Seems EU wont be getting out of negative/zero rates in the short to medium terms - can easily see 2025 before anything meaningfully above the ZERO bound
This is gonna levitate asset prices for a long time to come and to a certain extent you can see the smart institutional money stepping up their investments in ‘real assets’ realizing euro denominated government bonds / triple A credits are gonna be yielding pretty much zero for a long time - a PRS/commercial building with a yield of 3.5% is pretty attractive asset in that environment
With the PPR as evidence the vested interests will be baying that the CB is strangling the market and, by a certain logic, they’re not wrong. What they won’t acknowledge is that the CB is the “backstop” (everyone’s using that word nowadays so what the heck), but the proper solution lies elsewhere.
Probably the largest problem is too much government intervention.
They tax the property market to shreds at so many levels along the way.
Furthermore, the social housing requirement in new developments skews the development (cost) figures even more.
The irony is that this requirement has undoubtedly caused large scale developments to be delayed or abandoned so no housing gets built at all.
Everything the government does causes prices to increase.
This has the very simple effect of retarding the natural supply of new stock as the cost of building exceeds what buyers can afford.
Developers simply will not build if they think the demand (at the sales price) will not be there.
Finally, and sorry to sound all xenophobic, but 40% of Fingal’s housing list are non-Irish.
This is madness at the best of times, let alone when even working people can’t find accomodation.
To sum up: The government, through their knee jerk legislation, is causing blockages in the supply pipeline, meanwhile they are shoving all and sundry into the demand pipeline.
While there are many factors that play some role in the supply side problems I believe that the main cost issues are the price being paid for sites, the fact that the margin on the sale is also applied to the site cost and the failure to adequately financially punish holders of land in urban areas who are not building on it. Putting a site levy of n% on land (when it even gets applied so wide are the exceptions) when prices are rising at n+x% is pointless. The cost of labour is driven up by the focus on office and hotel construction - which is pushing a bubble at the moment and can only exacerbate the problem.
Here you see site costs (for the lower end apartment) of 33-50k, Margin and contingency of 49-57k and the statutory contributions of 16k - if you increase the price from 293 to 470k (taking the lower bounds) the statutory contributions rise to 20k. This doesn’t seem enough to complain about (8% of the price whereas margin and contingency are 20%)
I imagine Brexit is playing a part. Buyers in the market would be mad not to consider the potential impact of a no deal or bad deal Brexit on the economy. I think the jobs market is also slowing down a bit at present because of this uncertainty (anecdotal).
There will always be investors looking out for slowing house price increases as the most opportune time to sell. So there’s no reason to expect a leveling off – if prices aren’t going up, they will go down.
Aha! It’s not that things are too expensive … it’s just that nobody can afford them! Got it.
Houses not overvalued despite swift recovery, says think-tank
Irish houses are not overvalued despite prices rising by 85 per cent since 2013, Economic and Social Research Institute (ESRI) claimed. A report by the state-backed think-tank found that the rapid recovery since the crash was not out of line with the other economic indicators such as employment, wage growth and household spending. It added, however, that “affordability remains a challenge”.
I still think it’s mad that the CBI lending restrictions are quoted as the reason why property is stalling… as if it’s a bad thing.
But entirely predictable from vested interests.
None of my younger work colleagues want the restrictions lifted - they know it’ll just push prices higher.
They just want somewhere to buy that isn’t extortionate money. They want quality stock in the right accessible locations. Or at least good public transport to get to locations that aren’t practical with Dublin’s current transport design/clusterf#ck.
What they can’t stand is why this is always linked in media to the “pesky CBI limits”. It’s like watching them realise that the apparatus of the country wants their lives to be as difficult as possible, and unnecessarily so.
It must be difficult being millenial, aspirationally carbon neutral and pro-mass migration ie outwardly “woke”, while at the same time secretly craving a motorbike, steak dinner and a home of your own.