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

wassie

https://www.boards.ie/discussion/comment/118005109#Comment_118005109

They starting clearing shipments of Aus coal again last week in small quantaties in a sign of loosening of their 'unofficial ban'. Chinese provinces have been hit with power rationing so severe that in some places factories have been allowed to operate for only two days a week, threatening economic growth and the global supply chain. Doesn't bode well for the near term of materials.

Timing belt

https://www.boards.ie/discussion/comment/118005532#Comment_118005532

There will be a lot of demand for commodities If Biden gets his 1.5Trillion infrastructure funded and China continue with belt and road initiative.

mcsean2163

https://www.boards.ie/discussion/comment/118005851#Comment_118005851

https://youtu.be/6nC0f1185WI

worse than the worse case...

Amadan Dubh

https://www.boards.ie/discussion/comment/118006245#Comment_118006245

If the fallout from the Chinese property crash puts a pin in the unsustainable direction our housing market is heading then I welcome it. Some of our "economic growth" metrics might be hit of course from the contagion but I don't think the situation on the ground for the individuals will be worse and in fact could be better. At this stage, those looking for a correction in the housing market need to look beyond our shores as the government won't correct it!

As a side note, I received an ad for one of those zero/low fee trading apps when watching that YouTube video and it is timely that I comment about a possible correction as I it will burn a lot of those retail traders who jumped into those apps over the last couple of years.

Timing belt

https://www.boards.ie/discussion/comment/118006245#Comment_118006245

I think it is important to remember that this has been brought about deliberately by China with the introduction of their 3 red lines policy.

This is a political action with the CCP showing their strength and taking back control over a sector of the economy after overseas investors paid for it. They are deliberately ensuring that onshore bonds and household are paid and offshore bondholders get burned.

There are lots of example from insurance companies to airlines in recent years where China have nationalised company's in similar difficulty and I think we will see the same here. China will manage the crisis especially ahead of next year.

It is highly unlikely to impact the Irish housing market.

Amadan Dubh

https://www.boards.ie/discussion/comment/118006697#Comment_118006697

But a global economic "slowdown" caused by the Chinese economy could lead to more QE and lower interest rates which would impact yield hungry investors and their pursuit for gains, which would affect Irish property as they pump more cash into it. I think that's what you said before?

Timing belt

https://www.boards.ie/discussion/comment/118006711#Comment_118006711

I meant that it would be highly unlikely to cause a collapse in irish house prices

Eclectic Econometrics

https://www.boards.ie/discussion/comment/118006526#Comment_118006526

I've stolen these figures from The Street .com

In 2010, they made up just 10% of all daily stock trades, and an even smaller percentage of daily option trades. Today, retail traders make up as much as 25% of the market.

In Dec. 2019, the Options Clearing Corporation cleared 227 million option contracts. That may sound like a lot, but between the 20 trading days in December that works out to about 11 million option contracts per day on average.

In Feb. 2021, that number almost tripled to 572 million, or over 30 million contracts PER DAY. That’s a 3X increase in daily option trading volume in 13 months!

The amount of these guys (WSB-esque) that are not actually buying stock but are just buying options is unreal. Don't get me wrong, I am sure that a fair few will get burnt (in your scenario) but if you looked at the type of trades people who signed up in the last couple of years make it would be 100 people treating it like sports betting and Willy Wonka golden tickets for every 1 who is Warren Buffett buying and holding.

It's a casino baby, to the moon! *rocket emoji*

Amadan Dubh

Some very reasonable views in these two IT articles yesterday; from the perspectives of both the small landlords and from smaller players in the construction sector. It would appear that the non-voting institutional investors are the only ones benefitting from our housing crisis at this stage, which indicates to me that perhaps they had far too much of an influence over the policy making over the last 10 years, Irish Institutional Property being the main industry lobby group. Both views in the articles below flag the cost of living increasing and future economic prosperity of the country being threatened as a result of a continuation of the housing crisis.

The landlord view is put forward by the MD of Sherry Fitzgerald in Ireland, Marian Finnegan, in particular she highlights how so many small landlords have exited the market in recent years due to the failure of the government's policy and she discusses maybe the generous tax situation for institutional landlords that is unavailable to small landlords as being one of the main factors.

The construction sector view put forward is in relation to the labour shortages and how this needs to be addressed. One anecdote is from an Irish man living in Australia the last ten years hoping to set up a little construction shop back in Wexford with the hope of bringing home some Irish emigrants but that the cost of living would put them off returning.

https://www.irishtimes.com/business/construction/lack-of-rentals-causing-hardship-and-threatens-state-s-future-economic-success-1.4696605

Current market conditions are clearly a direct response to inadequate supply levels and yet the Government’s policy to date does not address this imbalance at all in the short term. Instead, it focuses on capping rental inflation in key urban areas. This is disappointing, it is akin to treating symptoms rather than addressing the cause of an illness.

There is clear evidence that rental yields for private investors are too low. Take the example of a two-bed apartment in the centre of Dublin, with a 70 per cent loan-to-value mortgage. Based on current capital values, rental levels and taking into consideration all expenses, the current net yield is 2.5 per cent.

In this example, the Government will receive 25 per cent of the total rent paid by the tenant through tax.

The lack of rental accommodation is leading to significant hardship for many and is a potential threat to our future economic success. We should leave no stone unturned in seeking a solution, however unpalatable to the populist culture.

https://www.irishtimes.com/news/ireland/irish-news/construction-labour-shortage-if-they-come-we-will-build-it-1.4696610

After 10 years in Australia, and with a new baby in the family, the 36-year-old – an economic emigrant of the Irish property crash – is returning home to set up a similar business, Dunwood Services, in Arklow. He has spied an opportunity to bring Irish construction workers back from Australia and elsewhere to meet a demand in Ireland.

Many Irish, like Wright, are in the same situation: it is “decision time” – after a decade down under, stay any longer in Australia and you are “probably here forever”, he says.

While the pandemic has intensified the pull to return home, the high cost of living in Ireland and of buying a home are big turn-offs. Wright sees this as a major obstacle to the Government attracting back workers, particularly general labourers, needed to build the roads, bridges, tunnels, schools and houses under the €165 billion plan.

“With the National Development Plan, everything comes down to money. It won’t work until the cost of living matches up to your wages,” says Wright.

CorkRed93

https://www.boards.ie/discussion/comment/118006245#Comment_118006245

https://twitter.com/SofiaHCBBG/status/1447731080669265927

https://twitter.com/C_Barraud/status/1447845798088163328

fliball123

https://www.boards.ie/discussion/comment/118006245#Comment_118006245

China and Ireland's property market are completely different. China (according to your video) has 90 Million vacant properties sitting empty?? That fact alone is enough to be confident that Ireland wont see any contagion from this. We don't have enough supply to meet demand. Until we build prices are not going down anytime soon.

Browney7

https://www.boards.ie/discussion/comment/118007823#Comment_118007823

I'd be interested to see the calculations behind her 2.5 net yield for the BTL investor with a 70% LTV and what term and interest rate she assumes for the loan. Would have been an interesting example if she laid out the gross yield and deductions.

Tax is high for all individual investors - if you invest in a company that pays a 5% dividend yield you lose up to half in tax aswell if you're on the higher rate of income tax.

AdamD

2.5% yield on a 2 bed apartment seems way off reality

JimmyVik

Im starting to see 2 markets acting totally differently now in Ireland.

You have the sub €450k asking price houses that are selling for above asking price easily.

And you have the €550k - 600k and above asking price houses where the EAs have chanced their arm actually not making their asking prices.

Takes a while for it to shake out but you can see it in the PPR for the latest houses added to it.

I think that trend will continue for a while sub €450k asking going gor above asking and €550k plus asking going for below asking.

But if I was in the market for a first house I would certainly be doing anything to get on the ladder at this point.

I dont see the sub €450k market getting any better. I am of the opinion that you get on the ladder as fast as you can or you end up renting forever, the way things are going these days.

I just dont see how anyone is going to fix this.

C14N

https://www.boards.ie/discussion/comment/118008541#Comment_118008541

I'd guess there is some kind of bell-curve distribution of what people can afford to spend, and it probably is heavily concentrated in the €350k-500k zone, with things that are €600k+ being a much smaller portion of the demand side of the market, even though new builds tilt heavily toward providing houses on the more expensive end.

I also don't really see a way out of this. The fundamental issue is that we don't have enough housing for a good market, and getting more housing online is just too slow and too expensive to remedy it any time soon. There is a lot of new building, which is good, but it's not going to solve the issues for quite some time yet, and even if it does, then we still have to solve the infrastructure problems which seem to be even further down the line from being addressed.

GoldFour4

https://www.boards.ie/discussion/comment/118008541#Comment_118008541

Yeah this makes a lot of sense based on what I'm seeing. There seems to be a lot of AIP for €400k or so which has people eyeing property in that range and being fairly driven to go sale agreed on a property they actually like in that range and so are willing to go over asking by 10-15% if needed.

iColdFusion

https://www.boards.ie/discussion/comment/118005532#Comment_118005532

UK steel industry are making big noises about the spike in gas prices hitting them hard so id imagine alot of companies making construction materials will be feeling it too plus increased transportation costs suggest to me build costs arnt going down any time soon.

Amadan Dubh

Some housing related news in the Budget; what a joke of a country;

"€168 million in current expenditure, or 7 per cent increase, for 14,000 HAP tenancies".

Infuriating and deeply troubling to see the government further blow up the bubble in the rental sector by pulling money from thin air or its magic money tree to keep up the farcical HAP policy. You can bet that this money is ending up in pockets of people who perhaps have had a hand in perpetuating the policy, which is my own belief. It's criminal.

https://www.irishtimes.com/news/ireland/irish-news/budget-2022-main-points-what-s-in-it-for-you-1.4698158?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Fnews%2Fireland%2Firish-news%2Fbudget-2022-main-points-what-s-in-it-for-you-1.4698158

Timing belt

https://www.boards.ie/discussion/comment/118010139#Comment_118010139

Is this not just in line with recent rent increases..... If it was not increased where would these people live... You need to have an alternative supply of housing before HAP can be dealt with.

Amadan Dubh

https://www.boards.ie/discussion/comment/118010258#Comment_118010258

These aren't "homeless" people on the streets. They are already living somewhere. At the equivalent amount of a higher rate tax payer getting a pay rise of €24k, it is a huge amount to pay per person just for their housing into the pocket of private landlords. We are paying over a billion a year in HAP leases and it has created a rental bubble, no doubt about it, there is scope for a 40% correction in rents quite easily the way things have gone yet the government is blocking this correction through incompetence, or perhaps criminality via accession to lobbyists requests, with this ridiculous HAP scheme.

This €1bn+ per year is coming from where and is ending up where? It is good money being thrown at bad and makes me sick, this budget today just reinforces how FF and FG have destroyed a prosperous future for this country over the last 20 years. The country will end up back where it was at the turn of the century unless the government makes dramatic changes to how our society and economy, including housing, is structured, with SF probably measuring for curtains in the various government department buildings at this stage. The highs and lows of the last 20 years will seem like a dream.

Timing belt

https://www.boards.ie/discussion/comment/118010560#Comment_118010560

how is rent due a 40% correction? Rent won’t drop until there there is enough supply that gives renters choices. At the moment you are lucky to find somewhere to rent. If people don't pay the rent someone else will and then where are they to live?

lossless

https://www.boards.ie/discussion/comment/118010938#Comment_118010938

There is never going to be enough supply.

Never.

The past, current and, hilariously, future policies of our governments are trying to dig down to get out of a hole. Then there's the rest that want it to continue.

I simply refuse to accept that the powers that be don't know what they're doing, that they arent being told 10 times a day that what they're doing isnt going to fix shyt, or that they are simply incompetent. It's all just too stupid to be stupidity.

Trying to increase finite supply against a background of infinite demand is foolish beyond belief.

Hence "crisis".

Throwing more money at an obviously intractable problem ffs. Why not give each person in the country 10 million euro each to pay the rent? Write it off as another medium term i.o.u to the future. Why not? Then allow investment funds to buy every blade of grass, guarantee to pay exorbitant rent on the grass, allow 35 million extra people into the country, build 20 million houses and so on and on and on and on and on.

Groundhog day personified as a country.

Amadan Dubh

https://www.boards.ie/discussion/comment/118010938#Comment_118010938

I feel rent is appropriately measured against salaries as salaried workers are renters and I look at the rent levels in this country and do not feel it is the big increases in salaries which have created demand at higher rents but the actions or at least the complicity of the State itself which have pushed them up and would see, without State meddling, rents having scope to drop 40% before levelling off and not being subject to material increases and decreases YoY, in the same way salaries are not subject to volatile swings YoY.

So it's not that the correction is due but that there is scope for it without some of the whale activity occuring by the State. As I think many are starting to realise with assets in general, there is no orderly unwinding of the bubble and our housing issue is part of that with the only way for it to perpetuate being the State to keep propping it up indefinitely in various ways. SF getting into government in the next election will probably be blamed ultimately for what happens should it stutter along a few more years.

Timing belt

https://www.boards.ie/discussion/comment/118011438#Comment_118011438

Although you are trying your best not to turn the post into another one of your xenophobia posts it still doesn't answer the question of how rents will drop 40%

lossless

https://www.boards.ie/discussion/comment/118011542#Comment_118011542

This is precisely the thing, that there is nothing orderly or natural about the housing situation. It is absolutely a conceived and perpetuated artificial crisis by the governments.

As I said above, there is just no way this is accidental. There are a few glaring, blazingly obvious factors that are underpinning the whole housing crisis. And the governments point blank refuse to acknowledge much less address them.

How long can this go on? How many years more of the exact same corruption will be tolerated before people take to the streets? It's amazing it's gone on this long.

lossless

https://www.boards.ie/discussion/comment/118011557#Comment_118011557

Utter hogwash.

Has it occurred to the thing on your neck that the combination of an unsolvable problem + "the unspeakables" may, just possibly, perhaps, be related to the unspeakable factor? You know, that years upon years of the same result may require a full appraisal of the situation rather than the tunnel vision of selected factors?

Here, solve this equation for me

2 + ? + ? (7/? + 5) = ?

That's the equation the knuckledraggers in this country are trying to solve. Can you see the problem?

And I did answer your question about how rents could drop, that the answer lies in not perpetuating a broken-brained conversation.

Or go ahead and keep trying to solve the unsolveable. Yeah, that's far more masturbatory. Maybe the answer is the chinese decouplement of the fed backed commodities that Centra sold last week as a long term fiscal guaranteed by Ugandan sentiment.

Or maybe not.

Timing belt

https://www.boards.ie/discussion/comment/118011542#Comment_118011542

I agree with your point that rent is now at a level that crippling the country and is a risk to future growth. But rent is not going to reduce until people have different accommodation options and are not forced into paying high rents. Personally I don't agree with HAP or the long term leases that are taken out as it is not value for money but you can't just stop HAP without providing an alternative solution.

lossless

https://www.boards.ie/discussion/comment/118011663#Comment_118011663

Any ideas yourself about the fascinatingly unexaminable, inexplicable housing crisis?

Build more houses, maybe?

Timing belt

https://www.boards.ie/discussion/comment/118008344#Comment_118008344

According to a CBRE report the prime yield on a house is 3.75%

(The prime yield is the yield of a property in a prime location built to the highest standard.)

Timing belt

https://www.boards.ie/discussion/comment/118011756#Comment_118011756

When people take out a loan to buy an asset (e.g. a mortgage) this leads to Asset inflation as more money is created and it is chasing the same supply of Assets. This asset inflation then leads to more people taking out loans to buy assets to increase their perceived wealth and this Debt/Asset inflation loop keeps going with a greater % of an individuals income being used to service the loan/debt.

Eventually the debt servicing cost gets so great that the individual defaults on the debt or you end up with job losses when the economy slows down as there is less money circulating in the economy as it is used to service the debt. The issues come when to many people default or loose their jobs at the same time as this leads to fire sale and asset depreciation. The asset depreciation then generates a downward spiral in property prices.

If you look at the central banks data on lending to private households you can see that mortgage growth started again in 2017 and this has been the extra money that has been chasing the same no of houses (as little new houses were built) which lead to property price rises.

If housing was to be fixed and prevent Boom/Bust then there needs to be an adequate supply of houses so that the new money created when the mortgage is drawn down is chasing an increased supply of assets which keeps the price of housing stable. Without this new supply of housing you will always have property inflation as long as the value of new mortgages is greater than mortgage repayments.