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

DataDude

https://www.boards.ie/discussion/comment/122174041#Comment_122174041

They were looking for €1.4m for this originally. Price just dropped last week. This has a bigger plot than the others and I’m assuming it’s the show house with furniture included. Now looks better value than the other 4 beds which were all snapped up for €1.175m in no time at all.

Sillan - a smaller/nicer estate with slightly bigger plots but identically sized houses from the same builder went for between €1.5m to €1.75m just up the road back in late 2021, early 2022.

timmyntc

https://www.boards.ie/discussion/comment/122173905#Comment_122173905

Post 08 low turnover was due to demand falling off a cliff, current day low turnover is due to supply falling off a cliff

Low turnover is a symptom not the cause. Another symptom is the huge number of prospective FTBs who cannot get on the ladder and are living with their parents. Low turnover alone couldn't explain that phenomenon because that would mean there is significant supply that could facilitate them and it is just lying empty. This isn't the case in any significant numbers

dontmindme

https://www.boards.ie/discussion/comment/122173595#Comment_122173595

Because we have a liquidity and turnover problem with our existing housing stock, not a shortage of existing housing stock.

Give your head a wobble and have a guess why we have a liquidity and turnover problem.

AdamD

https://www.boards.ie/discussion/comment/122173905#Comment_122173905

Can you explain what you mean by liquidity problem?

Villa05

https://www.boards.ie/discussion/comment/122173708#Comment_122173708

Not meant to be offensive. I guess my point is grant aiding one off homes is not the best use of taxpayers money and the money would be better used aiding central development in villages and towns (discussed yesterday)

We need to try and avoid repeating the poor spending outcomes in housing that is chronic in our health services

hometruths

https://www.boards.ie/discussion/comment/122174157#Comment_122174157

Low turnover is a symptom not the cause. 

A symptom of what? If you're really suggesting that a lack of new build stock is the cause of the low turnover rate of existing stock, just stop and think about how absurd that belief is for a second.

A lack of new build stock is literally impossible to be the cause of the low turnover rate, unless you're suggesting that people only sell second hand homes to buy brand new homes. Which is equally absurd.

hometruths

https://www.boards.ie/discussion/comment/122174166#Comment_122174166

I have duly wobbled my head and presume you're also referring the idea this is caused by a lack of new build supply.

If so, see above.

If not, would you elaborate?

hometruths

https://www.boards.ie/discussion/comment/122174276#Comment_122174276

Liquidity may be a poor choice of phrase, but I mean liquidity of second hand stock rather than finance.

In a functioning market there are ample buyers and sellers. Hence those who wish to sell, whether to move up, down or sideways are happy to place their property on the market for sale, confident that their ample choice of something to replace it with. This keeps the market moving like one giant game of musical chairs.

What's currently happening in the second hand market is more akin to a game of musical chairs in which the music has stopped, and everyone's stuck in their chair.

The swapping of chairs between participants is like the buying and selling of second hand houses to each other on a grand scale - it is the turnover in the market. Long term historical annual average market turnover rate is about 5-6% - i.e somewhere around 5% of the entire existing second hand stock should be expected to change hands in any given year. That's what happens in a liquid market.

It's currently somewhere below 2% and has been for well over a decade. That's what I meant by an illiquid market.

Of course the longer it goes on the worse the problem becomes.

I made post some time ago with a very simple hyper local theoretical property market with only 3 houses to illustrate the point a little better, I'll see if I can find it and repost.

timmyntc

https://www.boards.ie/discussion/comment/122174574#Comment_122174574

Low turnover is a symptom of shortage of supply - all supply. People do not list their homes for sale if they have nowhere to move into, while not all move into new builds some do, and that provides liquidity into the market, especially so when you have a growing population and/or decreasing household size.

And because the supply is so low, any supply that does come available will be snapped up by FTBs fast which does nothing for the game of musical chairs. In a normal market plenty of SSBs would buy new builds also, in addition to FTBs. In a supply constrained market the sellers have their choice of buyer, and who better than a FTB with no chain (and some whopper govt grants to boost their budget).

The situation can only be solved with more liquidity (i.e. more supply). Because we have a supply shortage.

hometruths

https://www.boards.ie/discussion/comment/122174661#Comment_122174661

Ok, I agree all of the above, particularly this:

The situation can only be solved with more liquidity (i.e. more supply). Because we have a supply shortage.

But I think where we differ is on the idea the only solution is more new build supply. As you say the problem is all supply.

It sounds like we would agree it is theoretically possible to solve this supply problem by increasing the turnover rate of existing stock of second hand homes if they existed.

Your position is they don't exist because we have a current deficit of 250,000 in the existing stock - that's the problem.

My position is they do exist because there is no deficit in the existing stock, just the cumulative effects of a over decade of low turnover, means the existing stock is very inefficiently allocated - that's the problem.

Is that a fair summation of your position vis a vis mine?

timmyntc

https://www.boards.ie/discussion/comment/122174703#Comment_122174703

Yes, I think that's a fair summary.

I do agree that our existing could (in theory) be more efficiently allocated, but in practice I do not think it's a viable solution. We have generations of people wedded to the idea that you must remain in the family home till death, even if you can barely afford to heat it or struggle with the stairs.

Gary_dunne

https://www.boards.ie/discussion/comment/122174784#Comment_122174784

This is one of the major issues, the older generation very rarely downsize or adpat their living situation to suit their needs. We often see 3/4 bed homes with one elderly resident who would rather install a chair lift rather than sell the family home and downsize to a much more manageable property to suit their needs. There is an abundance of these properties throughout the country and will continue to occur with people leading longer lives.

Hontou

I have just prepared my large family home for sale as I'm downsizing. This involved skips, diy, weeding galore, one new door and never ending scrubbing and cleaning. And lots of expenses! I'm doing it now in my 50's as I know I won't be able for it at retirement age. I also think it is wasteful to be knocking about a big house with big bills when a large family should be living in it. The reason people don't downsize is they don't have it in them to do the work involved when they are older. I realise many also don't do it for nostalgia reasons. I think a motivation could be some kind of 'help to downsize' service as it is truly daunting.

hometruths

@AdamD Eventually found the post I was referring to, and it was more made to illustrate point about being blinded by the narrative about what is for sale right now. You'll hear multiple times on here and in the media that the lack of current supply available for rent or buy is evidence of an overall deficit in the housing stock, but that's not necessarily true. And certainly the data would indicate otherwise.

Though it will equally illustrate the point I was making that you need a higher turnover in the second hand market in order to keep everybody moving around when they want to, ensuring an efficient allocation of stock.

Consider a hyper local micro property market consisting of just 4 properties, with no demand for people to leave the area, and no demand for new people to enter the area.

Apartment A - rented by Jill, single young professional

Apartment B - owned by Jack, single young professional

Semi-D house - owned by Paddy and Mary, couple with two small kids

Detached house - owned by Dinny and Denise, couple living with 20 year old daughter

They're all happy, nobody wants to move, they're all housed according to their needs. As everybody views the market as to what is happening right now, as far as they're concerned - all is well. The narrative is that there are no problems.

Fast forward three years.

Jack and Jill are now a couple, looking to buy a house to move in together and start a family, but they cannot buy because there is nothing on the market. As far as they're concerned, the market is in chronic undersupply.

Paddy and Mary's kids are bigger and they want to upsize but they can't because there is nothing on the market. As far as they're concerned, the market is in chronic undersupply.

Dinny and Denise want to downsize to an apartment and their daughter wants to move out and start renting. But they cannot buy because there is nothing on the market, and their daughter cannot rent because there is nothing on the market. So they're stuck too, as far as they're concerned the market is in chronic undersupply.

So now the narrative about the current market has moved in short order from no problem to chronic undersupply. Even though there are the same amount of people requiring to be housed and the same amount of properties in housing stock - I.e there has been no increase in demand or decrease in supply to the equation that has caused this chronic undersupply.

The housing stock is perfectly adequate to house everybody according to their needs. Jack and Jill would be very happy to buy Paddy and Mary's house. Paddy and Mary would be very happy to buy Dinny and Denise's house. Dinny and Denise would be very happy to buy Jack's apartment. And their daughter would be very happy to rent Jill's apartment.

The solution is obvious but nobody can see it because they're blinded by narrative that has been caused by what's available on the market right now - nothing.

So everybody is screaming chronic undersupply, we need to build more houses, increase supply to accommodate demand, it's absurd to deny it, otherwise how do you explain why there is nothing on the market available to buy or rent.

Politicians stimulate a developer to build two new houses and two new apartments to balance out the disparity in apparent supply demand.

Fast forward a few years.

Everybody put their house on the market so they could move into the new development. But as soon as they did so they discovered a problem.

There is now an oversupply of two apartments and two houses.

These are empty, languishing on the market but you cannot give them away because the market has moved into extreme oversupply, prices have crashed. There is now more than enough supply to house everybody according to their needs, but now they're not so happy, they're in negative equity, screaming that it's not fair, where's my bailout, how did nobody see this coming?

If politicians and the developer had listened to the data rather than narrative they would have seen there was no demand for the new builds no matter how strong the narrative seemed to be.

This is obviously a very simplistic example. But it illustrates the dangers of basing the entire narrative of the long term demand for housing stock on what is available to buy or rent on the property market right now today.

But there is an element of this happening on a huge scale in the Irish market. The data is being ignored in favour of the narrative.

Greyian

https://www.boards.ie/discussion/comment/122174952#Comment_122174952

The issue with this is that it has specifically been designed to work, which doesn't match the real world.

What if instead, Paddy and Mary have one small child, while Dinny and Denise have a 22 year old son and a 20 year old daughter?

Dinny and Denise sell their detached house. It is bought by Paddy and Mary. Paddy and Mary's house is bought by Jack and Jill. The 2 apartments are bought by Dinny and Denise (Apartment A) and the 22 year old son (Apartment B). Where does the 20 year old daughter live? It looks like we need a 5th property...

You've also completely omitted that families are getting smaller (so more properties needed to house the same number of people) and that more people are staying single (so it's more likely Jack and Jill remain single and therefore stay living in their separate apartments)

hometruths

It's been specifically designed as a simplistic example to illustrate a specific point - how the narrative can be misleading.

And you've rather neatly illustrated my other point about projections based on assumptions, by disregarding a known number of people with a known number of properties and saying, "Hang on, what if we make some assumptions about a different scenario rather than the scenario at hand. Hey presto we need to build more."

There's no doubt you can make assumptions to fit an argument for whatever figure you want to justify.

combat14

serious trouble in retail property market continue as massive write off for shopping centre values persist

the square for example has seen its value fall from 650m to 250m to 170m to 125m

blanchardstown has also seen its value plummet

who knows what way residential prices will go once migration controls are put in place and real building kicks off

The Square shopping centre goes into receivership, in sign of property market strain

https://m.independent.ie/business/commercial-property/the-square-shopping-centre-goes-into-receivership-in-sign-of-property-market-strain/a908000918.html

extra-ordinary_

https://www.boards.ie/discussion/comment/122174634#Comment_122174634

What's currently happening in the second hand market is more akin to a game of musical chairs in which the music has stopped, and everyone's stuck in their chair.

Indeed, or they find they have no chair.

Too many people chasing too few chairs, so if you have one, hold onto it!

monkeybutter

https://www.boards.ie/discussion/comment/122176152#Comment_122176152

Once real building kicks off? And migration control?

When are these going to kick in?

monkeybutter

https://www.boards.ie/discussion/comment/122174952#Comment_122174952

Are you still spinning this stupid scenario

After being shown to be incorrect about 50 times

Padre_Pio

https://www.boards.ie/discussion/comment/122174784#Comment_122174784

I would counter that most people don't NEED to downsize.

Why would you bother? The mortgage is paid, and let's be honest, if you could afford to live in the house for the past 40 odd years with kids and a mortgage, you can likely afford it when both are gone.

It's your house, full of memories, and likely in decent shape thanks to your hard graft over the decades. Why would you bother moving away from your locality and your friends and familiarity? Why bother putting a house up for sale, and the months of dealing with estate agents, banks, valuers and worst of all, finding and buying a new place, when you could just not do it at all. If you've been in any place for any length of time, services have likely developed around you, so it's probably more convenient than a new build in the middle of an estate.

And as for stairs, get a stairlift.

Gary_dunne

https://www.boards.ie/discussion/comment/122176253#Comment_122176253

What we mean when we are talking about people downsizing is to counteract the point that people are making that there is sufficient available housing to meet the population needs.

In the example I gave there could be a 4 bed houses that only has one elderly person living in it when there's space for a family of 4. That family of 4 are living in a 2 bed apartment. There is no shortage there in this scenario as everyone has sufficient living space but when the kids are 16 and 17 and don't have their own rooms or the family have a third child it's an issue as the family have outgrown the apartment but have no where to move so now there is a shortage.

In a utopia the elderly person could downsize in the same area to a property that suits their changing needs perfectly ie single floor living and the family of 4/5 can move into the available four bed house.

Padre_Pio

https://www.boards.ie/discussion/comment/122176762#Comment_122176762

My point is the idea of "downsizing" is irrelevant unless there is a real cultural desire among the elderly to do it.

In the real world the elderly person likely wants to keep their house so they have spare rooms when the kids and grandkids visit.

Anecdotally, my own grandparents live in a 4 bed house and 3 rooms are unoccupied 95% of the time. They've never once expressed any interest in downsizing. Thinking of my friends, all their grandparents either remain in the family home, or remained there until they passed away, or became unable to care for themselves.

Gary_dunne

https://www.boards.ie/discussion/comment/122176791#Comment_122176791

That's why I said a Utopia, I know that it more than likely won't happen, it doesn't mean that is shouldn't be seen as part of the solution. It's a ingrained thing in our Irish culture, you never sell the family home which is not a view shared throughout many other European countries.

To most it doesn't occur to them until unfortunately something happens that affects their health or mobility and a single storey dwelling suits their new circumstances far better. My own grandad lost his leg and instead of downsizing to a more suitable property the family built a massive extension to have a bathroom and bedroom downstairs leaving 3 double rooms upstairs vacant 99% of the year. Logically this is nonsensical. A 2 bed apartment would have suited him far better and the house that didn't need to be fully renovated could have been purchased by a family of 4 but again "you don't sell the family home".

JohnnyChimpo

Was chatting about this with my own mum who's in her late 70s. I asked her if she'd be happy to downsize to a hypothetical well-built 2br apartment in a block that was in the same estate (where she's lived for 40 years) - she said absolutely, no hesitation. I think a lot of the resistance to downsizing is just liking the comfort and routine of your own neighbourhood that you've invested decades into. It's a shocker that we don't have these kind of mixed uses in residential estates, such a no-brainer.

PommieBast

https://www.boards.ie/discussion/comment/122176152#Comment_122176152

Writing was on the wall when there was that 26% write-down of property values on Grafton Street back in 2021. Insistance of an 18-month lockdown coming home to roost.

Greyian

https://www.boards.ie/discussion/comment/122175834#Comment_122175834

The issue with simple scenarios is that they rarely work in complex realities. Nothing about the real world and balancing the needs of millions of people is simple.

Property is Ireland is used inefficiently, that is without doubt, but even if it was utilised in the optimal manner, we would still have supply shortages.
Any expectation of property use being perfectly optimal isn't realistic either. We can and should aim to improve it, but there will never be perfection.

Less than 100 metres from my house, there is a 5-bed house with 6 young professional men living in it. They've converted one of the two living rooms into an extra bedroom.
There's no efficient reallocation of existing supply that sees those 6 young men getting to have their own places, unless there's a family with 4 young kids with each of the six (2 parents, 4 children) living in their own 1-bed apartments (which hardly seems a likely scenario).

With family sizes getting smaller, the natural outcome is that each property will house a lower number of people. Naturally it follows that this means that housing the same number of people requires extra properties (and housing more people requires an even greater increase in total supply of properties).

In previous posts, you've said "So they're to calculate the housing deficit in April 2022, a point in time when they had an accurate figure of a) population, b) habitable housing stock and c) average household size."
The issue with this is if you were to look at population, housing stock and average household size, supply would always appear to be perfectly delivered, because average household size is determined by the population and the housing stock.
The problem is that to identify the number of properties required, you need to divide the population by the number of "family units" (where a family unit is a person or group of persons who want to live in their own household).
Our average household size is higher than it would be if there was adequate supply, as there are a huge number of younger person continuing to live with their parents or in overcrowded rental accommodation specifically because there is not enough supply for them to be able to leave their existing household and start their own.

Padre_Pio

I dunno, the supposed "utopia" where family sizes are matched to houses with the correct number of bedrooms is very non-sensical to me.

It's based on there being swathes of empty, unused bedrooms across the country, and people eager to match the number of people in a house with the number of bedrooms it offers, which is just not true. I'm sure many spare bedrooms are home offices, hobby rooms, gyms, yoga studios, dens, second living rooms etc.

hometruths

https://www.boards.ie/discussion/comment/122177698#Comment_122177698

The issue with this is if you were to look at population, housing stock and average household size, supply would always appear to be perfectly delivered, because average household size is determined by the population and the housing stock

Average household size is actually determined by the occupied housing stock not the total housing stock. That's a fairly critical difference when estimating any deficit or surplus, but unfortunately we're not allowed to discuss that distinction here, so we'll have to leave that particular argument there.

Our average household size is higher than it would be if there was adequate supply

This as another bit of the narrative that is widely believed but doesn't really stand up to scrutiny.

We're the led to believe that the high average household size - 2.75 - compared to our European neighbours is evidence that we don't have enough houses.

You can only start to make an argument that we have a shortage of stock if you assume that our preferred household size is about 2.4.

So obviously you just need to blame supply for the fact that our household size is 2.75 and not 2.4, if only we had enough houses it would be 2.4. And hey presto, we have a deficit of 250,000 houses.

The ESRI took a close look at why we are an outlier last year and found:

Using cross country data from the EU-SILC survey, the research presents a range of stylised facts regarding how Ireland differs from other countries and attempts to explore what might explain the variation. We find that Ireland has a high average household size on a cross-country basis. However, this appears to be strongly influenced by demographics, with high fertility rate, younger population and thus high share of households with children important factors in explaining the cross country trends. Indeed, a majority of the differences between Ireland and other countries disappear in a regression setting when socio-demographic and basic economic factors are controlled for.

So basically they found that our household size is higher because we have younger population who have more children.

They also considered the potential impact of increased housing supply and found it would be fairly negligible relative to demographics:

As housing supply rises (as proxied by a higher housing stock per capita) by one per cent, the growth in household size declines by 0.083 per cent.

https://www.esri.ie/publications/household-size-in-ireland-stylised-facts-and-cross-country-trends

DataDude

https://www.boards.ie/discussion/comment/122177778#Comment_122177778

I suspect most Irish people would not have too far to look outside their own circles to identify older relatives living in homes far beyond their needs - ‘in case the grandkids come to stay’…while the grandkids are rammed into a much smaller house with mum and dad day in, day out

In fact I’d say it’s more unusual for an older person to NOT be living in a house beyond their needs.

Ireland is a global outlier on this. There is definitely a cultural aspect and also housing stock composition issues which would be difficult to tackle, but there is also economic reasons

1. Gains in the value of family home are exempt from CGT, giving it tax advantages over any other investment
2. Investment literacy is poor in Ireland so older people releasing capital by downsizing would on average put it to poor use
3. Property taxes are exceptionally low by global standards so there is no ‘stick’ to downsize
4. There are weird inheritance tax rules which allow passing down of very valuable property tax free under certain conditions.