Davys see fall in house building / mort approvals

House building reductions will also add tens of thousands to the unemployment figures,which in turn will hit sentiment even more.
Looks like the snowball is starting to move.

Davy’s have been bearish for years trying to tell ppl house prices would stop riseing this year, year after year. They sell shares and have a vested interest in seeing an end to the house price maddness. Are they now spining ‘no panic, time to move to shares for a good return’? Find it strange that they are changing their mind. When prices where flying up in the then recent past they were forecasting a slow down against the VI’s on the housing sides’ forecasts now they’re ‘soft landing’ belivers. Do they not want to see builder’s shares ect. slidding bring down the iseq?

Just seems that every report is from a not entierly nuetral source.

grim reading

davydirect.ie/other/pubartic … 070226.pdf

There is no real correlation between builders stock and a decline in housing. Most of the companies are exposed to other markets. It takes a bit of reading and analysis to come to this conclusion but as one of the greatest bears here (since last year on aam) i however invest in “builders shares”.

Bloomberg
bloomberg.com/apps/news?pid= … 4&refer=uk

I suspect most of the fall was as a result of the chinese slump but must have had some effect.

If you’ve bought in the last year, definitely.

If you’ve bought in the last two years, maybe.

The article actually makes mention that there is considerable “constrained demand” out there. That is; people who want to buy but can’t afford to at market prices. So that means that for every percentage that’s lopped off selling prices, we’ll probably get a fair whack of people who can now afford to buy using the same props as before (100% mortgage, Bank of Man & Dad, borrowing deposit from credit union, etc). Therefore, I wouldn’t foresee a property crash (Assuming unemployment stays the same and interest rates don’t go up too much).

Comments?

Why would constrained demand jump in when renting is cheaper and you would be buying a depreciaiting asset?

IMO it will remain constrained but for different reasons.

All other things remaining equal, yes, as prices come down, more people come into the affordability net of the lower prices. However, the problem is that as prices start to slide - right now - we are in an upward trend on interest rates. So this is only going to work if affordability gains caused by sliding prices exceed affordability losses caused by rising interest rates.

The question is - at what point of sliding prices do people stand back and say “prices are going down, I don’t need to buy now as they’ll be lower in twelve months time, I’ll have more of a deposit, or a year in Australia or whatever”…

In other words - at what point does the rate of house prices falling become so top heavy that the constrained demand turns into no demand at all?

Its all about sentiment .Much of the demand up to now has been driven by fear.When the market slows,stops or reverses the fear factor dissapears so no need to worry about missing the boat or not getting a foot on the ladder.
If rent is less than repayments then why not save for another year or two as prices will still be the same.
This of course has the added effect of driving prices even lower,then the fear of not getting on the ladder becomes the fear of buying in a falling market and so on and so forth.

I think you are correct and this is why the rental values will refrain from taking off IMO. There will be a constant trickle of people leaving the rental market as each % comes off the price. I thought the lad from Davy’s when he was on Hook’s program over emphaised the increases in rent prices, but that is just a personal opinion. Hook did say (and read out some) that all the texts coming in were bearish which didn’t go down too well with his guest.

The boy from Conglows wood is just talking through his hoop as usual, like all the people in his office and that of their competitors - Goodbody. You can bet your bottom dollar that everyone in that industry are running for the exit re selling investment properties. I had to LOL when he said to George Hooke that there was a correlation between rents and interest rates since 2001 and you could see this if you plotted both lines on a graph as both fell ( which is an unrelated coincidence ). If he thinks rents are set by interest rates then he and his office cannot be taken seriously and perhaps have other motives close to heart. He failed to mention that rents were increasing as a result of the influx of fellow Europeans and thought that if rates go up then all landlords will just increase the rents - end of story, however it took a few texters to set the record straight. IMO rents are set by wages when the fundamentals are firmly in place and there is nothing to distort the market, these days are less than a year away.

Rising rents at the moment are not caused by immigration. We’ve had massive immigration for the past five years and during that time rents were falling.

Rising rents at the moment are caused by a bottleneck in supply caused by property coming off the rental market and going onto the sales market.

Swords is a neat illustration of this: rental supply is half what it would have been a year ago and sales supply is double what it would have been.

And that’s the first time Swords has been a neat illustration of anything!!! :smiling_imp:

they reckon 5000 houses less will be built this year…

how many people out of work will that be?..15000?..or is that a bad estimate

There’s been a growth in civil and commercial contracts.

Hard to know whether any one will be out of work per se.

In fact, anecdotally, I’ve heard some builders are short of labour…

Any fall or levelling off in housing output would lead to fall in inward migration IMO;

esri.ie/news_events/latest_p … /index.xml

Hence reduced demand for housing all those Eastern European’s in the building trade and the other jobs eg more shops and shop workers for a riseing population. ie IMO There will be less of a pull factor less of them staying or comming in the first place.

breakingnews.ie/2006/12/08/story288552.html

A lot of anecdotal stuff on my part but as for the infurstructure spending making up the demand in the industry. Nearly Every major road project promised in transport 21 seems to well under way, drive from Dublin to any other City and see a lot the major works well advanced. If a classroom stands for 50 years has 30 kids a year in the 50 years it will go through 1,500 kids. At 12 years to leaving cert each classroom is good for 125 educations to L.C. level. If we say each classroom is equvilent in worth to the building industry of a house then it’s poor trade off. IE as big as all the infurstructure spending is it will never make up IMO for any major drop in housing output as there already is a huge level of infurstructure completed or are under way the office of public works is careful to avoid giving out contracts in a hurry that lead to spirriling costs as happened in the past as witnessed by the under spending on capital projects last year.

There’s only officially 25,000 or so non-nationals on the books in the construction trade.

Probably far more off the books, but it makes you think what would happen if there was a major wind down!!! :open_mouth: