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

I don't know where people are getting these pensions that are tied up in property, I have 2 pensions and the exposure to property is minimal in all options

For the vast majority of Irish people pension building should avoid property as your heavily levarged in property already through the mortgage on your home

What I'm proposing is a bond to sell to pension funds to fund construction of homes, state backed and inflation linked which may be useful to them when there customers want to reduce risk at or close to retirement

Us financial adviser says:

“‘Whatever you do, never buy a house with a monthly payment that’s more than 25% of your monthly take-home pay on a 15-year fixed-rate mortgage (which has the overall lowest total cost).”

does this mean most irish homes are widely over valued?

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"Clamping down on REITs is just reducing investment in Irish property which means less money put into building and therefore less supply making the situation worse. It also means more government money being spent on housing instead of health, education etc"

This isn't a remotely valid argument in Ireland in 2024, though, and undermines your entire post.

As I said in the post you're replying to, we're currently at completely full capacity in the construction industry. And, at the same time, the Irish state has billions of unspent euros every year (€1.52bn in the department of housing alone) currently. Its absolutely false to suggest there would be a need to reduce spending in other areas.

Any drop in investment in construction from the private sector in the near future will result in the spare capacity being instantly snapped up and put to use by the Irish state itself. There will be no drop in overall housing output.

As for the rest - as discussed previously, even a substantial drop in prices would result in very few households in the country actually being in negative equity, circa 5% for something approaching a 30% drop. The idea this would result in a widescale banking/economic collapse is nonsense.

Getting rid of the demand side grants etc won't make a huge difference by themselves, no, but its all cumulative. If every one of these measures reduces prices by a few percent then they all add up.

The overriding point is that there are measures the Irish state could take if it actually wanted to reduce house prices, tomorrow. And that most of the country, including a majority of home owners, would support. But our current government is making the conscious decision not to, because reducing house prices has never been a policy they've supported.

Irish construction industry is at full capacity grand but who will pay for the capacity of the sector to expand? Remember staff costs will over time go up in line inflation, meaning less work done for the same money over time. Or should everyone in the construction industry not ask for pay rises or worse take pay cuts? That's where REITs and other outside investors come in. You can't employ more people in construction without more money. Irish banks have limits to how much exposure they can have to the constitution/housing market. Any serious reduction in property values would only reduce the money banks have for mortgages.

Grand the Irish state takes up the tab but that means less money being spent on stuff like, schools, health, public transport etc. IE the infrastructure required to support more houses in the first place. You seem to not understand the concept of opportunity cost. To make things simple money spend on housing cannot be spent on other areas. You are assuming the Irish government has infinite money which unfortunately it doesn't. It does though have near limitless things it can spend money on.

You have completed ignored that regardless of what level of negative equity people are happy with, reduced house prices directly impacts banks ability to lend which impacts the wider economy. Negative equity concerns has very real impact on bank lending. It's not something only those who are looking to sell need to worry about as 2008 showed.

It's very easy to say there loads of ways the Irish government could reduce house prices but when you start digging into the detail you haven't mentioned any.

You also have to remember that we are currently in a period of relatively high inflation. Currently house prices rises are lagging behind this rate. So in real terms house prices are already getting cheaper.

"Grand the Irish state takes up the tab but that means less money being spent on stuff like, schools, health, public transport etc."

No, in reality it very much doesn't. The Department of Housing has €1.52bn sitting in its accounts of unspent money as of right now, that it literally can't spend because the construction industry in Ireland is already at capacity. The Irish state has put €7bn+ over the last two years into the national investment fund, because its also unable to find things to spend it on currently.

The Irish state could spend billions of euros a year next year on capital investment in housing and not raise taxes, or cut spending in any other area, by a single cent. And it would, if it could get the workers. Thats why a drop in house prices, and a resulting drop in private sector investment if it happened, wouldn't matter a jot. Any and all excess capacity is going to get soaked up immediately.

? I listed off a number of measures the Irish government could use to reduce house prices less than one page ago in this thread: https://www.boards.ie/discussion/comment/121759440/#Comment_121759440

Irish banks wouldn't stop lending for mortgages if prices dropped by 30% over a period of time. German residential prices were down 10.2% YOY in Q32023 and guess what, banks are still lending. The show goes on.

The origins of our planning laws

pension exposure to property is a tiny percentage as the majority are invested in government bonds. But that tiny percentage is still very significant in the property market.

There is circa 50 trillion in pensions globally so if just 3% was invested in property that would be 150billion invested in property globally. Obviously this globally but looking at Ireland in Isolation the pension market is circa 125 billion which at 3% would be 3.75 billion.

As for state backed loans specifically for construction it makes little sense when the government can borrow on the open market at lower rates.

With regards inflation linked bonds these generally underperform in the long term and are not popular with most investors and therefore cost more to issue…. Just look at TIPS v T-Notes for example.

If the gov take places like this then there will be no end to it.

Don't know about your investors fleeing statement, however for the rest I would agree.

The housing shortage appears to have gotten much worse recently - possibly due to vacant refurb grants and asylum seekers rental monies increasing demand for previously less desirable properties.

if you can’t find a house to buy your unlikely to put yours up for sale so makes perfect sense why mainly ex rentals and probate are what we see coming to the market.

thats because they know the government will not pay top dollar for the portfolio

Business post had an interesting read trying to delve into this a few weeks back actually https://www.businesspost.ie/news/colm-lauder-dublin-simply-too-expensive-as-hap-drives-rents-sky-high/

Not so sure that's true - Zurich did have a fund some years back that was basically Hibernia & IRES, closed it when the sale happened, so recall the return being pretty good when we were forced to exit due to fund closure. Outside of that I'd agree with you though - unless you bought in 10 years ago its probably hard to assess the value.

Very much so - you can expect a very difficult market for FTBs in particular if there is another credit crunch like the one from 2009-2014 again - this time without the falling rents & considerable vacancy levels in the PRS.