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

Amadan Dubh

https://www.boards.ie/discussion/comment/117916508#Comment_117916508

But again it starts with property and Chinese property with that so the question I still have is how sustainable it is to have property so interlinked with the rest of the economy that a slowdown in property would have such a big impact on the economy? More QE and low interest rates is again can-kicking and throwing fuel on the fire to keep the bubble inflated but there has to be a reckoning and a showdown eventually surely.

Timing belt

https://www.boards.ie/discussion/comment/117916589#Comment_117916589

Interest rates have been falling for the past 40 years so as you put they have been kicking the can down the road for a long time.

The only time you will see come to an end is when there is a sustained period of wage inflation of the back of inflation in the wider economy. Inflation without wage inflation will be meaningless as people won't be able to pay and the inflation will be short lived.

mcsean2163

https://www.boards.ie/discussion/comment/117916508#Comment_117916508

Not if Chinese investors/ funds start dumping property in Europe. Even redemptions from companies affected by China etc.

Villa05

https://www.boards.ie/discussion/comment/117915274#Comment_117915274

In Ireland fiscal rules and sensibilities have been thrown out the window for 12 years nevermind 12 months

Timing belt

https://www.boards.ie/discussion/comment/117917723#Comment_117917723

Let's not forget that China has intervened with it's 3 red lines policy to slow down property appreciation and this is what has started the Evergrande crisis by limiting the amount of new debt that they can borrow. They can easily step in to resolve the situation but don't see them doing this as this would only send a wrong signal to the Chinese housing market.

The only way I see it escalating to a stage of investors/funds dumping property in Europe is if there are more companies like Evergrande that run into cashflow problems on the back of the 3 red lines policy. (i.e. if more companies have similar issues investors loose all confidence in Chinese investments and we have a total collapse)

Personally I don't see that happening especially when there are a lot of tools that China can use to prevent it. What I think is more likely is that China will step in and protect the 1+Million people that have a deposit for property and take over the company with investors accepting a large haircut or new terms.

mcsean2163

https://www.boards.ie/discussion/comment/117917862#Comment_117917862

Just reading a book by Cixin Liu. I wonder if Xi may be intentionally asserting power.

Evergrande collapse could affect contractors, suppliers, bank and possibly cryptocurrency (tether). Margin calls could have big affects.

wassie

I'm not seeing this a China's Lehman Bros moment. As troubled as these developers are, even though they have relatively large balance sheets, are not financial institutions. My reading of the situation is that the major financial institutions have limited exposure those that do are mainly state-owned enterprises and could avail of direct support from the Chinese Govt if warranted. A bailout of Evergrande is unlikely as opposed to an orderly restructure that would take years to resolve.

Local markets there have also responded seemingly positive at the end of trade. (The Chinese market is closed for local holidays). As for implications for our property market at the moment.....none at the moment. But this does have probably a long way to run.

Pussyhands

https://www.boards.ie/discussion/comment/117916384#Comment_117916384

A lot of chinese stocks have been in a bear market for the last 6-8 months.

BABA (which I have 73 shares) was down 49% in the last 6/8 months before yesterday and still dropped 5% yesterday.

Pussyhands

If the number of chinese investors in real estate globally is as big as some commentators say it is, then if they need to pay debts they could sell their oversea holdings.

I don't know what way it will play out but the guys speaking with their money usually know more than us and sometimes they're even late. Like the S&P500 made an All Time High in late February 2020 when Covid was sweeping europe and china.

If this Evergrande thing is the real deal, it will be a bleed of events over months.

All I know is I would be very nervous if I just bought a property here with prices the way they are.

fliball123

https://www.boards.ie/discussion/comment/117918322#Comment_117918322

Can anyone show me a point in history where Irish property has been interconnected with the goings on of the Chinese property market. If I just bought a property here I would be very happy as with the way the IRISH Markte is our lack of supply and huge demand prices are only going up for the next 3-5 years.

Pussyhands

https://www.boards.ie/discussion/comment/117918454#Comment_117918454

Just because the Chinese didn't invest in Irish property 30 years ago doesn't mean they didn't invest in recent years.

https://www.rte.ie/news/business/2021/0511/1220957-irish-institutional-property-analysis/

Between 2017 and 2019, 80% of funding for housing came from foreign investors.

Then we have chinese investments in irish property because the chinese wanted to take their money outside of China. If they need to pay debts, they could sell.

youtube!

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….

youtube!

evergrande bound to have a big impact

fliball123

https://www.boards.ie/discussion/comment/117918491#Comment_117918491

And there is an overly huge queue of first time buyers and immigrants waiting to buy if they do. As long as supply < demand prices are not going down. Have you any stats on the % of the Irish property market which have been bought or are in possession of Chinese people/companies??

wassie

https://www.boards.ie/discussion/comment/117918538#Comment_117918538

On what?

And why?

youtube!

Worldwide exposure. They have not paid contractors for months . There are videos circulating from recently completed skyscrapers actually being demolished in protest from unpaid main contractors. There are a run on Chinese banks as a consequence. Don’t think it won’t have a huge ripple effect unless the Chinese government intervene which is highly unlikely.

timmyntc

https://www.boards.ie/discussion/comment/117918608#Comment_117918608

How will it effect irish property?

To my knowledge there isnt massive chinese investment in Irish property. Nor would Chinese property crashing impact most of the employers here in Ireland. So with that in mind, how could it impact Irish supply or demand?

fliball123

https://www.boards.ie/discussion/comment/117918538#Comment_117918538

It may also be a case that this could put further pressure on Irish property supply as the case could be made that Chinese people may now see Irish property as a better bet and may take their stake from China and put it else where and guess what the Irish property market with their laws, tax, ROI and rental schemes such as the government rental one would skew Irish property to the top of a lot of investors as can be seen by the amount already been bought over the last 4/5 years for non domestic buyers. So Evergrande could go one way or the other. IMO it wont stop prices going up in the next 3/5 years in Ireland.

Wanderer78

https://www.boards.ie/discussion/comment/117918617#Comment_117918617

our global financial system is complexly intertwined, as 08 showed us, because of this, when a major shock occurs, it has the strong potential to cause contagion in global markets, even if the problematic institutions themselves, have little or nothing to do with investments in other countries, such as ourselves, i.e. its a wait and see game, we ve no idea what ll happen here, if anything at all. we still havent addressed the underlining issues that actually caused the 08 crash, we ve been trying to default back to the status quo since, so........

timmyntc

https://www.boards.ie/discussion/comment/117918646#Comment_117918646

This is not related to the 08 crash - this crisis is not caused by subprime mortgages. Also in 08 it wasnt just the global nature of markets, it hit us so hard because we were engaging in subprime lending also, and all the things that came with it.

Pussyhands

https://www.boards.ie/discussion/comment/117918544#Comment_117918544

if it goes tits up, jobs will be lost. We saw during covid people on PUP couldn't get mortgages.

It'll be worse if it goes belly up.

Wanderer78

https://www.boards.ie/discussion/comment/117918662#Comment_117918662

yes, but the truth is, we re still engaging in high risk financialised activities globally, we have not put these genies back in the box just yet, and since markets do not occur in a vacuum..... oh and baring in mind whats going on in davys....

Pussyhands

https://www.boards.ie/discussion/comment/117918662#Comment_117918662

You don't understand the point he's making at all.

After 2008 the global econony never weaned itself off cheap money and QE.

The world economies have just kept getting into more and more debt.

The US debt ceiling needs to be raised by 1st October or the US will default on their debts. If that happens it's a car crash.

All they're doing is delaying a crash and by delaying it, making the eventual one bigger. There's no such thing as a free lunch.

SmokyMo

Anecdotal evidence, but I am know one person who works for fund I guess... his job is to put portfolio of properties for Chinese investment to buy. Normally is a collection of residential houses, apartment, land. Not sure how widespread this is.. Very hard to gauge. They dont go around screaming about it.

Chinese banking system is not as integrated as US. Contagion wont get too crazy. Sure some banks prolly exposed via HK but I think the fall out is over estimated. Nevertheless it is amusing to watch.

Sierra Oscar

https://www.boards.ie/discussion/comment/117918617#Comment_117918617

It'll possibly have some impact alright, although the immediate impact is likely to only assist the domestic construction sector in my view. The cost of raw materials internationally is on a fairly sharp decline, which will ease construction costs in time. There has been a massive decline in the cost of lumber and there has been a sharp decline in metal commodities since the Evergrande story broke.

Supply chain problems have been alleviating so that is certainly putting a downward pressure on costs, but investors are clearly pricing in lower demand given the floundering construction sector in China.

fliball123

https://www.boards.ie/discussion/comment/117918664#Comment_117918664

https://www.boards.ie/discussion/comment/117918664#Comment_117918664

This has always been the case no matter what threat or what carrot is dangled. I mean in the last 5 years it was Brexit is going to sh1t all over prices then it was Corona and yet 5 years on prices are how much more expensive than 5 years ago. Yet what you have to take from covid/corona is that people who could afford houses kept working as can be seen by the way our income tax take performed, those on the medium to higher wage thrived with savings in irish bank accounts hitting record levels. The other side of PUP is that when people get back working property they will now be added to the queue for people trying to get a house ergo increasing demand. We are also going to have a lot more migration inwards in the next 5 years due to our immigration policy cutting the time for refugees going from undocumented to documented down from 8 years to 4 months. I would be looking at the the factors that are closer to home that will sway price instead of looking at China which as I pointed out could also mean further constraints on supply due to external investors.

Wanderer78

https://www.boards.ie/discussion/comment/117918683#Comment_117918683

once again, the 08 crash had little or nothing to do with public debt, it was primarily due to running our economies on excessive private debt, but in saying that, the process of qe has caused a similar problem, i.e. asset price inflation, noticeable in property markets

Amadan Dubh

https://www.boards.ie/discussion/comment/117918617#Comment_117918617

Potentially the spillover into Western markets will lead to the central bankers (ECB and Fed) claiming that they need to keep printing money and keep interest rates low, which of course is the reason we have a massive property bubble again in this country. That is the impact to Irish property. I don't agree that any Western economic fallout as a result of a property bubble collapse in China should receive any central bank or state support - parts of the economy suffering due to the fallout from this affair, should be left to suffer as it is just throwing dead money at a speculative investment which is far too interlinked with the economy to enable sustainability in the long term.

08 should have been a wake up call that economic growth should be siphoned off performance in the property market but I see it once again that economic growth and the prosperity / wealth of people is judged significantly on their property value - no lessons have been learned and the question is whether we are finally going to have to confront the issues which built up over a few decades to 08 or if the can is going to be kicked further down the road.

Just thinking though, if the Chinese real estate bubble bursts, might it help reduce construction costs in Ireland? There will be a lot of materials, machinery and labour hanging around looking to be put to use.

Edit: I didn't read Sierra Oscar's post about the potential reduction in construction costs before I posted. Glad to see someone else has the idea as to how it could affect property here!

Wanderer78

https://www.boards.ie/discussion/comment/117918778#Comment_117918778

....great response, but it truly is important to stress, the money of the 08 crash ultimately came from the financial system itself, in the form of credit, as this is the primary function of private sector banks, i.e. money creation, we also still havent addressed this fundamental issue and cause of the majority of economic crashes in human history, but central banks have also played their part in these crashes, as discussed

Villa05

https://www.boards.ie/discussion/comment/117918675#Comment_117918675

What are Davy's up to now all I'm hearing is how wonderful they are to our sports people and artists with background evangelical musical soundtrack.