Irish Property Market chat II - *read mod note post #1 before posting*

Board.surf

https://www.boards.ie/discussion/comment/118478847#Comment_118478847

Early-mid 30's here.

Tesco mobile €15 a month, same phone for 4 years, married, 2 kids (hypocritcal older gens say we should have waited until we buy a home...... you know, past menopause). Netflix (7.99 a month)but no cable tv subscription. Drive a 15 year old Prius. = Low tax, low insurance.

We save €1,500 a month. Havent been to a stag in 8 years. No holiday abroad for 5 years. None of my friends (early 30's) had a wedding because they can't afford it. Registry office it is. We have saved so much money that we can't even fit it into numerous credit union accounts. Still can't buy a house as the rate of increase on a simple 3 bed semi outstrips €1,500 a month. We have never had any parental help neither do any of our friends. We work constantly, and save every penny for a house. We have done for many, many years. We are the "core" you speak of. What a stereotype!! Stop blaming us please and thank you. The system for housing is broken and much like the economy we inherited, we didn't create this mess from our pushchairs back 30 years ago.

P.S saving 20% to 30% 30 years ago was much, much less proportionately than it is today. It's basic math. Alas, the generation who pumped up the price of that same house they bought for buttons having this attitude is just classic. Alas, blame the victim.

Timing belt

https://www.boards.ie/discussion/comment/118483563#Comment_118483563

What changed since 2004?

More people undertaking 3rd level education and less people undertaking trades. 3rd level education takes longer to complete and get work experience.

As more people undertake 3rd level education the standards rise. A basic degree in the past was exceptional and meant securing a good job. Now days a Masters is the equivalent of what a degree was in the past when looking for a job as basic degrees are as common as what the leaving cert was 20+ years ago. All that has happened as more people got educated is that the bar to job entry has been raised and as result takes longer to get established. Couple this with it taking longer to save a deposit and it explains the collapse in home ownership for under 30’s

The generational gap is just a distraction

I fully agree with this as comparing how hard it was for one generation to another is pointless. It has always been hard to get on the property ladder and regardless of generation and the generalisation of their spending habits you have people that are doing everything they can to try and get on the property ladder.

The financial crisis was caused by the financialization of housing by Wall Street. The "recovery" has increased this process. Expect the same outcome

The 08 financial crisis was caused by greed and the crash by fear.

Everyone blames Wall Street and the Banks but forget about the greed of people buying properties and flipping them for a profit which drove prices higher. The banks just contribute to this by lending to anyone because of their greed to make more profit.

Roll on today and the greed which started with funds by taking bigger risks has worked its way down to retail investors of the stock market. I do expect a massive correction here once fear sets in and central banks step back.

Will this translate into a drop in house prices? Probably yes if it is a recession and there are enough job looses. But the drop will be modest (5-10%) as it is very unlikely that the country will go bankrupt this time and be hit with austerity measures.

Timing belt

https://www.boards.ie/discussion/comment/118483590#Comment_118483590

P.S saving 20% to 30% 30 years ago was much, much less proportionately than it is today. It's basic math.

If wages were significantly lower and cost of living of basic items (with the exception of rent) more or less the same today. How was it proportionately easier?

As for blaming a previous generation for pumping prices surely you should also be blaming your own generation for pumping prices up the past few years as the same applies. Should they have not bought houses at current prices because it pushes prices higher for future generations. It’s swings and roundabouts.

Board.surf

https://www.boards.ie/discussion/comment/118483910#Comment_118483910

1990

Average house price : 60,000

In 1990 the average price of a house was €60,000. In 1990 a new house cost 4.3 times the average industrial wage.

2022

Average house Price: €311,000

In 2022 the average house price is over 7 times the average industrial wage.

As for blaming another generation, it was in contrast to the constant attenpt to stigmatize and blame "the millennials". It's become a joke. We can place blame all day. However, it was hardly accurate of the poster I was responding to, to simply state people spend too much and imply that they just need to spend less. It's just not true and a cop out. A fall back I hear constantly by older people who claim to have been through it. No, it's not the same as when they were young (and we aren't "young" like they were when houses were available to them). Numbers are numbers. And making light of people's pain and chiming in like they are the experts is just ridiculous. They don't know. They don't get it. They weren't heading for 40 in a world that basically won't ever allow them to have kids or own a home. Or if you have kids you can't afford one anyway.

Board.surf

Pussyhands

Gonna be interesting few months for those buying during rapid inflation. With materials rocketing in price and wages soaring this year prices will no doubt increase by a lot.

BUT.....the experts are also telling us prices are going to come down regarding prices, which means material prices should come down which should mean house prices come down from their higher level.

Timing belt

https://www.boards.ie/discussion/comment/118484041#Comment_118484041

You have only shown one variable which is house prices v average industrial wage. It doesn’t take into account any of the other factors such as disposable income, interest rates, supply of housing etc. looking at something in isolation can lead to unhelpful comments such as Advo toast or it’s previous generations fault.

in reality all that has happened is that interest rates have gone lower which has pushed up the asset value. The issue at the moment is that central bank LTI rules (which stop prices going higher) make it harder to get on the property ladder because they handicap’s people that need to borrow compared with cash buyers or funds have access to debt. Compounding this problem is the fact that investors are chasing yield which pushes them into property which pushes prices higher as there is a limited supply. This makes it more difficult for someone that needs a mortgage because they can still only borrow a set amount and require a larger deposit to get on the property market.

Timing belt

https://www.boards.ie/discussion/comment/118484063#Comment_118484063

As long as there is wage inflation and a shortage of supply property prices will go higher even if inflation falls away later in the year.

Board.surf

https://www.boards.ie/discussion/comment/118484123#Comment_118484123

As one of those people, I'm well aware. Unfortunately even though my family have saved well above the 20% required (second time buyers, as we previously owned a home abroad in our early twenties - fair enough), and even though we satisfy lti, additional affordability ratios implemented by banks throw us out of contention. Mostly due to having children.

Being old enough to be haunted by 2009 (which forced me out of the country), I then wonder if it would even be wise to buy at the current price. The quality of available properties is very bad. Many properties are shed-like and even if we bought a new build, and pumped in that level of equity, we still be head under water should history once again come to pass. I'm extremely prudent and wouldn't be interested in taking a loan for any more than the current lti limites regardless.

Board.surf

Villa05

https://www.boards.ie/discussion/comment/118483819#Comment_118483819

Therin lies the problems and the solutions.

I do believe that apprenticeships are picking up lately, one of the big deterrents to take up is the boom bust nature of construction and terms and conditions of employment and even issues with payment in the bust.

Many experienced tradespeole locally build up a pool of private customers and won't take on any further work. Why? Tried and tested, guaranteed payment, loyal customers. Sub contracting is a much more high risk space that they won't touch it anymore.

It's quiet clear from income levels that those that enter apprenticeships at 16/17 have a huge head start on their piers that follow the college route.

I would add an extra week holiday leave a year for the heavy trades to encourage take up as they have a longer working life, this would help balance it out and make the career more attractive.

We roughly have a consistent demand for 20k houses per year plus commercial sector and public infrastructure. We need a system where construction employment has a significant pernament element to it be that semi state/private or a combination.

This will help balance labour supply

Timing belt

https://www.boards.ie/discussion/comment/118484241#Comment_118484241

The risk you take by not buying is that you may not be able to buy in the future due to age constraints on lending. I was someone that didn’t buy before the ‘08 crash as I was of the opinion that prices were not sustainable. Following the crash I was impacted and because of this was unable to buy and regretted not buying because even with the crash in property prices and negative equity I would have been financially better off buying back then as opposed to paying rent for years.

Timing belt

https://www.boards.ie/discussion/comment/118484303#Comment_118484303

The problem is that it will take time and needs a the government to step in and provide work to keep people in the industry during times of recession. By doing so the impact of any recession would be reduced.

I also think that societies attitude needs to change and appreciate jobs that contribute to society and not just look at how much some earns and judge them on wealth.

Villa05

https://www.boards.ie/discussion/comment/118483819#Comment_118483819

As for Wall Street/Banks over private investors it's a bit chicken and egg, therefore we have to ask who has more influence on the system.?

Who are the biggest lobbyists? Who are getiing the influential jobs in the cental banks? Bankers and Wall Street elites. Who have bought out politicians? Who have recruited politicians.

Wall Street makes more money in volatile boom bust markets. Slow and steady gains is too boring.

A child robbing the unlocked drinks cabinet is wrong but blaming them for getting plastered over the alcoholic parents who left the drinks cabinet unlocked Misses the true root cause

Timing belt

https://www.boards.ie/discussion/comment/118484491#Comment_118484491

The root cause of boom bust is greed and fear and this is what drives every market. whether that greed is at an individual level or at a institutional level because investors/shareholders doesn’t matter as it is human nature that is at the root of it.

likewise blaming governments for high house prices is not looking at the root cause as house prices in every developed country have increased massively so the government can’t be the root cause as they have all adopted different policies. Yes some of there decisions make it worse but it is not the root cause. The root cause is lower interest rates Globally.

Villa05

https://www.boards.ie/discussion/comment/118484241#Comment_118484241

Are you excluded from all the state "help" due to being a previous owner

Villa05

https://www.boards.ie/discussion/comment/118484402#Comment_118484402

To borrow a famous quote from the celtic tiger bubble peak

"its never the wrong time to do the right thing"

Much cheaper to build a children's hospital, retrofit houses, build infrastructure during a recession/downturn.

Save in times of boom, spend when its quiet. We have been doing the opposite for decades

Villa05

https://www.boards.ie/discussion/comment/118484631#Comment_118484631

If, as in 08, some are considered too big to fail, have we removed fear from the equation for the most wealthy and most culpable for the problems?

Government continually Stoke the demand side doing nothing on supply. These government(s) are continually lobbied by banking, construction and landowners hence the mess we have today. Quite an achievement from a position of oversupply of land and property.

The financialization of housing has gone global. 08 was just a tremor

Timing belt

https://www.boards.ie/discussion/comment/118484941#Comment_118484941

Fear still exists as any bank that is considered systematic and to big to fail needs to have a resolution plan in place that would keep the bank operating without the need for a bailout by the government. These resolution plans are normally Coco bonds that are issued to investors whereby the bond gets converted to equity to bail the bank out and the investor looses his investment. This applies to all g-sibs.

Where fear has disappeared in some investors eyes is that they believe that the central bank will step in but that won’t always be the case as if the financial markets are over optimistic compared to the real economy central banks will not step in. China is a good example of this whereby they have deliberately let evergrande go to the wall.

mcsean2163

https://www.boards.ie/discussion/comment/118482258#Comment_118482258

Not according to Dermot Desmond.

https://www.irishtimes.com/opinion/dermot-desmond-everyone-has-a-right-to-a-home-here-is-how-it-can-be-done-1.4195439?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Fopinion%2Fdermot-desmond-everyone-has-a-right-to-a-home-here-is-how-it-can-be-done-1.4195439

he bought his first home as a 22 year old bank clerk.

The estate where I grew up was full of teachers, gardai etc. The houses now sell for over a million in the same estate. It's a LOT more difficult to get a house but it seems a LOT easier to get a job.

enricoh

Was reading in the Indo today that corporation tax today is what stamp duty was for the government coffers in 2007.

Interest rates on government borrowings are set to increase also with Ireland massively exposed. It sounds like the game is up from reading the article, maybe someone can link it ,I don't have a subscription.

Knowing Ireland house prices will probably rise double digits this year all the same!

Timing belt

https://www.boards.ie/discussion/comment/118485507#Comment_118485507

You need to put in context of the time Back then a job as a bank clerk would have been considered a good stable job and if you landed it you were considered well off compared to most. Likewise a teacher or a Garda was also considered good jobs.

today people don’t go into those jobs for pay or status but because it’s something they want to do. I’m not saying it’s right just pointing out that times have changed

Bass Reeves

https://www.boards.ie/discussion/comment/118485507#Comment_118485507

You went straight from the leaving certificate into the bank as a Bank Clerk at as young as 17 years of age. By your twenties you would be on serious money as a bank Clerk. You also had access to preferential bank loans not just on interest rates but also multiples lend to bank staff.

DD would not have been the average bank clerk either.

Timing belt

https://www.boards.ie/discussion/comment/118485657#Comment_118485657

Plus you would need to know the right people to land the job in the first place.

Bass Reeves

https://www.boards.ie/discussion/comment/118485674#Comment_118485674

Ya that was a big thing with Bank clerks. While you had to pass the exams it seems, the system was hugely open to influence by local bank managers who would put in the word for the local business people's children who would apply. These would find it easier to have a deposit in place in there early twenties.

His was not your average Joe Soaps life. He was born in Macroom , bought up in Marino in Dublin. Went to the Good Counsel College in New Ross.

He was not your average Bank Clerk either he went working for Citi Bank in Dublin so was probably a stock trader by the time he was 20 years of age

https://www.google.com/url?sa=t&source=web&rct=j&url=https://en.m.wikipedia.org/wiki/Dermot_Desmond&ved=2ahUKEwijk--M8rb1AhVzoFwKHfjtBLkQmhN6BAgFEAI&usg=AOvVaw3D6nqHxiNWtRpbP0geEF4F

Villa05

https://www.boards.ie/discussion/comment/118485105#Comment_118485105

I don't think that fear is felt by high finance. Davy stockbrokers being a good example of these people can do what they like and get away with it supported by the system. That culture of the 00's is still endemic

Also when the sh1t hits the fan and the financial system is threatened, they will be bailed out, a scapegoat will be found and off we go again. Main street will foot the bill.

Timing belt

https://www.boards.ie/discussion/comment/118486149#Comment_118486149

You are saying that all the new regulation that was put in place to prevent a bank being bailed out again won't work? Are you aware of all the changes that were implemented or is it just a gut feeling you have?

Villa05

https://www.boards.ie/discussion/comment/118486174#Comment_118486174

It's a gut feeling.

Are the regulations global or EU specific? How would they hold up to asset prices not seen since 1929 caused directly by cental bank policy?

What if too big to fail investment banks say this is central banks/political issue?

Timing belt

https://www.boards.ie/discussion/comment/118486672#Comment_118486672

regulations are global…adopted differently in some countries such as the Uk who introduced ring fencing meaning the investment bank would go bankrupt but the retail bank would survive.

Not adopted in the EU or US because of the belief it would encourage more risk taking by investment banks….instead those banks have had to hold massive amounts of capital and liquidity buffers and need need to issue bail in bonds that if the bank failed the bonds would be converted to equity to recapitalise the bank thereby preventing the need for government bailout’s like in 08.

mcsean2163

https://www.boards.ie/discussion/comment/118485657#Comment_118485657

Yes Dermot Desmond must be lying about being a junior bank clerk?

What about the other people from poor farming backgrounds one of whom bought her own house on a single income? I guess they are just anomalies too?

The wage multiplier shows it was much easier to get on the property ladder before the twenty first century. Anyway, this is really boring. You and your pals have entrenched views that no amount of logic will dissuade.

Can we get back to property discussion? It feels like we're trying to boost our population to make our debt look less awful. All around us are big apartment developments going up but maybe they'll be rented ASAP? Inflation to boost prices in 2021?

https://www.boards.ie/discussion/comment/118485507#Comment_118485507

The social housing got a bit too close to Dermot and Dermo & the wife had an absolute wobble over it and decided to get involved in the debate. (No doubt for the good of the nation)

https://www.boards.ie/discussion/2058088497/dermot-desmond-doesnt-want-apartments-in-d4

Villa05

https://www.boards.ie/discussion/comment/118486812#Comment_118486812

Do you think this is enough?

It was the investment banks that brought down the system, the retail banks were collateral damage. Asset prices are multiples of 08

Bass Reeves

https://www.boards.ie/discussion/comment/118487492#Comment_118487492

Banks back then gave preferential loans to staff. It was like a 4% reduction if I remember right. They slow allowed higher multipliers. If he paid 15k for his house at an interest rate of 6% the repayments were 100/month. With the reduced interest the repayments were 75/month. He could have borrowed 20k and he still have the same repayments of 15k back then .

As well he worked in Citi Bank which was.nit a retail bank.in Ireland. So he was not your average Bank Clerk. Houses were four walls, with timber ( pine/ deal) single glazed windows and doors. One bathroom, one pendant light in every room, one light switch and one plug in every room except kitchen and living room. Houses were to builders finish with no kitchens, fireplaces, furniture or white goods. As well back lawn had to be done yourself, front lawn was a pat h of earth with grass seed thrown in it.

The multipliers were virtually the same as women have up work when married. Now it's 3.5 times two income but it's a totally different product.

fliball123

https://www.boards.ie/discussion/comment/118487724#Comment_118487724

Sorry that is wrong.. There were multiple issues going on in 08 for that bust to happen, Ireland ramped up spending and had build up a debt and deficit in the hundreds of billions before the bust (08), The main culprit for our crash was Bertie buying votes and spending like there was no tomorrow, the government based spending on stamp duty that was 8% and thought this cash cow would never disappear. Then the banks got caught with their pants down and everything went south, I hate what the banks did but to say they brought the system down is wrong, they were just the straw that broke the camels back. You could be right by the way our corpo tax is looking like it could similar with how our stamp duty was viewed in that respect its just expected that this will roll in year on year but it could explode in our faces going forward.

What would you like to see done Villa, I know we have a heated debate but genuinely unless people can put forward options and realistic ones for how people can buy a house for this or any later generation it is going to be an issue, remember yeah the older generation may have a house but they also have kids and everyone living in this country will all have to jump the same hurdles and run the same race.

Wanderer78

https://www.boards.ie/discussion/comment/118488291#Comment_118488291

once again, the primary trigger of the 08 crash was an over reliance on the private sector money supply, i.e. the credit supply, which is created by banks when lending to debtors, this credit was in turned used to inflate property markets, not just here, but in many countries across the world. this placed major sectors, in particular the fire sectors(finance, insurance and real estate) in lead roles in running our economies, and the rest is history. yes we all know public financing was also largely based on these activities, but the facts are.....

Credit and Debt USA.png

Ireland Debt.jpg

combat14

interesting to see banks in new zealand clamping down on "frivilous" spending when considering mortgage lending - mortgage approvals are seeing a huge drop there after govt. introduced new lending rules to protect market from subprime lending & crash

https://www.theguardian.com/world/2022/jan/17/new-zealand-banks-reject-home-loans-over-spending-on-christmas-gifts-and-pets-as-tighter-rules-hit

Marius34

https://www.boards.ie/discussion/comment/118488390#Comment_118488390

Do you understand Ireland private debt diagram you posted? What does it tells you? Do you see any serious issues with it?

Villa05

How to solve multiple issues by focusing on 1. Take the figures in this article from the UK and think of all the advantages we have over them as Ireland is a blank canvas compared to the uk

Almost all the materials required for housing are manafactured/sourced in Ireland. We are an attractive proposition to foreign labour

https://www.theguardian.com/books/2022/jan/17/the-big-idea-could-fixing-housing-fix-everything-else-too

Timing belt

https://www.boards.ie/discussion/comment/118487724#Comment_118487724

Banks can still get into difficulty but the regulation should be enough to prevent a government needing to bailout a bank like in ‘08.

Villa05

https://www.boards.ie/discussion/comment/118489824#Comment_118489824

OK, what about countries, I'm sure those traditional defaulting countries are taking advantage of super low interest rates that don't reflect the true risk

Wanderer78

https://www.boards.ie/discussion/comment/118488647#Comment_118488647

yes i do, again, when you encourage a primarily credit fueled economy, it generally leads to a credit fueled asset bubble, which generally eventually goes kaboom! thats exactly what both of those graphs show!

Timing belt

https://www.boards.ie/discussion/comment/118489902#Comment_118489902

countries can definitely get into difficulty especially countries that issued debt in a foreign currency such as USD because devaluing their currency is not a real option.

You must remember that if rates rise the market value of sovereign debt issued at a low rate drops in price and a country could buy this back at a large discount.

A lot of people look at the actual amount of debt issued in isolation but a country could reduce this very fast if rates rise by buying back the debt from the market at discounted prices and issuing new bonds at a higher rate. Rather than looking at the total debt issued it is more important to look at the countries ability to repay the debt.

Timing belt

https://www.boards.ie/discussion/comment/118489951#Comment_118489951

No it doesn’t you are looking at debt as a % of GDP.

if the economy isn’t growing or in recession the debt as a % of GDP will rise even if there has been no increase in debt.

Timing belt

Slide from NTMA Investors Presentation issued in Jan 2022 on residential property prices.

Marius34

https://www.boards.ie/discussion/comment/118489951#Comment_118489951

If you look again at the graph and asset prices, you would realize the graph doesn't follow your logic at all. Economy didn't crash when private debt has reached peak back in 2015. Sine 2015 private credit is going down, while asset prices went up.

Villa05

https://www.boards.ie/discussion/comment/118491072#Comment_118491072

Is that based on rents?

Timing belt

https://www.boards.ie/discussion/comment/118491552#Comment_118491552

No it is based on disposable income, housing stock, mortgage interest rates etc.

I believe the formula is as follows:

Villa05

https://www.boards.ie/discussion/comment/118491686#Comment_118491686

Thanks, have you a link to the full presentation. There is some swing between oecd measure and NTMA

Timing belt

https://www.boards.ie/discussion/comment/118491913#Comment_118491913

The following is the link to the NTMA Investor Relations presentation

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

I think the data behind the ECB Graph can be found on the following report in the ECB statistical data warehouse:

https://sdw.ecb.europa.eu/browse.do?node=9698056

Villa05

https://www.boards.ie/discussion/comment/118491296#Comment_118491296

How is the activity of investment funds captured? Is there purchasing from share capital/ investor funds. Would it be hidden and not show up in that graph?

Again I'm assuming that graph is for Ireland? How is it effected by what many investors call leprechaun economics where GDP is greatly suspect and completely detached from the real economy