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

Villa05

https://www.boards.ie/discussion/comment/118538594#Comment_118538594

Do you think interest rates will stay at current lows for the next 3 to 5 years?

Genuinely interested in your views and reasoning. Group think can be very dangerous at both ends of the spectrum

J_1980

https://www.boards.ie/discussion/comment/118538558#Comment_118538558

The ECB won’t even be able to exit QE let alone raise rates.

the entire failed left wing debt fuelled big government is too embedded in tok many EU states. Unless germany/Netherland/ Finland threaten to re-issue their old currency as dual legal tender there is zero chance of this devaluation to stop.

https://www.boards.ie/discussion/comment/118538558#Comment_118538558

His thinking is simple, every single thing he reads about must eventually lead to a housing market crash.

fliball123

https://www.boards.ie/discussion/comment/118537607#Comment_118537607

What your missing is in a lot of cases people are renting rooms within a property that is being rented out so if a house with 4 rooms gets taken from the rental market and sold to someone buying for themselves it means one person or a couple gains a house and 3 - 6 who were renting now need to find accommodation. Also if its being sold as an investment its a zero sum game. So it increases the need for more housing

Amadan Dubh

https://www.boards.ie/discussion/comment/118538926#Comment_118538926

I just think we are currently heading to quite a similar environment to 2005/06 and mortgage interest rates were at 4-5% - things are booming, money is cheap and costs are high; the only way is up and no one can see a crash coming!

fliball123

https://www.boards.ie/discussion/comment/118538489#Comment_118538489

A bit misleading as to why you think the main cause of small landlords running for the hills is due to low interest rates even if we had high interest rates they would still be running as the main reasons are the tax implications and the new laws stacked on the renters side. Only in Ireland could a renter stay in a rental accommodation with out paying rent for 3+ years and after this period they can leave it trashed without any financial impact on them. That is what is scaring the majority of them. Also rates are not going to go up as quickly as people think they will this will be managed I reckon it will go up by 1 -1.5% over the next 3 to 5 years. There is already a legacy of mortgage non payments since the 08 crash and the central bank will have to take that into consideration when pushing the rates up.

Amadan Dubh

https://www.boards.ie/discussion/comment/118539155#Comment_118539155

Come back to me when the State isn't so heavily invested in the property market and tell me how sustainable it is.

Wanderer78

https://www.boards.ie/discussion/comment/118539050#Comment_118539050

again, private debt is far more problematic and has caused far more frequent and serious economic crashes, i.e. 08, the only way to counteract this, is to become less reliant on it, and more reliant on public debt, but to make sure this money is used productively, and not to inflate asset prices, such as property.....

fliball123

https://www.boards.ie/discussion/comment/118539304#Comment_118539304

The state have been heavily invested in the property market for decades , what makes you think they are going to pull back now. We face a future in this country with an even more left leaning government - do you think they will give more to those who need to be housed or less? You may be a long long time waiting for the other poster to come back to you. As those conditions are not going to change

J_1980

https://www.boards.ie/discussion/comment/118539447#Comment_118539447

Like old Joe is doing….

public sector spending is nearly almost inefficient and highly inflationary unless you’re transitioning from a 3rd world economy to a 1st world one and investment (roads bridges etc like china did for most of the last 30y).

building houses for people who can’t afford the building costs themselves is already inefficient. Others will pay via taxes or inflation.

the mental gymnastics Krugman, Stieglitz and co are using to argue that Argentina’s economic strategy is the right one is simply astounding. Nobel prize for economics to me is like handing out a nobel prize in astrology….

iColdFusion

https://www.boards.ie/discussion/comment/118537534#Comment_118537534

Yeah the impact to developer finance costs is a big one for people saying a rate increase will solve the housing crisis, builders are already struggling with these costs and its the reason they prefer to sell a whole development to a SHB or REIT, a builder of a 50 house estate could easily have 15 million of debt until all of those are built and sold.

Wanderer78

https://www.boards.ie/discussion/comment/118539483#Comment_118539483

theres no question theres inefficiencies within the public sector and its spendings, along side many bullsh1t jobs, but its a complete myth that the private sector is far more efficient, modern political and economic ideologies which ultimately promotes, encourages and facilitates fire sector lead economies, which in turn generally leads to financialisation of economies, this becomes extremely evident in property markets, primarily effectively hyper inflating the price of these markets, i.e. our current situation!

other elements of these ideologies, is moving taxation away from wealth, including property and land, and moving it more towards labour and consumption, again, our current situation!

krugman, stiglitiz and co, are whats called neoclassical economists, neoclassical economics has a refusal to accept the fundamental role of things such as banks, debt and money, that fact that banks actually create the majority of our money supply in the form of credit, hence why no neoclassical economist or neoclassically based institutions realized the 08 crash was in the post, i.e. that we had created the largest credit bubble in human history, and that it was gonna go kaboom....

Bass Reeves

https://www.boards.ie/discussion/comment/118539201#Comment_118539201

No we are not. In the mid noughties anybody first time buyer, trader upper or an investor could put have a house, get a 110% mortgage@ 5-7 times income and get a 30-50k personal load to buy a new a new car with cursory checks.

From 2006 on builders went from selling as you build, to being financed to complete projects before having to sell a unit. And after it fell in its hole in 2008 they were financed d to continue for another 12-18 months.

There is no comparison to now. We are still in a housing deficit unless 100k leave the country without any inward migration. Personal investors have to put up 20-30% equity to buy, that is why they have stopped buying. First time buyers have to have a 10% deposit. Trader uppers have to have a 20% deposit+ associated fees and costs inplace.

Any correct in the next few years will be sub 10% in the less than 500k market

enricoh

https://www.boards.ie/discussion/comment/118539447#Comment_118539447

Households have got their act together since the tiger calved and reduced their debt. The government have totally lost the run on spending, the golden goose of corporation tax n MNC tax take is looking iffy after this year. We'll soon see how reliant we are on public debt if interest rates go up!

Amadan Dubh

https://www.boards.ie/discussion/comment/118539230#Comment_118539230

I didn't mean to say landlords running for the hills was "mainly caused" or even "caused" by low interest rates - I just said the mass exodus was correlated when the other poster reckoned we'd bleed small landlords with higher interest rates. The main reason we've lost small landlords is because they are getting ran out of the market by institutional-driven housing policy; tax, issues with eviction, RPZs (which harm those landlords in the market before they were introduced and landlords choosing quality tenants more than chasing every red cent from their rental), finally getting out of negative equity and cashing in pots-08 etc.

I just disagree on rates not going up that quickly as pre-covid CPI inflation a lot of us feel understated the cost of living increase whch means that the CPI measures what it wants to measure but it is not particularly representative for the individual situation. The net effect is that increases to interest rates were needed pre-covid. Now throw covid restriction induced hyper QE and it lit the inflation rocket leaving the regulators bamboozled, embarrassed and humbled already by revising their "transitory" and "temporary" narrative within a few short months!

Amadan Dubh

https://www.boards.ie/discussion/comment/118539462#Comment_118539462

Our country is run on debt, which means our public spending is heavily reliant on our ability to borrow. HAP and other rental market supports alone (via county councils, tax breaks for institutionals and housing charity contributions) cost billions per year. With housing costs only going one way, these costs are naturally going to go one way, if the State stays wedded to the idea that it is just chasing the market rather than realising that it itself is propping up the market. 1/3 of all rentals are estimated to be receiving some form of State support - when do we say that enough is enough? Or do we have a limit and would we accept one in every two rentals being State-funded?

A few decades can quite easily be undone and a shift in approach be adopted if that shift in approach involves the State itself moving out of the private market and developing its own housing - quite clearly the market will not deliver affordable housing as it would've done so already. Personally, beyond housing, I don't think our economy has fully recovered and learned from the problems leading up to the 08 crash - in particular around diversification in public revenue and with the lack of investment in things like infrastructure, education and housing. 6 years ago is all it was when we would have said the economy had began its strong growth, but 9 years ago we were very much still in the throes of a recession - if you strip away the government's ability to borrow as much as it has, what sort of economy do we have left? Too much of this cash is ending up in housing and preventing the State from raising more cash itself as once the cash goes into housing it pretty much leaves circulation in the economy, whereas more affordable housing costs allow the individual to save more money and spend it in the economy which means it circulates more and generates more productivity (this is the same rationale as to why companies should not be allowed grow so big like Google, Apple, Amazon etc. as they also suck productivity out of the economy and destroy livelihoods). Short story made long, the Celtic Tiger period lasted a solid 8-10 years at unsustainable levels so a couple of decades in this context is not a long period and it is not a given that we will be in a stronger position every ten years than we were ten years previously.

Amadan Dubh

Someone else posted the other day but why is the 2021 thread still going? I always enjoy reading back over the first pages of these threads, great to see how thinking changes or doesn't change; and how predictions ended up.

@Timing belt congratulations for your prediction at the start of 2021 (10-15% increases as savings convert into spending on property) - maybe I shouldn't fight you so much! https://www.boards.ie/discussion/comment/115785054/#Comment_115785054

Villa05

https://www.boards.ie/discussion/comment/118539050#Comment_118539050

Some of the most successful and wealthiest European countries are left leaning.

The difference is tolerance of corruption lobbyism etc. UK is right leaning and in decline for decades

Bass Reeves

I cannot understand how he fascination with MNC's all deciding to up and leave tomorrow because of the change in corporate tax rates. First of all it only effect those companies above 750 million in valuation. This protects the indigenous smaller companies.

Most if these companies have to have a location in Europe. Ireland has a common language with American companies. Unless US corporate tax rates drop substantially these companies will not be repatriating there profits any time soon larger MNC that employ large numbers such as Amazon are unaffected.

Irish corporate tax return could actually increase.

PommieBast

https://www.boards.ie/discussion/comment/118540309#Comment_118540309

It's not any change in corporation rates that would screw over Ireland. It is moves towards requirements that profits are booked in country of sale.

Timing belt

https://www.boards.ie/discussion/comment/118539049#Comment_118539049

It depends on what you define as 'Interest Rate'.

Will rates increase?..... yes most definitely but the ECB rate increases will be small as I don't believe this is the tool that the ECB will use to cool the economy.

If you are looking at what people generally refer to as the ECB rate which is the Deposit facility rate I don't see this rising above 1% in the next 3-5 years. If it was to rise to even 1% it would be a major interest rate hike. The reason for saying this is that you need to look back and see where this rate has been historically and understand that changing the deposit facility rate as a monetary policy tool has not been used much since 2008 due to the zero bond nature of rates during the period.

i.e.

Instead the ECB have been using QE to implement monetary policy to influence market rates. To understand this you need to understand how QE works and that it is not 'Printing money' as some people believe it is. The ECB buy government bonds and Blue chip companies bonds which reduces the supply in circulation and thereby pushing the yield lower. The debt markets then reprice all debt as a result which results in lower rates for debt. It produces the same effect as a interest rate cut to the ECB deposit facility rate.

QE is a more powerful tool as it is not just short term interest rates that are manipulated (like a change to the ECB deposit facility) but they can influence long term interest rates by buying longer term bonds. This is important to understand as they have a tool to influence the full yield curve where as a change to the ECB rate only changes short term rates. Why is this important? It is important because they have a tool to prevent an inverted yield curve which normally the first sign of a recession. (i.e. short term rates are higher than longer term rates)

As debt becomes cheaper it encourages individuals/companies/governments to borrow more and in doing so create 'New Money' to replace the old money that is being destroyed when debt is repaid. If the money supply increases it is because individuals/companies/governments have borrowed more money than is being destroyed. whether the mechanism to lower rates is an interest rate cut or QE is irrelevant both are tools used by the ECB to spur growth in the economy or to cool the economy if they increase rates by either raising rates or undertaking Quantitative tightening (QT).

If the ECB were just to increase the ECB rate to cool the economy and inflation we would end up with an inverted yield curve which would be very dangerous to future economic growth. Instead I believe the ECB will undertake QT as the main driver to cool the economy with only moderate increases to the ECB rate (to impact consumer sentiment and their expectations of inflation)

Amadan Dubh

Speak of the devil and he shall appear - talking of the unsustainable government spending already, even before we factor in the billions we will need to borrow after covid to invest in infrastructure and housing. But no, no this is good value compared to building housing itself, once you ignore the impact it has to the wider housing market and the increased costs it adds to housing by being such a whale in the market.

For conclusive proof that the housing market is being propped up by the State and is in no way sustainable unless "sustainable" means the government can spend unlimited amounts on propping the whole thing up;

"The shift from directly building social homes to providing rent subsidies – the so-called bricks to benefits switch – has been one of the most significant recent trends in housing here and in other countries. The average monthly rent subsidy in 2019 was €1,872."

https://www.irishtimes.com/business/economy/government-spent-close-to-900m-on-rent-subsidies-in-2021-1.4787134

The Government spent close to €900 million on rent subsidies in the private sector last year, according to new figures obtained from the Department of Housing.

This included €542 million on the Government’s main rent subsidy scheme: HAP (Housing Assistance Payment).

Spending on HAP has risen by more than 80 per cent since 2018 amid criticism that the Government’s increasing use of rent supports is adding to pressure in the rental market here.

Some 100,000 households, a third of the rented sector, are now reliant on some sort of State subsidy.

Mr Ó Broin said the Government was absorbing a significant amount of the limited supply of rental accommodation, which was aggravating the State’s rental crisis.

“This is a direct consequence of their failure to provide an adequate supply of social housing,” he said. “This over-reliance on the private rental sector is bad for social housing tenants, private renters and the taxpayer,” Mr Ó Broin said.

“The Government must increase direct investment in social housing output and year on year reduce its use of the private rented sector to meet social housing need,” he said

MacronvFrugals

https://www.boards.ie/discussion/comment/118541164#Comment_118541164

A prediction made by DCC's head of housing policy and research Dr Dáithí Downey in 2020 that the cost of HAP annually by 2025 will equal that of the children's hospital (1.7 billion) would seem to be fairly accurate considering the current trajectory!

https://www.businesspost.ie/residential/annual-hap-payments-will-dwarf-cost-of-childrens-hospital-within-five-years-9c319be1

SmokyMo

https://www.boards.ie/discussion/comment/118541164#Comment_118541164

This alone should be enough for government to resign and loaf any pleb asking you to vote for FG/FF.

Timing belt

https://www.boards.ie/discussion/comment/118541164#Comment_118541164

The government has always been a big player in the property market. If you look back through history the government have always been a big player whether it was building social housing or whether they are providing rental support. This is not going to change anytime soon nor will it change depending on which political parties are in government.

If the Government provide social housing instead of HAP it still impacts on the housing market as resources are diverted away from the private sector to build social housing. It's not like the countries ability to build more houses has increased.

People that give out about HAP are generally the same people that give out about social housing saying that the government are giving out houses for free. At the end of the day without government assistance to provide housing whether it is is social housing or HAP a large portion of society will be unable to secure somewhere to live and we would have the equivalent of Trailer parks like in the US along with all the social problems that come along with that.

Amadan Dubh

https://www.boards.ie/discussion/comment/118541331#Comment_118541331

This is similar to the institutional gaslighting that I notice occurs in any government statement or lobbyist commentary, "we aren't the bad guys, we're actually the good guys and are part of the solution, not part of the problem". No one who is against HAP, that I can see and certainly speaking for myself, thinks that those needing HAP are some sort of trailer trash class. To dismiss arguments that criticise the level of spending on HAP and rental assistance so flippantly perhaps indicates a vested interest in the status quo, but that is my own speculation as to your context.

If the government provides its own form of social housing it reduces the reliance on the private sector and takes the deep pockets State out of competition with private individuals and by current estimates that would involve an extra 1/3 of tenancies being converted from State-funded to private individual tenancies - even cutting the 1/3 by 50% would result in 50,000 tenancies no longer being State funded.

iColdFusion

https://www.boards.ie/discussion/comment/118541260#Comment_118541260

SF want to massively increase social housing spending by borrowing more, want to buy up more private houses for social housing and want to remove HTB for people wanting to buy their own homes?

timmyntc

https://www.boards.ie/discussion/comment/118541331#Comment_118541331

The government have not historically played a large role in the rental sector, except as a supplier (social housing).

They have not until recently become a larger demand-side actor in this space. HAP inflates all rents, the same way extending LTI limits would inflate house prices. The government have deep pockets and can big higher and higher with HAP to ensure that HAP recipients pay their rent, meaning that rents will keep inflating as a result. It is not normal, or good policy, and cant be conflated with building social housing (which is positive economic activity, and gives the government an asset at the end of the day.)

Timing belt

https://www.boards.ie/discussion/comment/118541411#Comment_118541411

If he government provides social housing it results in people moving out of private rented accommodation but results in less private housing being built. It's simple!!!!!

As for accusing of gas lighting, all you are doing is trying to move the focus away from what I am saying.... This is something that I have noticed a lot with your posts this year where you come on and say Ukraine will crash the economy or interest rates will rise by 6-7% and when you are challenged on it you ignore and post something different to drive the conversation into a different direction because you are unable to explain the logic that has lead you to make such crazy claims.

timmyntc

https://www.boards.ie/discussion/comment/118541456#Comment_118541456

Even if government building social houses results in less private housing overall being built, it tends to increase the total amount of housing built compared to when the state arent funding builds. More money/work in houses tends to attract labourers and total capacity to build increases - this is different to rental sector, where even when rents are quite high it doesnt have half as much of an effect on new rental supply, largely because rental income is taxed at 50% for all bar institutionals, which makes rent increases less of an attraction to would-be landlords.

It is not a case of damned if you do, damned if you dont. Social housing is objectively a better investment for the state, and a better outcome for housing and rental markets than HAP.