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

You obviously don't remember all the 2010-2014 RTE specials about dual income, 40-something couples stuck in tiny two beds off O'Connell Street then? They moved in during boom times, as a "first step" on the ladder...a recession and three kids later left them squashed, miles from family amenities and in negative equity up to their eyes.

Not a risk people are willing to take anymore. We've seen in the last couple of weeks how fast things can ruin the best laid plans.

The market is completely dysfunctional.

Inflation will be 9-10% come July August although not Hyper Venezuela inflation it is still going to be extremely high and most unions will look for pay rises especially public sector. The food price already high will be even higher come next winter as the fertilizer price will get passed on. Talk to any farmer (I am one), the food price Inflation is really only being passed on my the processing plants (energy, transport and packaging plastic costs) not by the farmer for his raw input costs. This will come when we are eating 2022 crop and produce. Couple this with a food shortage and you bet ur left your left one there will be pay increases and that nasty wage price spiral starts. Yes you are correct in saying there will be a recession during to consumer spending qnd sentiment being down (KBC report out last week said it has being declining in Ireland since June 2021). This may be the only way to reduce demand and cool off inflation. Basically I really think the ECB need to cause a recession in order to control inflation if they don't they will not get it down especially if a wage price spiral starts.

Property prices are marginally above building costs. There almost zero leveraged speculation going on. Downside risknis minimal. On a 300k 2bed you “make up” 100k in 4y of rent savings. So even if it drops 33% you’re still flat.

I think that is a very good syinopsis of what most probably going to happen. As for the horseboxes though, I'm a sheep man so no good to me. I do wonder though, printing 80% of Europe's GDP in 2021 surely it has to have had a negative effect on inflation I know most of it went in to inflating asset prices and that's why they so high at the minute. What's your thoughts?

QE or printing money as everyone likes to call it doesn't cause inflation in the CPI the ECB and USA have been doing it for 10 years and the only inflation that it has generated is due to exchange rate differences and from people borrowing more due to lower rates but lending has increased significantly. The only time you get inflation from QE is when it is accompanied by fiscal spending by the government but the fiscal spending was needed to pick up the drop in GDP from the private sector....

The increase in asset prices is because all the money that would normally go into Bonds stopped flowing in because of the low rates and instead feed into every other asset class pushing prices higher.

The biggest risk that I see out there at the moment is China because there economy is already slowing down and they have already had to cut rates to stop them from going into recession.... with the high price of oil they will see a drop in exports and it could very easily push them into recession before anyone else... And a recession there will really scare the global markets.

heard of the 1000 euro dose for 2 nites .. alot of ppl already talking about it vs a week in spain 🇪🇸

The loan to value for residential property from what I read recently sits at around 60% on average for institutionals. That's not insignificant and events like valuation declines of X% would trigger default and immediate repayment on a lot of facilities so there is a bit of a scam going on to keep institutionals portfolios high in order to avoid defaulting on the loans used to buy the properties in the residential portfolios, and I personally believe the government is aware of what might happen if valuations drop so tries to implement policies to favour institutionals ("investor friendly" is probably how they describe them). If there was a default and immediate repayment was demanded then we could see fire sales fairly quickly.

What in gods name are you trying to say ?

The LTV of a residential loan book does not include institutions.

Any individual owning more than 3 residential properties or a company etc is classified as commercial real Estate (CRE) and not included in the LTV of mortgage books.

Any CRE lending will have clauses in the lending agreement whereby if the value of the collateral (I.e the property falls below x ) the full loan must be repaid or more collateral provided. This is standard in all lending even in the repo market where a margin call be made if the value of the collateral drops.

calling this a conspiracy and blaming government is as wacky as trump supporters still thinking he is president and storming white house.

All that will happen if the value of properties drop below the cost of building is that nothing will be be built as no-one will build at a loss and as a result the supply problem gets worse

LTV is irrelevant once repayments are being made. Despite what you think their is no grand conspiracy going on.

The treatment for institutionals investors is to increase rental stock. By using their cash their is no risk to the banking system for defaults.

Developers can't get traditional funding from the banks at a reasonable interest rate which is why they are building and selling to institutional investors.

What evidence do you have that there will be fire sales?

The State guaranteeing rental income at 85% of current market levels (which are way beyond what should be deemed "affordable") to the institutionals puts a floor on rents and prevents the portfolios correcting more than 15%. This is happening is it not, long term State sponsored leases at 85% of market value? Not a conspiracy and you can bet who influenced this policy.

Quite simply, the way policy is going is for the State to support the entire rental market as it keeps pushing rents higher and thereby creating more demand for social housing. Demand destruction, as used for oil/gas is definitely starting to take hold in our property market; the higher costs go, the less demand there will be (in this respect I think the arse has already fallen out of the market and that is why the State has stepped in). Slowly this has been happening and then all of a sudden demand will have changed for property in Ireland and we'll be seeing the headless chickens scrambling for explanations, solutions, people to blame etc.

Only thing I would add to that is the front-loading of new rents. Some asking prices I have seen look like they have priced in a decade of inflation.

Because current rent increaes only are capped. Any new rentals coming on now, especially with refugees arriving are going to be the properties that the REITs have leased. You will get very few people leaving lproperties now ehere the rent is capped. All things that could have been seen from 30 years ago in the US with rent control. There are even movis about it where people try to murder the tenants in a rent controlled apartment to get it :)

I'd imagine that if reits exploit the refugee crisis, Ukraine won't be the only country in Europe experiencing war