Where we are in the property cycle and what to expect next

Property cycles have always been a source of fascination for me (KD) and it’s worth briefly mentioning where we are now and where we are likely to go.

In the past I have always said that there are two broadly distinct phases, the first is a post-crash recovery where you see prices come back then rise fairly quickly before stalling.

The ‘stall’ is a mid cycle phenomenon where due to prices having risen you see a lot of buyers back off or take stock of the position, the memory of ‘we saw something like this before’ is still there to haunt them.

After that you get into the second phase where the upward momentum recommences but this time, having seen that the stall was somewhat ‘false’ (in the sense that it is perceived that way, it doesn’t actually have to be that), prices rise up even quicker.

This is unexpected (to some) and evidence that you have to ‘get in’ on the game. It brings us to the second phase which is the classic ‘boom-bust’. This eventuality is inevitable in …

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Newstalk ‘Talking point’ on housing with Sarah Carey

We rarely get to take part in a show that covers so many diverse and interesting points, but last Saturday was an exception.

‘Talking Point’ was about housing and Sarah Carey chaired the conversation excellently with a panel consisting of Ronan Lyons (Daft.ie, Trinity and Sunday Independent), Lorcan Sirr (DIT and Sunday Times), and Karl Deeter (Irish Mortgage Brokers, The Sun and The Sunday Business Post).

Topics ranged from false statistics to future crashes and current dilemmas, if you are into housing even in a tangential way this is a podcast well worth listening back to.

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Generation Rent? Try generation Broke

It bothers me when people promote long-term renting as a better choice than home ownership because it belies some basic facts.

When I was studying accounting, I was taught to be accurate. When I was learning about financial advice, I was taught to be prudent. Yet both of these concerns are often cast aside when debating the benefits of buying versus renting.

Nationally we are at an important juncture. It’s acknowledged that huge numbers of people won’t be able to afford to buy a home. If this proves to be true, many will also be locked out of one of life’s most wealth-creating activities.

The first problem is the nature of the comparison. If rent is €1,300 a month and a mortgage costs €1,500, then it’s cheaper to rent, right? Well . . . no it isn’t. The outlay is less, but the actual cost of the provision of occupancy is the rent versus the interest portion of the mortgage, not the entire payment. I will explain that point.

People often say rent is dead money. To be fair, so …

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Newstalk: Karl Deeter on the Pat Kenny show discussing pensions

The Pat Kenny Show on Newstalk had us on to talk about the future of pensions and to help people understand some of the looming issues in the retirement space.

It is a complex problem which is affected by everything from home-ownership to central bank interest rates. The main thing to take from it is that everybody who can start a pension, no matter how small, should do so. One of the biggest issues is the fact that people don’t even have one they can contribute to.

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First experience with ‘Help to Buy’

We are currently undergoing our first experience with a client who wants to use ‘Help to Buy’ and the same issue has arisen at two different banks so we are comfortable that it is probably a teething issue that is live and current.

The problem is that the banks are telling us they need proof the person will qualify for the HTB scheme, but to qualify you have to have a signed contract, no borrower is going to sign a contract unless the bank will advance the loan factoring in the HTB because otherwise they may not be able to complete the loan.

The lenders had forewarned us that there would be problems, but this one seems very basic. They could just make the offer contingent on the person qualifying for the scheme. Otherwise it will mean that people are stuck waiting for the contractors name to show up on what is so far a very short list, and they are also putting the kart before the horse in terms of how it was meant to operate.

For now all …

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Making sense of ‘help to buy’

Yesterday Revenue announced the details of the new ‘help to buy’ scheme. It is designed to make buying a home more realistic for first time buyers and to increase the supply of new homes. Whether it’s a good or bad idea is beside the point, what most people want to know is how it works so here’s the breakdown.

It’s a scheme to allow first time buyers buying a new home to get a rebate of up to 5% of the purchase price or contract price (whichever is the lower) from income tax and DIRT tax paid in the past four tax years to a maximum of €20,000. The property must cost less than €500,000 or 600k for retrospective applications, the size of the loan versus the value of the property must also be 70% or more.

So, for every €100,000 of value you must be borrowing at least €70,000 the idea being that very cash rich buyers don’t need this help. It started on the 19th of July 2016 and goes until the 31 Dec 2019.

Now that it’s …

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TodayFM: The last Word features Irish Mortgage Brokers

Matt Cooper had Irish Mortgage Brokers on ‘The Last Word’ to discuss some changes announced by Simon Coveney regarding rent controls in Dublin and Cork.

The piece focused on some of the issues at hand with a commentator from the Dublin Tenants Association also taking part.

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Vultures are a key part of our housing recovery

When we hear talk of ‘vultures’ and ‘vulture funds’ it’s usually in highly negative overtones. That’s why the name-calling exists in the first place, the idea is to imply you have these groups that feed off the dead bodies of an innocent party.

Put this aside and realize that even if a company does feed off the assets of a failed one, that it doesn’t mean the firm that failed was somehow an innocent bystander. Usually they lost their market share and assets as a result of their own decisions and by definition a liquidator would sell these on to somebody.

Whether that ‘somebody’ is a person, fund or regular company hardly matters. What does matter is that we have a housing crisis and that these same ‘vultures’ will likely be delivering about 75% or more of private new housing in Dublin where the problems are most pronounced.

Take a look at some of the numbers in new developments: * Lone Star own 600 acres of land in Dublin with the potential for 7,000 homes: in Adamstown, where it has …

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Irish Times mentions Irish Mortgage Brokers: Why is there a housing shortage?

We were featured in today’s Irish Times on an article by Barry McCall asking ‘why do we have housing shortages’.

Our contribution is as follows: Karl Deeter of Irish Mortgage Brokers believes this is part of a global trend. “The mega-trend is that we are now living in a low-yield world,” he says. “Central banks are being forced to play both sides of the same table. Low interest rates cause asset prices to rise and the Central Bank is curtailing credit to prevent asset price rises. But there is an upward pressure on house prices despite this and it has been compounded by the earlier economic collapse which has led to supply disruption. These are trends that are bigger than any of us.”

While the Central Bank rules are undoubtedly playing a part in the problem, Deeter sees supply as equally, if not more, important and one factor here is planning laws. “Ireland has a particular problem when it comes to third-party property rights,” he argues. “Planning applications for housing developments are being turned down in areas where …

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Even supply doesn’t fix a supply issue.

Housing is confounding, we are at a frustrating juncture where after a massive property crash brought about in part by a glut of housing we now have the opposite situation of a housing shortage in many areas.

Solutions abound, but no matter what happens this shortage is going to persist due to the time it takes to deliver housing and even if we announced a shovel ready, commencing tomorrow plan for 25,000 houses in cities the shortage would persist for at least another two years.

When you see various commentators saying what will or won’t work it’s almost arbitrary because nothing works in the short term, the main ingredient required to fix this is time.

Housing grants to first time buyers may push up prices, even if they don’t it doesn’t of itself create supply today. Many of the proposals will serve one side of a transaction without affecting price.

If we got rid of VAT would house prices drop? Or would developers merely pocket the additional income because of the fact that a price set during a shortage becomes …

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