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

The poster was responding to me. He said that all government spending was "left wing". I asked him whether he considered government spending on military to be left wing. I could have easily asked about government spending on prison facilities etc.

He did not answer the question. He just said he didn't see a problem with it. So we'll have to assume he doesn't see all government spending as left wing after all

Low interest loan is not a subsidy, its a mechanism to bypass extortionate rates currently available. The builder gets an efficient, manageable loan, the State gets 2% profit and increased supply.

The greatest subsidy anyone can get is almost tax free status. Surely investment funds should be able stand on there own 2 feet without leeching off the taxoayer

The example I gave was from the finance house quoted cost of finance on their website for funding a project that was presold to the state

If we have a housing crisis, one would expect a government to remove any barriers that may block those that can build from doing so

If cost of Finance is a barrier, reduce it, these small builders were building houses in this country long before an investment fund was heard of. You only need to finance maybe the first 10, the proceeds from them finance the next phase and so on

Overly complex, expensive and ineffective regulation compliance is a massive barrier for smaller operators whereas economies of scale make it viable for larger ones giving them a competitive advantage

Every other company pays tax on there profits and shareholders pay tax on there dividends, that's a BS argument that has been done to death on this thread

For tech that ship has already sailed. Back in 2021 my then-company wanted people back in the Dublin office, so they promptly lost half their tech teams. Canary Wharf is now more affordable to live in than Dublin 1.

One might ask why we can bring in competition on groceries that bring better value and choice for the consumer and yet, do the complete opposite on housing.

There economies of scale are derived from government policy on ineffective, unnecessary costly compliance.

Investment funds focus on high demand areas. There competitive advantage deter smaller builders, leaving our regions without any supply line

Everything was done for the funds to thrive, while our own landlords and small developers have pretty much exited the market as they can't compete with tax advantages enjoyed by the funds

No asset class benefits more from tax payer spending. Allowing funds tax free status has gifted them asset/income appreciation at the cost to the Irish taxpayer with much of those revenues leaving the country. The benefit to the taxpayer is the most expensive social housing in the world and record high rents

Do you not understand the difference between funding (or buying) a development, and actually constructing it?????????

Your post is nonsensical. Now you are bringing in landlords and "small developers" when the previous posts have been about "builders" getting access to subsidised loans. Is it actually builders that you want to get these subsidised loans, or is it speculators and "developers" (i.e. middle-men who don't do the work and who will just want a cut for having subsidised loans flow through them for your development that is already contracted in your example to be bought by the state after the actual workers lay the blocks etc)

What are these projects that the "small builder" is getting pushed out by the investment funds of because of this 7% rate? Is it the one-off bungalow in Leitrim that all the investment funds are mad to get, or maybe the 200 apartment block in Dublin that the "small builder" wants to finance?

You still haven't answered the simple questions I asked. Can you tell me what rate of tax on an investment fund would allow the small builder to afford a 7% loan. And then what rate would allow the builder to afford a 10% loan?

BTW, the reason there is indeed better competition in groceries is that the State doesn't support uneconomical actors like the small independent corner shops. That is the whole point. They can either survive on their own or they are replaced.

Not everyone is entitled to have everything handed to them easy. People have to take responsibility. It is the real world. In business you make decisions and you live by them. You don't bull into things and then whinge for a bailout or subsidy if you make a mess. It may have been your experience that things were handed to you, or if they went wrong, that someone bailed you out, but that is not how things work in general. So you can't expect that. There are plenty of people managing their businesses and able to cope. It would be better to give the efficient ones something rather than the amateur-hour chancers who can't manage. If some mickey-mouse operation isn't able to run itself, then let the workers go and work for a better run operation. Else all we have is Healy-Rae-king-of-the-village-cute-hoor shite and have everyone else subsidising them.

Maybe some of your builder buddies who are paying the lad sweeping the site 60k+ a year could take a look at how they are running their businesses before asking for subsidies (that is what you said wasn't it, for a fella to commute to work on a building site he needs 800 a week more than he would get locally. So 20k minimum wage + your 40k gets him up to 60k. Real world as you say. Or waffle as people with common sense would say.).

The solution to your worry about vacant sites is a properly enforced vacant site levy. No more being held to ransom by fellas just because they have a few connections but don't have the ability to do what they are supposed to. We've had interest rates as low as they can realistically be for years. If lads weren't able to get stuff done in those times, then the rates are not the problem. Pandering to inefficient and incompetents is just facilitating them to stay sitting there in everyone else's way.

How high could rates go?

That is the question.

With two more half percentage point increases in prospect, a base rate of 3.5% looks likely by the early summer.

very difficult for would be house buyers to budget when rates keep going up .. house price affordability is dropping all the time

The funds are irrelevant. They are not competing with your "small builder".

When you talk about "builder" you appear to mean "small developer". To me, a builder is the person I get to build my house. I have my site, I get the planning permission, then I get a builder in (depending on how far down the road I want to go in terms of direct labour). I give him money in stages. Or I buy a site and get permission to build a retail outlet on it and I get a builder in to build it for me. . The builder can also be a "developer" if he wants, but he doesn't have to be.

Breaking it down to the most simplistic argument, there are three numbers.

A: The price paid for the site

B: The cost to develop the property

C: The price obtained when selling.

Profit to the "developer" is C - (A+B).

Now if we have a system whereby if C decreases, or if B goes up, that we bail out the person so that they can always still make a profit, then the result of that is that they don't have to care about what they pay in "A". But "A" is where they have control. If they are always going to be bailed out, then all they need to do is keep outbidding each other at that stage.

The simple fact is small builders have completely stoped building houses/apartments in the country towns .It is far cheaper for buyers to buy s/h house then a new build so what reason would builders start building houses to lose money.The stock of these 2nd houses seem to be increasing in value still as supply is dwindling for a large part these were excess houses from the celtic tiger era.I predicted last december for prices not to drop because of lack of supply and we could see 5-10 % rise and i put my money where my mouth is by buying an investment apartment before christmas .

@Donald Trump The investment funds are very much relevant as they are not only building shared ownership, miniature flats and overpriced rentals for dissappearing IT workers there also building office blocks and hotels

In doing so they are employing small building operations that may otherwise be building small housing development's in there localities. Now we are facing into a potential recession with an oversupply of office space, hotels as the most expensive social housing, apartments that nobody really want, nevermind afford. Workers are being moved from the office to homes they can't afford

The incentives and tax breaks given to investment funds has completely distorted the market and resulted in the wrong type of supply. Does this sound familiar from the "Celtic Tiger"

I'm from Limerick most of our building workers are in Cork and Dublin, hence the rental situation in Limerick

small Builders(developers) are like corner shops they are unable to compete against the bigger shops that can benefit from economies of scale.

you need to remember that all the big developers that went bust in ‘08 started as small developers but were able to grow as you had dedicated teams in banks competing with each other to lend them as much money as they could and we all know how that ended.

Since 08 banks don’t finance developers directly because of the cost of capital in doing so (this is global and not just Ireland) and instead the funding comes from investment firms whereby investors put money into the fund and then the bank lends to the fund but has limited risk due to the structure. Small builders(developers) don’t normally have the connections to access this finance and even if they did the investment funds wouldn’t be really interested as it is small fish.

On top of that most small builders don’t want the risk of becoming a small developer where they could end up loosing everything if the project went south. Most are happy instead to be hired by a bigger developer and do the work without the risk.

A small builder could easily buy a second hand house and redevelop it to a good standard and BER rating and sell it on but they don’t because there is not enough profit in it for the risk that they would need to take. Even if you take the cost of finance out of the equation they won’t take on the risk as they will be waiting at least a year to be paid and the attraction of being paid monthly or regularly without risk is more attractive to them.

That was the point I was making. We don't subsidize corner shops, so why would we subsidize small developers. Subsidizing your corner shop isn't going to make your groceries cheaper. It might do the opposite if you do it enough so that the bigger shops lose some of their economies of scale.

In my area, you will be waiting a good while to get a builder to come and build a house for you. They are not sitting at home twiddling their thumbs. There is plenty of work for them. I'm talking about self-builds where the owner will be paying in stages.

And yes, regarding the investment funds, I was also trying to make that point. They are only finance. They are not competing with the "small builder".

Is the process of learning, throwing the baby out with the bathwater? The process I outlined was done for decades prior to the celtic tiger without issue

Is it necessary to lend to every new development? Does the process need a continuous overdraft or a kick-start?

What did we learn from the last crash? How to do it right? Or How to find new ways to blow up the bubble?