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

Our Euro-area interest rate is still only 3.5%. Its 5.5% in the US currently, and 5.25% in the UK.

Euro area inflation is still running at 5.3% overall as of July, 10.8% for food. That 5.5% overall figure was being dragged down by cheaper oil and gas prices too which were at -6% in July, but which have gone into reverse in recent weeks. So the overall figure is going to be trending up again soon.

Plenty of Euro countries also still have extremely high overall inflation - Slovakia (10.2%), Croatia (8.1%) Lithuania (7.1%) etc.

I wouldn't be betting on the increases to stop yet.

The 4x LTI only applies to FHB. Otherwise, its still 3.5x with exemptions for a small portion of borrowers, so the average is somewhere in between.

If an economy can't cope with normalization of rates, one suspects the economy was murdered prior to the rate rises rather than a consequence of rate rises

I totally agree here, The EU economic growth was mediocre at best when the interest rates was 0% for close to a decade. So I can only imagine what is in front of us. But remember it is the same people that made those decision still at the helm of the ship.

Went to view a house on Thursday, it’s listed at an ambitious €665k. Spoke to the agent a few days after, having had the third viewing they now have an offer of €630, the vendor isn’t interested in selling at that price. I was also at a different viewing where the agent acknowledged the price was too high but the seller insisted on it so as a result they weren’t getting offers.

I’ve been to a few others like this, sellers not getting what they think the house of worth and so leaving it up there. Hopefully (as a perspective buyer) it’s an indication of some cooling off.

In the headlines today :Why Ireland’s biggest private landlord is struggling - despite average rents of €1,800.

The biggest worry about Ires is its exposure to interest rates.

Last week it reached a deal to sell almost 200 west Dublin apartments to the Tuath Housing Agency for €72 million and is looking at offloading further assets.

Interesting is even so they achieve good rents, still they don't make enough.

I've no idea, I'm comparing to the quoted cost of construction we hear bandied about here

To think Nama flogged apartments beside tallaght hospital at what worked out at circa 100k per unit shows the opportunities that have been missed over the last decade

All of the apartments would have had tenants in them, the chance of any individuals wanting to buy them with tenants in-situ would be in the 1%. If they would have given notice for 200 families to vacate the premises so they could be sold, imagine there would have been another outrage!

You really need to understand REIT structure to kind of understand why they sold them in the first place.

Most REIT are asset rich and cash poor. REIT's pay no corporate tax in Ireland, this is because the tax structure is setup in a way that they must return 85% of profits to their shareholders. Thus moving the tax liability from REIT's to the shareholders. This also means that most REIT's have to borrow money for new projects and have very little capital in them. As interest rates rise and property value slowly goes down from the peak of last year, they will need to abide by their required LTV (loan to value). To do this, they will need to liquidate their assets fairly quickly and this is what is happening. Selling to any individuals is a nonstarter (it is to slow of a process), hence it will be another REIT, investors or housing agency would have bought it anyway. Thankfully in this case Tuath bought them, I bet they got it at a fairly decent discount too.

I still believe Tuath buying these are the best outcome here. Remember these aren’t distressed assets, someone will buy them at the end of day. People were complaining that individual Chinese investors were snapping up houses in Dublin, imagine if the Chinese setup a REIT’s of their own so people in China could invest in them by buying up these properties. If I recall correctly the Canadians are the biggest shareholders in IRES as an example.

All explained here

Who funds Tuath? Is it funded by the government essentially?