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

Timing belt

https://www.boards.ie/discussion/comment/117715927#Comment_117715927

You can use a P/E ratio as an indictor if a share price is overvalued in relation to current earnings but that doesn't mean that the share price is overvalued as many companies that have low earnings at the moment but potential for increased earnings in the future will have a high P/E Ratio but that is not to say that they are overvalued.

When you are unable to borrow to fund the pricing of a house due to macro prudential rules (3.5 x LTI) then this tells you that property prices are overvalued in relation to income but you can't assume that this overvaluation will lead to a correction as it does not take into account items like savings, wealth, Impact of investments or government on property prices.

Ray Palmer

https://www.boards.ie/discussion/comment/117714832#Comment_117714832

The point is how can somebody put a number randomly to say how much they are "overpriced" by. Price is always determined by how much somebody is willing to pay. I think Rolex watches are tacky looking and put little value on them but people pay a lot for them. As I will not buying one my opinion on value is mute. Everybody buying a house wants more than they can afford and has to compromise.

People really have to understand their desires do not determine price and things they think have to change don't have to change as they want. Houses being split up is the most likely outcome going forward not reduced prices in the long term. There are already about 10% of the houses on my road are now 2 households for families it is inevitable this will continue as home size reduces and car costs go up. The generations coming are going to have very different lifestyles and there will no longer be the "normal" people expect. Very little has stayed the same since I was child and nobody predicted most of it. As a child in the 80s the idea I would work with Russians on computers wasn't even vaguely an idea

timmyntc

https://www.boards.ie/discussion/comment/117716385#Comment_117716385

I take your point with numbers - nobody can really say what the "true" price of a house is to any degree of accuracy, but you can make general statements when it goes way beyond affordability for the target market.

If somebody decided to buy up all the baby clothes in the world - despite not being the intended market - the price would rise far beyond families who need them. Then you could say it's "overpriced" in relation to the target market.

The target market for homes is by and large owner-occupiers - yet these people are priced out. That implies overpriced/affordability issue. The exact degree of "overpricing" is impossible to say, but once it goes beyond max affordability it is overpriced for sure.

Marius34

https://www.boards.ie/discussion/comment/117716240#Comment_117716240

I see P/E as the most common metric used to evaluate if the stocks are overvalued. I personal would not call any stocks overvalued if it's listed on open market, as that means it's regulated by market price. Overvalued is very subjective term, depending of which metrics we use our results would be very different.

In the same way in regards to property price, I don't see how 3.5 LTI determines what is overvalued. It may make more sense to say not affordable for ordinary people, but if there are buyers I would not call it overvalued. But again it's more of subjective term, that there would not be agreement on what is overvalued. Overvalued to me is something that there are no buyer for the price on the market.

Amadan Dubh

https://www.boards.ie/discussion/comment/117715665#Comment_117715665

I agree with all this but one dark cloud on the horizon (or silver lining depending on your position) is that demand for property in Ireland is predicted to stay strong due to the massive population growth expected over the coming decades. A lot of this growth is based on immigration as opposed to increases to the birth rate. Putting aside the "everything bubble" and assuming that it does not pop, our population numbers go up but it is not a guarantee that this demand will equal sustained pricing in the housing market.

There needs to be a good reason to come to Ireland for this demand to be sustained and one thing myself I see as a possible error in the calculation of sustained demand due to immigration is the quality of the immigration in terms of their own personal situation and how that might feed into demand for housing at the costs it is in Ireland. For example, central or south American students/low paid essential workers as well as Indians filling low paid tech jobs will feed into demand for property but at the current cost of housing there is little to no chance that the current prices would even be met by this type of immigrant to Ireland. The other point is just that, should the increased immigration not materialise anywhere near to the extent it is predicted to grow, then there will be a fairly steady flow of downward prices across the market as the tide of buyers/renters who can afford these elevated costs goes out.

Autorotator

Can any one tell me how estate agents calculate the sqm of a house. Looking at a new build, the plans submitted for planning permission show 106sqm at best but on the marketing material provided by the estate agent its advertising them at 113 sqm . Are they including the patio in that?

cruizer101

Internal vs external maybe, could easily have 20m of walls perimeter at 0.3m thick, 2 floors that is 12m2.

Might be best to just ask them.

markjbloggs

Just a quick question : why would a property display a real estate agents "For Sale" sign but not be advertised on that agents website or on Daft/Myhome? Sign went up a week ago but still no indication of asking price. I called the agent, who was very evasive and would not indicate the asking price, suggesting the sign guy "jumped the gun" ! The house is in flats and the tenants have had notice to leave but there is no indication that it will remain in flats or refurbed as a family home.

Is there something underhand going on with this house?

WhiteWalls

https://www.rte.ie/news/2021/0809/1239939-daft-report-rent/

The latest doom and gloom

Amadan Dubh

https://www.boards.ie/discussion/comment/117732203#Comment_117732203

Grim reading and really we can't get enough red flags on the social, political and economic instability that will emerge the longer rents and house prices do not materially decrease.

PommieBast

https://www.boards.ie/discussion/comment/117732580#Comment_117732580

Push comes to shove the priority is those who overpaid for property back in the 2000s. Dublin will never have affordable housing until that cohort is told they will never recoup their debts.

JimmyVik

We are heading to a situation where you will only rent.

Nobody but institutions will be able to afford to buy property.

Any current buy to let l;andlords left in the market will be driven out in short order.

People will just have to get used to renting for the rest of their lives.

WhiteWalls

https://www.boards.ie/discussion/comment/117732740#Comment_117732740

All swings and roundabouts, will come around again in 5/6 years

JimmyVik

https://www.boards.ie/discussion/comment/117732947#Comment_117732947

Possibly, but only if its the result of a huge housing crash I fear.

WhiteWalls

I'm by far an economic expert but I also have to wonder how expert some econmists are.

Main issue at the minute is shortage as there was very few houses built for the best part of a decade. I don't see a housing collapse as the economy now isn't totally reliant on one sector as we were in the boom. Maybe there will be a correction if funds/markets take a drop but that's something I know very little about.

People are panic buying due to lack of supply which is driving up prices. Dublin is simply unaffordable for many but most attractive cities are. I just feel sorry for young families who really want to buy now and are renting. They're the real victims.

JimmyVik

https://www.boards.ie/discussion/comment/117733224#Comment_117733224

Nobody ever sees a housing crash :)

There are lots that take a guess and then claim some sort of economics genius IQ at work, but if we could see crashes coming, well, there wouldnt be crashes.

You gotta weigh the risk for yourself and then decide what you are happy to do.

You post is an exact copy of some i read in around 2006 or 7 though :)

Jmc25

https://www.boards.ie/discussion/comment/117732673#Comment_117732673

They've definitely been one of the top priorities for the Government over the last decade when it comes to housing. And fair enough in some respects.

But surely the majority of people who bought then, even at the top of the boom, would no longer be in negative equity when you look at current prices and factor in 15 years of mortgage repayments. Probably some outliers but in the vast majority of cases surely?

Unfortunately in the really extreme cases the only way to help some of these people is essentially to have someone else overpay to the extent that they did - hardly much of a solution.

cnocbui

https://www.boards.ie/discussion/comment/117733483#Comment_117733483

Australia has never had a housing crash and Ireland has had one. Talking about them as regular events is farcical, they are extremely uncommon. You can have a child and put it through 3 levels of education and watch it get it's first job between crashes, in countries that have them.

Amadan Dubh

https://www.irishtimes.com/business/housing-cycling-taxes-dublin-businesses-budget-2022-wishlist-1.4643869

Dublin Chamber of Commerce 2022 budget wishlist, with a huge emphasis on the need to make housing more affordable (i.e. material decreases in cost and significant increase in appropriate supply). So the businesses as well as the electorate have housing as their biggest political issue, it is a tsunami of cries for change at this stage, with pretty much little to no noise in voices happy enough with the status quo.

The top concern related to housing, as the chamber called on the State to double public capital investment in the sector, and to target urban areas in order to deliver “appropriate accommodation and ease pressure on the private market”.

Dublin Chamber chief executive Mary Rose Burke said: “Housing is now the top concern for 71 per cent of businesses in Dublin. The availability and affordability of housing remains the most immediate threat to cost competitiveness in the Greater Dublin Area.

“This also poses a challenge to maintaining our FDI competitiveness in the future. To tackle the housing crisis, the State needs to play a central role rather than a merely supplementary one.

“Social housing policy needs to shift definitively from reliance on acquisition and rental support to the construction of purpose-built affordable homes on a large scale.

PommieBast

https://www.boards.ie/discussion/comment/117733831#Comment_117733831

Certainly a large portion of those who got trapped as accidental landlords have exited, but offloading property is not exactly a quick or easy process. And political dogma tends to remain even after the "problem" has gone.

Timing belt

https://www.boards.ie/discussion/comment/117732740#Comment_117732740

That's the way it looks like going.... And as rents increase it will create wage inflation which in turn will make the building of houses more expensive which will make them more unaffordable and the cycle continues.

Unless there is action take to build large scale social housing which would free up rental properties and put downward pressure on rents I can't see the situation changing.. .....that is unless they find a new way of building properties cheaper which is unlikely as the properties will need to be eco friendly.

JimmyVik

Instead you have the councils renting and buying up private rentals

Amadan Dubh

https://www.boards.ie/discussion/comment/117734002#Comment_117734002

Reversal in mass migration from EU countries to Ireland to work for MNCs would probably do a job on alleviating the crises with rentals.

WhiteWalls

https://www.boards.ie/discussion/comment/117733483#Comment_117733483

I'd nearly read posts from that time for an insight 🤣

JimmyVik

https://www.boards.ie/discussion/comment/117735390#Comment_117735390

If only it was a month ago when boards could be used properly you would have had hours of entertainment going back through posts from years gone by.

:)

yer man!

These Daft reports are not good for my mental health. I have been following them for years, I heard on Newstalk yesterday they mentioned the first time the words "Rental Crisis" were mentioned in the news was 7 years ago. This problem requires an emergency sledgehammer approach at this stage. Declare it an emergency and start breaking down barriers to dwelling construction. I wonder will there be a straw that breaks the camels back moment in this, the Maynooth investment fund fiasco a while back sure felt like a pivotal point in this ordeal.

https://www.boards.ie/discussion/comment/117732203#Comment_117732203

Timing belt

https://www.boards.ie/discussion/comment/117737792#Comment_117737792

An emergency sledgehammer doesn't exist... There is plenty of of land but it's not zoned for residential... Just look at the big plot of land by newlands cross where the council rejected rezoning it early this year. Council reject Hibernia lobbying over Newlands Cross rezoning (irishtimes.com)

Then even if it rezoned for residential development and planning put on the fast track this is slowed down as a lot of cases taken to the high court to challenge the planning and the fast track route.

Add on top of that pollical parties using housing as a political football and objecting to new developments..... No wonder there is a shortage of housing.

yer man!

https://www.boards.ie/discussion/comment/117738034#Comment_117738034

I get at present there is no road plan, but covid hit us like a train and the government were able to mobilize previously unthinkable measures to try and cope with it (i.e. Lockdown, quarantine, social distancing, emergency flights to China, PUP). If the political will was there, solutions could be found quickly to this issue.

The items you state are regulatory/legal barriers, declare this an emergency and begin the process of overriding some of them to get things moving. There are levers that can be pulled, at present they're just seen as unthinkable until they're not.

Amadan Dubh

It's sad what has happened to Boards.ie with the update, and this forum in particular.

In any event, here is a macro outlook from the FT and discusses central banks across the world and their apparent perspective on housing markets, looking at the typical inflation metrics as their market stability mandates and how it is difficult to measure inflation in a way which also factors in housing costs. It is of course also relevant for Ireland. These articles are typically only available to subscribers but I think it's possible to get a few free per week or else there is some Press Reader website to view it (obviously I can't copy and paste it all).

My conclusion from the article is essentially that central banks put their head in the sand with respect to housing costs and say a lot without actually doing anything to impact the market.

https://www.ft.com/content/b5ad3c30-6b51-45f6-a87e-2a1a464d2945

House prices are rising in many major economies. This FT series explores whether these increases are sustainable. Inflation-obsessed central bankers are growing sympathetic to the plight of millions of buyers squeezed out of property markets by soaring house prices. Taking action, however, is another matter.

But because house prices are not directly included in the headline inflation measures that shape central banks’ mandate in advanced economies, those institutions are not required to seek to quell prices when they rise. They have a mandate to maintain financial stability, but most do not see the housing market as a prime source of risk. Economists also cite statistical reasons for keeping house prices out of inflation measures.

The US statistical authorities estimate the change in the notional rent of homes people own. They argue that rental cost is the best estimate of the consumption of housing services, even though rental trends often differ significantly from house prices. This “rental equivalence” method was also adopted by the UK in 2017. The EU has taken a different approach. Eurostat and the ECB prefer a “net acquisitions” method that seeks to measure the changing price of purchasing homes but not the land on which they are built. They are still struggling with how to split house prices into dwelling and land.

Governments seeking a quick fix to the problem of rising housing costs face the same dilemma: raising interest rates to control house prices risks fuelling unemployment and depressing living standards, thereby undermining financial stability. Lagarde has described it as a “balancing act”. So governments and central banks will probably continue to fret about affordability — but with only limited ability to tackle it.

Graph on the uncoupling of House prices and wages from article attached. The last 20 years of economic growth is in many ways hollow and it is not outrageous in my view that we revert to where we were in 2000 in terms of house prices. The main reason for this is the answer to the question, "what happens if the QE of the last decade was stopped?" The economies of the West have been and continue to be on life support post 2008, there is no doubt about this. Even pre-covid this was the case.

Screenshot_20210812_080708_com.android.chrome.jpg

FT articles are great for comments, a big part of the reason I pay the subscription to it. Here was my favourite comment under the article, setting out why increased supply alone is not the answer;

The immediate lesson from the article is that the official definition of inflation makes no sense. It should reflect the cost of living, including housing. 

But there is a deeper lesson that the FT series has totally missed. The FT has accepted the common wisdom that the answer to housing problems is more supply. This is superficially convincing, but actually quite wrong. To say this now invites controversy, as it has become a kind of quasi-religion.

Supply is actually only relevant inasmuch as it lowers price. The ability to access any good or service is dependent on it's price. People are not unable to buy flats in London because there are not enough flats to go round. They can't afford the many that exist. So the question is - and really this is the only question - how to lower prices, for all property. And the answer is not more supply, which will only make a marginal difference. The answer is high property taxes on ownership, not just transactions, which will lower prices. A London flat that cost £1m will typically require council tax on less that 2k. So 0.2% tax on ownership. Raise that to, say, 2%. Money for the exchequer, a steady fall in property prices, more housing access.

There is no way - simply no way - to protect the house price gains on the previous generation, and have the current and next generation access housing. The entire debate is built on a delusion and aims to avoid the elephant in the room.

The 'more supply' argument is appealing because it locates the problem with someone else. If, like me, you own property in the UK, the answer to this problem is clear - we all need to lose money. It really is as simple as that. 

The politicians here find it easier to have a rental crisis (small amount of unimportant people who only might be registered to vote) than raise property taxes (large amount of permanent residents who most certainly are reg'd to vote).