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

Blut2

https://www.boards.ie/discussion/comment/121754818#Comment_121754818

+1 to all of this, apart from the holiday home.

I'm an owner of two properties and I'd love if prices dropped by 30% tomorrow. I've got a significant outstanding mortgage (I'm young-ish) on one of them so in theory would be more impacted than most by potentially being moved slightly into negative equity if the drop was that much. But I don't plan on selling any time for a few decades so in reality it wouldn't mean anything negative for my day to day life.

It would, however, help my friends and family who're not home owners yet to buy. And would help my business get staff. And, on a general basis, I'd feel happier with more Irish people able to own their own homes. All three of those make such a drop completely worth it to me. And according to both the polls and my own anecdotal evidence, a majority of other homeowners too.

Blut2

https://www.boards.ie/discussion/comment/121755696#Comment_121755696

We have absolutely zero spare labour capacity in the construction industry in Ireland at present. And billions of euros worth of government projects waiting to go, with funding available, that just need that very capacity.

If the private sector reduced supply (which may or may not happen at a significant level, exact profit margins in the industry at present are murky at best) the government could and would absolutely step in to hoover up the spare capacity and put it to use.

AdamD

https://www.boards.ie/discussion/comment/121759393#Comment_121759393

The economic event required to drop our housing market by 30% would also leave our government without the funding capacity to do that. There is no scenario where property in this country drops by 30% and we aren't all much worse off.

As somebody said above, the market staying flat during an inflationary period would be a far better scenario which would make property more affordable.

Blut2

https://www.boards.ie/discussion/comment/121759415#Comment_121759415

There have been plenty of measures discussed repeatedly in this very thread that would reduce property prices without requiring a general recession.

Remove the demand side incentives like the FHS instantly. Provide incentives/disincentives to move private sector construction workers from commercial to housing. Remove the tax breaks for REITs, and increase the stamp duty for multiple-property at a time purchases. Massively expand our training&apprentice program, and then use these workers over time to increase housing supply. etc

We mightn't get all the way to 30% (thats just the figure under discussion because it a level of drop which polls show most home owners support), but we'd certainly make a dent in things.

theboringfox

What people say and what people do in privacy of the ballot box cam be two different things. I see posts on here all the time with this humble brag stuff where they are saying I bought my place for X and now the houses are selling for Y and feel so bad. People love that their houses are worth more. Its an asset. The more value the more equity. That might be equity they can release in retirement through downsizing or equity release loan or inheritance for kids. It does matter and its not an Irish thing. A proper functioning market should have low single digit annual growth. If house prices are only rising 2% it wont create a frenzy. And I do support the view that grants should be unwound including rent a room. Should be withdrawn over a number of years. Itll just remove the heat from market and might even lead to falls. Critically it will stop people rushing to buy today for fear of they dont house buying might be out of reach. That becomes a vicious cycle when sets in as everyone rushes to buy.

PeadarCo

https://www.boards.ie/discussion/comment/121759440#Comment_121759440

The 30% reduction is the price drop required to get to 300k as your average house price assuming the average house price in the state as currently being 430k.

The problem with a lot of your suggestions is that it will only reduce the investment into housing and reduce supply.

Any large reduction would reduce the amount of money banks can lend for mortgages and the wider economy. Negative equity has very practical impacts. Houses are held as collateral for mortgages. If the value of this collateral reduces significantly the value of the mortgage drops and the amount of capital banks have to hold goes up to counter this drop(thank the ECB) in asset value. Less lending to the wider economy with knock on negative impacts for the economy. Look at 2008 for what happens when your banking system seized up . Now thanks to Irish Central bank and wider ECB reforms it's unlikely we will see such a dramatic repeat, but a large drop in house prices will impact the wider economy due to reduced lending capacity from Irish banks. The fact we have so few banks only makes the situation worse.

Clamping down on REITs is just reducing investment in Irish property which means less money put into building and therefore less supply making the situation worse. It also means more government money being spent on housing instead of health, education etc. As already mentioned there are limits to how much Irish banks can lend when it comes to housing due to the lessons from the last crash. Building houses requires money, making it harder to invest money in Irish property doesn't help things. The advantage REITs have is that they can effectively prepay developer's for housing which makes cashflow a lot easier and the projects dramatically less risky. As China has shown you can take this approach too far but no one is suggesting we are remotely near that situation yet.

It's grand bringing back people from overseas and improving the amount of people working in the construction industry will help but that's a long term thing and is unlikely to result in any dramatic reduction in house prices especially once you factor in inflation. It will take years to see the impact from these measures.

Getting rid of the FTP grant may help things but again the rise in house prices predate this grant. Removing it is unlikely to collapse house prices.

If you want a huge drop in nominal house prices especially in a period of relatively high inflation you need to do something relatively dramatic that has a high chance of tanking the economy.

On the positive side currently house prices are below the current level of inflation. So in real terms house prices are actually going down or at the very least stabilising.

chalky_ie

https://www.boards.ie/discussion/comment/121759375#Comment_121759375

Owning 2 homes(one seemingly mortgage free) and your own business at a young age puts you in a pretty privileged position to be able to say something like that. Might get your hands on a few more homes with a 30% drop too!

Bass Reeves

https://www.boards.ie/discussion/comment/121757464#Comment_121757464

People keeping harping about government and banking interference. However the government has targeted its ''interference '' to support FTB, which was you.

However some choose to ignore the facts and choose to believe a ''Chicken Licken'' scenario where house prices would collapse.

The only way house prices falls is if demand falls. This is the fallacy that the economy will collapse but will not effect me and I can then buy a bigger house than I could have before the crash.

The economic crash of 2008-14 created a subset that taught housing would always remain cheap and they would have choices not available to previous or present generations.

Basically you nobody or no entity shafted you. You were just greedy and made decisions and you are greedy now looking for a crash that will effect and ruin others and probably your own life.

My children are an age where they are looking at building/buying a house. My eldest is intending to start digging foundations in the next few weeks. Do I wish building costs and building materials were cheaper. Yes I do but I am also realistic enough to know that its pointless wishing you just get on with it. Do Imind if house prices fall, I do not, but I just cannot see it happening.

chalky_ie

That poster seems to be banned, but the whole 'I want the world to fall apart so I can get my house/have others that have one feel my pain' is the shittiest opinion to have. Actively hoping for other people's lives to be negatively impacted, just so you can get something is just pure crap.

shoegirl

https://www.boards.ie/discussion/comment/121698618#Comment_121698618

All of these problems are historical and due to self certification that was introduced in the 90s. The same issues largely went from the Irish market around the depth of the bust.

Donegal was an outlier because partisanship at council level around 2010-2012 paralysed the council, they couldn't pass a budget for about 2 years, and at one point had it teetering on the verge of bankruptcy - with the council issuing protective noticed to its employees at one stage - the mica scandal largely originates from this period of deep instability, and its odd that no commentator calls that out.

shoegirl

https://www.boards.ie/discussion/comment/121700777#Comment_121700777

The phasing out period of the Amateur Landlord boom has resulted in a lot of poorly to zero maintained homes going on the market - some of them are really awful and shocking when you look back on google maps and can see people were actually living in them. The pre 63 sales that appear on b2b sites are the most horrific of them all.

timmyntc

https://www.boards.ie/discussion/comment/121760529#Comment_121760529

This is false - most of the mica builds (actually pyrrhotite) were built in the tiger years, not post 08.

It was due to some members of the ICF deciding to cut cement content of blocks to make more profit, as the blocks still met regs on the day they were produced.

This is why it appeared in several places, like Mayo, Limerick, Clare and Wexford.

All down to poor regs and poor enforcement

Villa05

https://www.boards.ie/discussion/comment/121758952#Comment_121758952

I don't know where people are getting these pensions that are tied up in property, I have 2 pensions and the exposure to property is minimal in all options

For the vast majority of Irish people pension building should avoid property as your heavily levarged in property already through the mortgage on your home

What I'm proposing is a bond to sell to pension funds to fund construction of homes, state backed and inflation linked which may be useful to them when there customers want to reduce risk at or close to retirement

fliball123

https://www.boards.ie/discussion/comment/121760851#Comment_121760851

There is a very high % of investment in Irish property from pension funds you should asking your fund manager why they are not doing this as you would of made a killing over the last decade

combat14

Us financial adviser says:

“‘Whatever you do, never buy a house with a monthly payment that’s more than 25% of your monthly take-home pay on a 15-year fixed-rate mortgage (which has the overall lowest total cost).”

does this mean most irish homes are widely over valued?

https://finance.yahoo.com/news/dave-ramsey-insists-cant-afford-194249566.html

.

Padre_Pio

https://www.boards.ie/discussion/comment/121761512#Comment_121761512

"The median home sale price was identified as $431,000 as of 2023, according to the video. With the average interest rate on a 15-year mortgage at 6.47%, the post detailed that a 20% down payment, amounting to $86,200, would be required. This initial payment leads to a monthly mortgage expense of approximately $2,998."

Using that example and interst rate, you'd pay about 163k in interest.

Using an Irish interest rate of 3.5% and 30 years, you pay 153k in interest.

Dave Ramsey is very outspoken on a lot of topics, and generally advice in the US does not translate well to Ireland.

Blut2

https://www.boards.ie/discussion/comment/121759997#Comment_121759997

"Clamping down on REITs is just reducing investment in Irish property which means less money put into building and therefore less supply making the situation worse. It also means more government money being spent on housing instead of health, education etc"

This isn't a remotely valid argument in Ireland in 2024, though, and undermines your entire post.

As I said in the post you're replying to, we're currently at completely full capacity in the construction industry. And, at the same time, the Irish state has billions of unspent euros every year (€1.52bn in the department of housing alone) currently. Its absolutely false to suggest there would be a need to reduce spending in other areas.

Any drop in investment in construction from the private sector in the near future will result in the spare capacity being instantly snapped up and put to use by the Irish state itself. There will be no drop in overall housing output.

As for the rest - as discussed previously, even a substantial drop in prices would result in very few households in the country actually being in negative equity, circa 5% for something approaching a 30% drop. The idea this would result in a widescale banking/economic collapse is nonsense.

Getting rid of the demand side grants etc won't make a huge difference by themselves, no, but its all cumulative. If every one of these measures reduces prices by a few percent then they all add up.

The overriding point is that there are measures the Irish state could take if it actually wanted to reduce house prices, tomorrow. And that most of the country, including a majority of home owners, would support. But our current government is making the conscious decision not to, because reducing house prices has never been a policy they've supported.

Villa05

https://www.boards.ie/discussion/comment/121761038#Comment_121761038

I don't want my pension in property as I'm heavily invested already through home/mortgage ownership. Plenty of other investment options out there

Irish Reits haven't been great, CRE is a mess. I'm sure there were other ways to gain on property in the last decade

PeadarCo

https://www.boards.ie/discussion/comment/121761671#Comment_121761671

Irish construction industry is at full capacity grand but who will pay for the capacity of the sector to expand? Remember staff costs will over time go up in line inflation, meaning less work done for the same money over time. Or should everyone in the construction industry not ask for pay rises or worse take pay cuts? That's where REITs and other outside investors come in. You can't employ more people in construction without more money. Irish banks have limits to how much exposure they can have to the constitution/housing market. Any serious reduction in property values would only reduce the money banks have for mortgages.

Grand the Irish state takes up the tab but that means less money being spent on stuff like, schools, health, public transport etc. IE the infrastructure required to support more houses in the first place. You seem to not understand the concept of opportunity cost. To make things simple money spend on housing cannot be spent on other areas. You are assuming the Irish government has infinite money which unfortunately it doesn't. It does though have near limitless things it can spend money on.

You have completed ignored that regardless of what level of negative equity people are happy with, reduced house prices directly impacts banks ability to lend which impacts the wider economy. Negative equity concerns has very real impact on bank lending. It's not something only those who are looking to sell need to worry about as 2008 showed.

It's very easy to say there loads of ways the Irish government could reduce house prices but when you start digging into the detail you haven't mentioned any.

You also have to remember that we are currently in a period of relatively high inflation. Currently house prices rises are lagging behind this rate. So in real terms house prices are already getting cheaper.

Villa05

Construction industry federation have said they are capable of 60k output per anum, this would suggest we are nowhere near capacity

Blut2

https://www.boards.ie/discussion/comment/121762034#Comment_121762034

"Grand the Irish state takes up the tab but that means less money being spent on stuff like, schools, health, public transport etc."

No, in reality it very much doesn't. The Department of Housing has €1.52bn sitting in its accounts of unspent money as of right now, that it literally can't spend because the construction industry in Ireland is already at capacity. The Irish state has put €7bn+ over the last two years into the national investment fund, because its also unable to find things to spend it on currently.

The Irish state could spend billions of euros a year next year on capital investment in housing and not raise taxes, or cut spending in any other area, by a single cent. And it would, if it could get the workers. Thats why a drop in house prices, and a resulting drop in private sector investment if it happened, wouldn't matter a jot. Any and all excess capacity is going to get soaked up immediately.

? I listed off a number of measures the Irish government could use to reduce house prices less than one page ago in this thread: https://www.boards.ie/discussion/comment/121759440/#Comment_121759440

Irish banks wouldn't stop lending for mortgages if prices dropped by 30% over a period of time. German residential prices were down 10.2% YOY in Q32023 and guess what, banks are still lending. The show goes on.

theboringfox

https://www.boards.ie/discussion/comment/121761512#Comment_121761512

I would agree personally that 25% is where Id personally keep it but thats general position. People on higher net incomes can put higher percentage in. If one couple has 10k per month net income and mortgage 2.5k thats 25% and 7.5k left after it. If another couple has 15k net income and mortgage 5k pm thats 33% but with 10k pm left. So they are still better off than couple A despite mortgage payment being double the others.

Villa05

The origins of our planning laws

https://twitter.com/ronanlyons/status/1757387798280052760?t=r45T-OHxE7EYqXQSgA-LKg&s=19

Timing belt

https://www.boards.ie/discussion/comment/121763558#Comment_121763558

It does impact the banks ability to lend and not just for mortgages but all lending because if the drop in value puts people in arrears or default then this eats up the capital the banks need to be able to lend.

This is why the banks sold off the bad loan books for a pittance as it freed up capital and although they made a big loss on selling it at a massive discount it was still cheaper in the big scheme rather than have the capital tied up or try and get additional capital from the markets (or a bigger government bail out as was the case in 08)

Timing belt

https://www.boards.ie/discussion/comment/121760851#Comment_121760851

pension exposure to property is a tiny percentage as the majority are invested in government bonds. But that tiny percentage is still very significant in the property market.

There is circa 50 trillion in pensions globally so if just 3% was invested in property that would be 150billion invested in property globally. Obviously this globally but looking at Ireland in Isolation the pension market is circa 125 billion which at 3% would be 3.75 billion.

As for state backed loans specifically for construction it makes little sense when the government can borrow on the open market at lower rates.

With regards inflation linked bonds these generally underperform in the long term and are not popular with most investors and therefore cost more to issue…. Just look at TIPS v T-Notes for example.

enricoh

E2000 per month rent for a 2 bed apartment in salubrious Longford! Is there anything to be said for a soft landing?!

https://m.independent.ie/regionals/longford/news/fears-longfords-rental-market-is-out-of-control-as-two-bedroom-apartment-goes-on-market-for-2k-a-month/a636607469.html

Ozark707

https://www.boards.ie/discussion/comment/121770900#Comment_121770900

If the gov take places like this then there will be no end to it.

Roberto_gas

Looks like investors are fleeing the market. Last straw. Either some global phenomenon crashes the market or it gets worse once the interest rates start going down. There are just no houses coming for sale in some of the areas i am keeping a tap on. Most houses sold are rentals so not sure whats going on there ! People who bought 5 years back are stuck not able to upgrade to bigger houses and cant get extensions/attics done due to high costs. increased rates after fixed period is a double whammy ! Houses which are half decent are ending up 50-80K over listed price(150K in one case i know of) and there are no decent second hand properties available. New homes are way way costly and pose a great risk of being able to repay as you are going above and beyond what you can afford.

Really interesting setup on the market and not sure how it will unfold !

timmyntc

https://www.boards.ie/discussion/comment/121771097#Comment_121771097

Don't know about your investors fleeing statement, however for the rest I would agree.

The housing shortage appears to have gotten much worse recently - possibly due to vacant refurb grants and asylum seekers rental monies increasing demand for previously less desirable properties.

Roberto_gas

https://www.boards.ie/discussion/comment/121771192#Comment_121771192

investors are selling is what i meant....most of the houses coming to market are either probates or investors exiting(which is fair enough as its a good return they would have made).

Timing belt

https://www.boards.ie/discussion/comment/121771278#Comment_121771278

if you can’t find a house to buy your unlikely to put yours up for sale so makes perfect sense why mainly ex rentals and probate are what we see coming to the market.

J_1980

https://uk.finance.yahoo.com/news/activist-investor-attempt-force-ires-121409724.html

IRES sell off not happening

combat14

https://www.boards.ie/discussion/comment/121776142#Comment_121776142

thats because they know the government will not pay top dollar for the portfolio

timmyntc

https://www.boards.ie/discussion/comment/121776174#Comment_121776174

It's a bad time to sell

High interest rates and cost of credit mean not many investors can raise that kind of cash

Time to sell was before rate rises, or once they fall in a year or two.

Only reason vision capital were pushing for this sale is because they are having liquidity issues of their own. They can't sell all their stake in IRES without share price taking a big hammering in the process, unless it was agreed IRES are sold in it's entirety to someone.

Browney7

https://www.boards.ie/discussion/comment/121770990#Comment_121770990

Business post had an interesting read trying to delve into this a few weeks back actually https://www.businesspost.ie/news/colm-lauder-dublin-simply-too-expensive-as-hap-drives-rents-sky-high/

Roberto_gas

Thought of putting this here

Hi All,

Anyone have insights on the scale of this issue? This has come up in a pre purchase survey of my mate and fire safety is the main finding !

This property from a fire safety point of view requires that the corridor is constructed in 1⁄2 hour fire construction with self closing fire doors. This apartment has no protected corridors and no fire doors and is in clear breach.

What kind of work and costs are we looking here ? 

Also anyone who recently took the risk of buying a fire safety issue apartment how did it go ? Any tips/inputs from your journey?

The property is over 550k plus in value

Thanks a mill

Bass Reeves

https://www.boards.ie/discussion/comment/121786731#Comment_121786731

Unless you are a cash purchaser you will not be able to complete the purchase as a bank will not lend to you.

It's amazing the OMC are not rectifying the issue.not too many would be buying an apartment where the building is a fire risk

Roberto_gas

https://www.boards.ie/discussion/comment/121786825#Comment_121786825

Funny enough its not even mentioned by EA so assume they are chancing their luck....there are apartments on tullyvale which are relisted after fail in mortages and they still not say cash buyers only !

shoegirl

https://www.boards.ie/discussion/comment/121761785#Comment_121761785

Not so sure that's true - Zurich did have a fund some years back that was basically Hibernia & IRES, closed it when the sale happened, so recall the return being pretty good when we were forced to exit due to fund closure. Outside of that I'd agree with you though - unless you bought in 10 years ago its probably hard to assess the value.

shoegirl

https://www.boards.ie/discussion/comment/121771933#Comment_121771933

There are some people selling outside of this tho - but a lot of it would be people who are say, in a relationship, or moved and want to cash in.

Do know of people who are selling up, and pricing in a year or so of renting, who either have a lot of equity, or else have somewhere else to live (i.e. inherited a home or moved in with partner or spouse). Also some folk cutting deals with jobs to work from home so they no longer have to live in Dublin - know a few of these who had sufficient equity in their Dublin homes to get very good bigger homes down the country and come up a day a week.

shoegirl

https://www.boards.ie/discussion/comment/121763847#Comment_121763847

Very much so - you can expect a very difficult market for FTBs in particular if there is another credit crunch like the one from 2009-2014 again - this time without the falling rents & considerable vacancy levels in the PRS.

shoegirl

https://www.boards.ie/discussion/comment/121698935#Comment_121698935

Not really - there was a few thousand apartments built in my area between 1994 and 2014. Two developments had issues - one was resolved, and it really only impacted a small number build in an early phase. It got fixed, but it had the effect of creating suspicion around the rest of the development, for a while, depressing prices. But eventually the development picked up as its in a good location for commuting (last in, first out on the buses to city).

The second was a fair worse issue - another development, built around the same time by different developer - most apartments had issues, and because of when it was built they'd issues collecting cost of remediation. So unlike the other development, that didn't get fixed - so it became more run down, "cash buyer only" territory, prices got really low. Lots of the worst kind of cash buyers got in (not institutions but the kind of serial landlord who carpetbagged in the mid 00s so didn't get hit by the meltdown in 2008) who ransomed the OMCs. So some blocks in that development done and some not, their annual charges through the roofs - and those apartments look very scruffy. Others are just fine though. Ironically the best looking apartments locally are the ones built in the 90s, not the 00s. But the ones built in the 00s aside from the few hit by defects are bigger and better appointed - more insulation, larger, more parking & outdoor space etc. Some of them are enormous - there are 1 beds with 60m2 space, etc as per post 2008 and pre 2015 design standards.

shoegirl

https://www.boards.ie/discussion/comment/121700449#Comment_121700449

To be fair have also seen cases where initial ask was too high, so relisted at 20k less and eventually got a price a little over that. Its not uniform throughout the country.

Some crazy stuff though - a converted period house in Swords had a 1 bed townhouse listed a few weeks ago for 325k and went sale agreed, which seems absolutely insane to me as typically one bed apartments there go for anything from 195k to 260k for a very large space.

PommieBast

https://www.boards.ie/discussion/comment/121786847#Comment_121786847

This sort of behaviour is alarmingly common. Wait until the buyer has already burned a load of time and money on things like engineer checks and then bounce them into completing. I left Ireland because EAs seem to go out of their way to give their "profession" a bad name.

Roberto_gas

https://www.boards.ie/discussion/comment/121788589#Comment_121788589

I doubt people are that silly to spend thousands after spending a 500 bucks survey ! But i know what you mean :) !

PommieBast

https://www.boards.ie/discussion/comment/121789285#Comment_121789285

Different equation when it is half a year down the line while renting for a few grand a month. And it is not the first time round this cycle.

Roberto_gas

https://www.boards.ie/discussion/comment/121793246#Comment_121793246

understood...if there is a urgency its a good tactic have to say

Sierra Oscar

Residential Property Price Index figures for December are out. Price increases seem to be accelerating again after falling off from April 2022 - August 2023. How high will they go in 2024? Imagine the carnage if interest rates had remained at their record lows.

Key Findings Residential Property Price Index December 2023 - Central Statistics Office

The national Residential Property Price Index (RPPI) increased by 4.4% in the 12 months to December 2023, with prices in Dublin rising by 2.7% and prices outside Dublin up by 5.7%.

lordleitrim

Give taxpayer funded assistance grants to people who don't need them and watch prices go up by the same amount! Net effect: every buyer is worse off!

markodaly

https://www.boards.ie/discussion/comment/121797391#Comment_121797391

That is pretty stark.

Now imagine in the next 12-18 months interest rates start falling again.