2021 Irish Property Market chat - *mod warnings post 1*

PropQueries

RichardAnd wrote: »

Alternatively, the state could be reduced in size, lessening the need for further taxation and putting money back into the pockets of citizens. A state without the funds to take out 25 years leases would be a good start.

That would be a good start. But will those 25 year leases then just be used even more in the second-hand market with no real benefit to FTBs or renters?

In relation to the state being reduced. Michael McGrath has already stated that it will get bigger and more expensive and that we should just basically get used to it. Back in November, he stated:

"We have also made decisions that will result in a permanently larger public service... That will need to be paid for within an overall framework that is responsible and sustainable... There will come a time, perhaps as early as later next year, when our borrowing costs will be fully determined by the attitude of investors on the markets."

Link to Irish Times article on Michael McGrath: https://www.irishtimes.com/news/politics/michael-mcgrath-we-will-inevitably-have-a-larger-state-coming-out-of-the-pandemic-1.4408766

RichardAnd

PropQueries wrote: »

That would be a good start. But will those 25 year leases then just be used even more in the second-hand market with no real benefit to FTBs or renters?

In relation to the state being reduced. Michael McGrath has already stated that it will get bigger and more expensive and that we should just basically get used to it. Back in November, he stated:

"We have also made decisions that will result in a permanently larger public service... That will need to be paid for within an overall framework that is responsible and sustainable... There will come a time, perhaps as early as later next year, when our borrowing costs will be fully determined by the attitude of investors on the markets."

Link to Irish Times article on Michael McGrath: https://www.irishtimes.com/news/politics/michael-mcgrath-we-will-inevitably-have-a-larger-state-coming-out-of-the-pandemic-1.4408766

I suppose that if the state wasn't able to offer 25 years leases, the investment funds would be less likely to want to buy up property to rent. If the funds were to rent the property directly, they would have all of the overheads of dealing with the property whereas by leasing it to the state, they get all the money with none of the hassle. Thus, if they weren't there to buy the property, we could assume that it would have gone to the open market?

Regarding the ever metastasizing state, it's nothing new, to be fair. States only get bigger and more bloated with each passing year, 'rona or not. I just like to dream heh...

Villa05

awec wrote:

TikTok obviously don't read the boards property forum or they'd have learnt that offices have gone the way of the dodo, nobody will ever work in one again.

Madium term plans to employ 5k people which is great, office space for 2k, maybe WFH will be significant at tiktok

I haven't seen rent free periods in commercial since the rebooting after the last crash. Is this normal?
Is it another accounting trick given the state is a significant renter of office space?

Any opinions on the deal, don't know much on commercial prices. Is it up/down on pre covid leases

PropQueries

Anyone have any insight into the current state of the local commercial property market in the IFSC?

There is an article in the Irish Times today that "UniCredit to quit the IFSC after 26 years".

What caught my attention was:

"The past decade has seen a number of banks in the IFSC hand back their licences as their parents seek to release capital that is “trapped” in various subsidiaries and streamline their own organisations. Wall Street giant Goldman Sachs and a number of German lenders, including DZ Bank, Helaba and Commerzbank, are among those to have returned local licences."

Link to Irish Times article here: https://www.irishtimes.com/business/financial-services/unicredit-to-quit-the-ifsc-after-26-years-1.4562224

What's even more interesting is that Trinity College Dublin acquired an IFSC block for €16m last year.

Link here to Trinity College purchase: https://www.irishtimes.com/business/commercial-property/trinity-college-dublin-acquires-ifsc-block-for-16m-1.4216869

DataDude

JimmyVik wrote: »

Dont own any house myself at the moment, but this call of tax, tax, tax will only end up coming back to bite us all in the arse.
Carrots are what are needed to solve problems, but in Ireland the only answer we seem to have is tax.

I get your point. We are too heavy on taxes in many areas. However, the problem with Carrots is they generally cost money. Carrots for the minority (owners of vacant properties) paid for with the stick for everyone else.

Personally think the inverse with vacant properties is much more desirable. You can either pay the tax, which is grand. Or you sell up, which is great. Win/Win.

If you see the bidding on some fairly shabby properties these days, there's no shortage of people with the money or the will to take these projects on. If someone isn't willing to pay up to bring a property into use - next person up.

awec

Villa05 wrote: »

Madium term plans to employ 5k people which is great, office space for 2k, maybe WFH will be significant at tiktok

I haven't seen rent free periods in commercial since the rebooting after the last crash. Is this normal?
Is it another accounting trick given the state is a significant renter of office space?

Any opinions on the deal, don't know much on commercial prices. Is it up/down on pre covid leases

Yes, I said this last year I think. One of the most difficult hurdles to overcome for companies expanding here is trying to get space for the increased headcount.

What an increase in WFH allows is an increase in headcount above their current capacity without having to absorb enormous capital costs straight away.

Bass Reeves

There is going to be no one pill cures all solution to this issue. You will need a carrot and stick approach. We need a vacant site tax but talks of 10% of value is ludicrous. It should be targeted at urban area's where demand for housing is highest. Where houses are vacant and are not in habitable condition tax relief on there upgrading should be considered to bring them to a minimum standard for habitation. This could be offset against future rental income or existing rental income from elsewhere. Tier it so as to encourage immediate uptake. Same with vacancy tax set a minimum rate now to raise in 2-3years time . Set it at 2% but a full rebate if site is developed and in use within 2years. This would encourage development on smaller sites.

I have always taught that the way vacancy over commercial premises has developed in Ireland is crazy. It is because of a mixture of insurance and H&S. Give tax relief to businesses or LL's to bring them up to rental standards against rental income.

Set conditions that where tax relief is availed of properties must remain in use for 5-10 years. Allow sale of properties to FTB or those on housing lists as fulfilling these conditions. Set maximum refurbishment values to prevent abuse.

Just one thing I forgot this will not solve the construction labour issue

JimmyVik

DataDude wrote: »

I get your point. We are too heavy on taxes in many areas. However, the problem with Carrots is they generally cost money. Carrots for the minority (owners of vacant properties) paid for with the stick for everyone else.

Personally think the inverse with vacant properties is much more desirable. You can either pay the tax, which is grand. Or you sell up, which is great. Win/Win.

If you see the bidding on some fairly shabby properties these days, there's no shortage of people with the money or the will to take these projects on. If someone isn't willing to pay up to bring a property into use - next person up.

They only carrot available at the moment is to REITs and they are piling into the market. Maybe grow some more carrots and spread them around. REITs are eating them all.

awec

Bass Reeves wrote: »

There is going to be no one pill cures all solution to this issue. You will need a carrot and stick approach. We need a vacant site tax but talks of 10% of value is ludicrous. It should be targeted at urban area's where demand for housing is highest. Where houses are vacant and are not in habitable condition tax relief on there upgrading should be considered to bring them to a minimum standard for habitation. This could be offset against future rental income or existing rental income from elsewhere. Tier it so as to encourage immediate uptake. Same with vacancy tax set a minimum rate now to raise in 2-3years time . Set it at 2% but a full rebate if site is developed and in use within 2years. This would encourage development on smaller sites.

I have always taught that the way vacancy over commercial premises has developed in Ireland is crazy. It is because of a mixture of insurance and H&S. Give tax relief to businesses or LL's to bring them up to rental standards against rental income.

Set conditions that where tax relief is availed of properties must remain in use for 5-10 years. Allow sale of properties to FTB or those on housing lists as fulfilling these conditions. Set maximum refurbishment values to prevent abuse.

I think one of the biggest hurdles to this is that many (most?) of these empty floors above retail or commercial units have no entrance to them, other than through the ground floor unit.

timmyntc

awec wrote: »

I think one of the biggest hurdles to this is that many (most?) of these empty floors above retail or commercial units have no entrance to them, other than through the ground floor unit.

Some dont even have stairs - worked in a shop once where there was just a stira type ladder going from ground floor up to 1st floor.
And 2nd floor was just a regular ladder

As central as you could get, could easily be turned into a 2bed apartment too if it had proper access (& stairs)

Bass Reeves

awec wrote: »

I think one of the biggest hurdles to this is that many (most?) of these empty floors above retail or commercial units have no entrance to them, other than through the ground floor unit.

An awful lot do. It may be a common entrance, some may have rear access. You be surprised at solution that will be found if a chance that you can invest and make a decent return. Bigger issue's are fire and building regulations that is where the cost is

awec

timmyntc wrote: »

Some dont even have stairs - worked in a shop once where there was just a stira type ladder going from ground floor up to 1st floor.
And 2nd floor was just a regular ladder

As central as you could get, could easily be turned into a 2bed apartment too if it had proper access (& stairs)

Yea and any access in and out of these would have to comply with fire safety etc.

It's not as straightforward as people think.

Timing belt

Amadan Dubh wrote: »

With inflation already here and even some hyperbolic media articles on the extent it is due to rise, we could see interest rate rises sooner rather than later to counter inflation and that of course will hurt mortgage holders and benefit the funds as more people go to the rental market. This needs to be protected against as rents are already beyond the ceiling of affordability (increase in rents has slowed substantially). Let's add the mortgage-paying home owners to the disgruntled category of the electorate annoyed at the housing market when these interest rate rises are necessary to curb inflation and then we will have some really interesting and chaotic times in politics.

Central banks will taper the QE before raising the ECB rate. It will have the same effect as an interest rate rise as bond rates will rise along with inter-bank rates which will lead to higher mortgage rates with the exception of trackers. The increase in rates will result in making property less attractive as there will be alternatives to invest in and get yield (assuming a substantial increase in rates)

Bass Reeves

awec wrote: »

Yea and any access in and out of these would have to comply with fire safety etc.

It's not as straightforward as people think.

That is why you need a carrot as investor needs to see a return. As well most of these can never be sold without commercial premises so LL will always have to rent them.

As an aside with a while now I see a lot of these commercial premises vacant as LL's cannot get tenants. This might encourage LL's to return them completely to residential units

Amadan Dubh

Hubertj wrote: »

https://www.irishtimes.com/business/commercial-property/tiktok-agrees-long-term-lease-on-new-dublin-docklands-office-1.4562076?mode=amp

Can someone please explain this. Experts on this thread were saying that when google pulled out of this lease the building would lie empty for years. I just don’t understand.

Great to see TikTok being legitimised after all despite the pathetic attempts by Facebook etc to try to block its access to the US via lobbying of Trump. Competition is the heart of capitalism. It is a direct rival to Facebook so anything that can hurt Facebook is a positive in my book!

Villa05

Bass Reeves wrote:

There is going to be no one pill cures all solution to this issue. You will need a carrot and stick approach. We need a vacant site tax but talks of 10% of value is ludicrous. It should be targeted at urban area's where demand for housing is highest. Where houses are vacant and are not in habitable condition tax relief on there upgrading should be considered to bring them to a minimum standard for habitation. This could be offset against future rental income or existing rental income from elsewhere. Tier it so as to encourage immediate uptake. Same with vacancy tax set a minimum rate now to raise in 2-3years time . Set it at 2% but a full rebate if site is developed and in use within 2years. This would encourage development on smaller sites.

Solid solution, far cheaper than current apartment building costs quoted and reinvigorates town/City centres
I bet that prices quoted for apartment building would drop significantly were this proposal implemented successfully

Would add CPO for properties where owner is not engaging, seen quite a few council notices on properties to establish who the owner is

Bass Reeves

Villa05 wrote: »

Solid solution, far cheaper than current apartment building costs quoted and reinvigorates town/City centres
I bet that prices quoted for apartment building would drop significantly were this proposal implemented successfully

Would add CPO for properties where owner is not engaging, seen quite a few council notices on properties to establish who the owner is

I would not worry about CPO's no need to complicate it. Remember there is a vacancy tax as well. That will focus minds on derlict buildings. A lot of LL's will have serious skillets in refurbishment already. Vacancy tax will encourage sale and tax relief will encourage refurbishment.

Prices for Apartments development will not go down they are more expensive to build than houses.

Amadan Dubh

Villa05 wrote: »

Madium term plans to employ 5k people which is great, office space for 2k, maybe WFH will be significant at tiktok

I haven't seen rent free periods in commercial since the rebooting after the last crash. Is this normal?
Is it another accounting trick given the state is a significant renter of office space?

Any opinions on the deal, don't know much on commercial prices. Is it up/down on pre covid leases

It represents a 15% discount on the rent (1.5 years rent free over 10 years) which is not bad for the landlord given the Grafton St write downs in value of 20/25%.

Rent free offers have been used in London in recent months to try to entice companies into the lease agreements. I think I read an article somewhere last week that the Irish market should be looking to offer longer rent free periods in line with what was being done in London.

There is an underlying assumption to all the talk of property that the economy can return to some sort of pre-covid levels however, which no one knows if that will happen. We have not really experienced any economic fallout from covid as of yet as employees have been supported so it will only be once restrictions and supports are gone that companies can properly assess their business needs. If inflation is indeed back, then employees will be expecting higher salaries over the coming months and if rents are also not going down this will also impact growth plans for companies in Ireland since again it will require paying more to employees to get them to work in Ireland.

DataDude

Villa05 wrote: »

Madium term plans to employ 5k people which is great, office space for 2k, maybe WFH will be significant at tiktok

I haven't seen rent free periods in commercial since the rebooting after the last crash. Is this normal?
Is it another accounting trick given the state is a significant renter of office space?

Any opinions on the deal, don't know much on commercial prices. Is it up/down on pre covid leases

It's a good bit down. 55-60 per sqft vs the pre COVID prime of 60-65 per sqft. But more importantly 18 months rent free is considerably up on pre-COVID where it was 6 months rent free, if at all. It's probably in the region of 10-20% cheaper than it would have been in 2019, based on my understanding.

I'm close to some people who do big commercial property deals in Dublin. It's a buyers market for sure, and expected to remain so for the next few years.

yagan

Bass Reeves wrote: »

Prices for Apartments development will not go down they are more expensive to build than houses.

Cost per rent yield unit is a lot cheaper than single, semi or terrace housing.

Villa05

Bass Reeves wrote:

Prices for Apartments development will not go down they are more expensive to build than houses.

Price seems more dictated by demand than cost of build, if a significant source of extra supply of apartments is tapped, price will fall

Geuze

Bass Reeves wrote: »

There is going to be no one pill cures all solution to this issue. You will need a carrot and stick approach. We need a vacant site tax but talks of 10% of value is ludicrous.

The current VSL is 7%.

https://www.citizensinformation.ie/en/environment/buildings_and_structures/vacant_sites.html

I don't think it has been very effective at releasing sites.

Maybe it should be higher?

PommieBast

Amadan Dubh wrote: »

There is an underlying assumption to all the talk of property that the economy can return to some sort of pre-covid levels however, which no one knows if that will happen. We have not really experienced any economic fallout from covid as of yet as employees have been supported so it will only be once restrictions and supports are gone that companies can properly assess their business needs. If inflation is indeed back, then employees will be expecting higher salaries over the coming months and if rents are also not going down this will also impact growth plans for companies in Ireland since again it will require paying more to employees to get them to work in Ireland.

We are still at Level-5 and the North Quays were already gridlocked at 8am today, so I dread to imagine what it would be like with "normal" traffic. A lot of people are simply not going to tolerate going back to the 10-times-a-week ordeal, especially since the traffic changes will make it worse for most.

Coincidentally I signed my notice letter today for this very reason.

Cyrus

DataDude wrote: »

It's a good bit down. 55-60 per sqft vs the pre COVID prime of 60-65 per sqft. But more importantly 18 months rent free is considerably up on pre-COVID where it was 6 months rent free, if at all. It's probably in the region of 10-20% cheaper than it would have been in 2019, based on my understanding.

I'm close to some people who do big commercial property deals in Dublin. It's a buyers market for sure, and expected to remain so for the next few years.

yes we had a rent review a few months before all this kicked off at 65/sq foot, if it was tomorrow id expect it to be closer to 55.

Bass Reeves

Villa05 wrote: »

Price seems more dictated by demand than cost of build, if a significant source of extra supply of apartments is tapped, price will fall

While prices may fall a little if prices fall too much then building will cease unless costs fall substandically. From 2013-2017 Construction struggled as price achieved at sale was below build price. This is still what prevent a lot of development outside of main urban centers.

RichardAnd

Bass Reeves wrote: »

While prices may fall a little if prices fall too much then building will cease unless costs fall substandically. From 2013-2017 Construction struggled as price achieved at sale was below build price. This is still what prevent a lot of development outside of main urban centers.

Hmm, but if prices fell by a significant, surely it would mean that the demand would not be there to maintain them at a higher level. Thus, if they were declining, then there would be no need to build more? Maybe I'm over-simplifying it.

PommieBast

Bass Reeves wrote: »

While prices may fall a little if prices fall too much then building will cease unless costs fall substandically. From 2013-2017 Construction struggled as price achieved at sale was below build price. This is still what prevent a lot of development outside of main urban centers.

Does anyone have any stats for all those Spencer Dock developments? Walking through the place it feels like a serious glut..

Bass Reeves

RichardAnd wrote: »

Hmm, but if prices fell by a significant, surely it would mean that the demand would not be there to maintain them at a higher level. Thus, if they were declining, then there would be no need to build more? Maybe I'm over-simplifying it.

Yes but that bring us back to 2010-2014. And no building going on and repocussions down the line. Houses and Apartments cost money to build the assumption that if prices fall they will continue to be build is fallacy there is a break even point for builders.

PropQueries

Bass Reeves wrote: »

While prices may fall a little if prices fall too much then building will cease unless costs fall substandically. From 2013-2017 Construction struggled as price achieved at sale was below build price. This is still what prevent a lot of development outside of main urban centers.

I don't think that was the primary reason. That was the period of time that NAMA and the banks were selling off their non-performing land bank portfolios. From what I remember, NAMA first concentrated on selling their UK assets and then the Irish ones. There was no building because there were limited developers/funds in control of the land banks that could be developed on.

Once the funds purchased them, it took the funds a couple of years to shift through what they bought and to decide what to build on them.

I think this build-to-rent craze (outside of the REITS, which is their actual purpose) only took off when Cairn Homes sold their Six Hanover Quay development to a fund for c. €800k per apartment and it caught all other developers by surprise. They had actually intended to sell them for substantially less to individual buyers prior to this sale.

It's only around then that the narrative of the current high cost of building apartments really started being spun in the media as it was the only way they could justify selling in bulk to funds as build-to-rent.

yagan

As 90% of last year apartment sales bypassed the open market and went to BTL yield farming institutions like foreign pension then how can the true domestic demand be measured?

The most important measure that we don't seem to have a handle on is how many of these foreign owned purchases are currently let. Without vacancy taxes and charges it's impossible to regulate this market.