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

The banks are using the low deposits rates they are paying to subsidise mortgage rates. They are still awash with deposits and the lack of competition means they are not afraid of people moving funds chasing rates.

Pretty odd statement to throw out with the disclaimer, "as far as I remember". According to Raisin bank they are guaranteed by the EU Directive 2014/49/EU. Irish banks guaranteed by the central bank of Ireland. Call me paranoid, but I dont trust any financial institution.

"They arent paying higher interest rates for the craic". I believe they are just passing on rates on offer by other European Banks. E.g. several banks in Italy, France, Germany offer these rates to their customers.

Dont get me wrong, I wouldnt stick all my cash in Raisin, but I wouldnt stick all my cash anywhere.

Yes all very valid points. The only thing I would say is while build costs might only be 37% of the total cost. Most of the other factors are also inflating significantly and are in some shape or form linked to wages (site development, marketing, professional fees). Wages in the construction sector are rocketing no doubt. Finance costs could also conceivably have doubled or worse.

That said, you are right on value of the land and this is ultimately the ‘floating variable’ that links the cost of building a house and the price it can be sold out.

House prices could drop much more than 20% and remain viable in places like Greystones assuming land values fall (which they should).

It’s the parts of the country where land values are lower because sale prices are much closer to total construction costs where the concern would be.

The issue is from an interventionist state (ie SF government) point of view it doesn't actually matter if the developers don't build. If developers stopped building all new construction next year, and say a 5-10% vacant property tax was brought in as a result, they would be forced very rapidly to sell their vacant sites to the state rather than let them sit there idle for potentially years.

The state would then build social/affordable housing on said cheaply bought sites, using the construction workers who are no longer employed by the developers.

The state has no lack of finances for building social/affordable housing bear in mind - it literally has billions of euros sitting, unable to be spent, for just this use. The issue is getting construction workers right now. So developers going out of business, and suddenly a lot of construction workers being available for hire, if anything solves the problem rather neatly.

Not wholly relevant to the subject matter, but with respect to bank strategies, what do people think the traditional irish banks will do to contend with Revolut?

Revolut are planning to offer mortages before the end of next year, with significantly reduced application and processing time and lower mortgage rates for customers due to lower processing costs.

I dont know what kind of scale they will offer their product at, but surely it has the potential to be a game changer in a small market like ireland.

Is it not the case that the 3% vacant land tax has been evaded by approx 50% of land owners?

If so, if SF increased it to 5% or 10%, would owners still be able to evade it with ease?

Also, the vacant property tax of 0.3% seems incredibly low.

Why is this not increased?

It always amazes me that even in very expensive and high expenditure areas of Dublin you will see some commercial buildings sit idle for literally years. Right on the main street.

Surely that kind of practice should be made unviable for the property owner.

Well it may take a bit of time but it will have to be passed on if rates continue to rise. The thing is with the first time buyers mechanisms, it would mean that these guys would have to see a serious drop in property price to realise any kind of negative equity for example with the 30k FTB to start you off you would need to see a fair drop in price to realise a loss. Having said that there will be a lot of FTB now looking on at price drops and may well actually for the first time in a decade think this time next year I could get a place cheaper. Also the banking stress tests and mortgage repayments will take people out of the demand via affordability. We will also see more government interference in the market and I will put money on one thing the government will introduce tax relief on mortgage interest next budget another way to keep prices from falling.

How is it insane I think a business hitting the stop button because they may not make as much profit as they were is insane. So what do they do? Can they afford to just stop and expect the business to stay viable? There is also a ticking clock of the shinners getting into power here and they have been quite vocal about how they intend to deal with developers. So once again can they afford to just let things lie and if so for how long? The two viable option they would of had up until now to stay afloat would of been loans which are now a hell of a lot more expensive and in 2 months time they will be more expensive again if they are looking to get by using credit and government interference which as pointed out now has a time constraint. So your opening line "business wants profit" I have pointed out now on multiple posts they have been making a very healthy profit margin and if they stop building they may well move from a "business want profit" mantra to a "business wants to survive" proposition. Also the knock on impact of them not building will be a further drop in raw materials less demand will push that price point lower.

But your argument was that developers would just not build and drop out of the market and that that would be a problem for the housing market.

When in reality as fliball123 has outlined if developers stop building they very rapidly either fire all their contractors, or go bankrupt, or both.

Which if the state had no spare funds would absolutely be a problem because the building of new houses would stop, and unemployment would rise. But for Ireland now thats not an issue, the state will just hire every single unemployed construction worker they can get their hands on for their own currently massively overfunded projects.

True they made a sh1tshow of the childrens hospital, but you have to be realistic. If construction stops the government have no choice but to pick up the slack and build and it could well play into their hands having a lot of construction workers not working and assets that developers cannot use and could be purchased on the cheap. Put it this way they cannot just sit on their hands either as the shinners are stage left waiting to enter the fray. Developers are in straightened times with regards to credit and how that impacts their liquidity and on the clock with regards to their buddies in government.

That is true of "this government" as I said this option is now time limited with an election coming.