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

100% it is the government and the capital "S" State (ie central banks) that have inflated the bubble and this is why Johnny Taxpayer will be the mug paying for the fallout again. This time how we will pay is that we won't see any return for the corporate tax boon we experienced the last few years. Instead of investing in the economy and improving life in this country, the exchequer windfall went into the property market and on public expenditure in the form of welfare supports and increased salaries in the public and civil sectors.

I read today that Iarnroid Eireann won't have a catering service on the train for the foreseeable future, for no good reason. We have therefore no train service with a catering car in the country, that is just embarrassing. Why this is mentioned is that it highlights the lack of investment in infrastructure, housing and education as well as SMEs has been a catastrophic failure of FF and FG and there won't be any accountability.

Every new BTR apartment block coming on the market seems to be geared towards the high paid worker. There are zero rentals newly built targeting more moderate incomes. This, to me, is just so utterly out of control and unsustainable that I think a fairly hefty correction is on the cards. I have flip flopped in my head around how much of a correction could happen but in the rental market for sure I could see something material in the level of correction possible.

You will find lower transaction data being blamed on a lack of supply and that more supply will result in higher transaction activity. That's when you will know the game is up!

We have lived in a low rates, easy money world for so long that people dont understand the ramifications of this changing.

My point is that we will be waiting for Godot when the lower transaction activity comes through in data if you were waiting for more supply to cause a pick up in transaction activity, because the reason for the lower transaction activity will be the affordability crisis moreso and less to do with supply.

Soft landing talk in the US. This time its different!

And people somehow think the likes of Dell or Northern Trust or some other MNC will hire more employees in the region? 5 rentals in Limerick. 5 rentals in Ireland's third largest city. 5 rentals.

To say that our whole economy is at a tipping point is not hyperbolic in this context. It is truly staggering that the housing crisis is going to sink the economy and yet here we are. This has been a gradual but steady build up and I don't think there is any orderly unwinding of the problem. It is just going to be a crash.

You say salaries are the biggest issue in tech right now but isnt that because of the nature of housing in Ireland as well?

If a MNC wants to bring over a Senior Engineer, they know that they will have to be paying big money for rent, so will want big wages to compensate. I do know from experience the recruiters are fully aware of the housing issue and have asked candidates before they made offers about their rental/housing situation in Ireland.

To date it has not been but right now supply has never been this low. 5 rentals in Limerick is absolutely dire straits. I assume we would need to go back to pre-covid times when it comes to your experience with hiring decisions as WFH would have been the case the last two years and housing would not have been that big of a factor?

It won't be long until some news emerges from a big company. I just do not see any probable outcome that doesn't involve an Irish economic shock, in particular with respect to our FDI model. 5 rentals in Limerick, how do we reconcile this with expectations that MNCs in the locality continue to hire?

I've also made the point last summer that people should go "low for very long" with their mortgage interest rates and at the end of last year that the ECB would firstly change its narrative around inflation and then ultimately change its position around rate rises, resulting in an embarrassing tail-between-the-legs introduction of interest rate rises, despite their insistence that inflation would ease into next year and rate rises wouldn't be necessary this year. I also posted last year commenting that it feels like we were at the stage of the cycle where human psychology is the reason for a change from bullish to bearish; from euphoria and FOMO the last few years, there would then be a sort of doubt or uncertainty take hold, without any real trigger event, which would then ignite a general sentiment in the market leading to an expectation that things would start to go sour which ultimately does lead to things going sour. We are at the point where the tone and mood is starting to shift to uncertainty, though it is tough to point to a trigger event, instead we can flag multiple incidents that maybe have fed into this uncertain narrative.

I do not see any murmurings yet of an MNC indicating it may have to reconsider Irish hires as a result of the uncertain outlook (which is what they will say but in reality housing is the big issue), but there is a precedent already in the public discourse on the housing crisis, here:

"But that wasn't a housing crisis issue", you may say. I'm not so sure;

My two biggest unanswered questions right now are (1) with 5 rentals in Limerick, 350 in Dublin etc. how will companies keep expanding in Ireland? (2) how is it in any way sustainable for any new supply of BTR (which is essentially the only supply coming on stream) to be geared towards the upper end of the market with no (as far as I can tell) more modest income targeting rentals?

We are being informally told that if we see someone for a position we are looking to hire in that we can look at basing them on the continent. Ideally they would like them here but we can be 'flexible'.

the income tax situation here is almost a bigger if not massive disincentive for anyone skilled to come here from abroad .. compared to france/uk/usa our higher rate of tax starting in the mid 30k is an absolute joke .. the mad rents here just top it all off ..

with remote working why does anyone with the requisite skill sets need to even be based here at all...

and if we open that can of worms the whole house of cards built on quick sand could come crashing down..

Im not speculating on the likelihood of crashes (my own view of what's "likely" is flat lining property prices with huge general price inflation in the economy peaking at 10% this year [Ukraine conflict isn't in the food prices yet] with ECB base rates of 0.5% to 1.0% by year end with more to come in '23) but the actions of the biggest player in the market (the state) will determine what happens to residential prices in my opinion.

Will they continue to keep the HAP and Homeless HAP chequebook open - probably. The radio had the story of a family in Dublin 15 entitled to 1950 on homeless HAP of 1950 per month or just shy of 24k a year. That's a big chunk of a wage for a higher rate tax payer (48k earned at the higher rate to get 24k net) so that's one juicy subsidy from the state. As long as the state is handing out such amounts, why would REITs/funds/landlords drop the rent? The state will be able to muddle through for a few years before this gets wholly unsustainable. Hell, they may get to a next election and leave the next crowd with an all merciful mess to fix.

Will the state continue to keep buying turnkey properties at high prices? - yes. 5 billion "housing for all" will see to that. They are even showing they are willing to throw half a billion to developers to build apartments but put it through the heritage budget and call it something fluffy "as gaeilge" so people mightn't notice

If a developer gets into a bit of hassle and starts to struggle to sell to private buyers (horses get spooked, interest rates, general uncertainty, belief a crash is coming), do you think the state will stay on the sidelines and say "Weren't you a silly lad paying all that money for land and building properties"? In the short term some public servant will be authorised to purchase more to house a few more people on the list so targets can be exceeded and be seen to be delivering "real houses for real people" (I don't know where the fake people are, I wonder who'll think of them. This again will support a floor on house prices.

Exit strategy for a REIT or opportunistic fund is the unknown in my mind - will they be able to sell the units individually to buyers (will planning allow and does design of block allow) or will they have to sell in bulk to some other fund? Would they even need to sell at all? I wonder who would be one of the first people for them to call if they did have to sell in a hurry? Again, they may sell direct to the state or better yet, agree a long term lease with a council, state guaranteed on upward only CPI and sell to a pension fund who is happy to take Irish government counterparty risk with a nice yield uplift versus a sovereign bond and run for the hills.

The people that make the decisions to purchase and lease on behalf of the state have zero incentive to drive a hard bargain - they'll pay what's asked. Why would they put a commercial hat on and say "we're the only show in town, X million, take it or leave it". People who think like that are on the other side of the trade.