Predictions 2020 and Summaries 2019


#1

Seems that the property pin has become less interested in property and has moved to a breeding ground for conspiracy theories and the encouragement of Trump/Farage/Putin style populism - but maybe that’s just the bots talking.

Anyway there used to be a tradition of looking at the past year and forward to the new year in the property market. I think the market is getting very interesting at the moment. The dogmatic refusal of the government to ‘interfere in the market’ has made said market ever more dysfunctional.

So last year for Dublin it looks like -

  • The number of sales in the PPR is slightly down on last year (although there were some big ‘straight to rent’ sales that appear as one transaction - it’s difficult to compare these back over the years but during the summer I counted over 1000 units in a handful of sales)
  • The sales of new homes in the PPR decreased over last year 3631 vs 4713 in 2018. Again this might be because of multiple sales in the PPR being reported as one
  • Supply stayed pretty high over the year - seldom declining below 4500
  • Dublin prices achieved were pretty much constant over the year with a slight upward blip in the summer and the Daft report suggests a fall in Dublin prices over the year. Median asking prices through the year remained persistently higher at 395k vs prices achieved of around 340 to 350k.

On the anecdotal side -

  • Talking to an EA they said that a huge number of sales have gone through in December although a lot will appear in the January PPR figures. He said he thought this was the banks using up their ‘exceptional’ approvals - I don’t think this is the case as talking to people who work in the banks they work out the exceptions on a quarterly basis to smooth things out but I suppose there must be a few left in the last quarter as sales have probably been stronger in that quarter. He also believed that a lot of the properties coming on the market were ‘accidental’ landlords getting out of the market.
  • Younger people that I know that are looking for houses are taking their time - there seem to be enough places at the right prices to see to keep their interest. I hear of EAs calling them back after sales fall through. It does feel as if they feel they are operating in a market where taking their time is to their advantage rather than the sense of panic that we saw in the past. Affordability seems to be increasing - a combination of static/falling prices and a feeling that at last pay is rising. But this is in the IT sector.
  • Younger people that don’t have salaries that will allow them to enter the market have simply given up looking. They take the view that they’re never going to own a house in Ireland and that rents are bleeding them dry. Foreign nationals are looking to move home/to other countries. Irish people are looking at Europe - not the UK, not the US - a lot of them are saying that Ireland will probably leave Europe, they feel the swing to the right happening, they despise Varadkar ( to be honest I don’t think the situation in other European countries is any better) and feel that the older generation have f**ked them over.

So what is the coming year going to be like -

  • Property prices in Dublin will probably stabilise - possibly falling in real terms, wages are definitely going up but if that becomes a European phenomenom then interest rates will rise and that will dampen prices - but there will probably be some years lag.
  • Supply has the potential to increase but it will depend on legislation. It’s unlikely that the Government will start house building - they will not admit they were wrong - but they might make a move to stop subsidising office development, and to discourge the hoarding of residential develpment land and planning permission (sensible) or subsidising development of residential housing (really stupid).
  • Sales will increase if prices stabilise
  • Rents achieved will decrease - asking rents will have to remain high for the REITs to maintain their valuations but this can only last so long until investors see through it. Some REITs will fail in time but I don’t think it will be next year.
  • The decline in commercial development will become obvious - i.e. the crane count will start to decline by the end of next summer. If the capital/labour involved in this moves into residential then this could have a significant impact on future years - this is where you will see the CIF sticking out it’s begging bowl to the taxpayer. If it doesn’t move to residential then that will mean a huge number of construction workers will be laid off. Very of few of the migrant workers that came for this boom have put down roots - they were either part of the previous boom workforce or they saw what happened to them. This will have an effect on rents if it happens. There are about 150k construction workers in Ireland - mainly in Dublin - even a 10% decline in that workforce would have a significant impact - my guess would be that the decline will be steeper than that.
  • Brexit is now going to happen, it’s going to be a hard Brexit, it’s going to be rushed and it’s going to be a disaster for Ireland and the UK. The only thing Ireland has going for it is that the EU will protect Ireland, the quid pro quo being the proper taxation of the MNCs. The UK will think that Trump will protect them - he won’t - he has a long history of infidelity in his political as well as his personal dealings.
  • When there is an election then the result will probably be a 3-3-3-1 split between FF-FG-Left(ish)-Independents. That will mean either FF and FG have to combine with each other or with the Left. If the Left come out with a coherent and co-ordinated approach they could possibly be the biggest bloc - but we all know they won’t. The election will be about housing, Eoghan Murphy will lose his seat (DBS and it’s predecessor DSE have a history of kicking out failures (e.g. Creighton, McDowell, Gormley)). FG seem determined to buy the election with tax cuts and pension boosts (for the rich and the old folks) and blow some hot air about Climate change (for the younger voters). FF and SF are going to try and buy the election with empty promises about housing (for the young folks) and tax cuts and pension boosts for the old folks. The other left will fail to create any coherent strategy on reducing wealth inequality but will talk about it a lot. No matter what the old and the wealthy will be grinning all the way to the bank and the young won’t turn out to vote - then they’ll emigrate - it’s the 80s all over again.
  • The significant MNCs in this country will take a triple whammy - Taxation - the EU are going to come down on hard on this, absolutely no doubt about it; Regulation - Advertising platforms (facebook, Google) are going to get hit by requirements to take responsibility for content - i.e. closer to publication, Uber and AirBnb will face similar issues; Forced splits - Businesses with multiple facets (retail, cloud, advertising) etc. (e.g. Google, Apple, Amazon) are likely to be forced to be split up by US regulation; Declining markets - for businesses that rely on expansion to succeed (e.g. Facebook, Twitter) they will run out of markets, fashion will also start to kill them off.

#2

Probably one of the best summaries of the current situation I’ve read. Well done MM

Very hard to add to that.

Given the election result in the UK, it shows a similar population are happy to keep voting conservative so the FF / FG should our perform the left group to some degree. If anything that suggests more of the same without any major changes to the political climate.

Could be a soft push for a United Ireland given the remain slant however there is all sorts of resistance against that. Would be a game changer for Irish politics if it did happen.

Hard to judge the financial climate - Ireland as a small open economy is heavily driven by the global performance. If that does well it bodes positively for Ireland. If the global economy gets a cold then Ireland gets a flu … maybe. It’s been a long time since the last economic crisis - Lehman’s or Greece. But it looks like all 3 major central banks are happy to print money for the foreseeable. That keeps things good on the same path as the current. 2019 was a record year for some equities.

More of the same as far as I can see on a macro level


#3

I’d agree with many parts of metalmike’s summary and would hope that with supply coming on stream, prices will stabilise or fall somewhat in Dublin. Stabilising prices at 2005 levels (as per PS200306’s and TheJackal’s info) is still too expensive for housing for Dublin and its only the central bank rules that are causing that plateau. Demand is still there.

With continuing net migration in the 30,000s, natural increase in the 30,000s also, and household size, I’d guess temporarily stable, at ~2.75 per household following decades of falls, the increased supply may well just be soaked up in maintaining the current prices and rents.

As someone who sees a lot of Dublin and commuter traffic, I can’t see how the situation of 3 hours+ daily in the car is sustainable and this will break people over the next few years (the last crash postponed that societal impact). Until then, prices in Dublin will remain under that pressure and need a commuter mass transit solution to be implemented before price falls can be baked in. No sign of that so I think that Dublin will solidify at the current ridiculous levels, maybe even increase again, and the commuter belt will tick along similarly.

On a macro level beyond population rise, the Europeans are starting to get worried about the age of their infrastructure and I think public investment will start to drive European domestic demand in the 2020s and push economic growth, with additional costs from ‘greening’ it, and this will outstrip any impact of interest rate rises or China/USA trade deals. The ‘Boomers’ have outlived their 1960’s investments and will have to contribute their pensions to the next generation’s roads, bridges, flood defenses, climate change adaptation, hospitals etc. This will be labour cost led investment and will more than compensate for shifting of corporate profits. Richer Europeans will buy more Kerrygold and Irish holidays etc.

Noting that the data for asking prices in the Q4 Daft report indicates that I am already wrong, I advise no one to use this post for informing any financial decision making…

Nationally, I don’t watch the situation but I can’t see much momentum for rises without jobs led demand as we are not in property boom land this time around.


#4

I think we are in for seconds recession,

David McWillams has been posting about “where is the slowdown the forecasters foretasted?” Reading the comments self employed people are finding it harder to get paid.

The brexit fear will cause people to stop spending and start saving leading to a slow down in the service sector.

The manufacturing index is negative two months in a row, only slightly but sill down.

We bailed out the banks to save the German bond holders taking on to much nation debit which we are now paying back. To shore up the banks we encouraged REIT’s to buy up their distressed stock. Now they are buying full developments to rent back. That is a lot of both government and private money leaving our economy. If a tenant pays rent to an Irish LL worst case the money rests in their bank account, its there for the backs to use and they pay tax. With the REIT’s it a black hole where the money leaves our economy. That is bound to have an effect.

I am so looking forward to the next election I think it will be a FF, Lab, Green collation. Lab and Green will win back seats.
FG will get their ass handed to them. Think, Irish Water, Trolleys, Swings and Insurance, Signing on in the Dail, National Broad band plan, he who shall not be named, Cervical Check, Housing, have I missed anything.

If the EU get their way on corporation tax we are fooked, for that reason I don’t think they will.


#5

The facts don’t match that narrative. We got much of the bank bailout money back. The overwhelming majority of the debt came from refusing to cut spending, including welfare and pension payments, when the economy had shrunk by 20%.

So basically the same people that bankrupted us last time.


#6

Dublin residential: +6%
Rest of Ireland: +5%
New build completions:+5%
GDP: +4%
Planning permissions: - 10%


#7

Brexit will reduce our exports and it may lead of job losses if tariffs are imposed.

CT for 2019 at record levels again and that’s the big unknown going forward, as it seems to be used to pay for public service overspends each year.


#8

According to this IT article the net cost was 41.7bn - do you have a different figure?


#9

My 2019 predictions

"
Brexit - delayed
Childrens hospital - delayed and additional costs
National maternity hospital to face more delays and price over-runs
Shane Ross to be the straw that knocks the government
Road schemes to be delivered and Galway ring road to be refused
House prices move <5%
Increasing scrutiny of Housing Agency and other housing bodies"

For once i was reasonable accurate

2020 will be similar

“Brexit - delayed with some yeloow pack deal in Dec which will affect the irish and UK economy negatively
Childrens hospital - delayed and additional costs
National maternity hospital to face more delays and price over-runs
Road schemes to be delivered and Galway ring road to be refused
House prices move <3%
Increasing scrutiny of Housing Agency and other housing bodies”


#10

I think the point is that the 40-50Bn (not including subtraction of our still unrealised equity in the banks, and yearly dividend), is not a lot of money to have to deal with over 10-20 years.

What has not been addressed at all is the 190-200BN total National Debt. We just scratch away the interest on it, hoping that it’ll all just devalue in the future - and it might - as long as there’s continuous economic growth and the Euro-zone give us cheap money forever. These 2 things will not last indefinitely though. If there’s a dip at all, we are f#cked.
We’ve not paid it down… it hasn’t gone away y’know…ahem.

And as has been said - we are paying for expanded public sector yearly costs, with one-off CT take, and a 10 year continuous economic rise.

Unfortunately, through the vested interests of the media and public sector we are being fed the false narrative for a decade that “it woz de banks that did it.”
And a lot of the public have swallowed it totally.
I think that narrative will be impossible to change substantially, therefore the public sector behaviour won’t change either.
Sure - the banks were terrible, however I’d argue that we as a public sector/ government/ people have been worse.

I fear that we are completely dead in the water the next time if we stumble and trip.


#11

Spot on. Paddy is trained to perfection to give off about ‘de banks’ to this day, allowing what could be called official Ireland, for want of a better term, completely off the hook for the pork barrel of the last decade.

What worries me a bit is how much pension money is tied up in that 200 plus Billion, and risk of future defaults (official or otherwise) on various pension T&Cs.


#12

Few prepared for what is coming (already begun) but a minority preparing for some time now, but that may be an immaterial data point in the grand scheme.

Incredible Year, by the end of it and into 2021 we may just witness the brith of what might simply amount to a New World (actually really NEW) trajectory, as opposed to a New World Order (reshuffling the deck chairs).

Might be what you’ve always been waiting for, but won’t know it till you see it.

Current Posture: Super Duper Hyper Optimistic about things most can not imagine, but some dream about, while even less dare to CREATE!

Not sure you’ll be able to take this one to the Bank, but lets all see we all make it over the line and long into the future, sharing in the fruits as we go - Godspeed.