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

schmittel wrote: »

As for the ESRI - take a look at their October 24th 2006 report on housing:

Mad stuff. The same guys who got it so wrong back then continued to weigh in and influence policy decisions all throughout the recession which followed - many of which are widely discredited today - and still continue to weigh in and influence policy to this day.

Jmc25 wrote: »

Mad stuff. The same guys who got it so wrong back then continued to weigh in and influence policy decisions all throughout the recession which followed - many of which are widely discredited today - and still continue to weigh in and influence policy to this day.

mcsean2163 wrote: »

Truly astonishing to see SCSI make such a recommendation. It may not age well...

Is it actually the same people? I am sure ESRI change staff.

But overall I agree, most text book economists are charlatans. Especially those who constantly forecasts and predict.

javaboy wrote: »

These “bubbles” are not comparable. For the most part, builders have no problem selling what they build even at the current prices. When prices rise, I don’t expect them to struggle to sell them either.

There are loads of mortgage approved buyers out there clamouring for houses. Due to the central bank lending limits and the more risk averse mid-COVID lending from banks, these buyers are unlikely to default.

So can you explain what will make this bubble pop? Because if it isn’t going to pop, then it’s not a bubble.

Rising prices alone aren’t indicative of a bubble.

The state being "the biggest player in the market" could be though

SmokyMo wrote: »

Is it actually the same people? I am sure ESRI change staff.

Ah no I would imagine most of the staff have changed. I was talking more in general terms rather than specific about the ESRI. There's definitely still plenty of people, be they columnists or think-tank types, who came out with this kind of stuff in the 00s and are still knocking around giving their expert opinions on housing and everything else now.

Normal people are buying houses, they are just 20-50 grand more expensive than they would like. Half the people I know have bought in the last year or two (we are just at that age). Many have bought in areas slightly outside of what they wanted, or bought probate sales that need work, or home down a bedroom etc. I agree that the funds make it more difficult and prices have increased well beyond what anyone would have expected but there are regular people buying, and the risk of any of these people defaulting is very very low. It's a very different market to the mid 2000s. Large scale buyouts like Mariaville are the real issue, there are plenty of buyers for those, families who will have to wait now. I'd have issues with that but capping the number they can buy in any estate should help hopefully.

Any economist claiming to know what's going to happen is a charlatan. We are in unchartered terratories completely. The central bank deciding to take a gamble of increasing capital and driving demand seems reckless. I remember just in the middle of the crash someone pointing out that noone in the ERSI even had a masters, if they'd rounded a bunch business teachers up they'd have had to have twice the number of degrees or more.

Single people are really struggling. Apartments and every small houses are attracting big money as rentals and the 3.5 makes it tough. The LA mortgages give up to 5 if you can prove your very stable and earning less that 50000.

schmittel wrote: »

Sure it's not a credit fuelled bubble with banks giving consumers 110% mortgages no questions asked, and thus is not going to pop in the same way.

But that's not a strong argument against the fact that it may be a bubble which could pop.

Whilst the factors at play might be different, the possible outcomes could be the same.

So it is different this time?

Aparthotels, student accommodation, co-living, office buildings and hotels are our 10s ghost estates in Dublin. Pretty dire outlook for Dublin city hotels for the summer season. This essentially means that they are looking at spring 2022 before they start to get some sort of decent bookings, at the earliest - another 9 months. This has massive repercussions for the businesses in the city which rely on tourism, namely pubs and restaurants, tourist attractions - here is a Failte Ireland publication on how vital foreign tourists are to jobs in Ireland and the economy https://www.failteireland.ie/FailteIreland/media/WebsiteStructure/Documents/3_Research_Insights/Key-Tourism-Facts-2018.pdf?ext=.pdf

https://www.irishtimes.com/business/transport-and-tourism/just-13-of-dublin-city-hotel-rooms-booked-for-summer-1.4596600

Internal industry figures show that Dublin city centre hotels are facing a disastrous summer, with average occupancy levels of only about 13 per cent forecast for the height of summer based on current bookings.

No pick-up is evident for when schools close. On most days in July fewer than one in 10 hotel bedrooms in the city are booked. That climbs to mid-to-late teens in percentage terms on Friday and Saturday nights.

There is a slight rise for August. Even then Dublin hotels are less than one-fifth booked most weekend nights. Average bookings are 13 per cent over the next 28 and 90 days.

schmittel wrote: »

Sure it's not a credit fuelled bubble with banks giving consumers 110% mortgages no questions asked, and thus is not going to pop in the same way.

But that's not a strong argument against the fact that it may be a bubble which could pop.

Whilst the factors at play might be different, the possible outcomes could be the same.

What do you think could cause the pop and how might it play out?

I think things are relatively stable and unlikely to pop. Strong government intervention around institutional investors, AHBs, council purchases etc. might dampen prices but I wouldn't envisage a catastrophic collapse.

Personally, I think the real issue is in the long term when people locked into the rental market reach retirement age.

javaboy wrote: »

What do you think could cause the pop and how might it play out?

I think things are relatively stable and unlikely to pop. Strong government intervention around institutional investors, AHBs, council purchases etc. might dampen prices but I wouldn't envisage a catastrophic collapse.

Personally, I think the real issue is in the long term when people locked into the rental market reach retirement age.

I fully agree with the last part, if there is a pension crisis now, it is going to be a lot worse when those who will never be able to buy start to get closer to retirement age. Maybe the State will just repurpose its 20/25 year social housing leases and use these long term renters to fill the properties? Or maybe the State builds big retirement villages out in Longford or one of those other counties that apparently exist but no one has ever been to.

Amadan Dubh wrote: »

The infamous "this time it's different" line, I love to read it!

If and when the bubble pops it will be caused as last time by something that happens in the US , last time our housing model was akin to theirs and when their market hit the rocks so did ours. This time despite efforts to outsource risk we are still tied very closely to the US model and investment and when their QE experiment comes under pressure we will feel the effects.

Marius34 wrote:

But we talk New builds versus Second hand. And there are more FTB in secondary market, than for new builds, for long while, even before REIT's increased their share.

That's hardly surprising as output of new homes has been suppressed for most of the last decade.

In the early years of the recovery, there were numerous stories on here of sales falling through as banks were bundling properties for sale to investment funds rather than proceed with sale to individuals.
This has evolved to investment funds dominating the new build market, despite the grants available to FTB s. The introduction of shared ownership of in this environment will be disastrous for affordability. It's akin to watching the fire brigade connecting their hoses to a petrol reservoir to put out the fire in your home

This is happening while multiple red flags of a bubble are flying in markets this economy are exposed to mainly US and UK

This mess is avoidable but we seem to be insistent on walking into traps that have caught us before. Madness!

schmittel wrote: »

I'm not sure if it is a bubble that will pop or not, but I have not heard many convincing arguments against it being a bubble.

All I know for sure is that are more headwinds than tailwinds facing the property market.

It could be argued that the strength of current prices is largely down to government policy. Thus either a change in policy or a change in government could be what causes the pop.

I think attempts to compare the current market with our last property bubble and bust does skew perceptions.

I think there is a huge bubble, although it's much more dominant in buy to let apartments rather than the long term family house segment. In the last bubble it was every type of property that was overvalued.

If/when this bubble pops I don't think the family home will be affected as much as the apartment market.

Amadan Dubh wrote: »

Yes, it will be linked to the US again. Just look at our recovery, it has relied on US MNCs and US institutional investors to employ people in Ireland and hoover up our distressed assets. This is why it is useful to read what happens there in order to appreciate the risks appropriate to Ireland, moreso than to monitor what is happening in other EU countries anyway. At the same time, it is totally out of the hands of those of us commenting here on Boards so is sort of like plane or bird watching, it is just a hobby interest to follow and discuss.

One thing I read in the last week was related to the institutionals being reluctant to drop rents, which we understand is linked to book values of the assets, how drops in asset values could trigger breaches of covenants in finance arrangements related to those assets, which of course could lead to forced asset sales by the lenders. The Central Bank also mentioned this in its risk report; the risk of asset fire sales and its impact on the property market. Liquidity and easy money is there until isn't.

Short story long, what happens in the US is extremely relevant to Ireland and not so much what happens in other EU countries.

Agree, QE has created a bubble in the US and my simple understanding of QE is that you print money and maintain you can back it up with output , this will work until your bluff is called or some unforeseen circumstance breaks confidence . We are getting closer to this point as we do in every cycle; this time its not different.

Villa05 wrote: »

That's hardly surprising as output of new homes has been suppressed for most of the last decade.

In the early years of the recovery, there were numerous stories on here of sales falling through as banks were bundling properties for sale to investment funds rather than proceed with sale to individuals.
This has evolved to investment funds dominating the new build market, despite the grants available to FTB s. The introduction of shared ownership of in this environment will be disastrous for affordability. It's akin to watching the fire brigade connecting their hoses to a petrol reservoir to put out the fire in your home

This is happening while multiple red flags of a bubble are flying in markets this economy are exposed to mainly US and UK

This mess is avoidable but we seem to be insistent on walking into traps that have caught us before. Madness!

And here is the problem I'm saying, there are to small number of new builds, to make a major impact, regardless of REIT's involvement.
FTB/STB are still dominating the market, and the price highly depends on them. With current low new build supply, it's quite clear, that if demands from FTB/STB goes down, prices will go down, if demands goes up, prices will go up.