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

mcsean2163

Just saw this this morning.

https://youtu.be/OpIRhkTOPAI

They built a fairly decent small house for $15,000 worth of materials. Perhaps we could pay them to build 100,000 such houses for county councils?

https://www.boards.ie/discussion/comment/119632952#Comment_119632952

100000 of these would be cheaper, and just as realistic.

https://youtu.be/R-x5QOSqP3E

jimmybobbyschweiz

https://www.boards.ie/discussion/comment/119632270#Comment_119632270

In real terms the economy has turned as has the housing market, but in nominal terms, as you say, this has not played out yet (it will, don't worry).

The fundamentals are absolutely there for the rental market to crash; we lose just a few thousand staff from big tech companies (barely a few percent of the total employed) and all of a sudden, with a hiring freeze that is being implemented, rental supply ticks up significantly. Additionally, the State needs to borrow to continue on its ridiculous spending frenzy this Budget, which is truly reckless and going to end up in tragedy as it is being totally misdirected - all of a sudden the State is told to clean up its spending by Europe or else there'll be no more free lunches for the Exchequer - the money won't be there to throw at the property market. Two massive risk factors now materialising; loss of big tech companies' employees and State ability to run the country predominantly by borrowing cash is no longer possible without significant cutbacks.

It's absolutely mental to try to argue against the massive red flags in the property market: no rentals whatsoever means no more growth in the FDI model on which the country is utterly dependent. Yet the government is trying to spend and spend like there's no tomorrow. The FDI model has stalled from the housing crisis (although the Business Post today have reported the IDA worries that energy crisis is also going to cause issues with our FDI - a perfect storm) which will feed into reduced tax take for the Exchequer, less demand for rentals and a correction in the property market as the rental market cools. It defies logic and necessarily requires the housing crisis to be resolved to think the economy and property market will sustain these current valuations.

Here is the market sentiment graph; we have been following it in Ireland fairly consistently; I posted it at the euphoria stage in mid-2021 and earlier this year to flag the anxiety stage. Now we are approaching denial. Fear and desperation come December to February.

Balluba

https://www.boards.ie/discussion/comment/119633006#Comment_119633006

I see in todays Sunday Business Post that BAE System’s (a British sims dealer) pension fund bought 43 second hand Irish properties in 2021 for €14.4 million. Less than 1 year later in April 2022 they sold those 43 properties to a Davy Investment Fund for €16.8 million making a 15% profit of 2.4 million in less than a year.

Why is this flipping of property allowed???

Balluba

https://www.boards.ie/discussion/comment/119633074#Comment_119633074

Apologies I meant British arms (not sims)

Villa05

https://www.boards.ie/discussion/comment/119633074#Comment_119633074

It's systemic, designed to pump asset prices and enrich the financial industry at the expense of youth and the disadvantaged

Some property owners will tell you its there genius and foresight, unfortunately not, it's a rigged system that's hollowing out the "middle class"

Davys entire management should be in court for fraud and insider trading

https://www.businesspost.ie/news/davy-shelling-out-bumper-prices-for-houses-already-leased-to-limerick-council/

https://www.independent.ie/business/irish/davy-staff-could-still-face-criminal-probe-over-bond-deal-40160930.html

Eclectic Econometrics

https://www.boards.ie/discussion/comment/119633074#Comment_119633074

There are two property threads going at the moment but I think it was this one where someone brought up the idea of a tax if a sale takes place within 5-10 years of purchase. I didn't realise this but they actually have a tax like this in Texas, one of the freest states in the US - https://www.realtyaustin.com/blog/capital-gains-taxes-on-homes-in-texas

I don't like the idea of corporations buying property. I've seen "funding" arguments on here but for me there must be another way. This BAE deal was setup to take advantage of this funding gap. BAE put up the upfront cost, the government sign a long term rent deal which in essence AAA guarantees a return. Why does the government not just fund the purchase itself through a bond and in 25 years at least they own the house?

There are pros and cons with flipping. You could have someone purchase a dilapidated property and make it livable, why should they be taxed? But I think the examples provided by the person I mentioned before were more "bought in May for X, sold in same condition in July for X+20%".

A lot of the arguments on here seem to be about how much housing should be a right Vs how much housing should be allowed to be a speculative asset, "I took a risk when I was young, we paid 40% interest rates and only ate coal for dinner etc.". I sympathise with both points of view but current market conditions should drive legislation. For example, and as I probably mentioned before, I would be against individuals who are not tax domiciled in Ireland being able to purchase property here. I am not in any way, shape or form in a desperate housing situation but the thought of BAE fu*king Systems outbidding people for housing, in this market, sticks in the craw.

cnocbui

It seems if you want to address housing supply, you first have to address problems with the planning system, and boy does Ireland have problems with that.

https://www.smh.com.au/national/nsw/crowded-house-s-can-new-zealand-s-planning-reforms-show-sydney-the-way-20220914-p5bi15.html

coolshannagh28

Ireland, its economy and property market has become a microcosm of America. Strip out FDI and we have a very low average EU economy. A change in sentiment in the multinational sector will have multiplier effects thriugh the rest of our economy in a mirror image of the impact of big funds leverage for the last 10 years in the property market. Our national debt is too high if the US money withdraws and we could see huge changes in a short space of time as in 08.

jimmybobbyschweiz

https://www.boards.ie/discussion/comment/119633074#Comment_119633074

Davy have Owen Keegan of DCC still on the payroll almost the way they have been flipping properties to DCC from their property funds. More evidence of a bubble as this is just blatant corruption! Everyone at the inner circle table is a winner including the BAE Pension Fund; great little country.

cnocbui

https://www.boards.ie/discussion/comment/119632952#Comment_119632952

I'd love to see an Irish quantity surveyor cost those materials at rip-off Ireland mark up.

Timing belt

https://www.boards.ie/discussion/comment/119633006#Comment_119633006

There will be a slow down as central banks raise rates but let’s not forget that the reason for raising rates is to cool the economy. It is being done deliberately or have you missed that point.

Will the central banks over do it and create a recession very possibly.

Will they over do it to an extent that it creates a very deep recession that results in large scale winding up of business? Very unlikely

Maybe you are unaware as no longer in the country but there are thousands of people who can’t find any accommodation to rent. Even if a few thousand properties hit the rental market in the morning it would have little impact on rent prices because the demand is there to easily absorb it.

Will this demand go away? No not unless people leave the country on a mass scale. A hiring freeze just prevents new jobs being added or existing jobs being replaced when people move on. It doesn’t result in people leaving Ireland.

Thanks for you economic lessons on economic cycles but I don’t need a screen shot from some sensational YouTube channel to explain. At the end of the day There are 2 things that move any market fear and greed.

The high house prices and rents are being generated from fear and not greed at present. Fear generated by a chronic lack of supply and the prospect that they will end up homeless despite having a job and being able to afford to pay rent.

jimmybobbyschweiz

https://www.boards.ie/discussion/comment/119633823#Comment_119633823

You have plotted the picture exactly in your post but aren't yet joining the dots.

Central Banks have to induce a technical recession and will likely overdo it like the way they overdid the accommodative policy.

People have already left the country during COVID in the Big Tech companies which is why they are being slow to implement full return to office policies. People left during lockdown and havent come back, but some people in this country dont believe this. What's more, the current lack of housing is pushing more people out of the country - to think otherwise is to have solved the housing crisis. The demand reducing from emigration risk is currently materialising and you refuse to acknowledge this.

Fear and greed move markets, well, hello fear - it's starting to grip. Greed moved it high with politicians and Investors as well as older homeowners all absolutely delighted to see rents and prices rise each year to the point where no homeowners will accept 30-40% Off their house value of it meant we could solved the housing crisis.

You have all the pieces and are aware of the issued, but aren't accepting yet that this is actually playing out right now in front of us.

Timing belt

https://www.boards.ie/discussion/comment/119633893#Comment_119633893

Ffs you contradict yourself again….you say a large no of people left during covid and didn’t come back…If that’s true it had zero impact on demand…I will make the assumption that they were renters so if they left it proves that there is adequate demand to be able to absorb it. Like it or not it’s not playing out like you have said it will just like your predictions of the past few years didn’t play out and the exact opposite of what you predicted happened.

return to office hasn’t worked because there is a chronic shortage of workers and if it’s enforced people will move jobs not because they are secretly trying to hide something.

Villa05

There appears to be no let up in investment fund activity

2/3 of completed property in Dublin, Kilkenny and Monaghan in the first quarter of this year were purchased by investment funds. Notable how this issue has spread to more rural locations. Its like cocaine

The state will run out of land to build in the next few years in Dublin.

DCC have completed 0 homes in that time period

https://twitter.com/aoifegracemoore/status/1571464299847057408?s=20&t=yd3Pdym4Or4ZKx8MG1hkjA

Timing belt

https://www.boards.ie/discussion/comment/119634450#Comment_119634450

I’m not one bit surprised…all the talk of investors selling and we will have a fire sale whilst the talk within investment funds is that there is a large opportunity for returns as it’s a captive market. The biggest issue they are calling out is the lack of opportunity to invest. they aren’t scared of SF coming to power as they have already have been given guarantees.

Alot of young people are talking about emigrating due to struggles here with cost of living, rent, and finding a place to live. Cost of living protests on next weekend.

cnocbui

If these were bought by REITs, they should remove their tax free status. If an individual living overseas owns an Irish rental property, they will be taxed in Ireland on that rent and CGT if they sell it, so I see no reason why a REIT should be treated any differently.

Villa05

https://www.boards.ie/discussion/comment/119634523#Comment_119634523

Grim stuff, we've sold our kids to bail out the financial industry, giving them the strength to batter them while their on the floor

I'm half afraid to ask, but what guarantees?

Timing belt

https://www.boards.ie/discussion/comment/119634599#Comment_119634599

REITS never really took off on Ireland. These will no doubt be bought by an SPV that is owned by a REIF.

The issue with taxation is that you if you tax funds you kill an industry in Ireland and in the process and cut off funding for new builds.

If they are to introduce a way of increasing tax specifically on funds they need to do so in a way that doesn’t impact other asset classes and still provides the necessary funding for new builds.

kaymin

https://www.boards.ie/discussion/comment/119634649#Comment_119634649

Can't be difficult to structure a tax that targets funds investing in Irish property (a tiny % of funds administered / managed out of Ireland anyway). It should never have been allowed in the first place.

Timing belt

https://www.boards.ie/discussion/comment/119634633#Comment_119634633

SF meet with institutional investors to say there would be no material change and that they still needed them…they did the same with big tech a few weeks back.

I’m no lover of big institutional investors but there is a place for them as without them there really would be a rental shortage. Problem is that because social housing hasn’t been built in sufficient numbers it gives them more or less a monopoly of the rental market.

interesting article in the times….sheds some light on the 54% of renters receiving supports. The largest portion being people in council or housing agencies and not renting in the private sector.

https://www.irishtimes.com/business/2022/09/18/local-authorities-should-get-construction-companies-to-tackle-housing-crisis-says-economist/

https://www.boards.ie/discussion/comment/119634599#Comment_119634599

Do they have a tax free status? I thought the tax was paid on dividends and if they taxed rental income as well, it would amount to a double taxation.

dontmindme

https://www.boards.ie/discussion/comment/119634450#Comment_119634450

"...You could cover all your land in concrete and prices will still rise..."

kaymin

https://www.boards.ie/discussion/comment/119634702#Comment_119634702

Yes if they're Irish residents but not if they're non-resident:

Non resident investors will not be liable to Irish capital Gains tax because the REIT is a publicly listed company. 

However, the investors may be liable to such taxes in their home jurisdictions. In relation to dividends, it is intended that the REIT will apply dividend withholding tax (DWT) at the rate of 20% from income distributions to non residents. Certain non residents may be entitled, under their tax treaties, to recover some of this DWT from Ireland or otherwise should be able to claim a credit for DWT against taxes in their home jurisdictions. 

Certain Irish resident pension funds, insurance companies and other exempt persons will be exempt from DWT.

https://www.boards.ie/discussion/comment/119634799#Comment_119634799

Thanks, I remember hearing an economist explain that it was incorrect to say they don’t pay tax, I just couldn’t remember the details.

cnocbui

https://www.boards.ie/discussion/comment/119634649#Comment_119634649

They have been buying completed builds that they did not fund the construction of, including in 2019, an entire apartment block. The Germans clearly have the same problem because they recently passed legislation to specifically forbid funds from purchasing residential properties.

We have been over this before and yet this false belief persists that commercial interests are a major funder of construction and that the supply of housing depends on them being allowed to compete against individual buyers.

cnocbui

https://www.boards.ie/discussion/comment/119634702#Comment_119634702

Dividends are taxed, but in likely the vast majority of instances, those individuals are not resident in Ireland so may end up paying very little tax here.

"And here lies the problem. Irish resident individuals pay Income Tax and USC at their marginal rates while a non-resident investor may pay little or no Irish Income Taxes on the REIT dividend. This is inequitable.

With no business taxes collected at the company level, and limited Income Tax collected on dividends from REITs, some overseas investors are obtaining profit and gains on Irish property and making very little or no monetary contribution to the State. In this way, the REIT regime undermines the principle that Ireland hold onto the right to tax profits and gains from Irish land and property." https://www.rte.ie/brainstorm/2021/0513/1221319-ireland-housing-property-reits-tax-investment-funds/

HerrKapitan

https://www.boards.ie/discussion/comment/119634450#Comment_119634450

You will own nothing and you will be happy - WEF

cnocbui

"'Most apartment developments pre-sold'

At the time, Cairn chief executive Michael Stanley said that cuckoo funds accounted for 30% of its sales in the medium term, adding that “almost all” apartment developments (exempt from the Government’s new rules) are forward-sold. 

Mr Stanley said: "There is nobody building speculative apartments where they don’t yet have a buyer or a forward buyer.

...

Funds bought 57% of new homes in 2019

Investment funds bought over 5,800 homes in Dublin in 2019 at a cost of €2.4bn, with 57% of all new builds in the capital snapped up.

While focus has been drawn to the purchase of 135 homes at an estate in Maynooth, the scale of that spending is seen in a report on the Dublin property market, which was published by estate agents Hooke & MacDonald in February." https://www.irishexaminer.com/news/politics/arid-40296650.html

Heres a clue, you don't need to 'buy' something if you commissioned and funded the construction.