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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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Villa05

Logan Roy wrote:

Did you even read the article? The headline is pure click bait as usual. Basically it's primarily due the logistical issues of having people working from home and also trying to get valuations done.

It is interesting that they chose to only process mortgages where there is > 40% deposit.
One would have thought the logical thing to do is process mortgages already in the system and suspend new applications until the crisis has passed

OEP wrote:

There's a lot to be said for buying now if you can get a seller to give you a good discount. Judging by some posts on boards, some are willing to do that. There is a lot of uncertainty now, so if you feel you're getting good value for your situation - then perhaps go for it. If this emergency doesn't last that long, the economy could recover quite quickly and property prices might not drop all that much - but no one knows! I would put a caveat that this should be a property that you plan on living in for minimum 5 years, ideally longer.

Nah. This is a wait and see time.

Prices were at their max anyway due to affordability issues. Every sale reduces the pool of available buyers. We were at a point where the market had stalled and prices need to fall slightly to find buyers. This crisis will accelerate that process

beauf

Villa05 wrote: »

....
Nah. This is a wait and see time.

Prices were at their max anyway due to affordability issues. Every sale reduces the pool of available buyers. We were at a point where the market had stalled and prices need to fall slightly to find buyers. This crisis will accelerate that process

Ability to buy will reduce along with prices.

OEP

Villa05 wrote: »

Nah. This is a wait and see time.

Prices were at their max anyway due to affordability issues. Every sale reduces the pool of available buyers. We were at a point where the market had stalled and prices need to fall slightly to find buyers. This crisis will accelerate that process

As a general rule, you're probably right but if you get down to more specific cases then it's different.

Example. Houses in the 400k to 500k range. The people effected most economically by Covid-19 are lower paid workers in hospitality and public facing jobs, they were never really in "competition" for these houses anyway. It is mostly FTBs (couples) working in banking, tech etc.. These jobs (so far) are safe, and these people won't have taken a salary reduction for the most part.

Building is going to slow down now, sellers are going to sit on more houses and mortgage rates are going to be reduced. Therefore supply will decrease but IF this emergency doesn't last too long, demand will remain as the people bidding for these houses won't have been effected. So, if you can get a good discount that suits your situation, it might be worth doing it as you will no longer have to rent, will potentially get a lower interest rate on your mortgage and will not have to fight for the reduced supply that's coming.

It's a risk, no doubt, but no one knows what's going to happen. You're also risking by waiting. Although right now we have no choice but to wait so there is a bit of time to get more information on how this is going to play out.

Donald Trump

beauf wrote: »

Anyone is free to get finance for a project and prove them wrong. But few will...

A lot of the new build estates I see are not sold out. They are still for sale must be close to a year now.

Any builder or developer is going to see that and be very reluctant to build, even before the virus.

So even this land became available, no one is going to build on it now for a long time.

This ship has sailed.

Lets use round figures and some approximations. Suppose a developer buys an acre for 1 million. He can build 10 houses on it. Finances it at 5%/year.
Their required rate of return on the land is 10% per year.

Suppose an actual builder will come in and build a house for 150k.

Fast forward 5 years
Developers are saying that their cost of building each house on this is:
150k to builder
150k for site
25k for finance
36k "margin" for developer (~11% of cost)

Total is 361k. Developer moans he can't build for less than 361k. It's uneconomical.

Now suppose land has dropped to 500k an acre. Developer is still moaning he can't build for less than 361k. But that's not correct. The cost for that house now is
50k site
150k to builder

Total is 200k. If someone else buys the land, builds a house and sells it for 201k he has made a profit. That's the reality. But the current developer will moan he can't or won't do it for less that 361k. And he owns the scarce asset.

I understand he'll want to sit on it. Councils give development permission for land which restricts supply and the developer has that scarce asset and is seeking his rent on it.

What the government need to do is to come in and put a 10% levy on the land. Increase it over time if he is still squatting on the land. It should be use-it-or-lose-it. Let him cut his losses and let the market find it's own level. The same as any other business. He shouldn't be allowed to sit on it and restrict supply just so he can make the profit he wants to.

pearcider

OEP wrote: »

As a general rule, you're probably right but if you get down to more specific cases then it's different.

Example. Houses in the 400k to 500k range. The people effected most economically by Covid-19 are lower paid workers in hospitality and public facing jobs, they were never really in "competition" for these houses anyway. It is mostly FTBs (couples) working in banking, tech etc.. These jobs (so far) are safe, and these people won't have taken a salary reduction for the most part.

Building is going to slow down now, sellers are going to sit on more houses and mortgage rates are going to be reduced. Therefore supply will decrease but IF this emergency doesn't last too long, demand will remain as the people bidding for these houses won't have been effected. So, if you can get a good discount that suits your situation, it might be worth doing it as you will no longer have to rent, will potentially get a lower interest rate on your mortgage and will not have to fight for the reduced supply that's coming.

It's a risk, no doubt, but no one knows what's going to happen. You're also risking by waiting. Although right now we have no choice but to wait so there is a bit of time to get more information on how this is going to play out.

This is madness. You are better off waiting. I think house prices will fall well below their long term average of 3.5 times wages to around 2 times wages (last time they were this cheap was 1980). I think we are around 7 times wages at the moment so a long long way to fall as the credit market breaks down globally.

OEP

pearcider wrote: »

This is madness. You are better off waiting. I think house prices will fall well below their long term average of 3.5 times wages to around 2 times wages (last time they were this cheap was 1980). I think we are around 7 times wages at the moment so a long long way to fall as the credit market breaks down globally.

I don't think they'll fall anywhere near that

pearcider

OEP wrote: »

I don't think they'll fall anywhere near that

Well that’s your opinion but I’m telling you we are at the end of a 40 year long credit super cycle. We will be going back to single income households too and huge interest rates. What is past is prologue.

Graham

pearcider wrote: »

This is madness. You are better off waiting. I think house prices will fall well below their long term average of 3.5 times wages to around 2 times wages (last time they were this cheap was 1980). I think we are around 7 times wages at the moment so a long long way to fall as the credit market breaks down globally.

Would it be fair to suggest you're just plucking numbers out of the air or have you found the secret to buying materials and labour for a quarter of their current prices?

garhjw

pearcider wrote: »

This is madness. You are better off waiting. I think house prices will fall well below their long term average of 3.5 times wages to around 2 times wages (last time they were this cheap was 1980). I think we are around 7 times wages at the moment so a long long way to fall as the credit market breaks down globally.

Of all posts on this thread you have made the most outrageous and laughable statement to date. Deserves a prize.

OEP

pearcider wrote: »

Well that’s your opinion but I’m telling you we are at the end of a 40 year long credit super cycle. We will be going back to single income households too and huge interest rates. What is past is prologue.

Fair enough, that's your opinion. The key thing in your statement is 40 years, do you not think the powers that be will not come up with a way of continuing it?

pearcider

Graham wrote: »

Would it be fair to suggest you're just plucking numbers out of the air or have you found the secret to buying materials and labour for a quarter of their current prices?

The central banks know about this. If you do a bit of research you can see the cycles for yourself.

https://www.macquarie.com/dafiles/Internet/mgl/global/shared/corporate/asset-management/investment-management/insights/facing-down-the-debt-supercycle.pdf?v=2

The Bank of England published the 180 year history of house prices widely available and in it you can see we are at the top of the cycle.

pearcider

OEP wrote: »

Fair enough, that's your opinion. The key thing in your statement is 40 years, do you not think the powers that be will not come up with a way of continuing it?

There is no way they can. The credit bubble will collapse as surely as the sun rises in the morning.

MrMusician18

OEP wrote: »

As a general rule, you're probably right but if you get down to more specific cases then it's different.

Example. Houses in the 400k to 500k range. The people effected most economically by Covid-19 are lower paid workers in hospitality and public facing jobs, they were never really in "competition" for these houses anyway. It is mostly FTBs (couples) working in banking, tech etc.. These jobs (so far) are safe, and these people won't have taken a salary reduction for the most part.

Building is going to slow down now, sellers are going to sit on more houses and mortgage rates are going to be reduced. Therefore supply will decrease but IF this emergency doesn't last too long, demand will remain as the people bidding for these houses won't have been effected. So, if you can get a good discount that suits your situation, it might be worth doing it as you will no longer have to rent, will potentially get a lower interest rate on your mortgage and will not have to fight for the reduced supply that's coming.

It's a risk, no doubt, but no one knows what's going to happen. You're also risking by waiting. Although right now we have no choice but to wait so there is a bit of time to get more information on how this is going to play out.

While your right to say that the sector most affected at the moment by the current crisis wouldn't be competing for €500k homes, they do compete for housing. Taking an entire cohort out of the market will shift the market. And that's just at the moment, waiting will see the illness propagate up through the "better" jobs as revenue for companies shrinks and investment stalls, advertising collapses and consumption shrinks.

So in the current situation for example, apartment bought for b2L at the low end of the market. Can't get tenants to rent at the price desired to make this profitable enough and decided to get out. The increase in supply will lower prices in all categories.

We are staring down the barrel at an 7% hit to the economy and that it the best case scenario avoiding to the ESRI and assumes this late 12weeks and the economy comes roaring back.

The likely scenario is not going to be the most benign one. You would be absolutely bonkers to complete a sale.

On the other hand, we do not know how government's are going to deal with the economic fallout. A large scale devaluation of currency could inflate away all debt and then you'd be bonkers to have not bought...

garhjw

pearcider wrote: »

There is no way they can. The credit bubble will collapse as surely as the sun rises in the morning.

Why are you lying?

Graham

pearcider wrote: »

The central banks know about this. If you do a bit of research you can see the cycles for yourself.

https://www.macquarie.com/dafiles/Internet/mgl/global/shared/corporate/asset-management/investment-management/insights/facing-down-the-debt-supercycle.pdf?v=2

No mention in there that property prices are going to drop to a quarter of existing levels.

[Deleted User]

pearcider wrote: »

There is no way they can. The credit bubble will collapse as surely as the sun rises in the morning.

Are you an economist?

OEP

MrMusician18 wrote: »

While your right to say that the sector most affected at the moment by the current crisis wouldn't be competing for €500k homes, they do compete for housing. Taking an entire cohort out of the market will shift the market. And that's just at the moment, waiting will see the illness propagate up through the "better" jobs as revenue for companies shrinks and investment stalls, advertising collapses and consumption shrinks.

So in the current situation for example, apartment bought for b2L at the low end of the market. Can't get tenants to rent at the price desired to make this profitable enough and decided to get out. The increase in supply will lower prices in all categories.

We are staring down the barrel at an 7% hit to the economy and that it the best case scenario avoiding to the ESRI and assumes this late 12weeks and the economy comes roaring back.

The likely scenario is not going to be the most benign one. You would be absolutely bonkers to complete a sale.

On the other hand, we do not know how government's are going to deal with the economic fallout. A large scale devaluation of currency could inflate away all debt and then you'd be bonkers to have not bought...

Completing a sale now, with discount, might be a more reasonable alternative to renting for the next few years because either supply disappears or credit does. Alas, there is no right answer and it is totally dependent on a buyers situation.

voluntary

If you pay like 2000 rent per month each month for a 1/2 bed apartment then go ahead, negotiate and buy a 1/2 bed for 200k as you pay 24.000 eur rent annually, so even if your new home drops in value by 25% to 150k then this is just 2 years of your rent.

25% price drop in the affordable range market would be exceptional. It's very unlikely to happen.

landofthetree

voluntary wrote: »

If you pay like 2000 rent per month each month for a 1/2 bed apartment then go ahead, negotiate and buy a 1/2 bed for 200k as you pay 24.000 eur rent annually, so even if your new home drops in value by 25% to 150k then this is just 2 years of your rent.

25% price drop in the affordable range market would be exceptional. It's very unlikely to happen.

Rents are going to fall a lot over the next year.

garhjw

landofthetree wrote: »

Rents are going to fall a lot over the next year.

Why? Where will all the additional supply come from? There is a serious shortage of accommodation and a few extra Air BnBs won’t move the dis much. There won’t be mass emigration although immigration will likely slow as MNCs re-evaluate plans short term.

garhjw

landofthetree wrote: »

Rents are going to fall a lot over the next year.

voluntary

landofthetree wrote: »

Rents are going to fall a lot over the next year.

Yes, but still. i believe if you're targeting something reasonably priced in the affordable range market and can get like 10% off deal today, then even when market plunges you won't be losing much. At the other hand, if market recovers in few months, then you'll have a good deal in your hand.

Mic 1972

garhjw wrote: »

Why? Where will all the additional supply come from? There is a serious shortage of accommodation and a few extra Air BnBs won’t move the dis much. There won’t be mass emigration although immigration will likely slow as MNCs re-evaluate plans short term.

the drop in rent is already showing on Daft so obliviously there are accommodations available now

MrMusician18

garhjw wrote: »

Why? Where will all the additional supply come from? There is a serious shortage of accommodation and a few extra Air BnBs won’t move the dis much. There won’t be mass emigration although immigration will likely slow as MNCs re-evaluate plans short term.

The extra supply will come from foreign workers losing their jobs and leaving. It will come from Airbnb lets going back into the long term rental market.

The amount of extra supply needed to crash a market can be relatively small. A 5% oversupply would have a dramatic impact on rent prices.

ZX7R

Mic 1972 wrote: »

the drop in rent is already showing on Daft so obliviously there are accommodations available now

The drop in rent is in relation to a lot of foreign workers returning home ,holiday appointment coming on the morning all a knee jerk reaction to the current situation,it is only a drop in the ocean as far as the amount of rental accommodating coming on the market

garhjw

MrMusician18 wrote: »

The extra supply will come from foreign workers losing their jobs and leaving. It will come from Airbnb lets going back into the long term rental market.

The amount of extra supply needed to crash a market can be relatively small. A 5% oversupply would have a dramatic impact on rent prices.

Why will they leave? Global crisis so opportunities in their home country or elsewhere will be limited as well.

smurgen

garhjw wrote: »

Why will they leave? Global crisis so opportunities in their home country or elsewhere will be limited as well.

The benefits of staying in Ireland are now gone. The gap in wages between Ireland and other countries will lessen. Remember it is hardship for people to leave their own country. Without the big wages here anymore it’ll no long be seen as a worthwhile pay off.

beauf

There will be downturn no doubt.

Villa05

landofthetree wrote:

Rents are going to fall a lot over the next year.

garhjw wrote:

Why? Where will all the additional supply come from? There is a serious shortage of accommodation and a few extra Air BnBs wonâ€™t move the dis much. There wonâ€™t be mass emigration although immigration will likely slow as MNCs re-evaluate plans short term.

I can't see rents staying anywhere near current levels for a number of reasons

1 reduction In foreign students

2 a lot of 3rd level courses have moved online. A succeeful implementation of this will see it being a future trend. Colleges are underfunded and this may be seen as a good way to reduce costs

3 you may also see similar trends in working from home

4 Housing was a major issue in the last election as more and more professions are excluded from home ownership. Political parties that don't address the issues will suffer. Parties that are part of the problem will suffer more

5 supply issue can be easily solved by the state generating new revenue streams and can be done in a profitable manner

6 it is low paid workers that are at the front line of fighting this virus. When we come out at the other side of this will it be tolerable that these same workers will be thrown to the mercy of bailed out markets and be ripped off with extortionate rents

q85dw7osi4lebg

IvoryTower wrote: »

couldnt you do a viewing with a bit of common sense?

I'm more thinking that its a bit weird that vendors are happy to have strangers in their house given there's a coronavirus doing the rounds, common sense eh?