2021 Irish Property Market chat - mod warnings post 1

PropQueries · 10-03-2021 11:11PM

fliball123 wrote: »

When have I ever compared London prices to Dublin prices? Why not Sydney prices, or New York prices, or Paris prices or Manchester prices..What correlation has London got to Dublin or Irish property prices? If you are to compare to Dublin to London how many people left London recently

I think the main problem these days is that the property markets in many of the worlds cities is heavily invested in by the same relatively few global funds.

Once they start panicking and pulling out of one market they may pull out of many other similar markets at the same time leading to a flood of property entering the market at the same time.

Property prices have being rising in relative tandem among the main cities for the past few years. They may now fall in tandem.

Timing belt · 10-03-2021 11:26PM

PropQueries wrote: »

I think the main problem these days is that the property markets in many of the worlds cities is heavily invested in by the same relatively few global funds.

Once they start panicking and pulling out of one market they may pull out of many other similar markets at the same time leading to a flood of property entering the market at the same time.

Property prices have being rising in relative tandem among the main cities for the past few years. They may now fall in tandem.

Why would they start panicking and pulling out of all markets at the same time and start a fire sale? What would be the driver that would make this happen?

PropQueries · 10-03-2021 11:39PM

Timing belt wrote: »

Why would they start panicking and pulling out of all markets at the same time and start a fire sale? What would be the driver that would make this happen?

Many of the decision makers at many of these funds generally think the same way eventually.

Whether it’s a belief that interest rates will rise faster than many think to increasing government intervention in the property markets.

Doesn’t take much to scare them.

Back in 2014, David McWilliams said:

“Most vulture funds have a rule called the three-thirty rule. This means they buy and hold for a maximum of three years and once they make 30 per cent they are out.”

I think what he may have got wrong back them was that the vulture funds bought so much property that it’s taken them a bit longer to get through what they actually bought.

They should be through the paperwork by this stage in many cases IMO

TheSheriff · 10-03-2021 11:42PM

PropQueries wrote: »

I think the main problem these days is that the property markets in many of the worlds cities is heavily invested in by the same relatively few global funds.

Once they start panicking and pulling out of one market they may pull out of many other similar markets at the same time leading to a flood of property entering the market at the same time.

Property prices have being rising in relative tandem among the main cities for the past few years. They may now fall in tandem.

It's funny how sometimes we are exactly aligned with what is happening in London, and other times we are not....

PropQueries wrote: »

But, then we’re back to the nonsense that land is expensive in Dublin because it’s a “city” and there’s not much of it. We’re not London or Tokyo. There’s nothing but land in and around the city. Actually, there’s plenty of land around london. Not sure about Tokyo, but probably plenty of land there as well though.

PropQueries wrote: »

I would actually compare Waterford to Dublin more than I would compare Dublin to London

PropQueries wrote: »

I’m not sure that argument stands. London is a real city and Greater London has a population about twice the size of Ireland in an area about one and a half times the size of Co. Dublin.

Outside a few areas, it’s also not that high rise and they still appear to have more and better parks than Dublin has (the park thing is a guess from the times I’ve been there).

PropQueries wrote:

In my opinion we're not London or New York. Is there really much demand for such units. Our "IT" jobs are mostly in sales etc. The real work in done in the United States, London or some other EU country. I think everyone believes we're the silicon valley of Europe but the truth and the wages are much different from the reality.

PropQueries wrote:

Some day. But from just looking at the number of a-rated turn-key apartments and houses for sale and rent in Dublin on MyHome.ie, the figure must be at least in the 5,000-6,000 range. That’s a fairly significant number of new build homes looking for occupiers and is significant for such a small city, We’re not London. And we’re still expected to build c.16,000-18,000 this year with most to be built in the greater Dublin region...

hometruths · 10-03-2021 11:43PM

fliball123 wrote: »

When have I ever compared London prices to Dublin prices? Why not Sydney prices, or New York prices, or Paris prices or Manchester prices..What correlation has London got to Dublin or Irish property prices? If you are to compare to Dublin to London how many people left London recently

It's a bit of a recurring theme...

fliball123 wrote: »

its a place the majority would like to live in and as such there is a premium to be paid. Just like London, Paris, New York, Sydney, Rome, Brussels, Copenhagen, Madrid, Berlin the list goes on and on. Why should Dublin be any different

fliball123 wrote: »

How does your population vs accommodation compare to within other major cities in the world I believe the problem is not just isolated to Dublin/Ireland you only have to look at London/England or Paris/France to see the same issues..

fliball123 wrote: »

Unfortunately the idea that if you want to live in an area that a lot of other people want to live in as in Dublin along the coast or leafy Foxrock. You have to pay a premium to do so. I also told you this is not unique to Ireland Look at America, Australia, England, France and look at places in here like Sydney, Manhattan, London and Paris..There is a premium needed to be paid to live in a desirable area.

fliball123 wrote: »

As for paying a price over the average or median. Look at the likes of New York, London, Paris and other major/captial cities throughout the world they have historically come with a premium so Dublin is not alone in this regard.

fliball123 wrote: »

How does the likes of New York and London and Paris and Sydney function with the same dynamics

fliball123 wrote: »

Lots of other houses bigger and for less in other areas if people want to live somewhere and if there is competition for the house price goes up. We are not unique in this look at New York, London, Sydney, Paris, Berlin and other Captial cities around the globe

l

fliball123 wrote: »

look at London, New York, Paris and other major hubs and before the sh1t of Dublin should not be compared to these, the simple fact is Dublin is now a major attraction for MNCs, foreign investment aswell as Software and Pharma and will be the the only English speaking Capital in the EU once England go so it is now up there or very close.

Hence why I thought it was odd after posting all of the above to reply to a post about London prices saying:

fliball123 wrote: »

AND what connection has your brain made to the Irish property market?

hometruths · 10-03-2021 11:46PM

TheSheriff wrote: »

It's funny how sometimes we are exactly aligned with what is happening in London, and other times we are not....

Nail on head!!

TheSheriff · 10-03-2021 11:49PM

PropQueries wrote: »

Many of the decision makers at many of these funds generally think the same way eventually.

Whether it’s a belief that interest rates will rise faster than many think to increasing government intervention in the property markets.

Doesn’t take much to scare them.

Back in 2014, David McWilliams said:

“Most vulture funds have a rule called the three-thirty rule. This means they buy and hold for a maximum of three years and once they make 30 per cent they are out.”

I think what he may have got wrong back them was that the vulture funds bought so much property that it’s taken them a bit longer to get through what they actually bought.

They should be through the paperwork by this stage in many cases IMO

So now your opinions extend to the inner workings of Vulture funds and specifically how their internal administrative processes work?

And of course more importantly, the vulture funds are now ready to instigate their own fire sale. Right now of course, any day now....

PropQueries · 10-03-2021 11:50PM

TheSheriff wrote: »

It's funny how sometimes we are exactly aligned with what is happening in London, and other times we are not....

Nice to see you’ve a keen interest in all my posts

However, the common theme in the posts you reposted was they were in relation to local demand.

My current argument is in relation to how many of the funds may exit many of the different markets they’ve invested in at the same time leading to property falls in many major cities at the same time. Just like when many world cities increased in tandem over the past few years, they may fall in tandem as the funds exit in mass.

But interesting how people can drag up so many posts

PropQueries · 10-03-2021 11:57PM

TheSheriff wrote: »

So now your opinions extend to the inner workings of Vulture funds and specifically how their internal administrative processes work?

And of course more importantly, the vulture funds are now ready to instigate their own fire sale. Right now of course, any day now....

It just takes one fund to start it. Just like a real fire, they may all rush for the exit. One wouldn’t want to risk being the last to leave the building in such a scenario.

Timing belt · 11-03-2021 12:04AM

PropQueries wrote: »

It just takes one fund to start it. Just like a real fire, they may all rush for the exit. One wouldn’t want to risk being the last to leave the building in such a scenario.

Which Funds are you including in your latest prediction?

Pension Funds
Reits
Investment Funds
Fixed income funds (you keep talking about the Nama Debt that was bought)
Hedge Funds

And in the current market what asset class would the funds flow into following your fire sale or are you predicting a run on the funds by investors.

thefridge2006 · 11-03-2021 01:14AM

European investor to seek €1bn from sale of Irish residential rental portfolio

https://www.irishtimes.com/business/commercial-property/european-investor-to-seek-1bn-from-sale-of-irish-residential-rental-portfolio-1.4506736

I'm pretty sure Props called this situation previously......this thread is turning into Props prophecies that are coming true. fair play

ebayissues · 11-03-2021 04:38AM

I dont see fund(s) leaving Ireland. If you work in the funds industry you would know that recently a new corporate vehicle structure was drafted. It's forecasted that this should increase funds domiciled in Ireland from 3 trillion to 5 trillion in 5 years.

Funds are not specific to QIAIF, UCITS, hedge funds, property funds etc.

Also given that most funds in UK that want to passport their product in Europe, Ireland is one of the top choices.

I don't see funds leaving Ireland anytime soon.

hometruths · 11-03-2021 09:09AM

ebayissues wrote: »

I dont see fund(s) leaving Ireland. If you work in the funds industry you would know that recently a new corporate vehicle structure was drafted. It's forecasted that this should increase funds domiciled in Ireland from 3 trillion to 5 trillion in 5 years.

Funds are not specific to QIAIF, UCITS, hedge funds, property funds etc.

Also given that most funds in UK that want to passport their product in Europe, Ireland is one of the top choices.

I don't see funds leaving Ireland anytime soon.

When Props is talking about funds leaving Ireland I am pretty sure he is not worried about them changing their domicile.

Joeyjoejoe43 · 11-03-2021 09:48AM

What is the general consensus on where the Irish property market goes in the next 1/3/5 years?

yagan · 11-03-2021 10:29AM

Joeyjoejoe43 wrote: »

What is the general consensus on where the Irish property market goes in the next 1/3/5 years?

I think it's way too early to say.

Covid has made WFH a cost saving option for businesses so no one except commercial landlords are going to argue against it.

I don't see why uni courses that don't require presenteeism won't be an accessible online option too.

Both are negative headwinds for Dublin rents but a boon for regional areas. Before Covid arrived the Dublin building boom was probably near peak anyway, and with major developers like Marlet now hawking for buyers where before they were selling off plan I reckon the dynamic is downhill.

Once covid restrictions end it will be interesting to see if there'll be more pent up sellers than buyers. As there's better value outside Dublin I reckon anyone with cash and able to avail of WFH will relocate.

Villa05 · 11-03-2021 10:31AM

Joeyjoejoe43 wrote:

What is the general consensus on where the Irish property market goes in the next 1/3/5 years?

1 up
3 to 5 crash

Loose prediction, but based on current policy not only is a crash inevitable but continuation of those policies will make the crash much harder when it happens

So basically the higher the rise, the greater the crash

World events may speed up the timing of the crash

Browney7 · 11-03-2021 10:31AM

thefridge2006 wrote: »

European investor to seek €1bn from sale of Irish residential rental portfolio

https://www.irishtimes.com/business/commercial-property/european-investor-to-seek-1bn-from-sale-of-irish-residential-rental-portfolio-1.4506736

I'm pretty sure Props called this situation previously......this thread is turning into Props prophecies that are coming true. fair play

Strange they are looking to exit all of a sudden considering they were buying and expanding in 2019. That operation look to have a substantial commercial property line which may not be as lucrative/attractive to sell. Or else they see the Irish market as topping out and looking to cash in.

Still, €1 billion would give them a chunky profit looking at what they paid for some of the acquisitions and the average sale price being near 600k (unless they have a landbank included in there also).

fliball123 · 11-03-2021 10:48AM

schmittel wrote: »

It's a bit of a recurring theme...

l

Hence why I thought it was odd after posting all of the above to reply to a post about London prices saying:

If you look at all of those references I am trying to get a point across that capital cities and highly desirable places across the globe will require a premium to be paid if you want to live there. There is no comparison of Dublin and London property prices in that list you put up. I have never actually gone and stated London property prices are x and Dublin property prices are y therefore we can assume z. If I have show me?

Hubertj · 11-03-2021 11:02AM

Villa05 wrote: »

1 up
3 to 5 crash

Loose prediction, but based on current policy not only is a crash inevitable but continuation of those policies will make the crash much harder when it happens

So basically the higher the rise, the greater the crash

World events may speed up the timing of the crash

You really should caveat your “prediction” by saying you have been predicting a crash for years. But you were wrong.

I think prices will start to fall in the 2nd half of next year.

fliball123 · 11-03-2021 11:03AM

Hubertj wrote: »

You really should caveat your “prediction” by saying you have been predicting a crash for years.

I think prices will start to fall in the 2nd half of next year.

In fairness I dont think there many who have got it right over the last 4/5 years.

johnnyskeleton · 11-03-2021 11:24AM

PropQueries wrote: »

Many of the decision makers at many of these funds generally think the same way eventually.

Whether it’s a belief that interest rates will rise faster than many think to increasing government intervention in the property markets.

Doesn’t take much to scare them.

Back in 2014, David McWilliams said:

“Most vulture funds have a rule called the three-thirty rule. This means they buy and hold for a maximum of three years and once they make 30 per cent they are out.”

I think what he may have got wrong back them was that the vulture funds bought so much property that it’s taken them a bit longer to get through what they actually bought.

They should be through the paperwork by this stage in many cases IMO

Are you bundling all types of fund into one here?

You might have one fund that buys loan books of distressed assets from banks, sells them and then moves on. Another might be a pension fund which is looking at a long term e.g. 40 year investment at a reasonable return. Yet another might have been attracted by the tax scheme and rising prices in Ireland. Others might have had too much money and no other options so bought Irish property not to make massive profits but because it was safer than holding large amounts of cash. Some will be set up specifically as a way of investing as a professional landlord too.

The current choices for each of these entities will vary differently. The "vulture" funds will buy loans, not property, at a discount, in the hope of turning a profit. They don't hold property and have no interest in doing so. They hold loans.

Pension funds who invested in property say in 2015 have seen large gains in terms of capital appreciation and strong returns. The choice for them now is whether to reduce rents (and theoretically risk reducing the theoretical value of the property) or keep rents high and risk losing out on tenants for the short term. They will have a the risk of reducing rents baked into the pie, so to speak.

Those who bought based on rising prices and the corporation tax scheme have to wait 7 years from when they bought. I would anticipate that some of these investments will start to cash out, but most likely they will try to sell their investments en bloc to institutional investors e.g. pension funds.

The ones who had too much money will only sell if money is now tight or there is a strong investment opportunity elsewhere. With most central bank rates at negative, and on the basis that they are probably getting very low interest institutional loans (or are e.g. holding money as an investment bank or insurance company), their decision will be based on money flows, and right now there is more money in the world than ever before (scarily so).

The professional landlord model seems to me to be the most likely to move first. If they can't get the historically high rents that they were getting, then they will be less inclined to invest in more properties and might try to offload a few properties.

For all of the above, the best way to get out of the market is to offload their assets onto another fund. So long as there is too much money swashing around the world, it is hard to see how someone isn't prepared to buy them. Outside of that, they might try to slowly offload a few properties quietly. The only way in which there would be a flood of properties on the market is if they panic and start undercutting each other.

I still think property prices at the moment are unsustainable and have to drop. But I don't think the impetus to drop will come from investment funds.

Villa05 · 11-03-2021 11:25AM

Hubertj wrote:

You really should caveat your â€œpredictionâ€ by saying you have been predicting a crash for years. But you were wrong.

Have I?
I thought I was highlighting bad policies that increase price and make affordability issues worse. This creates high risk within a market that everyone needs to access

Would you not agree that current policy is boom/bust?

PropQueries · 11-03-2021 11:31AM

Timing belt wrote: »

Which Funds are you including in your latest prediction?

Pension Funds
Reits
Investment Funds
Fixed income funds (you keep talking about the Nama Debt that was bought)
Hedge Funds

And in the current market what asset class would the funds flow into following your fire sale or are you predicting a run on the funds by investors.

While it's impossible to declare in advance what exactly will start it, maybe it has already started and the small guys just haven't realised yet?

But, there has been some writing on the synchronization of global house prices over the past few years. Here's one report from the IMF in 2018 titled 'House Price Synchronization and Financial Openness':

"House prices can be synchronized due to simultaneous changes in financial factors. For instance, the global financial condition and investors expectation for its future developments would simulaneously affect house prices in many countries, thus leading to synchronization of house prices across countries.

Also, if global investors can access to housing markets in many countries at the same time, house prices in those countries would move in tandem as a result of the global investors’ portfolio choice.

If financial factors play an important role for synchronization of house prices, financial openness for each country would independently influence the degree of house price synchoronization, separately from the synchronization induced by real economic connectivity through trade linkages."

"Those empirical results in this paper have some policy implications. First, given the increasing synchronization of house prices across countries, house prices need to be monitored from more global perspectives. That is, when policymakers monitor their own country’s house prices as a part of economic assessment, they should pay attention not only to the economic factors influencing their own country’s house prices but also the global cycles of house prices and their underlying factors."

"Hence, while the world with greater financial openness has an advantage for providing, for instance, diversified investment opportunities, the spillover of shocks through house price synchronization will possibly pose a more significant risk to financial stability in the future."

"Finally, a panel and cross-sectional regression analysis show that the heterogeneity of house price synchronization across countries is partly accounted for by both financial and trade openness, implying that financial factors influence the synchronization even after controlling for the real economic connectivity captured by trade linkages."

A lot of the above appears very similar to developments in the Irish housing market over the past few years and what drove property prices on the way up, can just as easily drive them in the other direction as they exit IMO

Link to report here: https://www.imf.org/en/Publications/WP/Issues/2018/09/28/House-Price-Synchronization-and-Financial-Openness-A-Dynamic-Factor-Model-Approach-46220?fbclid=IwAR1_ueffnK9Zl8V5wsqQML_ipIiI3ktcRC8trZfvb-sgIRVC-wu95eOQNps

fliball123 · 11-03-2021 11:33AM

Villa05 wrote: »

Have I?
I thought I was highlighting bad policies that increase price and make affordability issues worse. This creates high risk within a market that everyone needs to access

Would you not agree that current policy is boom/bust?

If you follow how prices have gone over the last 5 years then NO. As prices have unexcited gone up and back down and this trend repeated. Now we could be at the start of one now judging by some of the posts I am looking at on other threads about how prices are going through the roof but we will only know if its boom and bust after the fact.

PropQueries · 11-03-2021 11:54AM

johnnyskeleton wrote: »

Those who bought based on rising prices and the corporation tax scheme have to wait 7 years from when they bought. I would anticipate that some of these investments will start to cash out, but most likely they will try to sell their investments en bloc to institutional investors e.g. pension funds

The Government actually spotted that rule's impact on the supply of property entering the market a few years ago and changed the rules. The Finance Act 2017 introduced a change to the 7 year rule for investors who purchased between 2012 and 2014 and now allows for an exit after 4 years i.e. they have all being able to sell and avail of this relief for the past couple of years.

Kind of explains (at least partly) why property prices started falling in Dublin from 2018 onwards?

Villa05 · 11-03-2021 12:17PM

fliball123 wrote:

Now we could be at the start of one now judging by some of the posts I am looking at on other threads about how prices are going through the roof but we will only know if its boom and bust after the fact.

The number of FTB's in 2019 was just over 6k. The number of people that sit the leaving cert each year is just over 60k,
let's assume this 60k is demand each year.
Let's assume that this 60k couple up to become a FTB

This means that only the top 20% can afford to provide their own housing needs each year and that's with up to a 10% grant from the taxpayer

Now let's assume that we have net inward migration of 15k each year (most recent figures show 30k), that brings down that 20% figure that can afford their own home substantially.

Rents can be anything up to double the cost of a mortgage. Over 30 % and rising substantially of private rents are subsidised by the state. Add in corporation lets and the crazy prices government are paying for new property from the private sector.
The state has the most debt per head of population in the EU (which includes Greece and Italy).

Basic maths tells us all this is unsustainable together with all the other challenges that face the state such as pensions, healthcare, education

We are very much in an unsustainable asset price bubble. We can implement policy that cools it or blows it up further. Given that almost all interventions in the housing market have been on the demand side, clearly Government have chosen tho continue blowing it up.

This will come at great cost for people whose only wish is to have a house as their home

fliball123 · 11-03-2021 12:24PM

Villa05 wrote: »

The number of FTB's in 2019 was just over 6k. The number of people that sit the leaving cert each year is just over 60k,
let's assume this 60k is demand each year.
Let's assume that this 60k couple up to become a FTB

This means that only the top 20% can afford to provide their own housing needs each year and that's with up to a 10% grant from the taxpayer

Now let's assume that we have net inward migration of 15k each year (most recent figures show 30k), that brings down that 20% figure that can afford their own home substantially.

Rents can be anything up to double the cost of a mortgage. Over 30 % and rising substantially of private rents are subsidised by the state. Add in corporation lets and the crazy prices government are paying for new property from the private sector.
The state has the most debt per head of population in the EU (which includes Greece and Italy).

Basic maths tells us all this is unsustainable together with all the other challenges that face the state such as pensions, healthcare, education

We are very much in an unsustainable asset price bubble. We can implement policy that cools it or blows it up further. Given that almost all interventions in the housing market have been on the demand side, clearly Government have chosen tho continue blowing it up.

This will come at great cost for people whose only wish is to have a house as their home

Well it will all depend on how supply goes as well as WFH if both of these go up in significant numbers then a cuople on the median wage will well be able to afford the average house in Ireland. Its all ifs and buts.

What if props prediction comes through and all the rooms over the shops and all of the empty places come on stream. There are way to many unknowns currently to predict anything. At present the current prices IMO will continue to rise until this years budget that will be where we see where the governments mindset is.

But we were not in a boom and bust cycle up until last year as the historical prices since 2017 reflect this in how they trended.

Hubertj · 11-03-2021 12:48PM

Villa05 wrote: »

The number of FTB's in 2019 was just over 6k. The number of people that sit the leaving cert each year is just over 60k,
let's assume this 60k is demand each year.
Let's assume that this 60k couple up to become a FTB

This means that only the top 20% can afford to provide their own housing needs each year and that's with up to a 10% grant from the taxpayer

Now let's assume that we have net inward migration of 15k each year (most recent figures show 30k), that brings down that 20% figure that can afford their own home substantially.

Rents can be anything up to double the cost of a mortgage. Over 30 % and rising substantially of private rents are subsidised by the state. Add in corporation lets and the crazy prices government are paying for new property from the private sector.
The state has the most debt per head of population in the EU (which includes Greece and Italy).

Basic maths tells us all this is unsustainable together with all the other challenges that face the state such as pensions, healthcare, education

We are very much in an unsustainable asset price bubble. We can implement policy that cools it or blows it up further. Given that almost all interventions in the housing market have been on the demand side, clearly Government have chosen tho continue blowing it up.

This will come at great cost for people whose only wish is to have a house as their home

What other costs involved in construction besides land prices need to be addressed in order to help with affordability?

JimmyVik · 11-03-2021 01:09PM

Hubertj wrote: »

What other costs involved in construction besides land prices need to be addressed in order to help with affordability?

The list is endless

johnnyskeleton · 11-03-2021 01:15PM

PropQueries wrote: »

The Government actually spotted that rule's impact on the supply of property entering the market a few years ago and changed the rules. The Finance Act 2017 introduced a change to the 7 year rule for investors who purchased between 2012 and 2014 and now allows for an exit after 4 years i.e. they have all being able to sell and avail of this relief for the past couple of years.

My point more generally is that there are a variety of different reasons for funds to decide whether to sell or hold on to Irish property. But more specifically, on those funds, the point is that the business model was to buy and hold for 7 years, and then decide whether to sell or not. While some probably decided to sell, others decided to hold on. But their dynamic is very different to the pension fund who are looking at a 20, 30 or 40 year etc investment and are less prone to making decisions based on the immediate market forces.

Kind of explains (at least partly) why property prices started falling in Dublin from 2018 onwards?

Well Dublin peak seems to be October, 2018, and the scheme was introduced in December, 2011, so yeah, a lot of those funds who had a 7 year cycle in mind would have sold during this period.

I'm not sure that this was the reason why prices starting falling. Prices seemed to have hit a ceiling and didn't drop dramatically. The drops since then have been modest, with an equally modest increase at the end of last year. All points to property being overvalued and stagnating or dropping, rather than a catastrophic crash which would be caused by funds dumping their property. Other funds have been buying more property during that period, so it isn't a case of a dramatic net reduction in investment properties.

Also, doesn't the quoted stated that you think they have been disposing of them quietly since 2018 undermine your main point that you think a big crash is on the way due to them suddenly all exiting at once? How can they all suddenly exit if they are already exiting?

2021 Irish Property Market chat - *mod warnings post 1*

Comments

2021 Irish Property Market chat - mod warnings post 1