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

Ftb priced out of new homes

40% of new build mortgages were for self build

FTB getting older

Don't think they are priced out of new homes except maybe in Dublin or swanky parts of the main cities but they definitely can't compete with investment funds and social housing bodies buying up chunks if not all of new developments.

McWilliams is just like the rest of us he talks a good game but ultimately he is guessing he was predicting a bubble pre 2017 and was convinced it was going to burst in 2017 he got lucky with 2008 when he called it right but got it wrong with his prediction on prices post 2017. I would be careful listening to any of these lads you only have to look at his so called show where he has jazz singers and forms of entertainment like impersonators he was trying to go into mainstream as an entertainer and had moved miles away from being an economist.

yes, its important to realise, our whole financial sector has become highly predatory and parasitic, it no longer truly provides society with its needs, it no longer behaves as it was initially designed for, its truly just feeding itself now, creating money via credit creation, in order to push up the value of pre-existing assets. the financial sector was created to provide us with the finances to create what we need, it now no longer truly does this, you can clearly see that this is the case, with the severe lack of building and other financialised activities such as share buy backs etc etc, bailing the financial sectors out has ultimately failed. the measures implemented, as you mentioned, are in fact no guarantee that we are protected from future financial crisis, some in fact believe for example, that if bank bail ins are enacted in future crisis, that depositors will in fact be on the hook, i.e. some deposits maybe bailed into the system, in order to protect the banks, we ve no clue if this is the case, we ll only find out if and when this occurs.

there was a major push to reenact the glass steagall act post 08, but this was heavily lobbed against by the financial sector, you d have to wonder why! the protective measures implemented, clearly didnt go far enough, theres clearly all sorts of highly questionable activities still occurring within the sector

again, id pay far more attention to the opinion and experiences of commentators such as black over such matters, nothing has truly changed within the global financial sectors, including our own, and the fact our economy is now perfectly primed for another credit fueled building boom, so watch this space!

i agree that in the USA and Europe reform didn’t go far enough and they should have separated retail banks from investment banks but in the UK they did this with the ring fencing legislation (which is the equivalent of glass steal all act). If the USA and Europe did implement the equivalent it would have been a belt and braces approach to banking stability. But even without this the regulation that they have implemented has made the banks 1000 times more safer and as I said before if the exact same scenario as '08 played out the banks would not need to be bailed out by the governments.

I disagree with your point that depositors will be on the hook if a bank collapsed because every systematic bank is required under the new legislation to have a resolution plan in the event of a collapse to prove that retail depositors would not be impacted in the winding up of the bank. In order to ensure that this banks have sufficient funds to repay retail depositors they are required to issue bail in bonds that convert to equity in the event of the bank entering resolution thereby ensuring that there is enough cash to repay retail depositors. All this has been implemented sine '08 so to say that 'virtual noting' has been done is false.

I would also disagree with you on the fact that our economy is now perfectly primed for another credit fueled building boom because believe it or not the banks can't find enough customers that they are allowed lend to due to regulation implemented since '08. The banks are awash with liquidity and would love to lend as this excess liquidity is a real drag on their profits.

Most of the money creation that has taken part in the past 10 years has been off the back of QE and it has predominately stayed within the finance sector because their was no fiscal spending to accompany it. By creating the money and leaving it in the financial sector of course it is going to lead to asset inflation and not generate inflation in the wider economy because the cash never gets out there.

yes private debt has in fact been falling in ireland over the last few years, for various different reasons, but again, ireland is now a far more open economy than in the past, we are now far more vulnerable to external shocks, as stiglitz would say, 'markets dont exist in a vacuum', and the same goes for the irish economy.

yes money is also of course created in the public domain, and a significant amount of it has indeed been so over the last few years, qe etc, but again, this has just moved towards inflating existing asset markets, including the value existing properties, it has become far more profitable to do so, when the reality is, we actually need to create new assets with this newly created money, but thats not currently happening, in sufficient quantities, i.e. the whole fire sectors have become effectively defunct, no longer doing what they were originally designed for, the whole model of 'maximizing share holder value' is failing, in fact, i suspect its actually starting to collapse.

the only tool central banks truly have is rate adjustment, but this too has very limited abilities in fulfilling it objectives, i.e. controlling inflation etc, particularly when you have other major sectors such as the fire sectors playing critical roles in helping cause the inflation in the first place. the availability of credit plays a far bigger role in regards inflation, particularly in relation to assets such as property, as we experienced in the previous boom, and the fact, not a whole lot has truly changed in these sectors since the previous boom bust cycle, it wouldnt give you much confidence in the whole process, we simply have no clue whats going to happen next, but history doesnt show a pretty picture....

the pressure to get building now is immense, there will be incredible pressure placed upon the central bank and other entities in society to help do so, so....

again, we ve no real clue whats going to happen next, but if there was a major crash in asset markets, nobody knows it this will occur, including myself, you can be damn sure average mary and joe will be negatively impacted, some majorly so, as was the case in 08. there is a huge disconnect between asset markets and the world of the average punter, but history shows, including recent history, when they go bust, the average punter truly takes the hit!

And yet he still got it terribly wrong predicting a crash in 2017 like I say he is guessing just like the rest of us. His pre-2017 opinion if it had come true would mean we would be back at 2010 prices.

i cant remember him saying such a thing, hes well aware, nobody can accurately predict such a thing

...of course it doesnt, as its not trying to buy! but every man and his dog can see that wage inflation has completely decoupled from property price inflation, over the last couple of decades

Would those types of corrections not trigger a recession? I would have thought big companies would start letting staff go, consumers would get panicky and stop spending, pensions would be hit which would also impact spending etc etc?

Every man and his dog can also see that interest rates have fallen over the last couple of decades also. Affordability is not just about the price, it’s about the mortgage repayments. I don’t think mortgage repayments on current prices is vastly different than the past when interest rates were substantially higher, when compared with wages at the time.

I would agree that people who purchased between 2010 and 2016 or so are definitely insulated. I don't agree in terms of the rental element simply because there is not enough supply. Rental prices won't drop by any significant amount because of there are multiple people looking to rent and those with most resources will automatically get to rent.

The reduction in commercial rent in Grafton St (or any other) over the last 18 months is as a result of Covid. Firms who own these properties are paying tax on these rents, these taxes are funding our social welfare supports (amongst other tax revenues). We will only know if the average "joe" will be impacted when the economy actually opens up. We are not in normal times.

Part of any economies success (and by extension the people in it) is impacted on confidence in economic outlook. if firms don't have confidence they are less likely to invest in expanding their business, this leads to reduced demand for labour.

On the rental element; this is where our property bubble has been inflated - the amount of totally unaffordable new properties on Daft the last few years just sitting vacant is not something which can be classed as sustainable. These investors are holding 1 bed/2bed apartments at €2k/€2.5+ p/m empty for months and even years (Kennedy Wilson). There is a dubious acceptance that this is somehow tolerable as these are deep pocket investors and "things will recover once covid subsides" but this thinking that there is a "recovery" from covid seems to look back to pre-covid rather than forward to post-covid. What this translates to, for me, is that these newly renovated/developed apartments blocks sitting empty are effectively the empty bags or the road runners having run off the cliff, together with commercial properties. Your eyes don't lie and it is like seeing into the future observing all the empty buildings. The pandemic is an accelerator of change but for definite to think of "going back" to pre-pandemic activity in certain sectors, like commercial property or high end rentals, is to be trying to catch a falling knife.

I see in the news today, once again, covid is blamed for stock market anxieties and underperformance. This is like when Brexit was blamed for the housing market slowdown in 2019 in Ireland. There is a blissful ignorance to any argument which seeks to point out that actually maybe things aren't all rosy purely because they may just be overvalued. We could be walking eyes wide open into a significant correction and this view is bolstered by what I am reading in property market industry pieces and in general stock market commentaries; which seems to be not just downplaying but totally ignoring any sort of risk related to overvaluation. There is practically an expectation that things go up a little or a lot YoY, but no entertaining the possibility of things may be going down consistently for a few years. I don't mean to by hyperbolic but the whole investing world has gone mad and seems to me to be blinded by greed and selfishness - Wanderer78 describes the FIRE sectors as eating themselves at this point; for sure it does have a feeling given property and markets have uncoupled from the real economy where they should have at least some correlation - but they don't.

In Germany we have a new coalition with the CDU taking a backseat (likely a long-term backseat as their support in younger generations is waning every year and shows no sign of recovering) and this new coalition is planning big reforms which tie in with younger people's (i.e. the majority) wishes; legalising cannibas, more aggressive climate goals and reforming the housing market by targeting 400,000 new builds per year (100,000 of which will be social housing) as well as reducing the rental increase cap from 15% over 3 years to 11% over 3 years. They are targeting less fluctuations in housing and living costs YoY for people. This marks a huge change from pro-lobbyist and pro-business, traditional CDU. We will see similarly aggressive goals from our SF & Lefty Friends coalition in a few years - which, surprising to many, will actually have popular support among the majority of people. The change has already been happening but property indicators of course typically lag politics and the general economy so we have not seen the change yet but the indicators are there.

If there was no demand for the new build apartments (incl. student accommodation and short-term accommodation like hotels) to rent in the last 3 years, there will never be demand for them without the rents dropping significantly. I think it is a scam of some sort that they are being held empty despite being very expensive to build and there seems to be something sustaining the investors which enables them to make zero return for a long time on these investments. Maybe it is the "book value" accounting voodoo that means they can claim to hold an asset worth a certain amount based on projected full occupancy at high rents, which causes them to persist with brand new ghost buildings? Rent collection above 90% and occupancy at seemingly high levels is what is published in the investor reports but what does not seem so clear is whether the number of apartments being marked as "rentable" is being kept artificially lower than the number of apartments that could in fact be rented. As I said, your eyes don't lie and a walk around these developments in the evenings shows this. My point is that the "shock" has happened but the typical indicators used to assess the property market are lagging, as is normal as property is illiquid and slow moving to transact in.

We have had the drop in inward migration and the increase in cost of living is already eating into disposable income and is projected to get worse (the ECB once again fumbling around its inflation forecast and needing to revise it again as it is not fully grasping the situation - I mean, it shouldn't need to constantly change its short-term projections if it had a grasp on the situation https://www.ft.com/content/d789f624-5097-4809-a0e0-2541056b7e63 ).

The Central Bank's projections for price rises to keep occurring for home buyers seems likely for the next few months at least; I mean, supply is being restricted as best as possible with covid uncertainties and delays in breaking ground on projects combined with the low interest rate/hyper QE environment which is still going hell for leather, so of course it's easy to see the link.