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Property Market 2020

Bigmac1euro

Maybe an article for “Property Market 2020”
Anyhow looks like developers are going to start strangling supply in order to keep prices in check.

Worth a read anyway.

https://www.independent.ie/business/personal-finance/property-mortgages/developers-now-fear-flooding-market-as-house-prices-in-decline-38820967.html

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SozBbz

Claw Hammer wrote: »

They can stay with parents etc at home. many are young and single. Even a few thousand going would cause a drop in rents.

I really doubt it.

This will come to an end.

There are 20 seperate projects to find a vaccine, at least 2 of which are at human testing already. They are estimating September.

They are also finding existing drugs can have a positive effect on the virus - ie drugs that are already passed safe to use. I heard on Pat Kenny this morning about an anti inflammatory drug for arthritis thats had 80% effect on inflammation in the lungs and drastically cut the mortality rate of those treated. So, perfectly safe, available immediately, its just an off lable use of a drug if you will, that improves outcomes. They also mentioned virus blocking drugs that were developed in the Ebola crisis a few years back and how they're looking to have some impact on Covid19.

This is temporary. This will pass. We will be ahead of it for next year.

Necessity is the mother of invention and all that.

People are not going to uproot their whole lives for something that is not permanent.

Claw Hammer

fliball123 wrote: »

Once again I ask you why would they go home the same problems that would exist at home as they would in Ireland .

They can stay with parents etc at home. many are young and single. Even a few thousand going would cause a drop in rents.

Mic 1972

fliball123 wrote: »

Once again I ask you why would they go home the same problems that would exist at home as they would in Ireland and we would need a very high percentage of people dying and/or leaving in order to balance the supply/demand discrepancies. Not that I want anyone to die but it may become a factor in all of this. Also I have noticed over the last 3/4 months the stock of houses is almost baron very little to choose from out there.

Emigration

People go away if jobs becomes available somewhere else, or they go back home where they may have a family house to live in
A shrinking economy is not going to draw people

Assetbacked

Graham wrote: »

Mod Note

Agreed.

Probably better suited to the economics or investment & markets forum.

The fruits of my labours in a slow morning in work cast into the fire

Graham

Assetbacked wrote: »

It's speculative and difficult to link the above to Irish property

Mod Note

Agreed.

Probably better suited to the economics or investment & markets forum.

Assetbacked

For some light reading on what one of the EU-level regulators is keeping an eye on in terms of market stability and potential impacts to the EU countries' economies; https://www.esma.europa.eu/sites/default/files/library/esma_50-165-1040_trv_no.1_2020.pdf

Papers such as these are useful to give an insight as to the direction of travel for those at the wheel of economic regulation.

Some points which stand out in the paper include;

BigTechs - as a general comment, it outlines that trust is key to BigTechs growth but that concerns around privacy and illicit/uncertainties around use of customer data can erode trust, creating risks around such companies. In addition, regulation could be a factor which hampers their growth (e.g. GDPR). It is interesting that the paper from an asset management regulator, also includes such commentary on BigTechs which are not really involved in offering asset management services.
High Yield Bond Bubble - fixed-income funds have been receiving inflows at the expense of equity funds. In a low interest rate environment, investors chase yield from riskier assets, which allows corporates of typically poor fundamental standing to issue bonds and obtain additional funding from the markets. It is an area which has grown significantly, not just in Europe but also in the US, in recent years. The risk lies in a downgrade of this corporate debt which means investors may get spooked and sell or may be forced to sell as the rating of the bonds fall to a low level which they are not permitted to invest in.
CDOs and CLOs - are sources of concern (these are essentially repackaged debt obligations, similar to the credit default swaps which amplified the potential for 2008 to destroy the US economy - as we now know, this crash has not yet happened to the US). The popularity of these instruments gives the illusion of companies being in a better financial state than they actually are as the risk with their debt has been spread, enabling them to leverage themselves even more.
Short-termisim - the paper outlines the pursuit of short-term gains at the expense of long-term investments as being something which is posing market stability risks.

It's speculative and difficult to link the above to Irish property but a key takeaway from the paper is that one of the EU-level regulators has significant concerns around the risks posed to the market - this should not be taken lightly. We are not talking about banks but the asset management industry (i.e. equities (stocks, shares etc.) and bonds) and its large and rapid growth, potentially creating a bubble. Where has this growth been felt in Irish property? The rental crisis primarily, created by the huge demand increase from new workers to the multinationals and fund service providers; this has also caused house prices to go up and has created frothy returns on commercial property for investors. Mary and John who own their own home aren't speculators (assuming they just want a roof over their own head) so they are not exposed (in any event, mortgage borrowing is limited to 3.5 times salary so they are not leveraged to the hilt). Accordingly, those who require returns from Irish property in order to satisfy their investors or themselves are the ones exposed; the workers referred to above are very likely renters (therefore are somewhat agile in terms of mitigating wage reductions or job losses).

Assetbacked

Mad_maxx wrote: »

those reits were never a good tracker of the on the ground market , they are just stocks at the end of the day and thus drop sharply with the rest of the equity market , movements in ires tell us nothing about the property market overall

I disagree and it is still in freefall. It is reflecting a potential lack of demand/hit to rents it receives as companies potentially move towards home office work for the coronavirus scare and beyond. https://live.euronext.com/en/product/equities/IE00BJ34P519-XMSM Look at the 1YR, 3YR and 5YR graphs; it is back to where it was in May 2017 right now and seems to still be dropping. For context, the high in the last 5 years was only in December, 2019. Today it is 28% lower since then.

Claw Hammer wrote: »

Some businesses will be severely impacted such as tourism if there is a slowdown even for a few months. Conferences and conventions are now being cancelled, the profit that would have been made on them is gone forever. From the point of view of the property market, Air Bn B will be badly hit. This may result in units reverting to the long-term rental market which will bring down rents overall. In some cases, laid off workers may leave Ireland for their home countries. This will have a further depressing effect on the rental market. Rising levels of bad debts will make the banks extremely reluctant to lend making mortgages scarce. The result will be falling prices.

So there would be winners and losers in this scenario, in the same way there are winners and losers in the economic recovery. It's important for people to appreciate the context of the commentator when they are learning about what is happening in the property market.

fliball123 wrote: »

Once again I ask you why would they go home the same problems that would exist at home as they would in Ireland and we would need a very high percentage of people dying and/or leaving in order to balance the supply/demand discrepancies. Not that I want anyone to die but it may become a factor in all of this. Also I have noticed over the last 3/4 months the stock of houses is almost baron very little to choose from out there.

I think if you can't afford to live in a country and have your family in your home country, you are probably better off to sit on the toilet there than in that other country.

fliball123

Claw Hammer wrote: »

Foreigners who are working here in the hospitality industry will go home. If they are laid off they will to be able to afford to stay here. Foreign language students will go home and won't be replaced.

Once again I ask you why would they go home the same problems that would exist at home as they would in Ireland and we would need a very high percentage of people dying and/or leaving in order to balance the supply/demand discrepancies. Not that I want anyone to die but it may become a factor in all of this. Also I have noticed over the last 3/4 months the stock of houses is almost baron very little to choose from out there.

Dolbhad

sparkle109 wrote: »

Would anyone expect new build prices to stay relatively static compared to second hand given the help to buy scheme?

I don’t think think so. The released of next phases of new builds in Cork last few weekends have all increased in price on the previous phase.

sparkle109

Would anyone expect new build prices to stay relatively static compared to second hand given the help to buy scheme?

Marcusm

JamesMason wrote: »

There is already talk of liquidity problems for some banks due to the recent crash, airline and business slowdown. Can you imagine a credit crunch coupled with a rise in unemployment?

Liquidity, funnily enough, is the least of the banks’ problems this time around. TLTRO means that they have almost unlimited access. This time around it will be regulatory constraints and the additional (largely theoretical) requirement for access to (largely unnecessary) capital which will be an issue. In trying to make the banks immune to bailouts, constraints are such that income is hard to generate in this environment. We should hate them as much as we (individually) want but we need banks as agents for transformation of short term deposits into long term assets (mortgage and other financing). That is their social purpose.

lcwill

Cuddlesworth wrote: »

How does implementing government lead mortgage deferrals not lead to that exact same situation? I think the only difference between here and Italy is it probably doesn't take tens of thousands in legal fees over multiple years to evict.

Maybe you don't know Italy! Many many thousands of apartments in Rome kept vacant because the owners are afraid to rent them in case the tenants changes the locks and stops paying rent. Rents are pretty low compared to prices, not worth the risk.

JamesMason

Claw Hammer wrote: »

Some businesses will be severely impacted such as tourism if there is a slowdown even for a few months. Conferences and conventions are now being cancelled, the profit that would have been made on them is gone forever. From the point of view of the property market, Air Bn B will be badly hit. This may result in units reverting to the long-term rental market which will bring down rents overall. In some cases, laid off workers may leave Ireland for their home countries. This will have a further depressing effect on the rental market. Rising levels of bad debts will make the banks extremely reluctant to lend making mortgages scarce. The result will be falling prices.

There is already talk of liquidity problems for some banks due to the recent crash, airline and business slowdown. Can you imagine a credit crunch coupled with a rise in unemployment?

ZX7R

Surprisingly Irish banks made modest
Gain's today in direct reaction to how they plan on reacting to the cronavirus and how they plan on dealing with mortgages and help business .
The us market rallied nearly 3% today due to action taken by me Trump. The Asian market also was up.
World economy is still expected to stabilize in two months.
People need to realize that investors are not afraid of the virus itself but afraid of what action will be taken to it.

Claw Hammer

fliball123 wrote: »

Just one query with your prophecy. Where will the workers go to the whole world is going to have Corona in some shape or form and there would need to be a mass exodus from Ireland in order to have rents falling. Once again I ask where do they go?

Foreigners who are working here in the hospitality industry will go home. If they are laid off they will to be able to afford to stay here. Foreign language students will go home and won't be replaced.

Mic 1972

landofthetree wrote: »

The property market isn't very liquid.

These big landlords are generally taking a medium to long term view.

But property price crashes can happen despite the lack of sell offs from the vulture funds. If demand falls for mortgages prices will fall and fall quickly.

It's already way to late for investors to leave the market and avoid the coming meltdown.

it's such an easy concept to grasp, but not everybody gets it

fliball123

Mic 1972 wrote: »

Some will go back home
Some will stay and will stop pay rent/mortagegs
Most won't be able to get a mortage and even consider buying a house

and we will still have too many people for too few places to live

landofthetree

fliball123 wrote: »

I dont understand people thinking this. People want to make money. The Corona virus is in all parts of the world or will be. People have to live somewhere, the markets are crashing and it costs money to keep in savings. Where would the big landlords put their money . People virus free or not have to live somewhere. If I was a big landlord I would be sitting back and taking my very very generous rent income

The property market isn't very liquid.

These big landlords are generally taking a medium to long term view.

But property price crashes can happen despite the lack of sell offs from the vulture funds. If demand falls for mortgages prices will fall and fall quickly.

It's already way to late for investors to leave the market and avoid the coming meltdown.

J_1980

Claw Hammer wrote: »

Some businesses will be severely impacted such as tourism if there is a slowdown even for a few months. Conferences and conventions are now being cancelled, the profit that would have been made on them is gone forever. From the point of view of the property market, Air Bn B will be badly hit. This may result in units reverting to the long-term rental market which will bring down rents overall. In some cases, laid off workers may leave Ireland for their home countries. This will have a further depressing effect on the rental market. Rising levels of bad debts will make the banks extremely reluctant to lend making mortgages scarce. The result will be falling prices.

No.1 victim will be government revenues. I’d expect the surplus to quickly turn into a 10bn deficit given all the additional Corona related spending. All the SF spending plans will turn into a pipe dream.

Mic 1972

fliball123 wrote: »

Just one query with your prophecy. Where will the workers go to the whole world is going to have Corona in some shape or form and there would need to be a mass exodus from Ireland in order to have rents falling. Once again I ask where do they go?

Some will go back home
Some will stay and will stop pay rent/mortagegs
Most won't be able to get a mortage and even consider buying a house

fliball123

Claw Hammer wrote: »

Some businesses will be severely impacted such as tourism if there is a slowdown even for a few months. Conferences and conventions are now being cancelled, the profit that would have been made on them is gone forever. From the point of view of the property market, Air Bn B will be badly hit. This may result in units reverting to the long-term rental market which will bring down rents overall. In some cases, laid off workers may leave Ireland for their home countries. This will have a further depressing effect on the rental market. Rising levels of bad debts will make the banks extremely reluctant to lend making mortgages scarce. The result will be falling prices.

Just one query with your prophecy. Where will the workers go to the whole world is going to have Corona in some shape or form and there would need to be a mass exodus from Ireland in order to have rents falling. Once again I ask where do they go?

[Deleted User]

The economic impact of this is unknowable, but it will almost certainly be very significant.
People's morale is going to be walloped if the figures yesterday are anywhere near correct. Losing one to two per cent of our population will see a huge level of grief and trauma that won't easily be recovered from. The human cost of this is what's important, but the economic impact of that would be felt for years to come also.

Claw Hammer

J_1980 wrote: »

It’ll be an earnings recession. Businesses will take it on the chin for 1y. It’s no demand recession and uncertainty about staffing numbers will make them reluctant to mass fire.
Only negative outcome will be the devastating effect on public finances as the narrow tax base suffers the most.
No money, no social house building, rising rents to continue...

Some businesses will be severely impacted such as tourism if there is a slowdown even for a few months. Conferences and conventions are now being cancelled, the profit that would have been made on them is gone forever. From the point of view of the property market, Air Bn B will be badly hit. This may result in units reverting to the long-term rental market which will bring down rents overall. In some cases, laid off workers may leave Ireland for their home countries. This will have a further depressing effect on the rental market. Rising levels of bad debts will make the banks extremely reluctant to lend making mortgages scarce. The result will be falling prices.

SozBbz

AlmightyCushion wrote: »

Even if 29 degree weather stopped it, it's rare that we get weather like that. Even if it does it won't happen until the summer and it won't be sustained. A day here or there and in the evenings it will cool down. If warm weather stops the spread it will be good for some other countries but not Ireland.

You don't need 29 degree weather to stop it. Thats just an arbitary number mentioned by another poster.

There is no magic temperature at which it stops, but as it gets warmer, even Irish summer levels of warm it will gradually get less transmissable....slow down the spread sufficiently, you can contain it, isolate it and stop it.

AlmightyCushion

Mic 1972 wrote: »

Singapore is 29 degrees, just saying

Even if 29 degree weather stopped it, it's rare that we get weather like that. Even if it does it won't happen until the summer and it won't be sustained. A day here or there and in the evenings it will cool down. If warm weather stops the spread it will be good for some other countries but not Ireland.

SozBbz

Mic 1972 wrote: »

Singapore is 29 degrees, just saying

Singapore has less than 200 cases, no deaths and many of their original cases originated elsewhere and are now recovered. No signs of major community transmission like in Wuhan, N Italy, South Korea and Iran, that are all cold.

J_1980

Mic 1972 wrote: »

Singapore is 29 degrees, just saying

Singapore life is largely aircon’ed.
Thailand is not, there are very few cases given it’s a major Chinese tourist area.

J_1980

19233974 wrote: »

There is no containing this, it already has community transmission. We can limit spread which means business as usual is the worst thing we could do as it would just prolong it.

but nonetheless, i cant see how this will have any meaningful impact on property prices

It’ll be an earnings recession. Businesses will take it on the chin for 1y. It’s no demand recession and uncertainty about staffing numbers will make them reluctant to mass fire.
Only negative outcome will be the devastating effect on public finances as the narrow tax base suffers the most.
No money, no social house building, rising rents to continue...

Mic 1972

19233974 wrote: »

It is a hope that it is less infectious in warmer weather, like a typical corona virus, the fact is no one knows. Iran is 15-20+ degress daily and is one of the infection hot spots so it makes no difference to ireland, as we wont get near that temp for a good few months

Singapore is 29 degrees, just saying

19233974

SozBbz wrote: »

Well thats not what the experts are saying.

All the places that have had serious problems are in cold countries at this time of year. Wuhan, Northern Italy, South Korea etc are all cold at this time of year.

Much lower spread in warmer climates, and mostly to do with people who have been in effected areas.

It is a hope that it is less infectious in warmer weather, like a typical corona virus, the fact is no one knows. Iran is 15-20+ degress daily and is one of the infection hot spots so it makes no difference to ireland, as we wont get near that temp for a good few months