture for first time buyers or young people in general. They're competing with organizations which have serious cash on hand to purchase what they like.

I know two cases where each owner in the whole block were approached individually by a reit to sell to them. Ive heard of others but only know the people involved with two.

nerrad01

The above situation is why sein fein are going to romp home in the next general election. FF/FG have failed miserably in bringing any sort of balance to the housing market

Timing belt

The following slide from the NTMA investor relations slide pack shows the breakdown of institutional investors



Source:https://www.ntma.ie/business-areas/funding-and-debt-management/investor-relations

Cyrus

nerrad01 wrote: »

The above situation is why sein fein are going to romp home in the next general election. FF/FG have failed miserably in bringing any sort of balance to the housing market

be interesting to see what sinn feinn do about it.

timmyntc

Cyrus wrote: »

be interesting to see what sinn feinn do about it.

If they allow contract clauses and easier planning permission for new developments if, say the houses can only be sold to owner-occupiers or FTBs.

That would go some way to stopping Investors and AHBs from buying up all the new stock.

nerrad01

yea we have half the number of first time buyers compared to 2006, despite an increase in population of close to 1 million people in that time. That needs to change

Villa05

nerrad01 wrote:

yea we have half the number of first time buyers compared to 2006, despite an increase in population of close to 1 million people in that time. That needs to change

It might be better to pick a year before 100% mortgages when gauging the number of ftbs in the market

2006 is a bad measurement guage for many things

hometruths

nerrad01 wrote: »

yea we have half the number of first time buyers compared to 2006, despite an increase in population of close to 1 million people in that time. That needs to change

FTBers are drawing down half the value in mortgages compared to 2006.

That's not quite the same thing as half the number of FTBers and is probably an improvement.

Edit to add - looking at the graph again, actually I think you are right. Apologies.

nerrad01

Villa05 wrote: »

It might be better to pick a year before 100% mortgages when gauging the number of ftbs in the market

2006 is a bad measurement guage for many things

Im just commenting on the graph that was posted above which only goes as far back as 2006, either way there`s no denying the market/ system in place is stacked against first time buyers in every way imaginable

Timing belt

nerrad01 wrote: »

Im just commenting on the graph that was posted above which only goes as far back as 2006, either way there`s no denying the market/ system in place is stacked against first time buyers in every way imaginable

What I thought was interesting was the drop in mortgages to upgrade which also tells another story and means less available houses coming onto the market for FTB.

BryanMartin21

nerrad01 wrote: »

The above situation is why sein fein are going to romp home in the next general election. FF/FG have failed miserably in bringing any sort of balance to the housing market

The civil servants and lobbyists are going to have to start cosying up to the shinners. It is quite easy to see why the younger people will vote for SF and other lefties. FF and FG don't look after the under 40s. I'd be getting a deposit together for the institutional offload of properties in a few years when SF getting into government spooks them if I was a FTB.

Timing belt

Another slide from the investors pack.

What are peoples thoughts on the impact of Brexit on the housing market. The slide bellow highlights the risk of reduced liquidity but the pro's are there may be more high paid jobs coming.

hometruths

I’m not convinced there will be much in the way of high paid jobs coming, if by high paid you mean the top level finance jobs on high 6 and 7 figures.

I think it is far more likely that Dublin might get a clatter of admin jobs in order to establish an office here and comply with whatever geographic legislation is involved but the big guns will stay put in London or go to another Euro capital in preference.

Timing belt

schmittel wrote: »

I’m not convinced there will be much in the way of high paid jobs coming, if by high paid you mean the top level finance jobs on high 6 and 7 figures.

I think it is far more likely that Dublin might get a clatter of admin jobs in order to establish an office here and comply with whatever geographic legislation is involved but the big guns will stay put in London or go to another Euro capital in preference.

I was not talking about 7 figure jobs...a bit lower down the food chain lol..

brisan

Cyrus wrote: »

be interesting to see what sinn feinn do about it.

I have said this before but the reasoning of young people renting or trying to buy is
SF housing policies may not work
We know FFG housing policies do not work
So that's why SF done very well last time out and will do even better next time
Unless FFG revisit the money tree and build a sh1t load of houses in the next 3 years at prices people can afford .and block investors out of the market

hometruths

Timing belt wrote: »

I was not talking about 7 figure jobs...a bit lower down the food chain lol..

Sure we’d probably get our fair share of mid level jobs, but yes they’re well paid too in relative terms.

sometimes I wonder if the discussion on the Brexit effect on jobs (and thus property) is a little too focused on one way traffic, as per the NTMa slide.

Lots of talk about whether we’ll mop up the jobs that have to leave the UK, but very little discussion about planning for a potential scenario where we face a strong competitive threat in attracting/retaining new jobs/FDI.

Tech is a good example of where I think we are weak. Once the UK is unshackled from Eu state aid rules, who knows what they might do to attract the FAaNgs et al.

And since the UK is one of the big three European markets it seems likely that the Brit government will have the benefit of the stick as well as the carrot on their side.

Timing belt

schmittel wrote: »

Sure we’d probably get our fair share of mid level jobs, but yes they’re well paid too in relative terms.

sometimes I wonder if the discussion on the Brexit effect on jobs (and thus property) is a little too focused on one way traffic, as per the NTMa slide.

Lots of talk about whether we’ll mop up the jobs that have to leave the UK, but very little discussion about planning for a potential scenario where we face a strong competitive threat in attracting/retaining new jobs/FDI.

Tech is a good example of where I think we are weak. Once the UK is unshackled from Eu state aid rules, who knows what they might do to attract the FAaNgs et al.

And since the UK is one of the big three European markets it seems likely that the Brit government will have the benefit of the stick as well as the carrot on their side.

Yes the slide deck is out there to sell Ireland to investors

With regards to the unshackling from EU state aid rules isn't that one of the major stumbling blocks and the EU's stick is not to recognise the UK as EU equivalents from a Regulatory perspective for financial services and also in relation to sharing of Digital data from a IT perspective.

I see the biggest issue as the UK will use more tax loop holes that will enable foreign investors wash there cash in the UK. They are already the no 1 location for legitimately laundering cash from China, Russia etc via their offshore territories.

Hubertj

schmittel wrote: »

Sure we’d probably get our fair share of mid level jobs, but yes they’re well paid too in relative terms.

sometimes I wonder if the discussion on the Brexit effect on jobs (and thus property) is a little too focused on one way traffic, as per the NTMa slide.

Lots of talk about whether we’ll mop up the jobs that have to leave the UK, but very little discussion about planning for a potential scenario where we face a strong competitive threat in attracting/retaining new jobs/FDI.

Tech is a good example of where I think we are weak. Once the UK is unshackled from Eu state aid rules, who knows what they might do to attract the FAaNgs et al.

And since the UK is one of the big three European markets it seems likely that the Brit government will have the benefit of the stick as well as the carrot on their side.

would the UK's ability on attracting FDI be somewhat dependent on the trade agreements they have in place with other nations and trading blocks? For example, an MNC sets up in UK producing / developing whatever product / service / software. Where will that product be sold? How does a lack of trade agreement with the EU or US impact on that product from a tariff perspective? Perhaps, 1 of the experts on here can clarify.

Anyway, i agree and think Ireland will find increased competition for FDI but from other EU countries.

Hubertj

brisan wrote: »

I have said this before but the reasoning of young people renting or trying to buy is
SF housing policies may not work
We know FFG housing policies do not work
So that's why SF done very well last time out and will do even better next time
Unless FFG revisit the money tree and build a sh1t load of houses in the next 3 years at prices people can afford .and block investors out of the market

i expect the cardboard socialists that voted for them earlier in the year to learn a lot about what they voted for over the coming months. Brian Stanley is the tip of the iceberg. Not sure many who voted for them know they are terrorists and killed many women and children. Does a party that justifies that really have the best interests of the nation at heart? It would have a significant negative impact on FDI as well, impacting employment

brisan

Hubertj wrote: »

i expect the cardboard socialists that voted for them earlier in the year to learn a lot about what they voted for over the coming months. Brian Stanley is the tip of the iceberg. Not sure many who voted for them know they are terrorists and killed many women and children. Does a party that justifies that really have the best interests of the nation at heart? It would have a significant negative impact on FDI as well, impacting employment

I agree but it was not my age group that voted for them
It was the under 40s who barely remember the troubles and cannot see themselves ever owning a home due to high rents and high property prices
The Good Friday agreement was 18 years ago when many of these were still in school and politics was not high on their list of priorities

Timing belt

brisan wrote: »

I agree but it was not my age group that voted for them
It was the under 40s who barely remember the troubles and cannot see themselves ever owning a home due to high rents and high property prices
The Good Friday agreement was 18 years ago when many of these were still in school and politics was not high on their list of priorities

I fully agree that people have a short memory but likewise Covid and Brexit will be forgotten about come the next election and the housing crisis will be on the agenda yet again giving SF a platform.

The government need to pull there finger out and start finding solutions ASAP.

HAP and HTB schemes are not addressing the issue and it's not like Ireland has not had a housing crisis in the past when government intervention was required. If you look back at the history books you will see multiple housing crisis that required the government to build the necessary houses. It is like FG/FF are in a world of their own where they do not see the issue as they are to busy looking for praise for a wonderful job they have done on issues that they deem a priority.

brisan

Timing belt wrote: »

I fully agree that people have a short memory but likewise Covid and Brexit will be forgotten about come the next election and the housing crisis will be on the agenda yet again giving SF a platform.

The government need to pull there finger out and start finding solutions ASAP.

HAP and HTB schemes are not addressing the issue and it's not like Ireland has not had a housing crisis in the past when government intervention was required. If you look back at the history books you will see multiple housing crisis that required the government to build the necessary houses. It is like FG/FF are in a world of their own where they do not see the issue as they are to busy looking for praise for a wonderful job they have done on issues that they deem a priority.

Schemes like Donaghmede where Gallagher built the houses and the councils guaranteed them sales from people off the housing list who where in the main given council mortgages
With the Governments ability to borrow at near zero rates cheap mortgages should be made available for state led building projects to those below a certain income threshold

hometruths

Hubertj wrote: »

would the UK's ability on attracting FDI be somewhat dependent on the trade agreements they have in place with other nations and trading blocks? For example, an MNC sets up in UK producing / developing whatever product / service / software. Where will that product be sold? How does a lack of trade agreement with the EU or US impact on that product from a tariff perspective? Perhaps, 1 of the experts on here can clarify.

No idea of how all that detail will pan out in time.

My concern is I don't think we (Ireland) have given enough thought to the risk that it won't bother UK particularly that a MNC set up in Britain will have trouble selling their product/service/software in Austria for example.

UK might well take the position that, if an MNC wants to sell their product/service/software in the UK the company will get a better deal if they have a physical presence in the UK.

If the UK says jump, it is a large enough market to make it worthwhile for MNCs to say how high, within reason.

If this came to pass, I think there is a danger that Ireland will suffer disproportionately from this - i,e the path of least resistance for many MNCs might be to simply relocate some of their Irish operations to the UK.

It would not take a lot of this sort of thing at the margins to have an effect on the property market here.

Basically I think the long term potential benefits of Brexit listed in the NTMA slide timing belt posted are a bit naive.

However it all pans out, it is highly unlikely to be all one way traffic out of the UK.

Villa05

nerrad01 wrote:

Im just commenting on the graph that was posted above which only goes as far back as 2006, either way there`s no denying the market/ system in place is stacked against first time buyers in every way imaginable

No denying that

Timing belt wrote:

I fully agree that people have a short memory but likewise Covid and Brexit will be forgotten about come the next election and the housing crisis will be on the agenda yet again giving SF a platform.

Sorry for the politics, but which of the 3 main parties was not involved in violence?

SF housing policy does make alot of sense, why is the current Gov(s) adament on making the situation worse from a position of being the largest property owner in the world

brisan

Villa05 wrote: »

No denying that




Sorry for the politics, but which of the 3 main parties was not involved in violence?

SF housing policy does make alot of sense, why is the current Gov(s) adament on making the situation worse from a position of being the largest property owner in the world

I agree that SF housing policy does not make a lot of sense
But it may work ,that's the gamble young people are prepared to take
Do you buy a car with no engine ,or one with a dodgy engine
FFG are selling the one with no engine
I am sure that FFG have access to enough experts to form a workable plan to build more houses both social and affordable
At this stage one must wonder is the will to do so there
Are there vested interests at play ,a bit like the opposite of the builders tents at the Galway races
The land as you say is there ,the cheap finance is there ,the labour is there
The cost effectiveness is there for all to see ,free land ,VAT paid to themselves etc
One has to wonder why the most critical issue in the last election has not been addressed
I know covid took precedence but the end of 21 should see the end of covid and the harsh realities of the housing crisis will again be to the fore

Hubertj

Villa05 wrote: »

No denying that




Sorry for the politics, but which of the 3 main parties was not involved in violence?

SF housing policy does make alot of sense, why is the current Gov(s) adament on making the situation worse from a position of being the largest property owner in the world

according to some expert on this thread, prices will fall 50% within 2 years. It will be cheaper for the government to buy than build.

brisan

Hubertj wrote: »

according to some expert on this thread, prices will fall 50% within 2 years. It will be cheaper for the government to buy than build.

Only problem is like now no one will be selling as they will need somewhere to live
Unless a 100,000 probate sales hit in a 2 year period