Property Market 2020

OwlsZat · 05-03-2020 11:57pm

JamesMason wrote: »

Expect REIT values to drop as investors get nervous. What happens to all those vacant high end apartments around Dublin?

Last I read they are half empty. There is no vacant property tax so no incentive to let them out. Capital docks looks barely used, such a shame.

Thargor · 06-03-2020 9:49pm

What possible reason could there be for no empty property tax?

Assetbacked · 07-03-2020 12:35am

JamesMason wrote: »

Expect REIT values to drop as investors get nervous. What happens to all those vacant high end apartments around Dublin?

If it goes tits up, there's FTBs who I'm sure would take them off their hands.

Assetbacked · 07-03-2020 12:38am

JamesMason wrote: »

Expect REIT values to drop as investors get nervous. What happens to all those vacant high end apartments around Dublin?

Ires is trading at its lowest for a year.

https://live.euronext.com/en/product/equities/IE00BJ34P519-XMSM

beauf · 07-03-2020 1:18am

Last time a lot of these apartments around the docklands sat empty for years. They didn't reduce the rents they were asking, just happy to let them sit there.

JamesMason · 07-03-2020 1:28am

beauf wrote: »

Last time a lot of these apartments around the docklands sat empty for years. They didn't reduce the rents they were asking, just happy to let them sit there.

There's already talk of a credit crunch on the way thanks to the stock markets crashing. How long can these apartments/assets sit idle before investors throw in the towel?

beauf · 07-03-2020 1:30am

Quite a while...

https://www.thelondoneconomic.com/property/almost-11-billion-worth-of-london-housing-is-sitting-empty/30/10/

JamesMason · 07-03-2020 1:35am

beauf wrote: »

Quite a while...

https://www.thelondoneconomic.com/property/almost-11-billion-worth-of-london-housing-is-sitting-empty/30/10/

Ghost estates in Croydon!

Assetbacked · 07-03-2020 10:09am

Dermot Desmond piece in the IT today, shovelling mud onto FF and FG housing policy of the last few decades. An article that will resonate with all renters and I'm sure many homeowners too.

https://www.irishtimes.com/opinion/dermot-desmond-everyone-has-a-right-to-a-home-here-is-how-it-can-be-done-1.4195439?mode=amp

Some quotes (it is a very long article);

"Under any analysis Ireland is much wealthier now than it was in 1972. Many more people are at work, real incomes are higher and interest rates are at historic lows. Yet, we take it for granted that most households will require two incomes to meet the mortgage payments and even then, double income households on the average wage cannot afford a starter home in Dublin. At a societal level that is unacceptable. The State needs to pro- actively intervene."

"

"Currently institutional investors can acquire apartment blocks in Dublin with an initial return of about 3.6 per cent. Given that the current return on deposits is at best zero, the institution receives a substantial premium to cover any risk of delayed occupancy. The institution will borrow at less than 0.5 per cent. Depending on the amount of debt the institution is prepared to use, the institution can readily earn 12 per cent to 15 per cent on its equity. "

"The wider implications of the financialisation of the apartment stock are obvious:

1. Apartment blocks will be designed solely to maximise income for the acquiring institution. They will not be designed to meet any social policy objectives.

2. Decisions on when to rent will be taken on commercial grounds notwithstanding that apartments may remain empty for a protracted period. With a scarcity of accommodation and developers/institutions focussed solely on profit is anyone surprised that many apartments remain vacant while the developer/institution seeks higher and higher rents.

3. In a low interest rate environment, the cost of land for apartments will continue to escalate rapidly.

4. There will be continuing upward pressure on rents. It should be noted that given;

a. the relative shortage of housing, and;

b. the relatively large stock of existing housing;

constructing an additional 20,000 homes per year, less than 1 per cent of stock, will on its own have no noticeable impact on prices or rents.

5. There will be continuing upward pressure on the cost of suitable development land. As apartment buildings are financialised the value of the underlying land is ultimately determined by the yield at which the institution is prepared to acquire the apartment building. The cost of the construction is simply deducted from the final selling price to get the price that someone will pay for the underlying development land. The lower the yield the institution will accept and the greater the rental income the higher the underlying price for the land. Similar price pressures also apply to commercial land."

" My suggested solutions come under three headings:
1. Make housing affordable – remove the rent to interest arbitrage
2. The State should direct and control policies for affordable housing.
3. Accelerate the use of existing space and avoid hoarding for expected higher future prices."

"Some have warned on the dangers of the downward pressure on rents and housing costs if the State were to build 100,000 public sector houses over the next five years. Surely that downward pressure on prices and rents is precisely what, as a community, we should absolutely strive for. How can anyone justify having Dublin as the most expensive city in the EU to rent an apartment?"

An Ri rua · 07-03-2020 10:59am

Assetbacked wrote: »

Dermot Desmond piece in the IT today, shovelling mud onto FF and FG housing policy of the last few decades. An article that will resonate with all renters and I'm sure many homeowners too.

https://www.irishtimes.com/opinion/dermot-desmond-everyone-has-a-right-to-a-home-here-is-how-it-can-be-done-1.4195439?mode=amp

Some quotes (it is a very long article);

"Under any analysis Ireland is much wealthier now than it was in 1972. Many more people are at work, real incomes are higher and interest rates are at historic lows. Yet, we take it for granted that most households will require two incomes to meet the mortgage payments and even then, double income households on the average wage cannot afford a starter home in Dublin. At a societal level that is unacceptable. The State needs to pro- actively intervene."

"

"Currently institutional investors can acquire apartment blocks in Dublin with an initial return of about 3.6 per cent. Given that the current return on deposits is at best zero, the institution receives a substantial premium to cover any risk of delayed occupancy. The institution will borrow at less than 0.5 per cent. Depending on the amount of debt the institution is prepared to use, the institution can readily earn 12 per cent to 15 per cent on its equity. "

"The wider implications of the financialisation of the apartment stock are obvious:

1. Apartment blocks will be designed solely to maximise income for the acquiring institution. They will not be designed to meet any social policy objectives.

2. Decisions on when to rent will be taken on commercial grounds notwithstanding that apartments may remain empty for a protracted period. With a scarcity of accommodation and developers/institutions focussed solely on profit is anyone surprised that many apartments remain vacant while the developer/institution seeks higher and higher rents.

3. In a low interest rate environment, the cost of land for apartments will continue to escalate rapidly.

4. There will be continuing upward pressure on rents. It should be noted that given;

a. the relative shortage of housing, and;

b. the relatively large stock of existing housing;

constructing an additional 20,000 homes per year, less than 1 per cent of stock, will on its own have no noticeable impact on prices or rents.

5. There will be continuing upward pressure on the cost of suitable development land. As apartment buildings are financialised the value of the underlying land is ultimately determined by the yield at which the institution is prepared to acquire the apartment building. The cost of the construction is simply deducted from the final selling price to get the price that someone will pay for the underlying development land. The lower the yield the institution will accept and the greater the rental income the higher the underlying price for the land. Similar price pressures also apply to commercial land."

" My suggested solutions come under three headings:
1. Make housing affordable – remove the rent to interest arbitrage
2. The State should direct and control policies for affordable housing.
3. Accelerate the use of existing space and avoid hoarding for expected higher future prices."

"Some have warned on the dangers of the downward pressure on rents and housing costs if the State were to build 100,000 public sector houses over the next five years. Surely that downward pressure on prices and rents is precisely what, as a community, we should absolutely strive for. How can anyone justify having Dublin as the most expensive city in the EU to rent an apartment?"

It's superb. What an intervention.
It's rational, it's doable, and it's quite exposing of Ministerial ineptitude or worse.
I read it from start to finish when I woke in bed this morning. It's a call to arms, a calling out of how things are currently being run. What a broadside. On target and deadly. Let's hope it stays on target with all of the unfortunate Covid19 smokescreen for inept (or worse) Ministers.

It makes an absolute mockery of any of the political manifestos. Written from the hand of one who views the financial landscape and rewrites the checks and balances. Seismic yet straight forward.

beauf · 07-03-2020 11:11am

Nothing new in that for me. UN said the same thing a year ago. Lots of people saying the same for years.

Unlikely but if a anyone other than FFG got in and changed housing policy, it would destroy FFG as they have poured fuel on the housing crisis for decades.

lcwill · 07-03-2020 1:48pm

An Ri rua wrote: »

It's superb. What an intervention.
It's rational, it's doable, and it's quite exposing of Ministerial ineptitude or worse.
I read it from start to finish when I woke in bed this morning. It's a call to arms, a calling out of how things are currently being run. What a broadside. On target and deadly. Let's hope it stays on target with all of the unfortunate Covid19 smokescreen for inept (or worse) Ministers.

It makes an absolute mockery of any of the political manifestos. Written from the hand of one who views the financial landscape and rewrites the checks and balances. Seismic yet straight forward.

One of the main proposals are a series of measures to enable someone to pay off a 250k mortgage for 1125 a month.

In Italy banks are giving fixed rate mortgages for 1%, and that means fixed for the entire period of the mortgage 20-30 years, not fixed for 3-5 years, fixed forever. On a 250k mortgage that it is about 1100 a month over 20 years.

What can't Irish banks do the same? If the Government could get Irish banks lending at the same rates other European banks are lending at (or push for a proper common market in financial services across the EU) Irish buyers would have access to much lower cost financing.

Then bring back 100% or 95% mortgages for first time buyers, or get the government to underwrite the first 20% of the mortgage in place of a deposit.

Finally sort out supply so that prices don't rise as cost of financing drops. Some suggestions:

1) huge taxes on hoarders of undeveloped zoned land,

2) make it much easier to get planning for high density developments, and apartment blocks, and

3) a temporary tax incentive which gives a developer a discount on taxes on profits from all properties completed within the next five years and sold to individuals (not investment companies) for below the average cost of a property in that country.

J_1980 · 07-03-2020 1:50pm

An Ri rua wrote: »

It's superb. What an intervention.
It's rational, it's doable, and it's quite exposing of Ministerial ineptitude or worse.
I read it from start to finish when I woke in bed this morning. It's a call to arms, a calling out of how things are currently being run. What a broadside. On target and deadly. Let's hope it stays on target with all of the unfortunate Covid19 smokescreen for inept (or worse) Ministers.

It makes an absolute mockery of any of the political manifestos. Written from the hand of one who views the financial landscape and rewrites the checks and balances. Seismic yet straight forward.

100k homes is €40bn at least.
Where’s the money from?
The same institutional investors buying up blocks are funding the entire irish banking system.
Fight them and they pull the rug under this house of cards.

60% of social housing tenants don't work. So you build 100k homes for those who never work. The pittance of rent doesn't even cover a fraction of the maintenance of a modern A rated home.
Where are the workers then going to live?

J_1980 · 07-03-2020 2:08pm

lcwill wrote: »

One of the main proposals are a series of measures to enable someone to pay off a 250k mortgage for 1125 a month.

In Italy banks are giving fixed rate mortgages for 1%, and that means fixed for the entire period of the mortgage 20-30 years, not fixed for 3-5 years, fixed forever. On a 250k mortgage that it is about 1100 a month over 20 years.

What can't Irish banks do the same? If the Government could get Irish banks lending at the same rates other European banks are lending at (or push for a proper common market in financial services across the EU) Irish buyers would have access to much lower cost financing..

You guys are so deluded with your ideas....
European banks (looks up how Denmark mortgage market works) are selling off their mortgage to investors who are happy with a 1% yield on secured (vs property) loans. No one wants to buy Irish loans as loan repayments are optional and no one can be evicted. THATS why mortgage rates are high here: banks have to keep them on the balance sheet. And the ECB will not make any concessions to Ireland on property/bank related issues ever.
But keep on believing the SF nonsense about the greedy bankers. Social policies always punish the middle class. It’s just been delivered as it is being voted for

so keep paying 3% (Im German, I got unsecured consumer loans fixed at 1.8% for 10years to buy my apartment. No German bank would ever lend to an Irish domiciled person.)

TheSheriff · 07-03-2020 2:12pm

J_1980 wrote: »

No German bank would ever lend to an Irish domiciled person.)

Well thats not true, I've two very good (Irish) friends in Hamburg who recently bought with a German mortgage.

Summer2020 · 07-03-2020 2:13pm

Viewed a house this morning. Had been sale agreed at 680k , estate agent told me the highest bidder is a senior BOI employee and pulled out of the sale. Next highest bidder also now doesn’t want to purchase so house is back on view. I questioned whether this is due to some inside knowledge that the economy and housing market are in for a correction - estate agent floundered some nonsense reply. I’d be very cautious bidding on property at the minute. The warning signs are starting to flash for me.

J_1980 · 07-03-2020 2:17pm

TheSheriff wrote: »

Well thats not true, I've two very good (Irish) friends in Hamburg who recently bought with a German mortgage.

In Germany thats fine of course. The German house will be promptly reposessed by a German court irrespective how vulnerable they are.

I bought with a German loan in Ireland. If I default I would be declared bankrupt in Germany.

ZX7R · 07-03-2020 2:22pm

Summer2020 wrote: »

Viewed a house this morning. Had been sale agreed at 680k , estate agent told me the highest bidder is a senior BOI employee and pulled out of the sale. Next highest bidder also now doesn’t want to purchase so house is back on view. I questioned whether this is due to some inside knowledge that the economy and housing market are in for a correction - estate agent floundered some nonsense reply. I’d be very cautious bidding on property at the minute. The warning signs are starting to flash for me.

No estate agent would tell who or what the buyer is or worked at that pulled out.
They would be out of business quickly.
As for sings are starting to show it will be at least Christmas before you will see the house market adjust, even if there is a complete world economy chrash it takes considerable time for it to filter down

TheSheriff · 07-03-2020 2:30pm

We've viewed a few in the 450-550k price range around Castleknock/Coolmine and there have been quite a few stories of "went sale agreed at x, but pulled out". Not sure if it was just the EA wanting to float a number the seller was expecting.

Example, we viewed this house in Phoenix Gardens a few weeks back --> https://www.myhome.ie/residential/brochure/9-phoenix-gardens-castleknock-dublin-15-d15ey0a/4348165

We were told they were sale agreed at > 500k (can't remember the exact figure) but it had fallen through..... it needed substantial work. If I remember, even the windows were all cracked and would need a huge investment. Not even worth the current price in our opinion.

Summer2020 · 07-03-2020 2:31pm

ZX7R wrote: »

No estate agent would tell who or what the buyer is or worked at that pulled out.
They would be out of business quickly.
As for sings are starting to show it will be at least Christmas before you will see the house market adjust, even if there is a complete world economy chrash it takes considerable time for it to filter down

You can believe me or not I really don’t care. I was surprised he told me, but then again estate agents sometimes do let things slip.

TheSheriff · 07-03-2020 2:37pm

J_1980 wrote: »

In Germany thats fine of course. The German house will be promptly reposessed by a German court irrespective how vulnerable they are.

I bought with a German loan in Ireland. If I default I would be declared bankrupt in Germany.

I'm not disagreeing with you, as I know nothing about German mortgages, but I can't imagine there being very many people living in Ireland who are Irish who are looking to take out a mortgage in Germany to buy a property in Ireland.....

J_1980 · 07-03-2020 2:42pm

TheSheriff wrote: »

I'm not disagreeing with you, as I know nothing about German mortgages, but I can't imagine there being very many people living in Ireland who are Irish who are looking to take out a mortgage in Germany to buy a property in Ireland.....

Because the German banks would never do such business.

If they did, the demand would be gigantic:

https://hypotheken.fmh.de/rechner/fmh2/
Look at the interest rates (EFF ZINS), these are 10y fix rates

Mic 1972 · 07-03-2020 4:31pm

TheSheriff wrote: »

I'm not disagreeing with you, as I know nothing about German mortgages, but I can't imagine there being very many people living in Ireland who are Irish who are looking to take out a mortgage in Germany to buy a property in Ireland.....

I have friends who borrowed money from an Italian bank to buy property in Ireland, I dont know the full story tho but it looks like some banks will lend money to citizens for foreign investment

lcwill · 07-03-2020 5:07pm

J_1980 wrote: »

Because the German banks would never do such business.

If they did, the demand would be gigantic:

https://hypotheken.fmh.de/rechner/fmh2/
Look at the interest rates (EFF ZINS), these are 10y fix rates

Are we not all EU citizens? Isn't the idea for companies to be able to do business in all EU countries, with all EU citizens on an equal basis?

If we were talking manufacturing there would be no question of any problems being able to sell to customers in another EU market.

Still not there yet on mortgages, or car insurance, or other financial services, but that is just a political decision.

J_1980 · 07-03-2020 5:19pm

lcwill wrote: »

Are we not all EU citizens? Isn't the idea for companies to be able to do business in all EU countries, with all EU citizens on an equal basis?

If we were talking manufacturing there would be no question of any problems being able to sell to customers in another EU market.

Still not there yet on mortgages, or car insurance, or other financial services, but that is just a political decision.

There are plenty of foreign competitors (eg Allianz) in the Irish market. The totally dysfunctional compensation system is not the fault of the EU.

Loan contracts happen under a certain countries jurisdiction, if it cannot be enforced in Ireland (ie German court ordering eviction of an Irish homeowner) it won’t happen to its citizens. Can’t see anything wrong with that.

OwlsZat · 07-03-2020 6:23pm

J_1980 wrote: »

Where’s the money from? The same institutional investors buying up blocks are funding the entire irish banking system. Fight them and they pull the rug under this house of cards.

I wish I was a member of the illuminati... Who exactly is funding the Irish banks?

Q&A · 07-03-2020 7:02pm

OwlsZat wrote: »

I wish I was a member of the illuminati... Who exactly is funding the Irish banks?

That would be me and you. Retail banks are primarily deposit funded these days.

Was a different story in the boom. Deposit base couldn't keep up with increasing loan book so they turned to the debt markets. That is what caught them out in the crash. They couldn't raise new debt to pay off maturing bonds.

Banks balance sheet shrank considerably after the crises. They've been growing over the past number of years but rather modestly compared to pre-crises rates.

OwlsZat · 07-03-2020 7:41pm

Q&A wrote: »

That would be me and you. Retail banks are primarily deposit funded these days.

Was a different story in the boom. Deposit base couldn't keep up with increasing loan book so they turned to the debt markets. That is what caught them out in the crash. They couldn't raise new debt to pay off maturing bonds.

Banks balance sheet shrank considerably after the crises. They've been growing over the past number of years but rather modestly compared to pre-crises rates.

And as far as I'm aware the finance for the build to rent boom has come predominantly from America? Huge real estate and investment funds who deal frequency in pensions. It does make me very suspicious why we are extorting our renters for big gains to overseas pension funds.

1) if we have to create a favourable tax climate to line investment fund pockets could we not make it predominantly irish funds?

2) is there a threat against our Government of retaliation of some sort if we dont allow these funds coin money off our renters?

It's actually galling that we could bunch the young generation with the debt burden of the last false economic expansion then on top of that hoar them out to be overseas investment gimps.

coolshannagh28 · 07-03-2020 11:00pm

OwlsZat wrote: »

And as far as I'm aware the finance for the build to rent boom has come predominantly from America? Huge real estate and investment funds who deal frequency in pensions. It does make me very suspicious why we are extorting our renters for big gains to overseas pension funds.

1) if we have to create a favourable tax climate to line investment fund pockets could we not make it predominantly irish funds?

2) is there a threat against our Government of retaliation of some sort if we dont allow these funds coin money off our renters?

It's actually galling that we could bunch the young generation with the debt burden of the last false economic expansion then on top of that hoar them out to be overseas investment gimps.

Noonan done a deal with the devil in 2011.

J_1980 · 08-03-2020 5:54am

OwlsZat wrote: »

I wish I was a member of the illuminati... Who exactly is funding the Irish banks?

There’s virtually no money creation going on in the Irish banking sector (to be fair it slightly took off in 2019).
So how do you increase the money supply with a dysfunctional banking sector and public sector borrowing restrictions???? It has to come externally, and there aren’t many irish companies to invest into....

Property Market 2020

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