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

DownByTheGarden

https://www.boards.ie/discussion/comment/120260330#Comment_120260330

Less than the difference between the rent for a similar house even now buying it with an extra 2% on the rate.

Villa05

https://www.boards.ie/discussion/comment/120274676#Comment_120274676

A couple on minimum wage who bought 10 years ago is far far better off than someone who is earning 60k now

A couple on minimum wage 10 years ago would not get a mortgage, maybe, from 05 to 07, but not 10 years ago

Was listening to the latest other hand podcast earlier and Jim Power stated by his calculations, that a couple on the dole with 3 kids will get 56,000 this year from the taxpayer. This was in relation to the cost of living package announced earlier in the week.

How much would the same working couple need to earn to net the same total. Add in housing, medicare, childcare and commuting costs

It's a credit to the nation that we have almost full employment despite these massive deterrents the state puts in place to workers.

awec

https://www.boards.ie/discussion/comment/120278097#Comment_120278097

It's all buyers, but anyone who self-builds is excluded.

It's based on the PPR, so they have no idea if it's a FTB or not.

Villa05

Looking ominous for the commercial office sector

Google is asking cloud employees and partners to share their desks and alternate days with their desk mates starting next quarter, citing “real estate efficiency,” CNBC has learned

Ozark707

https://www.boards.ie/discussion/comment/120278969#Comment_120278969

I think it started to look ominous for the CRE sector many moons ago. Older buildings which are currently vacant have an extremely grim future. Too expensive to upgrade and conversion costs to other uses probably making zero financial sense. Maybe the only thing is a major government subsidy to convert them to apartments.

Villa05

https://www.boards.ie/discussion/comment/120279056#Comment_120279056

Would be easier/better to convert the older buildings to residential were the will to do so present as many were originally resedintial buildings.

Unfortunately the state is funding more office developments and demolishing other buildings or accelerating there path to dereliction.

rob316

https://www.boards.ie/discussion/comment/120278918#Comment_120278918

56k is that right?

Villa05

https://www.boards.ie/discussion/comment/120279581#Comment_120279581

More detail from the comments section of the podcast. It includes max HAP (investment funds/LL dole)

David, got this from an accountant after Budget 2023. It includes

Job Seekers Allowance; Qualified Adult Dependent; Qualified Child Dependent; Back to School allowances; October Double Welfare Payment; Christmas Bonus; Max HAP Allowance per month; Fuel Allowance 28 weeks; Fuel Allowance Once Off Payment; Double Child Benefit Payment; Child Benefit.

Timing belt

https://www.boards.ie/discussion/comment/120278969#Comment_120278969

This is nothing new banks were doing this since 2016

J_1980

https://www.boards.ie/discussion/comment/120279208#Comment_120279208

They should convert all of Georgian South city center to apartments. It’s the easiest to convert and most appealing to buyers/renters.

Villa05

https://www.boards.ie/discussion/comment/120280393#Comment_120280393

It does seem to be ramping up, and couple that with the fact that housing output was restricted since 2016 because Labour was tied up building office blocks and other commercial property. This inflationary period would also shake out alot of business and many may not survive it

J_1980

Stock is dwindling fast. Several Turnkey properties had bidding wars 100k above ask on 600k homes on offr.io.

only 550 dwellings to rent in county Dublin. I don’t see a crash or downturn at all….

combat14

the realities of rising interest on asset values: "State’s biggest private landlord cuts value of its homes as interest rates bite

Goodbody Stockbrokers analyst Colm Lauder said that the results show “the start of a re-pricing” of Irish private rental sector (PRS) assets as higher market interest rates feed through, resulting in lower dividends."

https://www.irishtimes.com/business/2023/02/24/residential-landlord-ires-cuts-dividend-as-asset-values-decline/

https://www.boards.ie/discussion/comment/120282700#Comment_120282700

The major fear now is that investors in REITs will still expect a dividend, if the REITs costs go up surely rents will follow in order to keep investors onboard. Just like oil companies, I'm sure REITs will limit supply of rental properties until rents reach values they are happy with.

combat14

https://www.boards.ie/discussion/comment/120283161#Comment_120283161

sounds like the REITs are heavily exposed .. and with rent pressure zone price freeze in place perhaps they will have to hold back some stock to drive up future rent prices .. a vaccancy tax of 10% on unlet properties over 3 months may be required similar to the incoming site vaccancy tax .. the next government could in less than 2 years time bring in many creative measures which should have REIT shareholders concerned

https://www.boards.ie/discussion/comment/120283248#Comment_120283248

I would say the majority of REITs have stock set aside for two years after they become vacant when the rents in the area increase significantly. I'm a relatively small landlord and even I do that.

The government won't do anything to hurt REITs interests. I'm sure they lobby sufficiently.

combat14

https://www.boards.ie/discussion/comment/120283298#Comment_120283298

all seems very bubblish

combat14

https://www.boards.ie/discussion/comment/120283298#Comment_120283298

all seems very bubblish

Villa05

https://www.boards.ie/discussion/comment/120283298#Comment_120283298

It's similar to the quantitative easing effect

Buy anything, as long as there is an entity in the market that will buy it off you at a higher price or bail you out if things go wrong ie the central banks

In the Irish property market its the government plus you have the added incentive of tax free gains on rent and price appreciation.

Donald Trump

https://www.boards.ie/discussion/comment/120282700#Comment_120282700

What I found interesting in that story was the below:

The company is allowed a maximum debt level equating to 50 per cent of the value of its property assets under Irish real-estate investment trust (Reit) laws and Ires’s own borrowing covenants. Its gearing rose to 43.3 per cent in December from 40.7 per cent a year ago, it said on Friday.

So if prices drop enough they would likely have to firesale properties......unless they can attract more investors into a market that is down at that time

combat14

https://www.boards.ie/discussion/comment/120286290#Comment_120286290

wow so their gearing could be heading for 45%+ now after repricing their own assets due to interest rate rises reducing dividends. As Warren Buffett says “Only when the tide goes out do you learn who has been swimming naked.” This will hold true as interest rates continue to rise this year.

What are some possible REIT options for this year:

- Raise rents significantly difficult to do immediately with many areas designated legal rent pressure zones

- Set up new company and transfer assets/ debt to that

- Hope property values significantly increase which is not guaranteed given high cost of living, rising interest rates and the fact there already been a massive increase since 2012 in values

- Sell parts of their portfolios to reduce gearing

- Discontinue repricing their own portfolio value given rising rates are increasing costs with the knock on effect of reducing dividends - probably not legally permissable option

- Other which there of course probably many

Interesting times ahead - either way it is still not good news for renters

Ozark707

A number of articles today across the water about drops in HP. First one sheds some interesting light on the implosion happening in many markets, good that is has been pulled together in one source.

Guardian: Across the world house prices are breaking records – but this time it is because of how fast they are falling. Houses in Stockholm are now selling for 20% less than their peak, Sydney prices are down by almost 14% over the year, while in San Francisco they are down by 15%, in Auckland by almost 22% and in Toronto by 16%.

Germany has registered its biggest six-month price fall for two decades, while in France forecasters are expecting declines of 5% to 7% this year, and after a strong year in Spain, the first price declines are being reported in Mallorca and Ibiza.

Meanwhile, maybe spare a thought for some homeowners in the South Korean capital of Seoul, where apartment prices are reportedly down by 24%since October 2021.

The UK’s house price falls to date – down by 4.2% or 3.2% since their peak in August last year, according to the Halifax and Nationwide respectively – look relatively mild in comparison with some of those locations.

https://www.theguardian.com/money/2023/feb/25/house-prices-falls-uk-us-europe-property-markets

Second one in the Telegraph referring to an ice age and what may happen next. Not as concise and as it is behind a paywall

Well, that era is over. At the end of 2021, the Bank of England base rate was 0.1 per cent. But in an attempt to tackle rampant inflation, policy makers have ratcheted it up 10 times since. The rate currently stands at 4 per cent. There will almost certainly be more rises to come.

While that isn’t very high by historical standards, it is much higher than many are used to. As Andy Haldane, the former Bank of England chief economist, said last year: “We have a whole generation of mortgage holders who have scarcely seen a rise in interest rates. It will be a massive shock to the system.”Today’s homeowners have such big mortgages that interest rates at 6 per cent would cause as much pain as those of 15 per cent did when the market crashed in 1989.

https://www.telegraph.co.uk/property/news/have-entered-property-ice-age-coming-next/

J_1980

Irish property never had the easy money upmove, hence it won’t go down.

scarcity trumps everything else.

tanko

Don’t worry lads, it’s different here. The boom is getting boomier.

Ozark707

https://www.boards.ie/discussion/comment/120286642#Comment_120286642

Scarcity narrative (and also high levels of immigration) have been trotted out in markets that are currently imploding.

Villa05

https://www.boards.ie/discussion/comment/120286642#Comment_120286642

Very misleading statement

If your an investment fund, Reit, government you had access to close to 0 cost finance plus very favourable and unsustainable tax treatment. They have been hovering up property in high demand areas in the past decade which accelerated into the interest rate change environment. This pushed buyers to less desirable areas and increased prices there.

Poor housing policy trumps everything else

combat14

https://www.boards.ie/discussion/comment/120286642#Comment_120286642

actual hard cash affordability trumps everything

there is a reason why the government has been issuing energy credits, extra child benefit payments etc. a massive portion of the domestic economy is struggling the same as across many parts of the world ... throw rising interest rates on top of massive mortgages / large borrowings, on top of 10%+ inflation with zero to low pay rises and you have a perfect storm

Timing belt

https://www.boards.ie/discussion/comment/120286373#Comment_120286373

Or they could do as they have said in the article and sell 50m to ensure that they have adequate headroom.

combat14

https://www.boards.ie/discussion/comment/120286957#Comment_120286957

they certainly could do that to solve issues of financial distress but it is a sign of where things are going with rising rates

once buyers are aware that REITs are being forced to sell property due to asset value repricing and legal gearing issues offers will be priced downwards accordingly

amacca

https://www.boards.ie/discussion/comment/120286672#Comment_120286672

I don't have an axe to grind, at least not really but it doesn't seem to be a narrative to me.....it seems more like an actual scarcity here.

Now if this market encounters a scarcity of buyers vs the number of sellers or a scarcity of those that cant access funds to buy then I suppose the house prices in Ireland wont come down much narrative might turn out to be just that....

Although it might be worthwhile considering those that won't sell at low prices and stick rather than twist hoping for a recovery.....and how long they are prepared to wait.