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

Timing belt

PropQueries wrote: »

Thanks for the definition. Actually interesting.

But I assume these lease up schedules projections are based on the last development in the area that achieved a certain occupancy and at a certain price.

No it will be based on a marketing plan and what they they think they can charge rent wise.... Sometimes it pays off other times not and they have to reduce rent or play the waiting game a bit longer.

My belief is that developers saw the initial success of Cairn Homes Marianella development (selling) and said me too.

Too many entered this segment of the market and there wasn’t enough buyers for these type of apartments. Basically, Marianella soaked up whatever limited buyer demand was there for these type of developments.

Then, when there were no buyers for their completed apartments, they switched their completed units to build-to-rent.

Maybe the first ones off the block managed to rent them to e.g. Google employees etc. but the ones following them didn’t given the limited demand.

Then, hey presto, the state enters the fray using the funds as middle men to make it look like it’s not a back door bailout of these developers.

you keep using this as an example when it is different as these were not built to rent initially

The funds are only interested in buying more of these built-to-rent units as long as the state is there soaking up all the significant excess supply in the background IMO

The state will stop eventually (I believe sooner than many expect) and then whoever’s left is gone belly up IMO.

That’s how I would sum up the past 5 years.

The funds don't give a monkey's who is paying the rent as long as they have established a rental price for the block of flights and occupancy is 90%+.

The state are not going to stop paying unless they have an alternative.... i.e. social housing to put people in which doesn't look like it will happen anytime soon. With the exception of docklands most of these apartments will be occupied as people have no where else to live.

As I said previously I would expect more and more funds to flood the market and buy more blocks of apartments or build them from scratch. I don't see them going belly up as the funds have generous margins that they could take a lower rent and still have a good return in this low rate environment. They won't choose to as there aim is to maximise profit.

The other thing worth mentioning is that a vacancy tax if introduced would probably only be applicable to the 145 units in the established properties.... I can't see them applying a vacancy tax for properties in a lease up period... Maybe I am wrong but that would not encourage them to build to rent which is one of they key deliverables that the government is using to address the housing issues.

PropQueries

Timing belt wrote: »

No it will be based on a marketing plan and what they they think they can charge rent wise.... Sometimes it pays off other times not and they have to reduce rent or play the waiting game a bit longer.

you keep using this as an example when it is different as these were not built to rent initially



The funds don't give a monkey's who is paying the rent as long as they have established a rental price for the block of flights and occupancy is 90%+.

The state are not going to stop paying unless they have an alternative.... i.e. social housing to put people in which doesn't look like it will happen anytime soon. With the exception of docklands most of these apartments will be occupied as people have no where else to live.

As I said previously I would expect more and more funds to flood the market and buy more blocks of apartments or build them from scratch. I don't see them going belly up as the funds have generous margins that they could take a lower rent and still have a good return in this low rate environment. They won't choose to as there aim is to maximise profit.

But occupancy is most likely only at 90% because of the state through HAP or other long term lease agreements.

For example, according to RTÉ, Ires Reit back in 2018:

“The company, which last week announced profits of €19 million for the first half of this year, confirmed to RTÉ's Morning Ireland that it has 303 tenants receiving a Housing Assistance Payment (HAP).

It equates to 11% of I-RES's total portfolio of rental properties of 2,678.

In 2017, just 4% of the company's properties were rented to State-funded tenants.”

After RTÉ did a documentary on the rents they were charging the state, Ires REIT don’t seem to break down this data anymore, but one can assume the percentage is much higher today.

If someone can find the data, please link it as I’m genuinely interested.

Without the state back-stop, the majority of build-to-rent developments wouldn’t pull in any real money and wouldn’t achieve anywhere near 90% occupancy IMO.

If the state pulls back and one small rise in interest rates and they don’t make any sense.

My reason for thinking the state will pull back much sooner than many believe. I think they’re currently soaking up all that ex AirBnB and ex student rental supply in Dublin (outright purchases or long term lease agreements) and are much further along reaching their housing targets than many people believe.

Link to RTÉ article here: https://www.rte.ie/news/2018/0809/983942-housing-social-tenancies/

Timing belt

PropQueries wrote: »

But occupancy is most likely only at 90% because of the state through HAP or other long term lease agreements.

For example, according to RTÉ, Ires Reit back in 2018:

“The company, which last week announced profits of €19 million for the first half of this year, confirmed to RTÉ's Morning Ireland that it has 303 tenants receiving a Housing Assistance Payment (HAP).

It equates to 11% of I-RES's total portfolio of rental properties of 2,678.

In 2017, just 4% of the company's properties were rented to State-funded tenants.”

After RTÉ did a documentary on the rents they were charging the state, Ires REIT don’t seem to break down this data anymore, but one can assume the percentage is much higher today.

If someone can find the data, please link it as I’m genuinely interested.

Without the state back-stop, the majority of build-to-rent developments wouldn’t pull in any real money and wouldn’t achieve anywhere near 90% occupancy IMO.

If the state pulls back and one small rise in interest rates and they don’t make any sense.

My reason for thinking the state will pull back much sooner than many believe. I think they’re currently soaking up all that ex AirBnB and ex student rental supply in Dublin (outright purchases or long term lease agreements) and are much further along reaching their housing targets than many people believe.

Link to RTÉ article here: https://www.rte.ie/news/2018/0809/983942-housing-social-tenancies/

These built to Rent apartments will be occupied even if there was no HAP payments... The funds may need to settle for a lower rent but it is would still be very profitable for them.

The difference if there was no HAP is that there would be more homelessness as there are no alternatives out there at present. yes the government are buying, leasing, renting everything they can get there hands on as homelessness does not make good news.

Yes HAP has grown from something like 5m in 2014 to just under 1bn today.

That is not a surprise when rents were rising by double digits every year and wages were not.

Rent will continue to rise in the short term 2-3 years but then as more supply comes on line rents will gradually fall... This is what has been the experience of countries that have had institutional investors enter the market after 2008 and has been well documented in research papers.

The funds are here to stay for 20+ years unless the likes of SF get in power and deliver shed loads of social housing by the truck load.

PropQueries

“Yes HAP has grown from something like 5m in 2014 to just under 1bn today.

That is not a surprise when rents were rising by double digits every year and wages were not.”

Would you not see a correlation between both the above i.e. HAP going from €5m to €1bn and rents doubling?

The rent rises were artificial and if the state makes any significant headway in reaching their targets and decides to pull back, rents could reverse by as much and much more quickly IMO

We’re still building residential units, we’re still building student accommodation units, homes are continuing to enter probate, we’re still refurbishing.

It’s my viewpoint and I could be wrong but I believe this supply/demand imbalance has already been corrected and the patient sellers holding out in the background are in for a very unpleasant surprise in the very near term IMO

Timing belt

PropQueries wrote: »

“Yes HAP has grown from something like 5m in 2014 to just under 1bn today.

That is not a surprise when rents were rising by double digits every year and wages were not.”

Would you not see a correlation between both the above i.e. HAP going from €5m to €1bn and rents doubling?

Of course there is a correlation and there is also a price correlation with the lack of rental properties on the market at a time when people had no option but to rent as owning a property was not in their reach with the LTV and LTI restrictions.

The rent rises were artificial and if the state makes any significant headway in reaching their targets and decides to pull back, rents could reverse by as much and much more quickly IMO

The rent rises were not artificial... you seem to think that everyone renting is on HAP which is not the case.... rents rose as there was a shortage of supply as BTL investors could not get loans the way the used to before 2008. Houses that should have been repossessed never came back onto the market as they were never repossessed. Institutional investors stepped in to fill the void and charged top rate for doing so.

We’re still building residential units, we’re still building student accommodation units, homes are continuing to enter probate, we’re still refurbishing.

It’s my viewpoint and I could be wrong but I believe this supply/demand imbalance has already been corrected and the patient sellers holding out in the background are in for a very unpleasant surprise in the very near term IMO

We disagree on what supply is required.... I have read the reports for ESRI, central bank etc and I agree with them when they say we need 20k+ of new housing stock every year. I have my view on this you have yours.... time will tell which one of us was correct.

If I am wrong then there will be an oversupply and rent and prices will be flat or drop... If you are wrong and there is not enough supply then we will be in a similar position to pre-covid and will probably need more intervention by the government which will probably make the housing situation worse... as every time they try and fix something they tend to generate 2 new issues.

mcsean2163

schmittel wrote: »

I think the problem is they are not coming to the market.

Go down to islandbridge and marvel at the empty luxury apartments. Go to daft and observe there are maybe 4 types of apartments listed for rent. They don't list all the empty apartments in a development...

TobyHolmes

mcsean2163 wrote: »

Go down to islandbridge and marvel at the empty luxury apartments. Go to daft and observe there are maybe 4 typese of apartments listed for rent. They don't list all the empty apartments in a development...

this is what I'm seeing in real life- empty apartments- but im being told on here - its not empty #confused

Timing belt

TobyHolmes wrote: »

this is what I'm seeing in real life- empty apartments- but im being told on here - its not empty #confused

Luxury apartments are empty they are trying to normalize a high rent so will release the units over a 12-15 month period. If there is demand at the price it will be quicker but we all know that those rents are top end.

TobyHolmes

Timing belt wrote: »

Luxury apartments are empty they are trying to normalize a high rent so will release the units over a 12-15 month period. If there is demand at the price it will be quicker but we all know that those rents are top end.

i see - trying to manipulate the market- interesting

Idbatterim

TobyHolmes wrote: »

do you mean the lack of supply in affordable housing in Dublin?

The outrageous prices that the government create...

Timing belt

TobyHolmes wrote: »

i see - trying to manipulate the market- interesting

Yes they are private institutions and will try and maximise their profit.... they have planned financially for it and at the end of the period they either achieve their objective and lease all the units at the desired rent or have to decided to reduce the rent to fill.

I am sure that on top of these there are other apartments that have become vacant during Covid and the landlord is reluctant to accept a lower rent because of the Rent Pressure Zones. You could say that RPZ's are manipulating the market as if they were not there landlords would accept lower rent knowing they could raise the rent in the future when economic conditions improve. Don't get me wrong we need RPZ's but there is a consequence to every action to manipulate the market.

Bass Reeves

TobyHolmes wrote: »

i see - trying to manipulate the market- interesting

If you are a large scale landlord with ROZ's it make no sense dropping rents. Your yield across the complete portfolio drops as tenants move to cheaper accommodation . It makes much more sense to take the hit on the empty units rather than dropping prices to fill vacancies. Even for private landlords who have multiple units it makes more sense to maintain your yield by holding out for your existing level of rent. As well some landlords may use this opportunity to. Upgrade poorer quality units to improve rents

Cyrus

PropQueries wrote: »

Never said marina. Similar developments “may”.

Right , so it was a throwaway post and you don’t really have an basis for what you said ....

hometruths

Timing belt wrote: »

Yes they are private institutions and will try and maximise their profit.... they have planned financially for it and at the end of the period they either achieve their objective and lease all the units at the desired rent or have to decided to reduce the rent to fill.

I am sure that on top of these there are other apartments that have become vacant during Covid and the landlord is reluctant to accept a lower rent because of the Rent Pressure Zones. You could say that RPZ's are manipulating the market as if they were not there landlords would accept lower rent knowing they could raise the rent in the future when economic conditions improve. Don't get me wrong we need RPZ's but there is a consequence to every action to manipulate the market.

I think the biggest impact of RPZs is with the small BTL investor/accidental landlord who is thinking of the capital value.

Because of the capped rent increases if you want to sell a property that is currently tenanted or recently vacated the existing yield sets a ceiling on the valuation.

In a strong market is far better to leave it vacant for long enough to reset the RPZ issues, and sell it without this burden. Property owners are incentivised to leave units vacant.

This is also applies to situations where for whatever reason it does not suit to sell the property in the short term - eg probate. RPZ legislation (both rent increases and tenants rights) means it is better to leave it empty until such time that you are ready to sell.

Of course this all only makes sense when prices and rents are rising or stable. If they start to turn down, you could see a lot of these properties come to the market in short order.

Bass Reeves

schmittel wrote: »

I think the biggest impact of RPZs is with the small BTL investor/accidental landlord who is thinking of the capital value.

Because of the capped rent increases if you want to sell a property that is currently tenanted or recently vacated the existing yield sets a ceiling on the valuation.

In a strong market is far better to leave it vacant for long enough to reset the RPZ issues, and sell it without this burden. Property owners are incentivised to leave units vacant.

This is also applies to situations where for whatever reason it does not suit to sell the property in the short term - eg probate. RPZ legislation (both rent increases and tenants rights) means it is better to leave it empty until such time that you are ready to sell.

Of course this all only makes sense when prices and rents are rising or stable. If they start to turn down, you could see a lot of these properties come to the market in short order.

I think again like many you misunderstand the market. There are fewer accidental landlords and fewer landlords with 1-2 properties. As long as larger LL hold the line it easier for smaller LL's to hold for there price. In cities there is fewer LL's owning 1-2 properties compared to 10 years ago. Most accidental LL's from that period have exited the market in Dublin as prices reached a place where they could exit without losing money. Most larger LL's work on yield capital appreciation is not something they are concerned with in the short term. If you worry about the drop in value of property it is not something you should invest in

Most accidental LL's now are people who will have inherit property from parents or relations. They may have undervalued the property to avoid inheritance tax. As there may be little or no debt they are not financially stressed the willingness to pay 33% on any gain will curb any tendancy to sell.

We have been down this cul de sac before. Very few in the property game worry about capital value in the short term. Except for some specific properties most houses are valued as much by owner occupiers buyers as by LL's. Most larger LL's who are the most likely LL who will be buying can manage RPZ's limits by revamping a house

hometruths

Bass Reeves wrote: »

I think again like many you misunderstand the market. There are fewer accidental landlords and fewer landlords with 1-2 properties. As long as larger LL hold the line it easier for smaller LL's to hold for there price. In cities there is fewer LL's owning 1-2 properties compared to 10 years ago. Most accidental LL's from that period have exited the market in Dublin as prices reached a place where they could exit without losing money. Most larger LL's work on yield capital appreciation is not something they are concerned with in the short term. If you worry about the drop in value of property it is not something you should invest in

Most accidental LL's now are people who will have inherit property from parents or relations. They may have undervalued the property to avoid inheritance tax. As there may be little or no debt they are not financially stressed the willingness to pay 33% on any gain will curb any tendancy to sell.

We have been down this cul de sac before. Very few in the property game worry about capital value in the short term. Except for some specific properties most houses are valued as much by owner occupiers buyers as by LL's. Most larger LL's who are the most likely LL who will be buying can manage RPZ's limits by revamping a house

Do you have any stats re "fewer landlords with 1-2 properties."?

PropQueries

Bass Reeves wrote: »

I think again like many you misunderstand the market. There are fewer accidental landlords and fewer landlords with 1-2 properties. As long as larger LL hold the line it easier for smaller LL's to hold for there price. In cities there is fewer LL's owning 1-2 properties compared to 10 years ago. Most accidental LL's from that period have exited the market in Dublin as prices reached a place where they could exit without losing money. Most larger LL's work on yield capital appreciation is not something they are concerned with in the short term. If you worry about the drop in value of property it is not something you should invest in

Most accidental LL's now are people who will have inherit property from parents or relations. They may have undervalued the property to avoid inheritance tax. As there may be little or no debt they are not financially stressed the willingness to pay 33% on any gain will curb any tendancy to sell.

We have been down this cul de sac before. Very few in the property game worry about capital value in the short term. Except for some specific properties most houses are valued as much by owner occupiers buyers as by LL's. Most larger LL's who are the most likely LL who will be buying can manage RPZ's limits by revamping a house

I would believe that paying 33% CGT or paying the current rates of inheritance tax and the relatively high thresholds will look like a bargain in about 5 years time.

Many economists and governments are now suggesting that taxes on property and inheritance taxes are going to be the most looked at sources of future Government revenue around the world as it's one of the few assets/sources of revenue that can't be picked up and shipped abroad.

The pre-covid pension crisis hasn't gone away (it's actually got significantly worse with the low interest rate environment) and they're going to be looking very seriously at both higher property taxes, CGT and inheritance taxes/lower thresholds over the next few years.

Workers are already taxed to the hilt so outside of carbon taxes, there's not much left to tax to pay for both the future pensions and legacy debt built up over the past c. 15 years.

Timing belt

PropQueries wrote: »

I would believe that paying 33% CGT or paying the current rates of inheritance tax and the relatively high thresholds will look like a bargain in about 5 years time.

Many economists and governments are now suggesting that taxes on property and inheritance taxes are going to be most looked at sources of future Government revenue around the world as it's one of the few assets/sources of revenue that can't be picked up and shipped abroad.

The pre-covid pension crisis hasn't gone away (it's actually got significantly worse with the low interest rate environment) and they're going to be looking very seriously at both higher property taxes, CGT and inheritance taxes/lower thresholds over the next few years.

Workers are already taxed to the hilt so outside of carbon taxes, there's not much left to tax to pay for both the future pensions and legacy debt built up over the past c. 15 years.

The age at which you get to draw a pension will change and people will be working longer.

PropQueries

Timing belt wrote: »

The age at which you get to draw a pension will change and people will be working longer.

That's very true. I would believe anyone under 50 won't be getting any meaningful pension, whether they they have a public sector pension, are paying into a private pension or hope to just live off the regular state pension.

Bass Reeves

PropQueries wrote: »

I would believe that paying 33% CGT or paying the current rates of inheritance tax and the relatively high thresholds will look like a bargain in about 5 years time.

Many economists and governments are now suggesting that taxes on property and inheritance taxes are going to be the most looked at sources of future Government revenue around the world as it's one of the few assets/sources of revenue that can't be picked up and shipped abroad.

The pre-covid pension crisis hasn't gone away (it's actually got significantly worse with the low interest rate environment) and they're going to be looking very seriously at both higher property taxes, CGT and inheritance taxes/lower thresholds over the next few years.

Workers are already taxed to the hilt so outside of carbon taxes, there's not much left to tax to pay for both the future pensions and legacy debt built up over the past c. 15 years.

Again we go down the cul de sac of things that may influence property prices in 10-15 years time. I was dealing with a post that specifically was dealing with a short term preceived thread to house prices.

Even at that at present capital taxes on houses are expensive in Ireland most suggesting on new taxation will follow the property tax route not the capital side as these are too variable. That is why we had the collapse in our national finances in the 2008-2012 period

Geuze

PropQueries wrote: »

Workers are already taxed to the hilt so outside of carbon taxes, .

This statement is false, as has been established over and over again.

Yes, the top MTR kicks in at a low income here, at 35,300, yes.

But overall, workers are not heavily taxed here compared to many other EU countries.

Our direct taxes are low across many earners.

Our income tax system is very progressive, so taxes are lower than average on lower earners, but then rise sharply.

Timing belt

It looks like the ECB may cut interest rates in a effort to weaken the EUR in an effort to fight of deflation.

I think that would bring the tracker mortgages under 1%

PropQueries

Bass Reeves wrote: »

Again we go down the cul de sac of things that may influence property prices in 10-15 years time. I was dealing with a post that specifically was dealing with a short term preceived thread to house prices.

Even at that at present capital taxes on houses are expensive in Ireland most suggesting on new taxation will follow the property tax route not the capital side as these are too variable. That is why we had the collapse in our national finances in the 2008-2012 period

CGT on houses aren’t high really. The CGT on property basically taxes the free gains made from inflation and there’s a strong argument they should be much higher.

The argument that people don’t sell if CGT starts increasing will become weaker and weaker as time goes by as people realise it’s only going one way i.e. up and going progressively higher IMO.

Lowering CGT only works if potential sellers were initially holding out for future lower CGT.

If their pensions are also progressively getting eroded at the same time, they will look at getting cash from wherever they can get it i.e. selling that property that they were holding onto.

JimmyVik

PropQueries wrote: »

That's very true. I would believe anyone under 50 won't be getting any meaningful pension, whether they they have a public sector pension, are paying into a private pension or hope to just live off the regular state pension.

What will they live off then?
The middle income earner I guess.

PropQueries

Geuze wrote: »

This statement is false, as has been established over and over again.

Yes, the top MTR kicks in at a low income here, at 35,300, yes.

But overall, workers are not heavily taxed here compared to many other EU countries.

Our direct taxes are low across many earners.

Our income tax system is very progressive, so taxes are lower than average on lower earners, but then rise sharply.

True. Except other countries get free healthcare, have lower insurance costs, lower costs of living etc. Our average income earner tax rates are incredibly high and the thresholds are very low given we get nothing back.

They could try increasing taxes on the low earners, but the vast majority of them are already under water given the high cost of living here so I don’t buy that that will happen.

That only leaves taxing higher earners more or increasing property taxes, CGT or taxing or lowering pensions.

PropQueries

Timing belt wrote: »

It looks like the ECB may cut interest rates in a effort to weaken the EUR in an effort to fight of deflation.

I think that would bring the tracker mortgages under 1%

Let’s see how Biden responds to that. Trump already did the legwork so will be interesting

hometruths

Bass Reeves wrote: »

Again we go down the cul de sac of things that may influence property prices in 10-15 years time. I was dealing with a post that specifically was dealing with a short term preceived thread to house prices.

Even at that at present capital taxes on houses are expensive in Ireland most suggesting on new taxation will follow the property tax route not the capital side as these are too variable. That is why we had the collapse in our national finances in the 2008-2012 period

I'm still curious about what sort of numbers you are talking about when you say "fewer landlords with 1-2 properties"?

mcsean2163

Timing belt wrote: »

The age at which you get to draw a pension will change and people will be working longer.

Maybe in the public sector but can't see it going much higher in the private sector.

Bass Reeves

PropQueries wrote: »

CGT on houses aren’t high really. The CGT on property basically taxes the free gains made from inflation and there’s a strong argument they should be much higher.

The argument that people don’t sell if CGT starts increasing will become weaker and weaker as time goes by as people realise it’s only going one way i.e. up and going progressively higher IMO.

Lowering CGT only works if potential sellers were initially holding out for future lower CGT.

If their pensions are also progressively getting eroded at the same time, they will look at getting cash from wherever they can get it i.e. selling that property that they were holding onto.

CGT is 33%. Indexation relief is gone. With the other costs on entering and exiting property very few will sell unless they require the money for something else. It is unlikely to increase as well as you get older you need for money decreases unless you go into a nursing home. Most will battle on with the property as there is no pint in paying CAT and CGT on the same money

Anyway like I said this is not going to be a factor in the medium term not to mind short term therefore wlll not effect house prices in 2021

Timing belt

mcsean2163 wrote: »

Maybe in the public sector but can't see it going much higher in the private sector.

It will be 75 in a few years in both public and private.