Newstalk: Pat Kenny & Karl Deeter on rapid property price increases

The Pat Kenny Show broadcast from the Shelbourne Hotel last week and Pat had Karl Deeter on to talk about rising property price and what they mean for different people as well as who the winners and losers of it are.

For some, the crash presents new opportunities such as the couple in Longford that were mentioned, for others it means being trapped in a property they can’t pay for and which rising prices represent an opportunity of freedom, but the main point is that there is no ‘common good’ to higher costs that can’t be avoided.

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Estate Agents – amazing how nothing has changed

Something which never ceases to amaze me is how estate agents have such an uncanny ability to capitalise on any opportunity. It’s really something to be admired, the absence of a hard sale makes it particularly difficult to spot, but like sharks who can smell blood at one part per million.

One should clarify, I like estate agents, it doesn’t mean I don’t know when they are making a market. The recent practice of only having three viewings or viewings that can only take place in one week is a recent addition to the toolbox which is designed to have a few effects.

This was something I thought was a bit sharp but rare, then today encountered three times in an afternoon of making calls. The method goes as follows:

1. List a property at a price so keen that it is bound to attract a lot of interest.

2. Field lots of calls as interested buyers ring in, about 7/10 will be tire kickers because the true price sought is way over list but the innocent/uninitiated will show …

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The market will flatline then recover.

(This article originally appeared in the Sunday Independent)

The Irish property market appears to be out of palliative care and perhaps somewhere between the ICU and recovery ward. If the historical property cycle which we don’t often discuss in Ireland holds true then we should see prices become static then within two years start to rise swiftly.

Obviously there are problems, the combined forces of high unemployment, massive oversupply in many counties, and stock mismatch (apartments for sale when people want standard housing), you could add to that list of negatives almost indefinitely.

Whether you are a fan or detractor, a healthy economy has a healthy property and construction aspect to it and there is no doubt anywhere that ours is in ill health, the National Bureau of Economic Research (USA) paper ‘The housing cycle is the business cycle’ paper is worth reading for anybody who thinks we don’t need property and construction in good order to recover.

The list of positives is smaller, but compelling, we have argued for a long time that credit and confidence are the two …

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The first time buyer conundrum, to buy or not to buy?

At the moment in Ireland there is a conundrum for first time buyers: should you buy now and potentially over-pay on purpose?

It’s an unusual one and it partly related to property prices, it is a combination of taxation changes that will occur from the start of 2012 and expectations of interest rate changes from both banks and the ECB.

The argument of ‘rent or buy‘ is well established, we produced report on it with Peter Stafford (now of the IAVI/SCS) and Frank Quinn of Senior College Dun Laoghaire, but this is different – buy now or buy later isn’t taking the default of renting as an assumed continuous option, rather it is a case of delaying for the sake of market timing.

The changes in tax are on the tax expenditure side, namely TRS (tax relief at source).

Currently it is applicable to a maximum of €10,000 p.a. and the rates applicable are …

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What did bankers do wrong exactly?

Sometimes I have to wonder where the blame-game changed course and the organisations with no commitment to societal well-being were burdened with that responsibility, while those with an inherent responsibility then moved into the realms of innocence in the whole fiasco.

Imagine if you will, a bold child being held responsible for eating all the cookies and spilling all the milk, that of itself is easy, and when you go to met out ‘blame’ you might focus on the child, but if this all happened while their parents stood idly by do you still focus on the child or do you apportion significant blame to those who have the responsibility of guidance and direction? Indeed, any person who understand the nature of a child will realise that they don’t really consider the wider costs of eating all the cookies and spilling the milk (such as depriving their siblings of same, no milk for the tea etc.).

So with this in mind I’ll turn to banking, commercial banks don’t have a moral code …

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Living in the past, Irish property prices.

Paul O’Connor of MyHat.ie and PropertyWeek.ie has written up a great post on the Irish property market, the single biggest hindrance in the Irish property market is that of it being totally non-transparent when it comes to sales prices, most of us would settle for some opacity but alas, even that is too much to ask for.

Here is Paul’s Take on it:

An auction is a sale conducted in public. As such, prices paid at auction have always been available to the general public, and until auctions themselves became a victim of the market crash, we had become used to seeing auction results reported every week in the property pages of the newspapers.

In contrast, a private treaty sale is conducted in private. It does not specifically imply price secrecy, just that you can negotiate a deal at your own pace …

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Derek Braun vs David Cantwell on the Late Late show

Pat Kenny had two well known commentators on the Late Late show on Friday, David Cantwell a director with the largest new homes estate agent Hooke & MacDonald and Derek Braun author of ‘Irelands House Party’. The section on the show had some interesting debate and both sides had some valid points, some things however were not mentioned – for instance – Braun pointed out that huge profits were made on a certain south side development (and nobody doubts that) but there was no mention of the taxation that is paid via contributions to local councils, VAT, other taxation, paying bubble wages etc.

Cantwell spoke about property prices being at their bottom (granted this is only in his opinion) when considering the supply and other economic factors they clearly cannot be, as well as failing to mention some of the common sense home truths which Braun used to shoot down his arguments.

The only issue I have is that of all the developers I know only one isn’t going into liquidation, in a

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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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Rent to Buy, why?

I had dinner in early 2008 with a man who was a retired builder, he told me about the way he used to do business back in the 70’s, and he told me ‘you wait and watch! It’ll be happening that way again!’, he was right, although at the time I didn’t realise that.

He said that back in the 70’s when people came to see his houses they’d say ‘how much is it?’, and he might say ‘£12,000’ to which they invariably said ‘we can’t afford that!’, and his approach was this – ‘what can you afford?’. He would then negotiate a deal with the buyer based on renting out the property with a view to buying or letting them have the property and paying him directly without having to go down the route of standard mortgages etc. and it worked, he was successful through the 70’s and 80’s and he retired in the mid-90’s before (as he said) ‘the real fun began’.

The point about this is that being able to work …

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Where property prices are going vs where they are

There are strong signals we will be getting a rate cut and historically that means that property prices will go up in response to a monetarist move. However, in Ireland this will not cause short term stabilization due to over supply. Today we will look at some of the ECB likelihoods as well as the response that property may have as the rates change.

Historically the boom in property in Ireland only truly gathered pace when rates were artificially low, that happened when the base rate was dropped to 2% for almost three years between 2003 until late 2005. The supply of money increases when you lower rates and the corresponding effect is that asset prices will rise as a result of it, however, there are other times when monetary policy acts as a life-ring more than as a rocket pack and that is the expected result of the Read More →

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