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Property Market 2020

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    #8522
    Nijmegen
    Registered Users Posts: 3,086 ✭✭✭Nijmegen


    The income tax returns are likely a strong indicator of what's going to happen in the property market. Income tax was down 7.8% in May versus last year. That's despite unemployment reaching 28.2% in April (haven't seen May figures yet, but I can't imagine they're better). That doesn't count 427,400 people receiving the wage subsidy scheme, where the state and employer both kick in. Add that to the figure and you have 1.246m workers affected.

    But income tax drops 7.8%...

    So, who's losing their jobs? People who earn less money, generally, and weren't in or very far in the income tax bracket. Lot of part time workers, younger people. People who weren't buying a house any time soon or who were buying in the lower end of the market.

    Builders have returned to sites on the expectation that developers can shift units to FTBs. There's a sign of confidence in the market. They're not having fire sales, either.

    With the economy re-opening I think the expectations of a 20-40% price drop as feverishly suggested by some in these parts is not supported by the evidence we're currently seeing. I think if you wanted to move a 2nd hand unit you'd need to give a discount to get a deal over the line, but I'm not sure there's a systemic falling off the arse out of the trousers of the market. As noted earlier in the thread, the demand for household formation is still there; and as evidenced in the income tax returns, the people who want to form a household are likely still at work or at least having their income supported through the pandemic.


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    #8523
    cnocbui
    Registered Users Posts: 19,908 ✭✭✭✭cnocbui


    An increase in unemployment shouldn't necessarily be taken as inevitably leading to prices dropping in a market where there is supposedly chronic under supply. All that the unemployment does is reduce the demand slightly. The overall demand would have to fall below supply to see the sort of two digit declines some people are hoping for, and I don't think that is going to happen.


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    #8524
    Hubertj
    Registered Users Posts: 2,000 ✭✭✭Hubertj


    cnocbui wrote: »
    An increase in unemployment shouldn't necessarily be taken as inevitably leading to prices dropping in a market where there is supposedly chronic under supply. All that the unemployment does is reduce the demand slightly. The overall demand would have to fall below supply to see the sort of two digit declines some people are hoping for, and I don't think that is going to happen.

    I presume that is why the ESRI are predicting a 12% decrease? I think KBC had 12% (best case) to 25% (worst case) in their forecast?


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    #8525
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,279 Mod ✭✭✭✭The_Conductor


    Hubertj wrote: »
    I presume that is why the ESRI are predicting a 12% decrease? I think KBC had 12% (best case) to 25% (worst case) in their forecast?

    I'd love to know where they are getting their figures from.
    The fact of the matter is- the vast preponderance of those who have lost their jobs- were never going to be in the market for buying property anyway (with a few obvious exceptions- particularly all those associated with the aviation sector who are being let go (Stobart, DAA, Ryanair) , or having their contracts unilaterally rewritten (a-la IAG).

    The manner in which income tax is holding up- speaks volumes- those who have lost their jobs weren't in the tax net to begin with, and likely would never have been approved for a mortgage.

    I still say- akin to the renting thread- that we're not going to have any answer to all these suppositions and ponderings for at least 16-18 months.


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    #8526
    Wingman2010
    Registered Users Posts: 416 ✭✭Wingman2010


    Shelga wrote: »
    So do people think there will be a significant drop in property prices over the next year, or not? I know it's an unusual situation with no precedent, but I'm starting to think there won't be.

    Going absolutely mad living at home, had planned on being well on my way to having keys in my hand by now. Anyway, it'll be like the queue at the supermarket- whatever one you choose will be the wrong one. If I buy now, prices are sure to drop by 20%. If I don't buy now, they'll stay the same. Attempting to buy as a single person so I'm screwed either way.


    I’m in a similar position to yourself. I was living in Dublin the last 13 years. I decided to move home to the midlands during this time and I gave up the apartment I was living in. We have been told by our workplace that we will be working from home for the rest of 2020 and long term that it will be ok working from home also so I’m very lucky in that way. I personally like to go to the office 1/2 days a week once things settle down.

    I was already saving a lot of money and now I’m saving an extra €850 a month since I moved home. I have decided to buy a big new detached house which is yet to be constructed in my home town. A similar house would be €150k more expensive in a commuter town like Celbridge and probably €250k more expensive in Dublin. I’m happy with my decision anyways, it really was a no brainier for me with the money savings! I know of a few more people doing something similar! The best of luck with whatever you decide to do.


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    #8527
    Reversal
    Registered Users Posts: 402 ✭✭Reversal


    The_Conductor wrote: »
    I'd love to know where they are getting their figures from.
    The fact of the matter is- the vast preponderance of those who have lost their jobs- were never going to be in the market for buying property anyway (with a few obvious exceptions- particularly all those associated with the aviation sector who are being let go (Stobart, DAA, Ryanair) , or having their contracts unilaterally rewritten (a-la IAG).

    The manner in which income tax is holding up- speaks volumes- those who have lost their jobs weren't in the tax net to begin with, and likely would never have been approved for a mortgage.

    I still say- akin to the renting thread- that we're not going to have any answer to all these suppositions and ponderings for at least 16-18 months.

    It was my impression that those forecasts from KBC and ESRI, are looking at the second and third order effects of the COVID emergency.

    As in, it's not about people who lost their jobs when the hospitality sector shut down temporarily, but about those who will lose their jobs and have earnings impacted as the dominoes in the economy start to fall over the next 12-18 months.


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    #8528
    cnocbui
    Registered Users Posts: 19,908 ✭✭✭✭cnocbui


    Hubertj wrote: »
    I presume that is why the ESRI are predicting a 12% decrease? I think KBC had 12% (best case) to 25% (worst case) in their forecast?

    This pandemic has shown that almost nobody can accurately predict diddly squat. A lot of Emperors wearing questionable attire. Reading the currently buying/selling thread, I would be surprised if that 12% happens.


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    #8529
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,279 Mod ✭✭✭✭The_Conductor


    Reversal wrote: »
    It was my impression that those forecasts from KBC and ESRI, are looking at the second and third order effects of the COVID emergency.

    As in, it's not about people who lost their jobs when the hospitality sector shut down temporarily, but about those who will lose their jobs and have earnings impacted as the dominoes in the economy start to fall over the next 12-18 months.

    Department of Finance statistics are at odds with the ESRI wonks (who are perpetually paranoid of being viewed as overly optimistic). The Department guys are suggesting a complete recovery in GDP by Q4 2021, and a complete recovery in employment numbers (to a background rate of approx. 5%- or 160-180k) in seasonally adjusted terms by Q3 2022.

    One way or the other- pretty much everyone is in agreement that we have a pretty torrid 18 months ahead of us- only after which will things normalise (from an economic perspective).

    As for KBC- while they might like pontificating, flinging darts at a chart on the wall might be a more accurate barometer of what might happen.........

    I'd give anything to get a copy of the most uptodate economic forecasts that were distributed to government Ministers by the Department a forthnight ago- and compare them to some of the forecasts that leaked 6 and 8 weeks ago.........

    If we get a vaccine at an early date- it could be a complete gamechanger for everyone- however, we have no right to expect this to come to pass.


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    #8530
    Ozark707
    Registered Users Posts: 944 ✭✭✭Ozark707


    Wingman2010 wrote: »
    I’m in a similar position to yourself. I was living in Dublin the last 13 years. I decided to move home to the midlands during this time and I gave up the apartment I was living in. We have been told by our workplace that we will be working from home for the rest of 2020 and long term that it will be ok working from home also so I’m very lucky in that way. I personally like to go to the office 1/2 days a week once things settle down.

    I was already saving a lot of money and now I’m saving an extra €850 a month since I moved home. I have decided to buy a big new detached house which is yet to be constructed in my home town. A similar house would be €150k more expensive in a commuter town like Celbridge and probably €250k more expensive in Dublin. I’m happy with my decision anyways, it really was a no brainier for me with the money savings! I know of a few more people doing something similar! The best of luck with whatever you decide to do.

    Great news for you, I think many will jump at this as well where it is available.


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    #8531
    lomb
    Registered Users Posts: 6,031 ✭✭✭lomb


    GavMan wrote: »
    And how exactly will banks be making money if they do not lend?

    Where did you pluck 20% from? Or did you just throw out any old number that sounds good. There will be an increase in unemployment which will reduce the number of buyers potentially but we need to wait to see where we end up. The numbers are soft right now. Vast majority will go back to work.

    Crucially and what is completely different to 2008 is that housing stock is still low. Vast majority of buyers will remain relatively untouched. But stock will still be low and we've lost 12 weeks of building. That will stabilize prices IMO

    Boi themselves say prices could fall 12 % this year. There usually are further falls after initial ones. We're at an end of an economic cycle , we've job losses from Corona, income reductions, fear. The 20% comes from removal of half the lending in the market. So it will be cash buyers who make up half anyway and the other half who can get credit for the next 2 years. Prices should tick back up then so I'm not worried considering I've a new 400k mortgage. If you think about it logically 20% isn't that much its like if you had a euro in your pocket you lost 1/5 the of it or 20cents. The figures are large so it makes it scarier.


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    #8532
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    I think potential; negative interest rates, a relaxation of the bank reserve rules and plenty of EU Central Bank money sloshing around could impact your 20% estimate.


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    #8533
    sheepsh4gger
    Registered Users Posts: 622 ✭✭✭sheepsh4gger


    I have some experience investing and made a good lot of money in 2017 on crypto. Don't own a house, don't want to.

    I think property owners are coping hard all over the world. I think the market made them complacent. I strongly believe we're in a "bull trap" at the moment and there will be a crash within 6 months.

    There's huge asset inflation caused by banks handing out cash. This whole QE thing just inflated the supply of money and got pushed into housing.

    Here's my plan, mock me if you want to (not afraid of criticism):
    Currently in Gold (would be in silver but it's taxed here to the roof). I got my 'boomer rocks' in 2017 - cashed out of crypto at the peak of the market and put it in Gold. Every other guy could not see the ponzi scheme and got rekt.
    Now I'm waiting for the (predicted) crash, pretty much like 2008. I'm going to cash out of Gold in 2023 at the perdicted peak of the market. [I don't try to time things exactly, it's a fool's errand]
    Then I will see where to go next.
    Rothschild said 'I buy when there's blood in the streets'. I'll probably buy a house once the market crashes, when the market favors me.
    They say JP Morgan once said "Gold Is Money, Everything Else Is Credit" and I believe that to be true. There's no free lunch. When every idiot is making money hand over fist it's time to get out.

    I believe in scarcity and price discovery, but I don't think current prices have any connection to reality. Some think Brexit is going to attract people here, I believe they will just go to Frankfurt instead.


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    #8534
    mcbert
    Registered Users Posts: 460 ✭✭mcbert


    Graham wrote: »
    I think potential; negative interest rates, a relaxation of the bank reserve rules and plenty of EU Central Bank money sloshing around could impact your 20% estimate.


    Until Covid hit, I was expecting rates to fall a bit more, but now I have no idea. Is rates dropping more or less likely than before?


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    #8535
    accensi0n
    Registered Users Posts: 2,749 ✭✭✭accensi0n


    sheepsh4gger wrote: »
    There's huge asset inflation caused by banks handing out cash.

    I don't get this part. How is this the case considering the LTI limits?


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    #8536
    OneMoreBabadee
    Registered Users Posts: 33 ✭OneMoreBabadee


    sheepsh4gger wrote: »
    There's huge asset inflation caused by banks handing out cash. This whole QE thing just inflated the supply of money and got pushed into housing.


    The Fed, ECB and pretty much all the world's banks are planning to print money (QE) as a solution to the covid19 fallout. I would actually say tangible assets like property and gold are much safer than cash deposits in the short term future. My own prediction is the relative price of property will remain stagnant for the next 5 years, but the absolute price (in euros, dollars, etc) will rise over that period due to money printing.


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    #8537
    sheepsh4gger
    Registered Users Posts: 622 ✭✭✭sheepsh4gger


    I think this is what's going to play out again but this time globally:
    https://en.wikipedia.org/wiki/Finnish_banking_crisis_of_1990s


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    #8538
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    why?

    That was largely a banking crisis, I don't see the similarity.


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    #8539
    Geuze
    Registered Users Posts: 13,151 ✭✭✭✭Geuze


    OneMoreBabadee wrote: »
    The Fed, ECB and pretty much all the world's banks are planning to print money (QE) as a solution to the covid19 fallout. I would actually say tangible assets like property and gold are much safer than cash deposits in the short term future. My own prediction is the relative price of property will remain stagnant for the next 5 years, but the absolute price (in euros, dollars, etc) will rise over that period due to money printing.

    Planning?

    The ECB started QE in October 2014.


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    #8540
    Villa05
    Registered Users Posts: 4,527 ✭✭✭Villa05


    cnocbui wrote:
    An increase in unemployment shouldn't necessarily be taken as inevitably leading to prices dropping in a market where there is supposedly chronic under supply. All that the unemployment does is reduce the demand slightly. The overall demand would have to fall below supply to see the sort of two digit declines some people are hoping for, and I don't think that is going to happen.

    Just like the last crash unemployment, wage cuts, job security disproportionately affect younger workers who pay rent and are the FTB of now and the future. These people are the drivers of the property market. Those households with 100k income most likely have their housing need looked after by now

    The_Conductor wrote:
    The manner in which income tax is holding up- speaks volumes- those who have lost their jobs weren't in the tax net to begin with, and likely would never have been approved for a mortgage.
    There is something not right about those income tax figures. How many people are getting the covid wage subsidy? The wage subsidy is not taxable through payroll, rather collected at the end of the year or deferred till next year through reduced tax credits.

    I'm on this subsidy and as a result I have a much reduced tax deductions


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    #8541
    lomb
    Registered Users Posts: 6,031 ✭✭✭lomb


    Graham wrote: »
    I think potential; negative interest rates, a relaxation of the bank reserve rules and plenty of EU Central Bank money sloshing around could impact your 20% estimate.


    The banks have legal responsibilities to shareholders too not just the ECB pulling a lever with negative rates forcing them to lend. Credit is created when someone says the money will be repaid and someone else believes them.
    A bank can't lend if it doesn't know people's incomes are stable. Hence I think half the credit will be withdrawn. It's just a guess.
    For half the properties out there that arent cash there are two buyers for that home. One the bank and one the purchaser.


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    #8542
    lomb
    Registered Users Posts: 6,031 ✭✭✭lomb


    accensi0n wrote: »
    I don't get this part. How is this the case considering the LTI limits?

    It's in non property assets stocks bonds etc and then there is the rising tide that floats all boats.


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    #8543
    lomb
    Registered Users Posts: 6,031 ✭✭✭lomb


    sheepsh4gger wrote: »
    I have some experience investing and made a good lot of money in 2017 on crypto. Don't own a house, don't want to.

    I think property owners are coping hard all over the world. I think the market made them complacent. I strongly believe we're in a "bull trap" at the moment and there will be a crash within 6 months.

    There's huge asset inflation caused by banks handing out cash. This whole QE thing just inflated the supply of money and got pushed into housing.

    Here's my plan, mock me if you want to (not afraid of criticism):
    Currently in Gold (would be in silver but it's taxed here to the roof). I got my 'boomer rocks' in 2017 - cashed out of crypto at the peak of the market and put it in Gold. Every other guy could not see the ponzi scheme and got rekt.
    Now I'm waiting for the (predicted) crash, pretty much like 2008. I'm going to cash out of Gold in 2023 at the perdicted peak of the market. [I don't try to time things exactly, it's a fool's errand]
    Then I will see where to go next.
    Rothschild said 'I buy when there's blood in the streets'. I'll probably buy a house once the market crashes, when the market favors me.
    They say JP Morgan once said "Gold Is Money, Everything Else Is Credit" and I believe that to be true. There's no free lunch. When every idiot is making money hand over fist it's time to get out.

    I believe in scarcity and price discovery, but I don't think current prices have any connection to reality. Some think Brexit is going to attract people here, I believe they will just go to Frankfurt instead.

    You can't print a property though theres likely 3 man years of labour in the average house, another 3 man years worth of materials and then taxes, fees , profit and land value. You can print the money backstopping it.
    Gold is a.type of unproductive dead money it sits there looking pretty and doesn't do anything. I love the stuff and have 5 grand of the physical stuff and a gold watch but I don't think it's a great investment. It is difficult to leverage, and costs money to professionally store large amounts of it. Would I buy 100 grand of the stuff at some point-possibly, I think it's prudent in case there's a meltdown of some sort.
    Wrt buying a house. The prices today are half the inflation adjusted peak in Ireland. They are held back by prudent lending likely overprudent.
    My advice is to buy a house if you need a house, can comfortably afford the monthly payment and if a bank will advance credit. The price if affordable is a blended price over 25 years. Rents are double what buying costs. There is a landlord middleman, a bank that charges double the interest rate to investors and also a greedy taxman involved.
    Even if they drop 20% it's meaningless as they will recover in euro cash terms ( thanks to QE) quickly and there is no margin call from the bank ie they can't ask you to make up the loss in collateral like they can do with other loans.
    If I was investing and didn't need a house I would likely wait another two years for prices to bottom.


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    #8544
    Dav010
    Registered Users Posts: 14,197 ✭✭✭✭Dav010


    sheepsh4gger wrote: »
    I think this is what's going to play out again but this time globally:
    https://en.wikipedia.org/wiki/Finnish_banking_crisis_of_1990s

    This is not a financial crises caused by debt, the banks are well capitalised and given that we have recovered from a recent, long recession, lessens have been learned by both Governments and CBs.


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    #8545
    pearcider
    Registered Users Posts: 1,033 ✭✭✭pearcider


    Dav010 wrote: »
    This is not a financial crises caused by debt, the banks are well capitalised and given that we have recovered from a recent, long recession, lessens have been learned by both Governments and CBs.

    The last recession wasn’t recent. We have just finished the longest economic expansion in history which came in at 128 months. The recession has literally just begun on June 1st. It will last minimum 18 months and probably more like 36. As for the banks. Well capitalised? The European banks are basically insolvent and will eventually have to be nationalised. Look at their share prices.


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    #8546
    kippy
    Registered Users Posts: 18,467 ✭✭✭✭kippy


    pearcider wrote: »
    The last recession wasn’t recent. We have just finished the longest economic expansion in history which came in at 128 months. The recession has literally just begun on June 1st. It will last minimum 18 months and probably more like 36. As for the banks. Well capitalised? The European banks are basically insolvent and will eventually have to be nationalised. Look at their share prices.
    Not saying I disagree with your statements about the banks not being in good shape but in the current environment share prices aren't a good indicator of the health or future prospects of an organisation.


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    #8547
    accensi0n
    Registered Users Posts: 2,749 ✭✭✭accensi0n


    lomb wrote: »
    It's in non property assets stocks bonds etc and then there is the rising tide that floats all boats.

    I'm still not following.

    It's in non-property assets? Even though the post I was replying to said people were putting too much cash into property/housing assets?

    What has stocks/bonds got to do with the post saying banks were handing out too much cash?

    Or are you saying that many people were taking out non-mortgage loans, pumping that cash into stocks/bonds, making a big profit and then buying their house with that? That doesn't seem likely.


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    #8548
    hometruths
    Registered Users, Subscribers Posts: 5,817 ✭✭✭hometruths


    Dav010 wrote: »
    This is not a financial crises caused by debt, the banks are well capitalised and given that we have recovered from a recent, long recession, lessens have been learned by both Governments and CBs.

    The idea that all is well because this time high levels of debt are not a problem is a recurring theme on this thread, and like a lot of the other recurring themes, does not really stand up to scrutiny.

    Whilst a pandemic is not a financial crisis caused by debt, locking down economies will inevitably trigger a recessionary environment where debt repayments come under pressure.

    Which can quite quickly become a financial crisis caused by debt.

    The global economy is drowning in debt, way more so than in 2008. Anybody who thinks Ireland is different because our CB imposed income limits on Paddy's mortgage has their head stuck in the sand.

    Private Debt to GDP in Ireland increased from 257.2 percent in 2007 to 374.1 percent in 2017.

    Screenshot-2020-06-10-at-09-35-18.png


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    #8549
    Nijmegen
    Registered Users Posts: 3,086 ✭✭✭Nijmegen


    Reversal wrote: »
    It was my impression that those forecasts from KBC and ESRI, are looking at the second and third order effects of the COVID emergency.

    As in, it's not about people who lost their jobs when the hospitality sector shut down temporarily, but about those who will lose their jobs and have earnings impacted as the dominoes in the economy start to fall over the next 12-18 months.

    Some of the first hard data we have received has come out in the form of the exchequer results, which shocked everyone on the income side. If incomes are holding up better than expected, VAT etc will come back - and consumer spending generally - as incomes holding up + low spending = enforced savings. That was surprising data that is likely making a lot of people look at their forecast models.

    There will be an impact, but a few weeks ago on here there were doom mongers circle fantasising about these massive 20-30-40-50% drops that weren't supported by evidence then, but had a lack of any real counterpoint evidence; and definitely aren't evidenced now.

    In summary:
    • Incomes are holding up better than expected
    • Developers are back building sites aimed at FTBs
    • No evidence has emerged to say that we have mass emigration on the cards and household formation demand is still there - It was well in excess of supply before Covid, so the current trend does not lend support to the idea that demand will fall below supply as we recover given incomes are holding up


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    #8550
    ngunners
    Registered Users Posts: 604 ✭✭✭ngunners


    Dav010 wrote: »
    This is not a financial crises caused by debt, the banks are well capitalised and given that we have recovered from a recent, long recession, lessens have been learned by both Governments and CBs.

    The last recession wasn’t recent. We were due a recession regardless of covid. How bad that recession will be and its impact on house prices is anyone’s guess.


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    #8551
    pearcider
    Registered Users Posts: 1,033 ✭✭✭pearcider


    Nijmegen wrote: »
    Some of the first hard data we have received has come out in the form of the exchequer results, which shocked everyone on the income side. If incomes are holding up better than expected, VAT etc will come back - and consumer spending generally - as incomes holding up + low spending = enforced savings. That was surprising data that is likely making a lot of people look at their forecast models.

    There will be an impact, but a few weeks ago on here there were doom mongers circle fantasising about these massive 20-30-40-50% drops that weren't supported by evidence then, but had a lack of any real counterpoint evidence; and definitely aren't evidenced now.

    In summary:
    • Incomes are holding up better than expected
    • Developers are back building sites aimed at FTBs
    • No evidence has emerged to say that we have mass emigration on the cards and household formation demand is still there - It was well in excess of supply before Covid, so the current trend does not lend support to the idea that demand will fall below supply as we recover given incomes are holding up

    Incomes are holding up so far because the government is using huge fiscal stimulus to hold the economy together we are going to run a 30 billion deficit on the back of tax returns of 60 billion last year. Doom mongering has very little to do with it. Your optimism does seem like a bit of a stretch though.


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