Economic Factors affecting Irish Property Market (part I)

Background: The Irish residential property market has gone from a period of spectacular growth, to a dramatic crash and lately to recovery in the past ten and half years (2005 – 2015) the period I will concentrate on in this article.

The economic factors which influenced these major upheavals are many and varied such as Interest Rates, Unemployment, Population Growth, Demographics, Wage Inflation, Exchange Rates vs Sterling & the US Dollar, Budget Measures, Central Bank borrowing limits, Credit Availability, Rents, Sentiment & Stock Market performance.

This is not an exhaustive list but it does show the range of factors that can influence property price movements with some having a much more dramatic effect than others. Here I will confine my analysis to the influence four key factors played on residential property prices in Ireland during the period discussed.

These are Unemployment, Migration, Exchange Rates & Sentiment. Firstly I will look at the property prices themselves and how they have behaved during the period.

Property Prices:

In the early part of the period under review (2005 to 2007) property prices increased …

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RTE 1 O’Clock News: Housing crisis and what can be done in the budget to help

Today on the 1 O’clock News on RTE Radio 1 we were asked to consider things which the budget could do to help achieve some stability in the housing market.

We echoed the Construction Industry Federation for a call to end ‘Part V’ contributions as this is a 20% tax levied only on new homes which is meant to provide for social housing. This is a mistake, social housing is a society wide responsibility and should not be put only on the shoulders of new home buyers.

Other ideas included ending development levies and dropping the VAT rate while also being mindful of the rented sector.

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A developers side of the story.

I had an interesting conversation with a developer yesterday who’s company is closing, they would have been a mid-range development company, they built many buildings that we all recognise around Dublin but they are not in the ‘Big 10’.

We got to talking about banks, the public sector, developers and in doing so I asked how he felt about the way developers are portrayed of late, as being at the very root of the crisis and at fault for the course the country is on.

He said that his family had been in the development industry for three generations, they had built it up from the 70’s and put everything on the line in the 80’s to keep going, they took calculated risks but it was their neck they were risking, not the necks of others, and now that things have fallen apart they have lost everything and somehow most of the bankers have kept their jobs.

That is a fair point in many respects, the banks have yet to face up …

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A tale of two developers.

The builders, developers, and even architects I know are all having a really tough time at the moment, with some they are talking to the banks about how much they are willing to lose on the deals they financed because the numbers no longer add up with the market the way it is now. The adjustment is painful, but at the same time it means there are going to be a few who buck the trend, who are able to not only weather the storm but come out of it stronger.

The two types will have to have one or more of the following traits

1. They have no stock for sale at the moment, if you are going to market today it means you likely financed the deal on figures which were calculated at 05/06 prices, you paid wages and costs that were high during the remaining days of the boom and now you have property where the cost outweighs the market clearing price.

2. Any land bank was bought a long …

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A 'Knowledge' based economy

Today the Irish Times had an article about an American University opening a college here, in Dungarvan Co. Waterford. It occured to me that the Island of Saints and Scholars could do with trying to encourage this type of investment if we are to truly become a ‘knowledge economy’. In creating centres of excellence it is vital to ensure that the best research and advancement is happening in a certain place, in I.T. that may be Silicon Valley, in Finance the City of London prevails.

Harvard University Professors are not paid millions, rather they teach there for prestige. With Universities such as Trinity and our strong heritage of learning (if you want an interesting take on our written word tradition a book called ‘How the Irish saved civilization‘ is fascinating) there is no reason we should not see more universities wanting to locate here and have …

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A ‘Knowledge’ based economy

Today the Irish Times had an article about an American University opening a college here, in Dungarvan Co. Waterford. It occured to me that the Island of Saints and Scholars could do with trying to encourage this type of investment if we are to truly become a ‘knowledge economy’. In creating centres of excellence it is vital to ensure that the best research and advancement is happening in a certain place, in I.T. that may be Silicon Valley, in Finance the City of London prevails.

Harvard University Professors are not paid millions, rather they teach there for prestige. With Universities such as Trinity and our strong heritage of learning (if you want an interesting take on our written word tradition a book called ‘How the Irish saved civilization‘ is fascinating) there is no reason we should not see more universities wanting to locate here and have …

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The good thing about a Property Bubble

There is so much gloom and doom in the press recently that only those with the greatest fortitude seem to find any cause for happiness. Personally I have been talked down off the roof a few times already (philosophically not in reality). And hardly a day passes where the Government don’t give us some negative outlook news. If you are into sadomasochism there is a new way to get your kicks, it’s called the ISEQ and if you are truly sick you can always watch property prices.

However, today’s article is going to focus on the good life and the good things that are coming out of the property bubble and that will continue to serve us all better in the future (catastrophic losses aside)

1. The Bubble performed where the Government and Good Intentions failed: The Government and all of the good intentions in the world were never able to gentrify the north inner city (my former home), but the property bubble did a GREAT job! Walking down Sean McDermott Street or Gardiner Street after dark is no longer …

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People queueing to buy while 310 million is wiped off the property market

according to Irish Property Watch €310 million euro was the total amount that prices on the popular property website Daft were reduced by in from last March until this February. This looks at properties listed in the 26 counties and then the total amounts that the asking prices were decreased by and then adds them all up, in percentages the average was -7.6%

However there are a few things to bear in mind, firstly, The market is probably getting used to the idea of more realistic asking prices, the market has without doubt slowed down in the last 12 months and there probably is tendency of people who are listing their property for the first time since the slowdown began to price optimistically and then after an initial period to price more realistically or ‘price to sell’.

To the Bears this may be a sign that prices are falling at a spectacular rate, and that might be true, it could also mean that prices are simply coming in line with …

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