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

Amadan Dubh wrote: »

It was a bubble before covid, for the same conditions that have been at play during covid, except that covid had made it much worse. The simple reason is this; what would happen if the QE tap was turned off?

Commercial property is the canary in the coal mine and just look at the property fund suspensions which occurred in 2019/2020; these had nothing to do with covid. Seems odd that there were runs on property funds if everything was on more stable ground pre-covid. Hopefully politics will kick in before the bubble can pop (ie interest rate rises and significant investment in public housebuilding programmes) but potentially a large pension fund going under is what would indicate the chains have broken and the market is crashing.

As a separate point; with the whole WFH thing becoming stabilised into something that is clearly a long term adoption for most companies, with the Daft report today, will we start to see people moving over the border to N.I. where rents are significantly cheaper than the Republic? From going on propertypal.com and searching for rentals, it's crazy how much cheaper they are over the border.

https://www.propertypal.com/16-queens-square-17-queens-square-belfast/477716/photo-12

£775 for a nice 2 bedroom, in the heart of Belfast City centre. You'd be down in Dublin City centre on public transport in 2 hours. Even if you wanted to just stay for a year or two you'd save good money doing that compared to renting down here.

turning the tap off does not sort out our over demand and under supply issue

fliball123 wrote: »

prices up 13% so much for the doomsdayers. We could be looking at another 2/3 years of price increases

My take on this thread is that the majority of people's interest lies in the purchase side of the deal, not the selling. I would be one of the very few interested from a sellers perspective.

The doom and gloom was probably just good old observer bias.

Timing belt wrote: »

I agree that supply falling short of demand and a high level of immigration around 2019 pushed prices higher but I don't know would I call it a bubble in 2019.

I know you talk about QE being removed but that is a process that will take at least 10-15 years to unwind as the central banks taper QE. They are not going to overnight start selling all the government bonds they hold and instead will rollover a smaller amount as they mature. If inflation is temporary as the central banks are predicting then we will remain in a low rate environment for some time to come and if the economies of the world don't see economic growth start you can be sure that more QE will be undertaken by the central banks. Although its unlikely at present rates could go lower in an effort to kick start the economic engine if it starts to stall.

Of course in practice QE probably won't be unwound in a meaningful way anytime soon but I am confident that QE has found its way into assets, including property, which has had a big hand in inflating them to these levels. Especially during covid the link between QE and assets has been particularly pronounced. But, like I said, my hope is that politics kicks in before the bubble can burst and political intervention in terms of managing the QE and interest rate rises combined with significant public house building programmes and other supply stimulating measures.

Hubertj wrote: »

Not sure all employers would/could allow you to work from another country, tax wouldn’t be the only consideration. Also, why would someone want to live in the basket case that is Northern Ireland? Political landscape in the republic is bad but when you compare it to the North.

If you could save €1k+ per month on your rent, then I'm sure people would consider it for 6 months/1/2 year(s). I've never actually been to the North myself.

Amadan Dubh wrote: »

Of course in practice QE probably won't be unwound in a meaningful way anytime soon but I am confident that QE has found its way into assets, including property, which has inflated them to these levels. Especially during covid the link between QE and assets has been particularly pronounced. But, like I said, my hope is that politics kicks in before the bubble can burst and political intervention in terms of managing the QE and interest rate rises combined with significant public house building programmes and other supply stimulating measures.

Yes QE has definitely increased property prices as investors case yield. But it is not just property that has been impacted... QE has lead investors to take on more risk. Just look at the non-MMF investment funds (which include property funds) who have increased their exposure to interest rate risk. If rates rise by 1% these funds will see a decrease of 5-7% in their market value. The central banks can't raise rates without causing a market crash similar to 2008 unless there is real economic growth.

Timing belt wrote: »

Yes QE has definitely increased property prices as investors case yield. But it is not just property that has been impacted... QE has lead investors to take on more risk. Just look at the non-MMF investment funds (which include property funds) who have increased their exposure to interest rate risk. If rates rise by 1% these funds will see a decrease of 5-7% in their market value. The central banks can't raise rates without causing a market crash similar to 2008 unless there is real economic growth.

Speak of the devil and he shall appear. This has been been published today in the FT, reporting on the Fed's possible outlook for QE and what is happening in the property market. Essentially, a bust in the property market should not be leading to financial stability risks.

https://www.ft.com/content/ff83ed04-3bb5-444a-9af0-1b466201ef67

US cannot afford housing market ‘boom and bust’, warns Fed official

“It’s very important for us to get back to our 2 per cent inflation target but the goal is for that to be sustainable,” Eric Rosengren, the president of the Boston Fed, told the Financial Times. “And for that to be sustainable, we can’t have a boom and bust cycle in something like real estate.

“I’m not predicting that we’ll necessarily have a bust. But I do think it’s worth paying close attention to what’s happening in the housing market,” he said.

According to data released by the National Association of Realtors last week, the median price for sales of existing homes was up 23.6 per cent year-on-year in May.


He said the roaring housing market should be a factor as the central bank considers slowing or removing some of the hefty monetary support for the economy introduced during the coronavirus pandemic.

Villa05 wrote: »

Would I be wrong in my assumption that bubbles are caused by controlling supply and/or demand and both are being controlled in the Irish/global housing markets

The last crash was primarily caused by credit growth. Credit growth is a mechanism for controlling demand.

Would love for someone on the bullish side to come out and say the current situation is sustainable because........

I feel it is not and government actions are exacerbating the extent of the crash through borrowing to make the situation worse
State subsidising every new build through various schemes. This mainly ends up as developers profit driving up land prices
Inflation linked Long term leasing locking in the taxpayer to ballooning housing costs
Accelerating SF path to power

In regards to property price.
the current situation is sustainable because of low LTI value, fairly low credits, high savings, low construction output, economy growth, etc..
BUT I would not be surprise if next year we will start to see real signs of Bubble that could pop, there are lots of conditions for Bubble to appear soon. Next year I may start to move to other side of equation, with some expectations of overheat.
And don't get me wrong, I'm well aware that Ireland has serious housing problems.

Villa05 wrote: »

Would I be wrong in my assumption that bubbles are caused by controlling supply and/or demand and both are being controlled in the Irish/global housing markets

The last crash was primarily caused by credit growth. Credit growth is a mechanism for controlling demand.

That's some twisty logic there. How was the unchecked credit growth of the last crash a mechanism for controlling demand? Surely it was the exact opposite: uncontrolled demand

Would love for someone on the bullish side to come out and say the current situation is sustainable because........

Wouldn't necessarily cast myself as bullish but I'd argue the short to medium term is sustainable because there are enough buyers (owner occupiers) who can afford the current supply at these prices and even higher.

Most people agree supply can't be ramped up overnight but if it gradually increases and/or if prices exceed what people can afford, why shouldn't price rises taper off and plateau?


EDIT: Longer term, large amounts of the population having no capacity to house themselves into retirement is definitely not sustainable.

Deleted User wrote: »

Thanks for sharing that paywall.

Same Old Hope: This Bubble Is Different

By Catherine Rampell
Sept. 13, 2009
This time is different.

Villa05 wrote: »

Nama remit was to achieve the best price for the tax payer. It was not untill Nama sold most of there loanbook that social housing achieved the best returns for investors.
Mismanagement on an epic scale

True at the time but its been common knowledge for at least 2 years we needed more social housing how many properties have been sold in that time from nama that could of been cultivated into social housing. I mean the Irish people own it.

Villa05 wrote: »

You take measures to stop a bubble forming early, we are doing everything to blow it up. Would you stick with your prediction that we won't see 2020 prices again.
The higher the rises the greater the fall

Yes, I stick with my predictions, that it's most likely we won't see 2020 prices again.
The higher the rise, the greater the fall could be possible.
But if the price will go 30% up, and than fall 20%, we still would be above 2020 levels.
The crash of over 30% is very rare, thus no much point of waiting for it.

Villa05 wrote: »

Would I be wrong in my assumption that bubbles are caused by controlling supply and/or demand and both are being controlled in the Irish/global housing markets

The last crash was primarily caused by credit growth. Credit growth is a mechanism for controlling demand.

Would love for someone on the bullish side to come out and say the current situation is sustainable because........

I feel it is not and government actions are exacerbating the extent of the crash through borrowing to make the situation worse
State subsidising every new build through various schemes. This mainly ends up as developers profit driving up land prices
Inflation linked Long term leasing locking in the taxpayer to ballooning housing costs
Accelerating SF path to power

SF can come to power but will not be able to solve the crisis in 4 years.... what is needed is for political parties to come together to resolve the issue regardless of who is in government.

Plus I think there needs to be a open debate on housing needs for the country as there are people who will never be able to buy there own houses which will lead to greater problems down the road. Its not the first housing crises in Ireland and previous crises were addressed by large scale developments the difference now is that no-one wants to see large scale developments as these contributed to social issues.

If you had more social housing then you would have less HAP which would lead to lower rents as it would increase supply of rental properties. This in turn would lead to lower valuations of property and reduce demand from Investors which would lead to more supply for purchasers.

As for a bubble... Property is to expensive for a large portion of the population but that doesn't mean we are in bubble territory. Would lower houses prices benefit everyone... Absolutely but without government intervention to cut costs of building whether it be reduced taxes or preventing land hoarding and at the same time increasing supply of social houses it won't happen.

Hard working people who are paying high taxes won't want to see social housing as they will see at as free houses and not the best use of the tax they pay as they are unlikely to benefit from it. This is why the stigma of social housing needs to change and it shouldn't just be for people on the dole. If it was available to everyone and they had the ability to purchase the house then it would be a personal choice that people are making if they choose to buy their own non-social housing. But at least people are given options and not locked out of home ownership.

Timing belt wrote: »

SF can come to power but will not be able to solve the crisis in 4 years.... what is needed is for political parties to come together to resolve the issue regardless of who is in government.

Plus I think there needs to be a open debate on housing needs for the country as there are people who will never be able to buy there own houses which will lead to greater problems down the road. Its not the first housing crises in Ireland and previous crises were addressed by large scale developments the difference now is that no-one wants to see large scale developments as these contributed to social issues.

If you had more social housing then you would have less HAP which would lead to lower rents as it would increase supply of rental properties. This in turn would lead to lower valuations of property and reduce demand from Investors which would lead to more supply for purchasers.

As for a bubble... Property is to expensive for a large portion of the population but that doesn't mean we are in bubble territory. Would lower houses prices benefit everyone... Absolutely but without government intervention to cut costs of building whether it be reduced taxes or preventing land hoarding and at the same time increasing supply of social houses it won't happen.

Hard working people who are paying high taxes won't want to see social housing as they will see at as free houses and not the best use of the tax they pay as they are unlikely to benefit from it. This is why the stigma of social housing needs to change and it shouldn't just be for people on the dole. If it was available to everyone and they had the ability to purchase the house then it would be a personal choice that people are making if they choose to buy their own non-social housing. But at least people are given options and not locked out of home ownership.

Housing provided by taxpayers should never be sold other than on the open market. Selling it to occupants at a huge discount is not on, in my view.

This idea that home ownership as a basic right is equally wrong.

KBC and Ulster Bank will exit, Provident will issue no more new doorstep loans, Paschal will offload Bank of Ireland...... a lot of little ripples