# It is a fallacy that house prices are too high in Ireland



## cremeegg (27 Sep 2021)

Brendan Burgess said:


> We do have a serious problem with high house prices throughout the country.


Do we? Are house prices high ? What is your basis for this rather extraordinary claim, I know that's what it says in the papers, but that does not really mean it is true.

The average house price is in the region of €300,000, the monthly repayments on a loan for this house is approx. €1,200, this is 18% the gross income of a couple both working full time on the average wage.


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## Brendan Burgess (27 Sep 2021)

cremeegg said:


> Do we? Are house prices high ? What is your basis for this rather extraordinary claim,



Good question.  And, in fact, I have taken your side of the argument in public debates a few years ago. 

For example, people have argued that the "average house price in Dublin is €x" and that is too big a multiple of the average earnings. To which I replied, that First Time Buyers do not buy the average house. They buy a starter home. And I went in to one radio debate with a list of the houses which could be bought for under €300k in Dublin. 

But it's a very good point which I will move to a separate thread.

Brendan


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## Brendan Burgess (27 Sep 2021)

Here is a report from E&Y on the topic which suggests that for most people, getting the deposit together is the big problem. It's a good report, but it is based on the median house price. 









						Just how affordable is housing for Ireland’s first-time buyers?
					

The study reveals that for most of the country, the main barrier to home ownership is the deposit.




					www.ey.com
				




_The evidence suggests that lack of affordability is driving house buyers out of those key markets and leading to increased activity in other, more rural, housing markets. This will present significant challenges for the five major cities whilst at the same time potentially providing a boost to the urban areas of other counties. However, looking beyond the main urban centres, the issue of unaffordability seems more widespread. Ultimately, out of Ireland’s 26 counties, nine of them were unaffordable on the basis of the ability to raise a deposit of 10% of the median house price: seven were deemed unaffordable based on the ability to repay the mortgage should buyers be successful in gaining the deposit (on the basis that it would be more than three and a half times first-time buyers’ gross household income)._


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## cremeegg (27 Sep 2021)

According to that EY report if I understand it correctly it takes between 3 and 4 years for a FTB renting to save the deposit for the median house, 4.3 years in Dublin. 

That does not strike me as excessive. 

At age 24, 2 years out of college/3 years a qualified tradesperson,  I decide I want to buy a house, aged 29 I have the deposit saved and can afford the mortgage. That is paying rent all the while. Is that a sign that house prices are too high ? I don't think so.


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## kinnjohn (27 Sep 2021)

cremeegg said:


> According to that EY report if I understand it correctly it takes between 3 and 4 years for a FTB renting to save the deposit for the median house, 4.3 years in Dublin.
> 
> That does not strike me as excessive.
> 
> At age 24, 2 years out of college/3 years a qualified tradesperson,  I decide I want to buy a house, aged 29 I have the deposit saved and can afford the mortgage. That is paying rent all the while. Is that a sign that house prices are too high ? I don't think so.


When my Daughter moved to Austria to get the best /special interest rate she had to save over five years, in the area, she intended buying
I think part of the reasoning is they can plan/know how much housing is required in each area  5 years before buying,

 The landlord's tenancy agreement would be built around the expected date of termination of the lease and moving to new home,


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## Protocol (27 Sep 2021)

In rural Ireland, prices are okay.
It is the cities where the problem is.

I know of a modest 4-bedroom detached house on an okay estate, in a town of maybe 5k-10k in Tipperary, that sold for 215k approx during the last 12 months.

That price is fine.

The problem is that the same house within 20km of Galway or Dublin is nearly double that.


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## Protocol (27 Sep 2021)

cremeegg said:


> According to that EY report if I understand it correctly it takes between 3 and 4 years for a FTB renting to save the deposit for the median house, 4.3 years in Dublin.
> 
> That does not strike me as excessive.
> 
> At age 24, 2 years out of college/3 years a qualified tradesperson,  I decide I want to buy a house, aged 29 I have the deposit saved and can afford the mortgage. That is paying rent all the while. Is that a sign that house prices are too high ? I don't think so.




The problem is that as rents are so, so high (relatively higher than house prices), it is nearly impossible to pay Dublin rents and save for a deposit.


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## Protocol (27 Sep 2021)

Rents are way too high.

Two example: 2-bed small apt near NUIG = 1280 pm - this should be more like 800 pm

Modest 3-bedroom house in Moycullen = 1350 pm - this should be more like 800 pm


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## cremeegg (27 Sep 2021)

Protocol said:


> it is nearly impossible to pay Dublin rents and save for a deposit.


Well according to the EY report quoted by Brendan above it would take 4.3 years. Perhaps EY are wrong, it wouldn't be the first time.


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## cremeegg (27 Sep 2021)

Protocol said:


> Rents are way too high.


That would be my perception also.



Protocol said:


> Rents are way too high.
> 
> Two example: 2-bed small apt near NUIG = 1280 pm - this should be more like 800 pm


Why should it be 800pm. Why not €1,280, or indeed higher as I think it actually would be. 

This one 









						Apartments for Sale in Salthill, Galway | Daft.ie
					

Find Apartments for Sale in Salthill, Galway. Search 21 Apartments for sale on Daft.ie now.




					www.daft.ie
				




 is for sale for €250,000, is that a fairly average 2-bed apt in Galway? €800pm is a 3.8% return before any costs and before taxes, no one would be a landlord for that kind of return.


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## PGF2016 (27 Sep 2021)

Protocol said:


> The problem is that as rents are so, so high (relatively higher than house prices), it is nearly impossible to pay Dublin rents and save for a deposit.


But people can and do save for deposits. There's no shortage of people with deposits and mortgage approval. There aren't enough houses for those people and bidding wars are pushing the prices up. 

There isn't enough supply to satisfy all those with deposits.


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## noproblem (27 Sep 2021)

cremeegg said:


> That would be my perception also.
> 
> 
> Why should it be 800pm. Why not €1,280, or indeed higher as I think it actually would be.
> ...


In fairness, that apartment is not a private treaty sale, it's for sale by Public Auction. Going by what something similar sold for in Donnellan and Joyce's public auction last week (a few hundred yards away) this could sell for €300,000.00 plus.


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## Firefly (27 Sep 2021)

Protocol said:


> The problem is that as rents _Avocado on toast_ are _is_ so, so high (relatively higher than house prices), _nice_ it is nearly impossible to pay Dublin rents _eat Avocado on toast _and save for a deposit.


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## Protocol (27 Sep 2021)

Cremeegg asks why I think a 2-bedroom apt in the suburbs of Galway city should be 800pm, rather than the 1280 it is.

I suppose I base my opinions relative to incomes, and relative to rents in cities abroad.

I had a look here:





__





						Property Prices Comparison Between Galway, Ireland And Berlin, Germany
					






					www.numbeo.com
				




It suggests that Galway rents exceed Berlin rents.

I don't think they should.


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## PebbleBeach2020 (27 Sep 2021)

By that logic, should a Ferrari be fifty thousand euros so and not two hundred thousand euros?


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## The Horseman (28 Sep 2021)

House prices are based on costs of input. Why is it so difficult for people to understand this? Somebody has to pay for these costs. We have become paralysed trying to please everyone and ending up pleasing no one. 

If we import raw materials we can't dictate prices we pay. Raw material costs have increased. Lower building regs which should lower build costs. 

For example why do all houses need to be an a ber rating?. Why not have a lower rating and work up that. I know personally my house is a mid 70's build and is far from that. At best it's a c rating but it's perfectly habital.


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## Purple (28 Sep 2021)

The Horseman said:


> House prices are based on costs of input.


House prices are based on what the market will stand. House costs are based on input costs. The difference is the profit or loss. 


The Horseman said:


> Why is it so difficult for people to understand this? Somebody has to pay for these costs. We have become paralysed trying to please everyone and ending up pleasing no one.


Just about everything else has become cheaper to make over the last 50 years. Why are houses so much more expensive? (and no, it's not because standards are higher). The problem is that the construction sector internationally is dysfunctional. That's been covered in detail elsewhere.


The Horseman said:


> If we import raw materials we can't dictate prices we pay. Raw material costs have increased. Lower building regs which should lower build costs.


Not by much. Site costs, taxes and charges and the cost of finance are bigger issues and easier to fix. The fact that around 30% of construction materials that are delivered to a construction site end up as waste tells us that the problem is not the cost of materials. Factory built houses generate around 5% waste. 


The Horseman said:


> For example why do all houses need to be an a ber rating?. Why not have a lower rating and work up that. I know personally my house is a mid 70's build and is far from that. At best it's a c rating but it's perfectly habital.


Yes, but higher BER houses produce lower carbon emissions over their lifetime.


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## Purple (28 Sep 2021)

PebbleBeach2020 said:


> By that logic, should a Ferrari be fifty thousand euros so and not two hundred thousand euros?


A ferrari is a discretionary luxury item. A place to live isn't. A doubling in the price of caviar shouldn't concern everyone but a doubling in the price of bread and vegetables should.


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## NoRegretsCoyote (28 Sep 2021)

Here is a list of per square metre prices for 41 north European cities. Ireland is not particularly high: Dublin (13), Cork (32), Limerick (36). The latter two cities are cheaper then the Baltics, which are pretty low-wage places. Dublin is on a par with Liverpool, very much a second-tier UK city economically.

Of course for rents it's a different story. But prices themselves are medium-low by comparison with peers.


1London, United Kingdom16500.432Stockholm, Sweden11913.183Oslo, Norway10220.044Helsinki, Finland10056.345Saint Helier, Jersey8278.306Copenhagen, Denmark8238.067Brighton, United Kingdom8189.828Glasgow, United Kingdom8125.479Cambridge, United Kingdom7997.7210Gothenburg, Sweden7341.6711Espoo, Finland7134.8212Tromso, Norway6968.38*13**Dublin, Ireland**6914.45*14Liverpool, United Kingdom6853.1215Trondheim, Norway6757.6916Stavanger, Norway6571.7717Bergen, Norway6500.7118Bristol, United Kingdom6314.8219Arhus, Denmark6146.9220Lund, Sweden6060.3821Uppsala, Sweden5600.8222Turku, Finland5428.0023Manchester, United Kingdom5405.2024Edinburgh, United Kingdom5357.2025Tampere, Finland5319.1026Birmingham, United Kingdom5253.2527Reykjavik, Iceland4989.7628Aalborg, Denmark4920.0329Derby, United Kingdom4830.0030Southampton, United Kingdom4786.8631Malmo, Sweden4625.24*32**Cork, Ireland**3983.17*33Oulu, Finland3809.0334Vilnius, Lithuania3582.9435Tallinn, Estonia3372.30*36**Limerick, Ireland**3016.64*37Aberdeen, United Kingdom2620.1138Kaunas, Lithuania2592.8439Riga, Latvia2450.8240Tartu, Estonia2390.8041Belfast, United Kingdom2368.2


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## Purple (28 Sep 2021)

NoRegretsCoyote said:


> Here is a list of per square metre prices for 41 north European cities. Ireland is not particularly high: Dublin (13), Cork (32), Limerick (36). The latter two cities are cheaper then the Baltics, which are pretty low-wage places. Dublin is on a par with Liverpool, very much a second-tier UK city economically.
> 
> Of course for rents it's a different story. But prices themselves are medium-low by comparison with peers.
> 
> ...


Prices are being kept lower here by the Central Bank lending rules. That's a good thing.


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## The Horseman (28 Sep 2021)

Purple said:


> House prices are based on what the market will stand. House costs are based on input costs. The difference is the profit or loss.
> 
> Just about everything else has become cheaper to make over the last 50 years. Why are houses so much more expensive? (and no, it's not because standards are higher). The problem is that the construction sector internationally is dysfunctional. That's been covered in detail elsewhere.
> 
> ...


If costs outweigh sale price then properties are not built. 

The spec of houses has increased significantly over the last 50 yrs and someone has to pay for this increase. 

I old enough to remember houses with no bathrooms inside. When we bought our family house in the mid 70's it came with nothing  no central heating, no insulation, no garden wall, no shed, a very basic kitchen. 

Nowadays properties are very well insulated, have solar panels, on suite bathrooms etc so who how exactly is supposed to pay for all of these?

Site costs, vat, finance costs etc are an issue but there are a number of the reasons our we are where we are. Our eviction laws are non existent. Failure to pay your mortgage or rent has no real consequences. Which is one of the reasons foreign banks are leaving the Irish market. Vat on the price of a house is significant where the purchaser has to include the that as part of the mortgage required. What people fail to realise is that if you lower Vat and other taxes relating to the construction sector this needs to be found elsewhere if you want to maintain social welfare levels and public services. 

You can't have both, something needs to give.


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## Purple (28 Sep 2021)

The Horseman said:


> If costs outweigh sale price then properties are not built.


Yes, and then prices rise as demand out strips supply, and then supply rises, assuming that there are no other constraints on the market. 


The Horseman said:


> The spec of houses has increased significantly over the last 50 yrs and someone has to pay for this increase.


The specs on cars and just about every other manufactured item have increased in the last 50 years but prices have dropped massively. This is due to improvements in productivity within those sectors. Construction is unique as an industry in that it has hardly seen any increases in productivity in the last 50 years. Increases in standards are not anywhere near the main reason prices have gone up. 


The Horseman said:


> I old enough to remember houses with no bathrooms inside. When we bought our family house in the mid 70's it came with nothing  no central heating, no insulation, no garden wall, no shed, a very basic kitchen.
> 
> Nowadays properties are very well insulated, have solar panels, on suite bathrooms etc so who how exactly is supposed to pay for all of these?


Cars used to have no airbags, a solid steering column, no electronics, no ABS, very inefficient engines, they used to rust and belch black fumes and break down all the time. New cars are vastly superior and cheaper in real terms. Increases in standards are not anywhere near the main reason prices have gone up


The Horseman said:


> Site costs, vat, finance costs etc are an issue but there are a number of the reasons our we are where we are. Our eviction laws are non existent. Failure to pay your mortgage or rent has no real consequences. Which is one of the reasons foreign banks are leaving the Irish market. Vat on the price of a house is significant where the purchaser has to include the that as part of the mortgage required. What people fail to realise is that if you lower Vat and other taxes relating to the construction sector this needs to be found elsewhere if you want to maintain social welfare levels and public services.
> 
> You can't have both, something needs to give.


I agree. The construction sector is structurally grossly inefficient. We shouldn't subsidise inefficient industries and sectors as it encourages them not to change, consolidate and modernise. We do it for farming and we do it in Healthcare and both are basket cases.  We did it in construction for years, and still do it through grants for buyers, and look where we are.


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## The Horseman (28 Sep 2021)

Purple said:


> Yes, and then prices rise as demand out strips supply, and then supply rises, assuming that there are no other constraints on the market.
> 
> The specs on cars and just about every other manufactured item have increased in the last 50 years but prices have dropped massively. This is due to improvements in productivity within those sectors. Construction is unique as an industry in that it has hardly seen any increases in productivity in the last 50 years. Increases in standards are not anywhere near the main reason prices have gone up.
> 
> ...


Electric cars are by no means cheaper in real terms. You can't compare manufacturer goods to property. Property is more than the bricks and mortar. 

It is the infrastructure that goes with it, the power supply, drainage, etc.

If you don't subsidise it then properties won't be built. If you want the state to build then the State must make some serious decisions. If people don't pay mortgage or rent evict them. I seen a comment on another either thread on this or on boards where DCC is owed a fortune in unpaid rent. 

If you want to bring the cost of housing down and the State can do so by using economies of scale and then bypass the developer profit then deal with these issues. Remember it's all of those who play by the rules end up paying for those who don't.


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## WolfeTone (28 Sep 2021)

Maybe average house prices are not too expensive for average income earners. 

Perhaps average houses, are priced too expensive for average income earners and families? 

Average house being a 3 bed terrace or semi-detach.


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## Purple (28 Sep 2021)

The Horseman said:


> Electric cars are by no means cheaper in real terms.


Modern Internal Combustion engine cars are a fraction of the real cost of what they were 40 years ago.


The Horseman said:


> You can't compare manufacturer goods to property.


From a manufacture and supply perspective you certainly can. We build houses the same way we did 50 years ago. We biuld them to modern specifications but the construction method hasn't changed. It is changing now but it'll take years or decades for that to fully permeate the industry. Houses should be manufactured and assembled, not built.


The Horseman said:


> Property is more than the bricks and mortar.


Yes it is. A good cigar is more than a smoke but it's still a cigar. 


The Horseman said:


> It is the infrastructure that goes with it, the power supply, drainage, etc.


And?


The Horseman said:


> If you don't subsidise it then properties won't be built.


Why do you think that?


The Horseman said:


> If you want the state to build then the State must make some serious decisions.


Agreed. I don't want the State to build. I want the State to finance the building of public housing and, if necessary, subsidise suppliers who use modern construction methods. 


The Horseman said:


> If people don't pay mortgage or rent evict them. I seen a comment on another either thread on this or on boards where DCC is owed a fortune in unpaid rent.


Agreed. 


The Horseman said:


> If you want to bring the cost of housing down and the State can do so by using economies of scale and then bypass the developer profit then deal with these issues. Remember it's all of those who play by the rules end up paying for those who don't.


Or they can shorted the planning process so the cost of finance is reduced.
Or they can CPO agricultural land, service it and sell it to developers, but only the ones using modern manufacturing methods. 
Or they can modernise building standards so that factory built houses become the benchmark.
Or they can tax the bejesus out of anyone that hoards building land.

About half the price of a house is the construction price. As I've already pointed out within that building cost there is a totally unnecessary amount of labour and 30% of the materials ends up in landfill. Why on earth would we subsidise such a dysfunctional process and sector?


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## joe sod (28 Sep 2021)

The Horseman said:


> The spec of houses has increased significantly over the last 50 yrs and someone has to pay for this increase.
> 
> I old enough to remember houses with no bathrooms inside. When we bought our family house in the mid 70's it came with nothing no central heating, no insulation, no garden wall, no shed, a very basic kitchen.


Agree, I made exactly the same point in another thread, @Purple also makes a good point about cars being manufactured to higher spec now than 50 years ago. However one factor not taken into account with this comparison is that these higher spec cars have short life spans maybe 10 years then they are obsolete and not worth repairing, in fact it is this complexity that increases their obsolescence. If you ever watch classic car programs the cars from 50 years ago are much more desirable for amateur classic car enthusiasts precisely because they don't have this complexity.
A house is there for a century you can't scrap it and buy a new one after a decade like you can for a car


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## odyssey06 (28 Sep 2021)

joe sod said:


> Agree, I made exactly the same point in another thread, @Purple also makes a good point about cars being manufactured to higher spec now than 50 years ago. However one factor not taken into account with this comparison is that these higher spec cars have short life spans maybe 10 years then they are obsolete and not worth repairing, in fact it is this complexity that increases their obsolescence. If you ever watch classic car programs the cars from 50 years ago are much more desirable for amateur classic car enthusiasts precisely because they don't have this complexity.
> A house is there for a century you can't scrap it and buy a new one after a decade like you can for a car


We didn't have the NCT 50 years ago either though.
I think car longevity peaked in the late 1990s with better rust proofing etc and they were much safer and reliable than earlier era cars.
Emissions are putting a lot of those cars off the road, something never checked pre NCT.

It's the electronics with the spec of the cars reducing their lifespan now & complexity of repair cost.


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## Purple (28 Sep 2021)

joe sod said:


> A house is there for a century you can't scrap it and buy a new one after a decade like you can for a car


That leads on to another point. Do we want houses to last 200 years? Look at the cost of upkeep, the bad use of space and energy waste on old houses. A 100 year old house has been completely re-plumbed and completely re-wired. All of the windows have been replaced at least once. All of the soffit and facia has been replaced (at least once). It has been re-insulated at least once.
The expensive bit is the site and ground works. Houses should be designed to be disassembled and recycled at they become obsolete. Houses last 70-100 years on average. Factory built wooden frame houses last exactly the same as a traditional block and wood house.


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## The Horseman (28 Sep 2021)

Purple said:


> Modern Internal Combustion engine cars are a fraction of the real cost of what they were 40 years ago.
> 
> From a manufacture and supply perspective you certainly can. We build houses the same way we did 50 years ago. We biuld them to modern specifications but the construction method hasn't changed. It is changing now but it'll take years or decades for that to fully permeate the industry. Houses should be manufactured and assembled, not built.
> 
> ...


You want the state to control the market. Markets don't work like that no matter how much you want them too. Entrepreneurs specialise in finding how to maximise profit.

Markets aim is profit maximisation. Why would a developer/builder build at a price lower than market price. The developer/builder will want the most income. If subsidised  price is greater than income from market prices then they will go that way. 

Deal with the issue of non payment of mortgages and rent and work your way backwards to the other issues. These issues are completely within the control of the govt to deal with. If banks can recoup properties from non paying owners/tenants they maybe more willing to loan and it might even encourage foreign banks back to Ireland. 

The result is increased competition and reduced finance costs for developers/builders.


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## Leo (28 Sep 2021)

joe sod said:


> However one factor not taken into account with this comparison is that these higher spec cars have short life spans maybe 10 years then they are obsolete and not worth repairing, in fact it is this complexity that increases their obsolescence.


Yet car warranties are now longer than they've ever been? And more than 46% of the cars on our roads are 10+ years old? Average age of cars still on the road here is 9 years.

It's not that cars are unrepairable or obsolete after 10 years now, it's down to the fact that efficient manufacturing has brought the up front price down to a level where even those with very limited funds can afford something better, so there is reduced demand for a lot of 10+ year old cars.


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## Purple (28 Sep 2021)

The Horseman said:


> You want the state to control the market.


Where did you get that notion from? That's the last thing I want. I do want the State to be efficient in how it interacts with the market. At the moment the State in grossly inefficient and it passes on the cost of that inefficacy to the buyer in the form of development levies and the high cost of finance due to delays in planning.  


The Horseman said:


> Markets don't work like that no matter how much you want them too. Entrepreneurs specialise in finding how to maximise profit.


They specialise in finding profit in the market. The more dysfunctional the market the more profits can be made. If you can control supply you can earn supernormal profits (5th year economics, week 1)


The Horseman said:


> Markets aim is profit maximisation. Why would a developer/builder build at a price lower than market price. The developer/builder will want the most income.


See above.


The Horseman said:


> If subsidised  price is greater than income from market prices then they will go that way.


What?


The Horseman said:


> Deal with the issue of non payment of mortgages and rent and work your way backwards to the other issues. These issues are completely within the control of the govt to deal with. If banks can recoup properties from non paying owners/tenants they maybe more willing to loan and it might even encourage foreign banks back to Ireland.


I agree with you but that just places a burden on the people who aren't scroungers and thieves. It doesn't impact supply or prices. 


The Horseman said:


> The result is increased competition and reduced finance costs for developers/builders.


How so?
Developers who own the land want things as they are. They are making a fortune. Builders don't, they have the high cost of land and all the associated costs and risks.


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## Peanuts20 (28 Sep 2021)

Interesting if you do a search on myhome.ie, you can find 110 properties for €200k or less on it Dublin. Now some of them, to be honest, are not long term homes but in terms of getting started and "on the ladder" they are fine.

However, I can't help but wonder if the concept of the ladder went out the window for a lot of people after the crash of the Celtic Tiger and if they are jumping to desiring the forever home instead, having seen so many people fall into the negative equity trap? 

reality also is that to buy a 2 bed apt in Dublin for 200k, you need a joint income of 50-60k or both of you (assuming it's a couple) working in a job that pays over €15 per hour. That excludes so many people. Reality is that if you work in retail or the services industry, buying in Dublin is a pipedream. 40 years ago, you'd have got the council house but they're just not there either now


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## odyssey06 (28 Sep 2021)

Peanuts20 said:


> Interesting if you do a search on myhome.ie, you can find 110 properties for €200k or less on it Dublin. Now some of them, to be honest, are not long term homes but in terms of getting started and "on the ladder" they are fine.
> 
> However, I can't help but wonder if the concept of the ladder went out the window for a lot of people after the crash of the Celtic Tiger and if they are jumping to desiring the forever home instead, having seen so many people fall into the negative equity trap?
> 
> reality also is that to buy a 2 bed apt in Dublin for 200k, you need a joint income of 50-60k or both of you (assuming it's a couple) working in a job that pays over €15 per hour. That excludes so many people. Reality is that if you work in retail or the services industry, buying in Dublin is a pipedream. 40 years ago, you'd have got the council house but they're just not there either now


I don't think it has to be forever home, but apartments suffered more than houses in the last crash, and recovered more slowly.
For a lot of people it wasn't a rung onto the property ladder, it was a snake off it which trapped them in negative equity.

It might be more appropriate to talk about 'starter houses'.


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## The Horseman (28 Sep 2021)

Purple said:


> Where did you get that notion from? That's the last thing I want. I do want the State to be efficient in how it interacts with the market. At the moment the State in grossly inefficient and it passes on the cost of that inefficacy to the buyer in the form of development levies and the high cost of finance due to delays in planning.
> 
> They specialise in finding profit in the market. The more dysfunctional the market the more profits can be made. If you can control supply you can earn supernormal profits (5th year economics, week 1)
> 
> ...


If the state wants to be efficient then build themselves. 

Thank you for the explanation of " supernormal profits" you should then understand when supernormal profits are earned new suppliers are attracted to the market to drive down supernormal profits to normal profits. 5th year economics week 2. Ie increased competition. 

If you punish those who don't pay what they owe you free up property for those who will pay and you can use that income to invest in additional social housing supply.

Many developers can avail of economies of scale because banks won't loan for whole developments at the start because they are concerned they won't get paid which is why developments are released in phases. This impacts on the developers/builders costs as they could get better bulk discounts if they purchase for whole development.


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## Purple (28 Sep 2021)

The Horseman said:


> If the state wants to be efficient then build themselves.


God no. The State is rubbish at just about everything. They should never build themselves. Imagine 20,000 builders who were also public servants. We've have to shoot them when we ran out of houses for them to build.


The Horseman said:


> Thank you for the explanation of " supernormal profits" you should then understand when supernormal profits are earned new suppliers are attracted to the market to drive down supernormal profits to normal profits. 5th year economics week 2. Ie increased competition.


Where are these new suppliers going to get development land?
That's what's in shortest supply and that's where the supernormal profits are being made. The market is cornered. 


The Horseman said:


> If you punish those who don't pay what they owe you free up property for those who will pay and you can use that income to invest in additional social housing supply.


Yea, to house the people who have just been evicted for not paying their rent. We don't do the whole Poor House thing anymore. Maybe we should but that's a whole different ball of wax.


The Horseman said:


> Many developers can avail of economies of scale because banks won't loan for whole developments at the start because they are concerned they won't get paid which is why developments are released in phases. This impacts on the developers/builders costs as they could get better bulk discounts if they purchase for whole development.


Yep, so the State CPO'ing land and/or releasing serviced State owned land would shorted the cycle. So would factory built houses. The issue isn't just the interest rate but the time it takes to get planning permission and the construction time. Both of those problems can be addressed. That reduces the risk and so the risk premium on the finance drops.


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## time to plan (28 Sep 2021)

cremeegg said:


> Do we? Are house prices high ? What is your basis for this rather extraordinary claim, I know that's what it says in the papers, but that does not really mean it is true.
> 
> The average house price is in the region of €300,000, the monthly repayments on a loan for this house is approx. €1,200, this is 18% the gross income of a couple both working full time on the average wage.


It is neither 'true' or 'false'. It can't be as it is really a value judgment. House prices are not too high if you've just inherited a house, but they are too high if you are a single parent in Dublin working for a below average wage.


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## The Horseman (28 Sep 2021)

Purple said:


> God no. The State is rubbish at just about everything. They should never build themselves. Imagine 20,000 builders who were also public servants. We've have to shoot them when we ran out of houses for them to build.
> 
> Where are these new suppliers going to get development land?
> That's what's in shortest supply and that's where the supernormal profits are being made. The market is cornered.
> ...


OK so why were developers building and selling enmasse (before the change in the law) to institutional investors. 

Simple they were guaranteed their prices and were able to get bulk deals etc for inputs. 

Developers don't care who they sell to once they get paid which goes back to my point of not being able to access finance for whole developments. 

There is no concerted conspiracy between developers. With the increasing anti developer agenda why would they run the risk of seeing the value of land decrease by the imposition of increased taxes etc. That does not make business sense.


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## Purple (28 Sep 2021)

The Horseman said:


> OK so why were developers building and selling enmasse (before the change in the law) to institutional investors.
> 
> Simple they were guaranteed their prices and were able to get bulk deals etc for inputs.
> 
> Developers don't care who they sell to once they get paid which goes back to my point of not being able to access finance for whole developments.


Yes, and the State is the main tenant. If the State wasn’t scooping them up they wouldn’t be nearly as attractive a proposition.


The Horseman said:


> There is no concerted conspiracy between developers. With the increasing anti developer agenda why would they run the risk of seeing the value of land decrease by the imposition of increased taxes etc. That does not make business sense.


I know there’s no plot by developers, they are just making sound business decisions given the market conditions.


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## kinnjohn (28 Sep 2021)

The Irish Government should concentrate and plan on having a Glut of housing for people on the average industrial wage in our cities, to control prices over all other housing needs, along with good transport system,

Someone posted that there were 110 properties for less than 200K for sale on myhome. ie,

110 homes for sale for under 200K in Dublin is about as useful as an ashtray on a motorbike to make housing affordable to people on an average industrial wage,
 in rural Ireland, we have local needs when it comes to housing
Why can't we have local needs for people working in Dublin below a certain income, 

Housing units are getting smaller in cities over the EU as families got smaller,

Smaller units would also attract retired people to downsize,

 570000 fewer people are living in Dublin than was forecasted in 2005 so where has the original plans for this population growth gone to,


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## The Horseman (28 Sep 2021)

Purple said:


> Yes, and the State is the main tenant. If the State wasn’t scooping them up they wouldn’t be nearly as attractive a proposition.
> 
> I know there’s no plot by developers, they are just making sound business decisions given the market conditions.


So the issue is the State not the developer or the cost of property. These properties would find a natural market price if it was not for the States interference.


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## PebbleBeach2020 (28 Sep 2021)

Purple said:


> A ferrari is a discretionary luxury item. A place to live isn't. A doubling in the price of caviar shouldn't concern everyone but a doubling in the price of bread and vegetables should.


A place to live in Dublin is luxury compared to living half an hour outside Dublin. If u can't afford smthg, then look at the options.


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## Protocol (28 Sep 2021)

House prices in Dublin are so high that two people (the Taoiseach and a doctor) can only afford a terraced house in Dublin 8.

The width is one door and one window.

And yet it is 800k.


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## Purple (29 Sep 2021)

The Horseman said:


> So the issue is the State not the developer or the cost of property. These properties would find a natural market price if it was not for the States interference.


It's not binary. Because of the supply side issues with land and the dysfunctionality of the construction sector the market doesn't function in the way is should under a theoretical model where there is limitless potential short to medium term supply to match whatever demand there is.


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## Purple (29 Sep 2021)

PebbleBeach2020 said:


> A place to live in Dublin is luxury compared to living half an hour outside Dublin. If u can't afford smthg, then look at the options.


So someone on a moderate wage who can't afford a home in Dublin should buy 30-50 Km outside the city and have to shoulder the extra cost of that commute? They should take their kids away from their friends and family and school? 
I'd rather we fixed the supply side issues. I don't think living in a modest home on the outskirts of Dublin should be seen as a luxury.


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## The Horseman (29 Sep 2021)

Purple said:


> It's not binary. Because of the supply side issues with land and the dysfunctionality of the construction sector the market doesn't function in the way is should under a theoretical model where there is limitless potential short to medium term supply to match whatever demand there is.


It would if it was allowed to find its equilibrium. There are plenty of developers who are only too happy to commence construction if the State stopped changing the rules all the time. it is you who suggested we get supply up and it wont happen if the State continually changes the conditions. 

This is adding to the banks reluctance to loan to developers. As I have already said developers don't care who they sell to but they can't finance the builds if the market is not allowed find its natural place. The State is introducing business uncertainty which is influencing the banks decisions to loan and at what interest charges. 

It makes no business sense for a developer to sit on land with the risk of increased taxes. If your view is correct then why would a developer not go to for example Germany (or whoever can construct off site) and order the units to meet the site requirements and reduce his costs (30% waste v your 5% waste figs) and make bigger profits?

Surely developers would be queuing up to do this if it was the way to go?


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## Purple (29 Sep 2021)

@kinnjohn made an excellent point in this thread about the longer term participation rates in the workforce of people who have to commute long distances.


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## Purple (29 Sep 2021)

The Horseman said:


> It would if it was allowed to find its equilibrium. There are plenty of developers who are only too happy to commence construction if the State stopped changing the rules all the time. it is you who suggested we get supply up and it wont happen if the State continually changes the conditions.
> 
> This is adding to the banks reluctance to loan to developers. As I have already said developers don't care who they sell to but they can't finance the builds if the market is not allowed find its natural place. The State is introducing business uncertainty which is influencing the banks decisions to loan and at what interest charges.
> 
> ...


So what is there a housing crisis? 
Why are they talking about vacant site taxes?
Why are there banks of land sitting undeveloped for years?

Why are you talking about developers and builders as if they are the same thing?


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## The Horseman (29 Sep 2021)

Purple said:


> So what is there a housing crisis?
> Why are they talking about vacant site taxes?
> Why are there banks of land sitting undeveloped for years?
> 
> Why are you talking about developers and builders as if they are the same thing?


Access to credit is why. Developers make money from developing. Banks are reluctant to loan because of risk of non payment. 

Why do you think so many foreign banks are leaving Ireland. If we have the highest mortgage interest rates in Europe business logic would suggest they stay and more would be attracted to Ireland (remember your supernormal profits example in an earlier thread).


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## Purple (29 Sep 2021)

The Horseman said:


> Access to credit is why. Developers make money from developing. Banks are reluctant to loan because of risk of non payment.


Really? That's it? Just access to credit?

There's no shortage of labour?
There's no issue with land suppy?
The fact that the sector is grossly inefficient isn't a problem?
If the developers had better access to credit the builders would just appear, the land would become available and prices would drop. Is that what you are saying?



The Horseman said:


> Why do you think so many foreign banks are leaving Ireland.


Off the top of my head I'd say it has to do with Capital Ratios, the large number of Tracker Mortgages which are even less attractive in a low interest environment, the unwillingness of the courts to allow repossessions and the high costs they face in what is a small market.


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## PGF2016 (29 Sep 2021)

Protocol said:


> House prices in Dublin are so high that two people (the Taoiseach and a doctor) can only afford a terraced house in Dublin 8.
> 
> The width is one door and one window.
> 
> And yet it is 800k.


House prices are so high that two people can only afford to pay .... €800k for a house? 

There are many houses in the city for €800k (and far less) that are far bigger than the example you've cherry picked.


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## The Horseman (29 Sep 2021)

Purple said:


> Really? That's it? Just access to credit?
> 
> There's no shortage of labour?
> There's no issue with land suppy?
> ...


During the last boom Labour was not an issue. Non nationals made up a significant portion of our trades people. Alot of the trade people emigrated after the last boom. Some would return in a heart beat if the work was there.

The land is available the credit isn't. 

The capital ratios can be financed by hq's of banks. As Ireland is a relatively small market in comparison to other countries these banks trade in they could easily subsidise the capital requirements. 

Couple this with the increase in online banking then the cost base is reducing rather than increasing in the future.


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## Purple (29 Sep 2021)

The Horseman said:


> During the last boom Labour was not an issue. Non nationals made up a significant portion of our trades people. Alot of the trade people emigrated after the last boom. Some would return in a heart beat if the work was there.


The UK and Ireland were the only counties which allowed free movement of labour from the new Eastern European EU member states. That labour supply isn't there any more so no, that's not a solution.


The Horseman said:


> The land is available the credit isn't.


You should let the government and ERSI know. They, along with just about everyone else, think there's a shortage.


The Horseman said:


> The capital ratios can be financed by hq's of banks. As Ireland is a relatively small market in comparison to other countries these banks trade in they could easily subsidise the capital requirements.


The Capital Ratio's are the reserves of cash the bank has to hold relative to the loans they give out. The Central Bank sets those ratio's. 


The Horseman said:


> Couple this with the increase in online banking then the cost base is reducing rather than increasing in the future.


Increased levels of regulation are where the extra costs are coming from. Economies of scale dilute those costs in larger markets. This is a tiny market.


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## kinnjohn (29 Sep 2021)

The Horseman said:


> During the last boom Labour was not an issue. Non nationals made up a significant portion of our trades people. Alot of the trade people emigrated after the last boom. Some would return in a heart beat if the work was there.


I can tell you the none nationals trade people who left will not be coming back, they are the kind of people who travelled to find work and security for their families,

They trade people and their families who left can be found working for less than they were getting in Ireland all over the EU with added security for their families in the event of being out of work between jobs,


In fact, there are lots of Irish tradespeople who switched to Industrial employment and in lots of cases to lower wages for the security of employment
who will not be switching back to the construction industry having got burned out of work between jobs offer less supports than people who never worked a day in their life,


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## PebbleBeach2020 (29 Sep 2021)

Purple said:


> So someone on a moderate wage who can't afford a home in Dublin should buy 30-50 Km outside the city and have to shoulder the extra cost of that commute? They should take their kids away from their friends and family and school?
> I'd rather we fixed the supply side issues. I don't think living in a modest home on the outskirts of Dublin should be seen as a luxury.


Like it is in new York and London and all other cities of the world?


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## kinnjohn (29 Sep 2021)

PebbleBeach2020 said:


> Like it is in new York and London and all other cities of the world?


Dublin 1.4 million
New York almost 19 million
London 9.5 million


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## Purple (29 Sep 2021)

PebbleBeach2020 said:


> Like it is in new York and London and all other cities of the world?


New York and London have excellent public transport links. 
As pointed out they are vastly bigger than Dublin (the population with 45 Km of the centre of both cities is a multiple of the population of this entire country).


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## PGF2016 (29 Sep 2021)

If prices were too high no one would be buying houses. I have a sibling who is trying to purchase for the past while and is experiencing bidding wars for many properties. 

Can talk about the prices all day but the issue is the lack of supply.


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## Purple (29 Sep 2021)

PGF2016 said:


> If prices were too high no one would be buying houses. I have a sibling who is trying to purchase for the past while and is experiencing bidding wars for many properties.
> 
> Can talk about the prices all day but the issue is the lack of supply.


Prices are high mainly because supply massively exceeds demand. Prices are too high for average income households to buy 3-4 bed houses in most of Dublin. 
Dublin in a small city with lots of space in an underpopulated country on the periphery of Europe.


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## Purple (29 Sep 2021)

PGF2016 said:


> Can talk about the prices all day but the issue is the lack of supply.


Exactly. The measures the government are bringing in are to stimulate demand in a market where demand already exceeds supply. It makes no sense.


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## Protocol (30 Sep 2021)

Here is a discussion of something @Purple has mentioned many times:

Productivity in construction 









						What happened to construction productivity? Part 1: Measurement
					

How do we know what's actually happening to construction productivity?




					noahpinion.substack.com


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## noproblem (30 Sep 2021)

cremeegg said:


> That would be my perception also.
> 
> 
> Why should it be 800pm. Why not €1,280, or indeed higher as I think it actually would be.
> ...


This did go to auction and was in fact sold for its AMV. I made a few enquiries about it and has had  its car park flooded on many occasions. Did anything happen to the 1st floor apts during the flooding? Not that I heard of, I was told. For someone who wouldn't be too worried about the parking and the management fee of €1,700.00 a year, it's not a bad price for an apt right next to the Salthill prom, near enough to the hospital and UNI for renting, but nothing out of it as regards profit from letting.

Bidding Closed 

BIDDERTIMEAMOUNT7888230/09/2021 11:23:06€250,000
SOLD FOR
€250,000


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