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

Roberto_gas

https://www.boards.ie/discussion/comment/121892375#Comment_121892375

Nothing coming in south..this 3 bed apartment was bought in 2018 for 383k…listed at 450k..current offer 525 k !

Madness

https://www.myhome.ie/residential/brochure/apartment-21-carmanhall-court-sandyford-dublin/4772165

BlueSkyDreams

https://www.boards.ie/discussion/comment/121865120#Comment_121865120

Kind of sums up irish housing policy at the moment.

Its laughable.

And some people say we have a Centre Right Govt.

BlueSkyDreams

https://www.boards.ie/discussion/comment/121878558#Comment_121878558

Very few new builds are actually for sale and I believe only about 6% of new builds are bought by private buyers.

So prices for new builds available to joe public for purchase will inflate, because of demand.

Blut2

https://www.boards.ie/discussion/comment/121892085#Comment_121892085

For hundreds of thousands of homeowners with adult children in their 20s and 30s living in the family household its finally having them move out.

For any homeowners looking to trade up a decline in overall market value benefits them more financially than they lose.

For huge numbers of local business owners who own their own homes its actually being able to employ people on cheap wages. Its no longer possible to rent in places like Dublin on minimum wage, which is having a massive impact on getting staff in industries like hospitality and tourism.

For employees of the large multionationals in Ireland who own their own houses its actually being able to hire foreign staff. The #1 factor in having people turn jobs in IT in Ireland now is seeing what our housing market is like, its developing into a massive issue thats putting jobs at risk.

For homeowners in general its having gardai in your location station, nurses in your local hospital, and teachers in your local school. All of which are hugely problematic at present, because junior staff in all of these essential fields can't get housing.

And, just on a moral level, for most homeowners its about your friends/family/Irish people in general finding it easier to get housing. I own my own house, if it dropping 20% in value tomorrow helped tens of thousands of people get secure housing in Ireland I'd be delighted.

Thats why polls show a sizable majority of homeowners are perfectly OK with house prices dropping. Because even on a selfish level the positive, day to day, results far outweigh the vague theoretical loss of asset valuation.

timmyntc

https://www.boards.ie/discussion/comment/121892048#Comment_121892048

How many people where in negative equity following the financial crisis who could not trade up (as family grew etc) because of negative equity

Very few. The proportion of people in negative equity is vastly overestimated time and again

Dav010

https://www.boards.ie/discussion/comment/121892751#Comment_121892751

Which figures are you saying are overestimated?

According to the central bank over 36% of home loans, and 56% of investment properties were in negative equity when prices started to recover at the end of the recession, are you saying the CB overestimated? Of course they have probably recovered since then, but the point being made is that if there is a significant downturn which causes properties bought over the past few years to lose significant value, it traps owners and causes the housing market to stutter even more, on top of developers closing up shop if it is not worth building.

PommieBast

https://www.boards.ie/discussion/comment/121892534#Comment_121892534

In Dublin it is a struggle with median salary let alone minimum wage. I remember talking to some founders at SiliconDrinkabout back in 2018 and they said pretty much the same thing about employees.

The Student

https://www.boards.ie/discussion/comment/121892751#Comment_121892751

Okay try reading my post slowly. I asked the question "how many people where in negative equity" I did not mention how many people "are" in negative equity. If however property prices drop then the number of people who could go into negative equity could increase and the market stagnates again.

Whether you want to accept it or not part of any market focuses on "confidence" if suppliers don't have confidence in a market they stop supplying it.

It reminds me of the banking crisis where people say the banks should have been allowed fail following the financial crisis. Assume we let this happen do you think any international investor would invest in Ireland Inc for anything? Exactly what could we do about an international investor not investing in Ireland inc?

Roberto_gas

I doubt prices will fall ! The reduction in interest rates will fuel the prices further....see what happened in UK. Prices dipped due to high rates and are bouncing back slowly in UK as they will start to reduce rates too. The biggest risks taken are by people who have purchased beyond their means or have gone full in with very high mortgage or have bought a keep due to lack of supply.

timmyntc

https://www.boards.ie/discussion/comment/121892778#Comment_121892778

That central bank report is from when prices bottomed out after the GFC - even people in the black were not looking to sell or move.

Those buying investment properties on 100% mortgages rightly got stung, but most homeowners never felt the effect because you do not feel the impact of negative equity unless you actually want to sell. By the time things had improved the % in negative equity dropped massively, less than 1 in 10 by 2018. And of those I'd wager most were unaffected aside from being on a higher LTV rate, as the majority of homeowners in this country only ever buy and live in 1 house.

timmyntc

https://www.boards.ie/discussion/comment/121893061#Comment_121893061

The argument that negative equity stops people trading up is a fallacy - those people most likely to go into negative equity never had much equity to begin with, hence they ended up in negative equity from a price drop. These people are least likely to trade up because even before a price drop they never had equity.

The people most likely to be mover-purchasers are those with significant savings or equity, usually equity. If prices fall across the board but you still have equity in your home you are just as likely to trade up as the gap between your home and that you want will in most cases have narrowed in nominal terms.

PeadarCo

https://www.boards.ie/discussion/comment/121893458#Comment_121893458

But your problem is that your only evidence that people would support falling house prices is one opinion poll. You pretty much have to ignore every other bit of evidence. As an article I linked to shows we have a situation where a 75 year old man(he's very unlikely to sell again or get a new loan etc)is prepared to engage in potentially criminal behaviour because he feels a new development has reduced the price of his house. You can't get better evidence that people do care about falling house prices even at a very local level. It may be very illogical but that doesn't not make it true.

You also have to remember nominal house prices on there own don't tell a lot. Houses sold worth 400k in 2000, 2007, 2012, 2024 etc are all effectively selling at different prices once you factor in inflation. There's a post a few pages ago that goes into this in more detail. But it's important to remember that house prices can effectively be falling even if the nominal prices are increasing. That will be the where normal inflation exceeds house price inflation.

It's important to keep in mind inflation because that will drive the cost of building houses as normal inflation is driven by stuff like wages, oil price, building material costs etc. If second hand house prices drop dramatically but the costs of building new builds doesn't it ends up being cheaper to buy secondhand compared to a new build. In that situation house building stops ie what happened after the 2008 banking crash. It's one of the reasons why we are in this mess.

Padre_Pio

https://www.boards.ie/discussion/comment/121891468#Comment_121891468

You're correct, it's not that clear cut, but it's far truer than saying gains are "offset largely or entirely by inflation in the rest of the market".

As you said, the market is far from uniform. There is a huge variance across locations and price ranges. Anyone who is fortunate enough to own in a high value area is very happy for prices to continue to rise.

Anecdotally, a friend of my parents retired early by selling their house in Dublin. The proceeds bought them a small hobby farm in Sligo, an apartment for their college-age children and the rest to supplement them until the state pension kicks in.

Property in Sligo has increased along with the rest of the country. Apartments are probably overpriced for what they are. It doesn't matter when you've cleared well over a million on your PPR.

Just for fun I picked a random ad from daft.ie

200sqm terrace in Ranelagh. 11 Mountpleasant Avenue. Sold in 2013 for 495k. On daft.ie today for 1.29 mil. I'm sure whoever bought that wouldn't be in favour of house prices falling.

Padre_Pio

https://www.boards.ie/discussion/comment/121893431#Comment_121893431

Prices didn't drop when our rates increased by 2%. Still plenty of cash out there snapping up property off plans.

Dav010

https://www.boards.ie/discussion/comment/121893458#Comment_121893458

People may have equity if they are paying a significant portion of the price of housing from savings or the capital paid off is in excess of the price drop, but a considerable number I suspect are scraping together the minimum required deposit. But given the circumstances a financially literate person like yourself welcomes, a significant drop in house prices as per at the article being discussed/Mary Lou's preferred price point, anyone who bought within the last couple of years with a deposit/finance rather than cash will most likely be locked out of trading up by negative equity. No matter how you want to spin it, such circumstances where the second hand market stalls, developers don't build and lenders don't lend (as they didn't last time property values crashed), will not make things easier for the average income earner, though it will for cash buyers, if that's who you want to help, I can see why you welcome it.

People with significant savings or equity probably don't need prices to fall that much, they are the ones currently buying houses and are probably the ones who least want the price of their new house to fall.

For prices to drop, supply and demand levels have to change dramatically. Developers won’t build if profits decline to that extent, and a reduction in demand will only come about if there is either mass emigration or major financial crash, neither of which is preferable. The government are not going to build hundreds of thousands of houses, so why would you welcome such a scenario?

Again, I'm bemused that such a financially literate person as yourself thinks you, or other literates, will be unaffected by the economic conditions which would lead to such a drop, and that suddenly buying houses will become easier. Was it easier in 2009 for the average earner to buy a house because property prices plummeted? Lord knows there were plenty of houses to buy.

timmyntc

https://www.boards.ie/discussion/comment/121893867#Comment_121893867

Touched a nerve it seems

Dublin area median house price is around 450k now? If the median dropped to 300k overnight as per your unrealistic scenario, worst case is someone who just bought with min 10% deposit would be in negative equity of just over 100k.

On a 25 year mortgage term at 4% it'll take about 8 years to get back into the black. Not trivial but for a FTB having to stay in same house for 8 years from buying before moving on is not the end of the world. I believe that's less than current avg duration for Irish households to live in one owned home before trading up/or down.

As for the claims that 2nd hand market stalls because of those in negative equity - nonsense. The people at risk of negative equity from a drop in prices are the most leveraged, and the most leveraged are those least likely to sell and move in the first place before any fall in prices should happen.

The current 2nd hand market stalls we are experiencing is all to do with lack of supply of new builds, and also the perception that there is little value in 2nd hand homes due to prices being too high for people looking to trade up! Because when you trade up you pay in nominal terms not % terms.

A 40% difference in price trading up is feck all going from 300k to 420k, it's much bigger going from 500k to 700k.

Also regarding developers not building due to lack of lending - that is already happening today with our record high house prices. The only reason building is keeping up at the minute is state intervention. LDA, state purchasing of new build homes, turnkey acquisition scheme, and the various schemes from government to directly fund apartment building. The private lending drying up has already happened, and it had nothing to do with low house prices.

BlueSkyDreams

https://www.boards.ie/discussion/comment/121894116#Comment_121894116

Most schemes currently being delivered are financed by investment funds, not the govt.

The govt themselves are building next to nothing.

They are also renting a lot of properties from investment funds, rather than buying them. A terrible waste of tax payers money.

Dublin prices are not going to average or median at 300k. Short of an economic crash and mass emigration, it just wont happen.

There is far too much money and too little supply to drop to 300k.

chalky_ie

https://www.boards.ie/discussion/comment/121892534#Comment_121892534

Nothing would happen for most people in reality if prices dropped 20%, you will just have more people outbidding each other for the same houses. More housing is what is needed.

Dav010

More housing?

Incentivise private developers to build more, and change planning legislation/sack the idiots in the planning offices.

https://m.independent.ie/business/irish/desperately-needed-apartment-scheme-grounded-by-concerns-over-brent-geese/a918730724.html

SharkMX

https://www.boards.ie/discussion/comment/121892534#Comment_121892534

You lost me at HUNDREDS of thousands of homeowners with adult children living with them who cant move out.

Exaggerate much?

Im telling you now. A poll showing over 60% of homeowners wanting house prices to fall is not getting any sort of accurate results when asking its question. Its probably like the woman who used to call to my student house and give us vouchers for beer. She would come in to the living room with her survey once a month or so.

Tell each of us what we were. (male 40s Irish, female 50's from the UK) and ask us 18 year olds to answer as those people. A lot of the time we would do a few surveys as different people. Off she would go with her surveys done for the day and we would have vouchers for pints. win/win for us and for her, but the survey results were, lets say, highly suspect.

AdamD

https://www.boards.ie/discussion/comment/121894116#Comment_121894116

If house prices dropped from 450k to 300k overnight, not a single non-cash buyer in the country would get a mortgage from a bank. Confidence in the market would disappear, people and banks would anticipate further drops, the tap gets turned off. Bank's balance sheets turn to mush as their RWAs turn to crap, their provisions go through the roof. Builders stop building because its no longer profitable, even if it was they can't get finance because the tap has been turned off.

Its barely worth discussing

Greyian

https://www.boards.ie/discussion/comment/121894116#Comment_121894116

Dublin area median house price is around 450k now? If the median dropped to 300k overnight as per your unrealistic scenario, worst case is someone who just bought with min 10% deposit would be in negative equity of just over 100k.

On a 25 year mortgage term at 4% it'll take about 8 years to get back into the black. Not trivial but for a FTB having to stay in same house for 8 years from buying before moving on is not the end of the world. I believe that's less than current avg duration for Irish households to live in one owned home before trading up/or down.

Assuming a mortgage of 405k, it would take about 9 years to get out of negative equity. But at that point, they still have to stay in the same property, because they are only out of negative equity which means they have no equity. This means they have no deposit for trading up. So it'll be far longer than 9 years that they are stuck in the house.

A 40% difference in price trading up is feck all going from 300k to 420k, it's much bigger going from 500k to 700k.

So let's say the property started at 450k (and the trade up property they wanted was 630k, 40% more expensive). If it dropped to 300k (and the trade up property dropped to 420k), they would be waiting 9 years to get out of negative equity and then another 3 years to build up 42k of equity. So 12 years in total before they have enough equity to be in a position to go from Property 1 to Property 2.

If we assume property prices remain static, property 1 would have 45k of equity on day 1, and the purchasers would need to build up an extra 18k (to reach 63k) of equity before being in a position to trade up. On a 25 year mortgage at 4%, it would take 22 months to get to a position where they would have enough equity to serve as a deposit for the trade up property.

If property prices were growing by 4% per year, at the end of year 1, Property 1 would be worth 468k, Property 2 would be worth 655k and our imaginary couple would have equity of 73k of equity. They would have a large enough deposit for Property 2 after a single year.

If it was a young couple who bought Property 1, there's a real possibility that they wouldn't be able to have the family they wanted to have if they were stuck in Property 1 for 13 years. The fact that the nominal difference between Property 1 and Property 2 would be smaller is of absolutely no benefit to our couple, because they don't have any equity to be able to make the move.

Blut2

https://www.boards.ie/discussion/comment/121895651#Comment_121895651

The extreme mental gymnastics you're trying to do here to avoid accepting the fact that most Irish people have empathy, even if you do not, is pretty telling.

Just because you're obsessed with your home value on paper going up at all times, even at the expense of the country's wellbeing and Irish people in general, doesn't make it a common view. The data, and common sense, would suggest the exact opposite. Most of us have friends and family we care about, and just a general wish to have the country to do well.

As to losing you at the hundreds of thousands of homeowners with adult children living at home, you're apparently rather unaware of the statistics on this so:

"In 2022, there were 522,486 adults aged 18 years and over who were living with their parents.

This was a 14% increase (+63,612) compared with 2016 and a 19% increase since 2011 (+83,008)."[1]

and:

"Eurostat data shows 68% of people aged between 25 and 29 in the State continue to live at home, nearly 26% higher than EU average

Pointing to countries such as Denmark where only 4.4 per cent of people aged 25-29 live with their parents, Mr O’Callaghan says the Irish Government has overseen “a monumental failure to provide people with access to affordable housing”. [2]

Two thirds (and still rising every year) of adults in their late 20s in this country are living at home with their parents. Thats an utter failure of a wealthy society.

[1]https://www.cso.ie/en/releasesandpublications/ep/p-cpp3/censusofpopulation2022profile3-householdsfamiliesandchildcare/adultslivingwiththeirparents/

[2]https://www.irishtimes.com/ireland/social-affairs/2023/08/15/more-than-two-thirds-of-young-adults-in-ireland-still-living-with-parents-figures-show/

Bass Reeves

The only way for a government to hit a 300k House in Dublin is to use state land and for the government to pickup all development levies and most costs( sewage, electricity and communications ducting, storm water, connectivity to pu lic roadways etc).

This would provide state subsidised housing for a certain cohort of the population but make it virtually impossible for any other significant house building to continue to function.

Hiw do you allot such housing. It might be a boon to those doing extensions as some trades would start to price these jobs to have work.

It might also push trades and builders to build more in the commuter area as if Dublin labour rates were low it might be more attractive to work locally and not have commute times into Dublin.

Just as an aside for to let people understand why costs have escalated even in the last ten year but especially in the last 30+ you can look at concrete strength used.

Traditionally concrete uses in most foundations was what was called a 5-1 mix ( it was even as low as 8-1) 1 part cement, 1 part sand and 4 parts aggregate it was about 18 Newton. On good ground very little steel was used ( mainly 3 bars of half inch rebar)

Now concrete for foundations is 35 Newton, that requires double the sand and cement. Add to that half inch grid rebar is used.

Next comes foundations sizes widths have gone from 900mm to 1.2m and dept of concrete from 225-250mm to a minimum of 300mm.

In real terms not including inflation your average foundation has probably quadrupled in cost compared to 15+ years ago

Bass Reeves

https://www.boards.ie/discussion/comment/121896423#Comment_121896423

And what is the increase compared to the 1980's or 2000. To compare you have to look at single people living at home as in the 80's a significant amount of people married in there 20's.

You have to factor in the majority of young people career only starts now at 22/23 compared to 16-18 in the 80's.

Add in a significant number now travel and return and some expect to restart a career at 30's pay whereas they have not the skills of someone that remained and has 10 years experience.

As well like some other's you are quoting for stats form the lower point of the greatest crash to hit this country probably similar to the Great Depression in the US.

There are lies, downright lies and then there is statistics

Blut2

https://www.boards.ie/discussion/comment/121896475#Comment_121896475

And what are the statistics for the 1980s so? Do show us.

The statistics I posted showed an astronomical increase in the number of Irish people living at home in the last 14 years. And show that we're now a complete outlier with the number of adults living at home both in Europe in general, and compared to our peers in wealthy Northern Europe in particular.

Two thirds of Irish people in their late 20s do not want to be living in their parents house, in any society with a functioning housing market only a tiny fraction of people in this age demographic live at home. They're being forced to be there by our dysfunctional housing market, to the deteriment of both their quality of life and their parents, the homeowners, quality of life.

Eclectic Econometrics

https://www.boards.ie/discussion/comment/121896143#Comment_121896143

"If it was a young couple who bought Property 1"

If it is the average homebuyer they have the additional problem of their age affecting the mortgage term length of their 2nd home. The age of a 1st time buyer plus 13 years is not getting 35 or 25 years. The longest term they'll get is 22 with that coming down every birthday.

timmyntc

https://www.boards.ie/discussion/comment/121896431#Comment_121896431

That is one factor definitely, building standards do not come for free.

However a much bigger issue is soft costs. Labour and materials are less than half the cost of new build houses these days. It's all the other regs, levies, part V, and in particular the cost of finance that is impacted viability the most.

It's almost impossible for small builders to build more than 1-2 units at a time now because it's so difficult to finance, both availability and the rates are prohibitive to development. This has resulted in a near total cessation of building outside of GDA, Cork, Galway

shoegirl

https://www.boards.ie/discussion/comment/121886690#Comment_121886690

One thing also is that there's a lot of non home owners in their 30s and early 40s who stand to inherit a considerable amount of housing wealth. In fact I suspect many are depending on that to sort their own issues. The trouble is, if there is a collapse in values, it disincentivises building, as we saw during the bust, when builds fell to less than 10k pa despite continued population growth. And while I'd forgive anybody under 25 for believing home owners would be AOK with value falls, anybody older than that has a very short memory indeed as we were far more focused on the plight of the poor home owners, and renters didn't get a look in when prices did fall from 2008 to 2014.

shoegirl

https://www.boards.ie/discussion/comment/121887541#Comment_121887541

Not really - as the great recession demonstrated negative equity puts people on the back foot with regard to their lenders. If your property price is falling, you cannot get a good mortgage rate, or perhaps cannot switch mortgage at all. And given that a lot of people will sell and move to a bigger or smaller home at some point, you will be denied that also. One of the biggest impacts of negative equity has been people falling into arrears, having their loans purchased by specialist finance, and then being locked in to whatever interest rates they can get away with - we currently have people stuck on 6-7% who have no possibility whatsoever right now to change to another lender.