Question on uk market

Z

z106

Guest
You know the way people are always on about how in ireland they produce 80,000 units a year (perhaps less than that these days).
And then they always say that due to planning laws in the UK that there are only (not sure - could be wrong with the figure) 125,00-ish units being built a year.
If this is true - and i assume it has to be somewhat true given the amount of times i've read it - how come thereisn't ridiculous apprecitation over there given the population?
(based on the ratio of the uk population to the irish population you would expect c. 800,000 per year - certainly nothing near that)

I also assume the uk has plenty of immigration.

Obviously there are other factors which result in general, only low to mid-single digit appreciation these days.

WHat are the other factors which override the above statistic ?

Taking the above statistics alone one would expect massive appreciation in the uk.
 
Still though - we've been coming from a lower base for a long time - and they had the same boom we had.

LIke - what were they producing a few years ago?
It must have been in the millions per year in that case for them to catch up to only require 125,000 these days and still have low appreciation.
 
qwertyuiop said:
Still though - we've been coming from a lower base for a long time - and they had the same boom we had.

LIke - what were they producing a few years ago?
It must have been in the millions per year in that case for them to catch up to only require 125,000 these days and still have low appreciation.
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It is an anomaly alright...must be the fact that everyone you talk to these days has 3 apartments!
Strange though
 
Presumably, the UK were building several hundred thousands of houses per annum in the post-war boom period from the 1950s to the early 1970s. For most of that period, I'd guess that more houses were demolished than built in Ireland due to emigration.
 
What were they outputtting during the boom of the last 10 years I wonder ?
 
If this is true - and i assume it has to be somewhat true given the amount of times i've read it - how come thereisn't ridiculous apprecitation over there given the population?

I also assume the uk has plenty of immigration.

Obviously there are other factors which result in general, only low to mid-single digit appreciation these days.

WHat are the other factors which override the above statistic ?

Taking the above statistics alone one would expect massive appreciation in the uk.
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Its pretty simple why there isn't massive appreciation, its because people can't afford to upgrade anymore when multiples of cost to income are at record highs of between 6-10 times earnings. Contrast this to the long term average of around 3times average earnings that it was in the late 90's.

Clearly the UK market is in a speculative phase and highly overvalued.

I do not understand why people on this board still expect huge capital appreciation in the UK merely because it is cheaper than Dublin.

The fundamentals for investing in UK property are all wrong yet people here still think its great to get to the party years too late.
 
I don't think anybody is saying they expect massive appreciation in the uk.
It;s generally accepted there won't be. (That said I did recently buy in London)
My question was looking for the clearly present overriding factors that outweigh the output dilemma - I wasn't questioning whether they are/are not there.
Everyone knows they are there.What are they is the question.

Anyway - Your answer implies that the level of output is irrelevant to the level of multiples.
Comparing it to Irelands output they are nearly the same(-ish) - and that means one would think there is a HUGE shortfall given the difference in populations.
SO you are saying that the multiples overrides any supply and demand issue?
Just to exaggerate your point - lets say there were no units produced next year. Would this in ur book result in still low inflation due to the multiples?
I think not.
I accept I am exaggerating what you said to stress my point - however,I still think 125,000 units is ridiculously low.
There has to be other reasons too.
Any other reasons out there other trhan the multiple issue anyone?
 
The fact the Irish developers are always comparing the output of Uk to Ireland is ridiculous. The fact is supply in Ireland is too high which is why over 10% of houses in Ireland are currently empty and we are currently seeing problems emerge as a result. Look at it this way if the UK was making the same ratio of houses to populations as Ireland they would be building 1.1m units a year and would clearly be oversupplying the market there. The fact that Ireland is building 80,000 houses per year is way too high for population of 4m.
 
Fair enough - but if the 80,000 odd is such a huge oversupply how come there isn't massive depreciation ? That isn't happening at all.
The bottom line is both nations produce a similar no. of units per year - both are looking at similar low to mid single digit apprecitaion - and both have completely different populations !!
I can't figure it out.
 
qwertyuiop said:
Fair enough - but if the 80,000 odd is such a huge oversupply how come there isn't massive depreciation ? That isn't happening at all.
The bottom line is both nations produce a similar no. of units per year - both are looking at similar low to mid single digit apprecitaion - and both have completely populations !!
I can't figure it out.
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Just because there is a supply issue does not equate to double digit growth.

Look at the last 6years. Property has become so rediculously overpriced against earnings. Therefore no disposable income to pay for the increased mortgages. Add in the rising interest rates putting up the average mortgage by some 25%-30%.

Based upon the increased cost people are reluctant to move up the ladder. I myself am in this position. When the first time buyers also are holding off buying by renting and 2nd time buyers like me are holding off from moving up the ladder, the whole market becomes stagnated.

Supply and demand are not the only issues to affect property prices. When people can't afford to pay the price then prices will not continue up forever at double digits.

I predict that rental yield will rocket in the UK in the next few years as the rental market holds up well against an overpriced sales market.
 
Qwertuiop, I am confused as to why you can't figure it out unless you don't know how markets work. It remains to be seen the full effects on the Irisk market, but evidence of large depreciation (up to a third) has happened at the top of the market.

At lower levels this has not happened yet for a number of reasons, but on evidence that is emerging already it is very likely to once the full effects of interest rates rises filter through to market.

At the moment we are seeinf estates agents falsely keeping prices up by offering inducements to buyers such as car or the vendors paying the mortgage, instead of dropping the asking price (and lower their commissions).

By its nature the level of buy-to-lets in Ireland compared to overall population is high because of the Irish psyche of buying as much property as possible, but the real problems in the market will only really start to emerge when investors' mortgages come out of the fixed rate periods. You only have to look at estates that completed at the top of the market such as Charlesland and developments in Delgany where the number of for sale signs is indicative of the number of investors who are stretched. I know of one investor who can only get offers that would leave him 40% out of pocket, his fixed rate finishes in 4 months and his payments are due to be over €200 what he is getting for his rent - with so many investors chasing tenants he has very little prospect of putting the rent up successfully. Not a good situation in anyone's book, but it's his own fault he paid too much and bought in a bad location. But, this is example is miles from the city centre so its not surprising, in the UK this is happening right in the centre of cities like Manchester and Leeds where they have made too many apartments, a great deal sold to Irish, with the result that many of them are vacant. It comes down to doing due diligence before you buy.
 
geordie said:
Qwertuiop, I am confused as to why you can't figure it out unless you don't know how markets work. It remains to be seen the full effects on the Irisk market, but evidence of large depreciation (up to a third) has happened at the top of the market.
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The above drop you mentioned is a tiny tiny percentage and is in fact not in any way representative of the Irish market.
The high end stuff was just nuts anyway with 2 suckers trying to ouytbid each other at the same time.

The reality is that in Ireland going by the Permanenttsb index - prices haven't really dropped much.
In fact they are up 5% in the last year nationally - up something like 10% in dublin for the same period.
Obviously it's crystal ball stuff but most analysts do believe that we are facing into a couple of years of no/little growth.
No one is predicting depreciation here that would back up a theory that 60,000 to 80,000 is a vast oversupply for Ireland while 125,000 is about right for teh UK.
 
I think the Uk number is closer to 200,000.

Ireland's massive oversupply has been supported by in past 5 years

1. massive immigration inflow ( far more proportionally than Uk).
2. huge purchasing of holiday/ retirement homes here
3. investors in many cases happy not to rent out property as the capital appreciation was so good you didnt need to.
4. People buying property at earlier age - low interest rates - temporary increase in demand actually slows demand in future years

Risk are
1. these folks go to London for Olympics or back home
2. having a holiday home no longer seen as an essential
3. interest increases force these investors to rent or sell
4. These people now take their time, prices going nowhere and interest costs going up making it less attractive.
 
Year on year figures are marginally up because they include figures from last year. Since the beginning of the year prices have dropped and will do this year. We advised all our clients to sell their Irish properties and take their profits last year. Most of them did. The UK is supported by a massive economy lead by London as one of the pre-eminent financial centres in the world. The Irish housing market was support by those coming here to build more houses, fed by buy-to-let investors, simply as that. The underlying economic fundamentals are just not here for Irish housing market. I know estate agents who have absolutely no buyers on their books, not even one.

View the Irish economy from the point of view that foreign overseas property investors, there's no way you would have held onto your properties in Ireland unless you were going to weather a storm and keep investments for the long term. Whereas London is pretty much recession proof and a safe haven for money in times of economic restraint.
 
Well i'll have to disagree with you there Geordie.
There's no way i'll be selling any of my irish properties.

They are in good locations and will always be rented out.

In fact - i reckon people should pretty much never sell a property.
Always remortgage instead.(Assuming yuo can rent it out to pay the interest)
Unlike selling, it's tax-free - so you'll pretty much get all the cash and still retain teh appreciating asset.
And even if property prices only rise with inflation (which may be a bit of an ask for the next year or so) they should be worth 20-25% more in 5 years time anyway.
 
qwertyuiop said:
Unlike selling, it's tax-free - so you'll pretty much get all the cash and still retain teh appreciating asset.
And even if property prices only rise with inflation (which may be a bit of an ask for the next year or so) they should be worth 20-25% more in 5 years time anyway.
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What if they're worth 20-25% less in 5 years?

A distinct possibility. Western Europe property markets have had their day.

Remember the late 1980s????

[broken link removed]

Not sure what it was like in Ireland but the UK saw a massive drop.

Why do you assume property prices allways go up when the fundamentals are all negative for property???
 
Because historically property doubles every 10 years or so.
In the UK property has risen on average 7% since 1950.

In Ireland - since records began 58 years ago,property has only dropped once n those 58 years.

Obviously if you had a crystal ball and knew for a fact that property would drop 20-25% then of course sell.
However - historical data would suggest this is the exception.

Also back then in teh UK fundamentals wee a lot different. Intersest rates were double what they are now and there was a lot more unemployment.

Going by decades of history the far more likely assumption is that kind of drop won't happen.
 
I completly agree with above. Why sell. If you have enough property just keep releasing the equity gained its tax free. OK property will not increase every year but if your borrowings are 70% or less you can afford a drop every now and then. You cant compare the UK market to Ireland in the 1980s 20 to 30 thousand of the best people were leaving Ireland to work abroad every year these people are now staying.
 
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