13 ms·

Why Ireland's housing bubble burst

96 points by salonium_ 5y ago

shell0x 5y ago
Meanwhile in Toronto a house is $1m+ while salaries are 100k-150k.
- inglor_cz 5y ago
  A house in Prague will cost you about 600k USD, but the average salary after tax is something like 21k USD. Welcome to Europe :)
  - neon_me 5y ago
    Yes, Prague is the extreme place to live.
    - inglor_cz 5y ago
      Interestingly, Warsaw is much more affordable. They also build a lot more condos there. AFAIK around 100 000 new housing units were built in Warsaw in span of just 5 years. That pushes the prices down.
      - ptsneves 5y ago
        In Poland there is anew term called pato-developer, from patological developer. Patologia is a common derrogative for something not good. The pato-developer thing comes from the fact that many of these new apartment complexes often make huge compromises on quality or amenities. A common complaint is very thin walls or apartments with windows facing a few meters from neighbors. Search in youtube for pato developer and you will see some really comical videos. It is very not ideal, but even so it provides a huge pressure relief on housing demand and kind of allows young people the ability to afford something to start a family. Real estate is even so often used as an investment but I think with the current interest rate hikes the crazy valuations on the main cities will come down.
  - klohto 5y ago
    Lol exactly. I don’t wanna tout who has the most expensive houses but Prague and Brno win with the average wage / price ratio. I’m already remote for US company and still cannot a flat here due to abysmal central bank rules.
    - inglor_cz 5y ago
      "Weeee are the champions, my friend!" At least in something.
- nemo44x 5y ago
  It’s because interest rates are so low. A combined income of $225 can easily afford a $1m home at todays rates.
  - deleted 5y ago
    [deleted]
  - shell0x 5y ago
    I also heard the downpayment required is only 5%.
    - humanlion87 5y ago
      That is true for properties that are valued at less than 1mil. And you have to pay mortgage insurance. For properties that are >= 1mil, you have to put 20% down.
      - antoniuschan99 5y ago
        and also for first time home buyers
  - onlyrealcuzzo 5y ago
    Canada doesn't have a 30-year fixed rate mortgage, though. So anyone making that trade better be betting that interest rates never go up...
    - nemo44x 5y ago
      Aren’t the rates fixed? If not then it’s a fairly ridiculous trade to take on. If no one has a fixed rate then without massive inflation any kind of interest surge will decimate the country.
      - thefringthing 5y ago
        The standard mortgage in Canada has a five-year term, amortized over 25 years. You generally cannot lock in a low rate for 30 years the way you can in the United States.
- randomdata 5y ago
  That's driven by the farmland bubble. Southern Ontario farmland prices are up 700% since the mid-2000s, which has priced urban sprawl out of the market. With Toronto (i.e. the cities around the City of Toronto) unable to expand like they once were able able to, that has increased buying pressure on the land that is already within the city limits, thereby also driving up the cost of housing in those cities. While Canada as a whole has recently seen some small increases to the cost of housing on the back of increasing lumber and labour costs, the country has a whole has remained largely stagnant, even falling in some cases. The gigantic gains seen, which bring up the country average, are limited to the prime agricultural areas, namely Toronto and Vancouver, where farmers are now willing to pay more than developers for undeveloped land. Something that is historically unusual.
  - poutine 5y ago
    This isn't true. Costs of housing have spiralled out of control outside of Toronto and Vancouver -- here on Vancouver Island in Nanaimo the house I built in 2018 for $950k is now worth near $1.5M. Up 20% in the past year. It's nuts.
  - oblio 5y ago
    Are you building higher density stuff? If not, the injury is self inflicted.
  - jonwithoutanh 5y ago
    >While Canada as a whole has recently seen some small increases to the cost of housing on the back of increasing lumber and labour costs, the country has a whole has remained largely stagnant, even falling in some cases Kelowna? Calgary? Halifax? Are those places being driven up by farmland demand?
  - gruez 5y ago
    >That's driven by the farmland bubble. [...] >The gigantic gains seen, which bring up the country average, are limited to the prime agricultural areas, namely Toronto and Vancouver, where farmers are now willing to pay more than developers for undeveloped land. Something that is historically unusual. Why is farmland in those areas so sought after? Were canadian farmland historically underpriced? Is the land just really good farmland? Are speculators buying it because of global warming?
- etimberg 5y ago
  I've been looking to buy in the Toronto are. Prices are up 15% since November. Houses that had comparable sales of $850k in November are now going at around the $1M mark. I don't know how that rise is sustainable.
camgunz 5y ago
Like others in this thread I'm not an expert, but it seems to me that the thing every cyclical housing market has in common is a heavily subsidized/credited/backed mortgage market. I think the counterexample is Germany? They build a good amount of housing every year, they watch housing prices very carefully and pull some levers if they tick up or turn down, and they don't store a huge amount of their population's wealth in their homes. Anything else wildly perverts monetary policies. The mortgage market is suddenly the real bond market, there's extreme moral hazard, there are either explicit mortgage market safety nets or quasi-nationalized mortgage providers, etc. It becomes a weird monetary policy slush fund that is incidentally also where people live.
- qwytw 5y ago
  Germany also has a much more decentralized economy and more spread out population compared to other European countries. There is no city equivalent to London, Paris or Dublin. For example Berlin's population only started growing in the 2010's (it's was stable or declining since the 1990's) and prices have been growing quite rapidly lately so arguably it just a few years (or decades) behind other major European cities. Munich on the other hand is almost as expensive as Paris.
  - inglor_cz 5y ago
    Munich is crazy. You would have to be a very upper middle class to afford children and a house there. Unless you inherited one, of course.
    - oblio 5y ago
      House or an apartment?
      - inglor_cz 5y ago
        A house. Let us say 160 sqm with 800 sqm garden. You can buy such property very cheaply somewhere in rural Thüringen, but for Munich, you would have to be a millionaire or close to that status.
dtjohnnyb 5y ago
Interestingly Leitrim and other counties in the north west he mentions have been high on the list of places people have escaped to from Dublin during the pandemic. Many people are now living there and working remotely for Dublin companies, and there are far too _few_ houses there now, and house prices have skyrocketed
wonderwonder 5y ago
Very curious to see what happens with the US housing / real estate market. I think stocks / equities are going to see a severe down turn this year and a good deal of money is going to leave the market. At the same time inflation is very high so sitting in cash is a loser as well albeit not as bad as riding the markets down. Will that money from the stock market go into real estate or will real estate crash too as the fed raises rates? Will remote work continue and in doing so will it reduce pricing on commercial business offices? Will business offices convert to condos? I have no idea but interested to hear any theories.
- FiReaNG3L 5y ago
  The fun bit is that everything is 'overvalued' now - stock market, real estate, even crazy things (many parts of crypto such as NFTs, but also Pokemon cards and other collectables) are through the roof, where will all this money go? money out of a bubble has to go somewhere... How far are we from the boomer generation leaving the market (one way or another)? This will create a lot of oversupply and negative pressure on prices I would assume - who will buy all their houses in the country, their share in the stock market? The answer to that is that we've been doing that already in the past decade with all the money printing / inflation / devaluation of wealth... not sure where the train stops and who will be left holding the bags.
  - toomuchtodo 5y ago
    Anyone buying in between now and the future is holding the bag as value terminally declines. These are structural demographic issues combined with technology deflationary pressures, leading to heat death of asset baskets supported by declining productivity of aging populations. See Japan for a preview. The juice was squeezed over the last 40-50 years, and those times aren’t happening again [1]. [1] https://ourworldindata.org/uploads/2013/05/Updated-World-Population-Growth-Rate-Annual-1950-2100-750x525.png https://ourworldindata.org/uploads/2013/05/Updated-World-Pop...
    - ashtonkem 5y ago
      That’s only true if we cutoff immigration, which is how the US has offset the downsides of lower fertility. Even if we can’t defer those problems forever, we can slow down the transition, making it less painful than the one experienced by Japan.
BiteCode_dev 5y ago
I can't wait for the housing prices to go down, but there is no sign they will in France. They kept going up, even during the covid crisis.
- subpixel 5y ago
  The value of real estate may decline but it’s very unlikely to dip into the “affordable for normal folks” territory where demand exists. Rental houses are an asset class now, and that’s unlikely to change while the rich can get richer renting to people who can’t afford to buy.
- chrisseaton 5y ago
  > even during the covid crisis. Well yeah people wanted more space and had more money to spend - of course prices went up. Not sure why you've said 'even'?
  - coldtea 5y ago
    Because tons of professions, small business, workers laid off, etc suffered from the lockdowns, so there was not exactly clear that "people had more money to spend".
    - chrisseaton 5y ago
      The markets absolutely soared. People saved money rather than spent. Most people's jobs carried on as normal or were protected by the government. As a concrete example, bank account deposits in the UK rose 10% during COVID.
      - coldtea 5y ago
        >The markets absolutely soared. The markets are not invididuals, if we're talking about stock markets. And in Europe they don't represent most of the population as asset holders or anything like that. Case in point for France: "There was an 8.3% decrease in France’s economy in 2020, and the country has not seen a recession to this extent since World War II. For example, France’s travel and tourism sector’s contribution to the French economy decreased by 48.8% due to travel restrictions. As a result, that sector alone lost 193,000 jobs. (...) Before the pandemic, 9.3 million people lived below the 1,063-euros-per-month poverty line in France. Those who were poor had little opportunity to improve their lives, especially during the pandemic when unemployment rates reached a two-year high. As a result, retail workers, artisans and self-employed people were among those the pandemic most affected. Further, the number of French people in poverty has significantly increased to more than 1 million people during the pandemic. (...)" >As a concrete example, bank account deposits in the UK rose 10% during COVID. That's one disconnect. Most people don't have bank account deposits (or don't have any to write home about). That's apparently true for the US too... https://www.cnbc.com/2019/01/23/most-americans-dont-have-the-savings-to-cover-a-1000-emergency.html https://www.cnbc.com/2019/01/23/most-americans-dont-have-the... - though I guess those people don't go out buying houses either.
mandmandam 5y ago
I object to the characterization of Ireland's housing issues as somehow accidental, or solely due to broad market forces. At every major decision point there were intelligent people screaming in the ear of media and politicians that property developers were getting away with murder. I knew teenagers who emigrated as the writing was so clearly on the wall, and the entire time our print and TV media were inflating the bubble with every tool at their disposal. Trails of brown envelopes (bribes) have been sniffed out repeatedly, and then left to grow cold. Large scale developments were made and begun without any plan whatsoever to connect them to basic and necessary infrastructure such as sewage, or schools. The media have pointed fingers at immigrants, dole scroungers, and market forces - anything but policy. They give airtime to politicians who have been repeatedly proven to be actively working against us and caught in lies over and over. They smear anyone speaking truth. And when it all went tits up the same fuckers - property developers and politicians and media - made even more money. For example, with NAMA, which this author inexplicably ignores completely. Irish housing policy for the last decade has been to sell property to vulture funds and foreign investors at firesale prices tax free, while the average Irish worker has none of the same advantages and no chance of getting on the ladder whatsoever. Our Minister of State for Housing recently tried to get his monkeys to find flaws in an ESRI report saying we could borrow billions for social housing. Our Minister for Housing has come through with just 5% of his promised build number. THIS IS POLICY. Our government funds landlords with schemes such as HAP (1.5 billion euro directly to landlords since 2017) instead of building fucking houses. They then use those schemes to twist the numbers, pissing in our face and telling us its raining despite clear record homelessness and child poverty. We give foreign companies billions to build houses which we then rent off of them for decades and don't own at the end. It's sheer, clear insanity. And this Oxford chap seems completely unaware, yet wholly confident in his "understanding" of the issues we have. This crisis was NOT built on misunderstandings, or myth, or innocent mistakes and apathy. It was CONSTRUCTED. And at every point, the wrong people have profited at the expense of the 40% of Irish who don't own a house. And if I'm not wrong, neoliberals and banks are running this scam all over the world.
- ploika 5y ago
  > Trails of brown envelopes (bribes) have been sniffed out repeatedly, and then left to grow cold. Large scale developments were made and begun without any plan whatsoever to connect them to basic and necessary infrastructure such as sewage, or schools. Can't argue with this, in fairness. > The media have pointed fingers at immigrants, dole scroungers, and market forces - anything but policy. They give airtime to politicians who have been repeatedly proven to be actively working against us and caught in lies over and over. They smear anyone speaking truth. This is just not true. It's almost libellous it's so wide of the mark. I don't know where you're getting this from. Nobody of any substance has ever blamed the crash or the housing crisis on immigrants, people on the dole, direct provision or anything like that. Immigration in particular has been an absolute non-issue the entire time. > Irish housing policy for the last decade has been to sell property to vulture funds and foreign investors at firesale prices tax free, while the average Irish worker has none of the same advantages and no chance of getting on the ladder whatsoever. This is not true either. Vulture funds buy non-performing loans (not property, loans), of which there are many, and for which reason we have higher than average mortgage rates. It's distasteful, but without them our current account fees and loan rates would be higher than they already are. REITs are not vulture funds. They generally build to rent: they finance the construction, and then collect the rent. Without them there would be thousands fewer apartments in Dublin in particular. Cork city went a full decade without a single apartment complex being built. They serve a purpose. They don't pay corporation tax, but they do pay tax. See here: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-25a/25a-00-01.pdf https://www.revenue.ie/en/tax-professionals/tdm/income-tax-c... The funds swooping in post-construction and buying entire blocks of houses or apartments that would otherwise have gone on the open market, they're a different story. They can die screaming. > Our government funds landlords with schemes such as HAP (1.5 billion euro directly to landlords since 2017) instead of building fucking houses. They then use those schemes to twist the numbers, pissing in our face and telling us its raining despite clear record homelessness and child poverty. We give foreign companies billions to build houses which we then rent off of them for decades and don't own at the end. It's sheer, clear insanity. And this Oxford chap seems completely unaware, yet wholly confident in his "understanding" of the issues we have. HAP is a bad scheme. Totally agree. The "Oxford Chap" is a Trinity academic who writes the daft.ie reports on housing in Ireland. He knows what's going on as well as you do. > This crisis was NOT built on misunderstandings, or myth, or innocent mistakes and apathy. It was CONSTRUCTED. And at every point, the wrong people have profited at the expense of the 40% of Irish who don't own a house. Nobody manufactured the crisis on purpose. That's tinfoil hattery.
yawaworht1978 5y ago
Let's see. Prosperity, low-interest rates, wider mortgage product offerings, and easy to access credit cause pricing bubbles. Now, forces that make a housing bubble pop include a downturn in the economy, a rise in interest rates, as well as a drop in demand. We've had all that and credit is getting more expensive. Theres only so many people who can live somewhere or buy to rent scheme spaces, developers building as much and fast they can and you can't renew all the older buildings. In the end, follow the money, all the stake holders and you'll find it is always universal greed at the root. I am not so sure that building houses for non business purposes should be handled so liberally.
coldtea 5y ago
Because that's the nature of bubbles? Though bubbles are a bad analogy: actual bubbles burst, economic bubbles deflate - not because of a puncture, but because they were continuously filled with air from a source that at some point can't provide it anymore.
- yojo 5y ago
  While true, this misses the point of the article. What was the source of the air? The author claims cheap homebuyer credit and laxer lending requirements explains 90+% of the run up. They also claim this is non-obvious.
  - coldtea 5y ago
    They do claim it, but how is "cheap homebuyer credit" and "laxer lending requirements" non obvious? I call BS - especially since there have been warning spelling those exact issues out time and again...
    - eliasmacpherson 5y ago
      People were a lot more economically illiterate before the GFC, and it was an awful lesson for a large section of the global population.
- capableweb 5y ago
  > actual bubbles burst [...] not because of a puncture, but because they were continuously filled with air from a source that at some point can't provide it anymore. Don't they burst because the source doesn't stop before the bubble gets larger than what it can be? The source stopping would just lead to a deflation where it slowly gets smaller if the air hole is still open, or remain the same size until tiny leaks make it not be the same size anymore.
  - coldtea 5y ago
    >*Don't they burst because the source doesn't stop before the bubble gets larger than what it can be? (...) The source stopping would just lead to a deflation where it slowly gets smaller if the air hole is still open To continue my analogy, I prefer to visualize them as flying uncontrollably while shrinking very quickly (but not immediately as a puncture would), propelled by their own deflation discharges... So, this kind of thing: https://www.youtube.com/watch?v=6CTnTi1Lq60 https://www.youtube.com/watch?v=6CTnTi1Lq60
rossdavidh 5y ago
I'm not sure how many HN readers we have in Ireland, but as an American I'd be interested to hear their perspective on this article.
- mrspuratic 5y ago
  Almost certainly more than one reader... Since the terms "transport", "landlord" and "highest mortgage interest rates in the eurozone" appear nowhere, I believe the article is a relatively shallow analysis, though some good points are made. This is probably the most important assertion, to my mind: Put another way, nobody worried about the cost of building a home rising from €125,000 to €225,000 when credit had pushed prices up from €150,000 to €350,000. But when prices crashed back down to €175,000, the system had a real problem on its hands – one that policymakers have been loath to touch. It's long been my opinion (I have no economic background) that the last decade or so has seen successive governments sit out the problem: stalling until the indebted inflate their way out of debt. Attempts to stimulate supply have been wrong footed, attempts to reduce demand have resulted in grants and tax relief being withdrawn from the renter/owner (in stark contrast to the ever increasing reliefs granted to the investor, but I understand supply and demand). The lower end of the market is particularly competitive as a result. The Central Bank borrowing limits referenced have kept price growth partly in check, but favours foreign investment (pension funds in particular get bad press). Small scale private landlords are exiting the market, there's general unease with large scale commercial operations (a novelty here) given tight supply and not so ancient Irish history. A particular issue in Dublin city is the scale of privatised student accommodation to avail of various tax reliefs (recently some 18k units, in over 50 individual developments). I have a reluctance to take on personal debt, I was able to save and needed only a small mortgage for a house in Dublin city (and more importantly, within cycling distance of work). I consider myself one of the lucky ones. My mortgage repayments are approximately my previous rent, I rented for more years than my mortgage term (but ability to move according to work was my preference for a long time). It's no small irony that the house I live in was built in the 1950s, local authority housing designed by Dublin corporation architect HG Simms - back in the original Dublin housing crisis ... https://www.irishtimes.com/culture/art-and-design/hugh-linehan-to-understand-dublin-s-current-problems-you-must-understand-its-past-1.4725913 https://www.irishtimes.com/culture/art-and-design/hugh-lineh...
e12e 5y ago
> Ireland had arguably the world’s largest housing bubble and crash in the 2000s, with prices quadrupling in the decade to 2007, even while supply soared, before crashing by more than half between 2007 and 2012. So, prices doubled in the years from 2000 to 2012 - a little under 5% yearly growth. Is that really a crash? Or am I misunderstanding "quadrupled then halved"?
- namdnay 5y ago
  The crash is if you bought a house in 2006 and needed to sell it in 2012 :) > So, prices doubled in the years from 2000 to 2012 - a little under 5% yearly growth. Is that really a crash? 2008 was still a stock market crash, even if the average growth from 2000 to today is very good
- deleted 5y ago
  [deleted]
- iso1210 5y ago
  https://data.cso.ie/ https://data.cso.ie/ Has price index since 2005, but not before. For all residential properties it was 2005-01: 125 2007-07: 163 (peak) 2013-03: 73 (trough) 2021-11: 155 (latest) Even just looking at Dublin houses (where people want to live due to centralisation of economic activity), it follows the same pattern 2005-01: 112 2007-04: 155 (peak) 2012-04: 65 (trough) 2021-11: 141 (latest)
greesil 5y ago
It's like this guy has never heard of a speculative bubble, and sets up a series of straw men to nock down instead. Even though "bubble" is in the title. Edit: oh I get it, his point is that yes there was a bubble, and that's why prices went up. Without extra supply it would have been worse. I think that's putting the horse before the cart, because without the bubble the extra supply wouldn't have been built. This post is all over the place.
- dwighttk 5y ago
  I think the horse goes before the cart.
- onlyrealcuzzo 5y ago
  In lot of housing markets (most) - one cannot simply build more housing. The localities do everything they can to limit supply. In fact - places like Ireland are shockingly rare exceptions where supply actually went up with demand. That's why this article is interesting.
- simplestats 5y ago
  Looks like the links in the second paragraph are examples or perhaps origins of the myths he is attacking. The topic is apparently his phd thesis.

96 points by salonium_ 5y ago

shell0x 5y ago

Meanwhile in Toronto a house is $1m+ while salaries are 100k-150k.

inglor_cz 5y ago
A house in Prague will cost you about 600k USD, but the average salary after tax is something like 21k USD. Welcome to Europe :)
- neon_me 5y ago
  Yes, Prague is the extreme place to live.
  - inglor_cz 5y ago
    Interestingly, Warsaw is much more affordable. They also build a lot more condos there. AFAIK around 100 000 new housing units were built in Warsaw in span of just 5 years. That pushes the prices down.
    - ptsneves 5y ago
      In Poland there is anew term called pato-developer, from patological developer. Patologia is a common derrogative for something not good. The pato-developer thing comes from the fact that many of these new apartment complexes often make huge compromises on quality or amenities. A common complaint is very thin walls or apartments with windows facing a few meters from neighbors. Search in youtube for pato developer and you will see some really comical videos. It is very not ideal, but even so it provides a huge pressure relief on housing demand and kind of allows young people the ability to afford something to start a family. Real estate is even so often used as an investment but I think with the current interest rate hikes the crazy valuations on the main cities will come down.
- klohto 5y ago
  Lol exactly. I don’t wanna tout who has the most expensive houses but Prague and Brno win with the average wage / price ratio. I’m already remote for US company and still cannot a flat here due to abysmal central bank rules.
  - inglor_cz 5y ago
    "Weeee are the champions, my friend!" At least in something.
nemo44x 5y ago
It’s because interest rates are so low. A combined income of $225 can easily afford a $1m home at todays rates.
- deleted 5y ago
  [deleted]
- shell0x 5y ago
  I also heard the downpayment required is only 5%.
  - humanlion87 5y ago
    That is true for properties that are valued at less than 1mil. And you have to pay mortgage insurance. For properties that are >= 1mil, you have to put 20% down.
    - antoniuschan99 5y ago
      and also for first time home buyers
- onlyrealcuzzo 5y ago
  Canada doesn't have a 30-year fixed rate mortgage, though. So anyone making that trade better be betting that interest rates never go up...
  - nemo44x 5y ago
    Aren’t the rates fixed? If not then it’s a fairly ridiculous trade to take on. If no one has a fixed rate then without massive inflation any kind of interest surge will decimate the country.
    - thefringthing 5y ago
      The standard mortgage in Canada has a five-year term, amortized over 25 years. You generally cannot lock in a low rate for 30 years the way you can in the United States.
randomdata 5y ago
That's driven by the farmland bubble. Southern Ontario farmland prices are up 700% since the mid-2000s, which has priced urban sprawl out of the market. With Toronto (i.e. the cities around the City of Toronto) unable to expand like they once were able able to, that has increased buying pressure on the land that is already within the city limits, thereby also driving up the cost of housing in those cities. While Canada as a whole has recently seen some small increases to the cost of housing on the back of increasing lumber and labour costs, the country has a whole has remained largely stagnant, even falling in some cases. The gigantic gains seen, which bring up the country average, are limited to the prime agricultural areas, namely Toronto and Vancouver, where farmers are now willing to pay more than developers for undeveloped land. Something that is historically unusual.
- poutine 5y ago
  This isn't true. Costs of housing have spiralled out of control outside of Toronto and Vancouver -- here on Vancouver Island in Nanaimo the house I built in 2018 for $950k is now worth near $1.5M. Up 20% in the past year. It's nuts.
- oblio 5y ago
  Are you building higher density stuff? If not, the injury is self inflicted.
- jonwithoutanh 5y ago
  >While Canada as a whole has recently seen some small increases to the cost of housing on the back of increasing lumber and labour costs, the country has a whole has remained largely stagnant, even falling in some cases Kelowna? Calgary? Halifax? Are those places being driven up by farmland demand?
- gruez 5y ago
  >That's driven by the farmland bubble. [...] >The gigantic gains seen, which bring up the country average, are limited to the prime agricultural areas, namely Toronto and Vancouver, where farmers are now willing to pay more than developers for undeveloped land. Something that is historically unusual. Why is farmland in those areas so sought after? Were canadian farmland historically underpriced? Is the land just really good farmland? Are speculators buying it because of global warming?
etimberg 5y ago
I've been looking to buy in the Toronto are. Prices are up 15% since November. Houses that had comparable sales of $850k in November are now going at around the $1M mark. I don't know how that rise is sustainable.

camgunz 5y ago

Like others in this thread I'm not an expert, but it seems to me that the thing every cyclical housing market has in common is a heavily subsidized/credited/backed mortgage market. I think the counterexample is Germany? They build a good amount of housing every year, they watch housing prices very carefully and pull some levers if they tick up or turn down, and they don't store a huge amount of their population's wealth in their homes. Anything else wildly perverts monetary policies. The mortgage market is suddenly the real bond market, there's extreme moral hazard, there are either explicit mortgage market safety nets or quasi-nationalized mortgage providers, etc. It becomes a weird monetary policy slush fund that is incidentally also where people live.

qwytw 5y ago
Germany also has a much more decentralized economy and more spread out population compared to other European countries. There is no city equivalent to London, Paris or Dublin. For example Berlin's population only started growing in the 2010's (it's was stable or declining since the 1990's) and prices have been growing quite rapidly lately so arguably it just a few years (or decades) behind other major European cities. Munich on the other hand is almost as expensive as Paris.
- inglor_cz 5y ago
  Munich is crazy. You would have to be a very upper middle class to afford children and a house there. Unless you inherited one, of course.
  - oblio 5y ago
    House or an apartment?
    - inglor_cz 5y ago
      A house. Let us say 160 sqm with 800 sqm garden. You can buy such property very cheaply somewhere in rural Thüringen, but for Munich, you would have to be a millionaire or close to that status.

dtjohnnyb 5y ago

Interestingly Leitrim and other counties in the north west he mentions have been high on the list of places people have escaped to from Dublin during the pandemic. Many people are now living there and working remotely for Dublin companies, and there are far too _few_ houses there now, and house prices have skyrocketed

wonderwonder 5y ago

Very curious to see what happens with the US housing / real estate market. I think stocks / equities are going to see a severe down turn this year and a good deal of money is going to leave the market. At the same time inflation is very high so sitting in cash is a loser as well albeit not as bad as riding the markets down. Will that money from the stock market go into real estate or will real estate crash too as the fed raises rates? Will remote work continue and in doing so will it reduce pricing on commercial business offices? Will business offices convert to condos? I have no idea but interested to hear any theories.

FiReaNG3L 5y ago
The fun bit is that everything is 'overvalued' now - stock market, real estate, even crazy things (many parts of crypto such as NFTs, but also Pokemon cards and other collectables) are through the roof, where will all this money go? money out of a bubble has to go somewhere... How far are we from the boomer generation leaving the market (one way or another)? This will create a lot of oversupply and negative pressure on prices I would assume - who will buy all their houses in the country, their share in the stock market? The answer to that is that we've been doing that already in the past decade with all the money printing / inflation / devaluation of wealth... not sure where the train stops and who will be left holding the bags.
- toomuchtodo 5y ago
  Anyone buying in between now and the future is holding the bag as value terminally declines. These are structural demographic issues combined with technology deflationary pressures, leading to heat death of asset baskets supported by declining productivity of aging populations. See Japan for a preview. The juice was squeezed over the last 40-50 years, and those times aren’t happening again [1]. [1] https://ourworldindata.org/uploads/2013/05/Updated-World-Population-Growth-Rate-Annual-1950-2100-750x525.png https://ourworldindata.org/uploads/2013/05/Updated-World-Pop...
  - ashtonkem 5y ago
    That’s only true if we cutoff immigration, which is how the US has offset the downsides of lower fertility. Even if we can’t defer those problems forever, we can slow down the transition, making it less painful than the one experienced by Japan.

BiteCode_dev 5y ago

I can't wait for the housing prices to go down, but there is no sign they will in France. They kept going up, even during the covid crisis.

subpixel 5y ago
The value of real estate may decline but it’s very unlikely to dip into the “affordable for normal folks” territory where demand exists. Rental houses are an asset class now, and that’s unlikely to change while the rich can get richer renting to people who can’t afford to buy.
chrisseaton 5y ago
> even during the covid crisis. Well yeah people wanted more space and had more money to spend - of course prices went up. Not sure why you've said 'even'?
- coldtea 5y ago
  Because tons of professions, small business, workers laid off, etc suffered from the lockdowns, so there was not exactly clear that "people had more money to spend".
  - chrisseaton 5y ago
    The markets absolutely soared. People saved money rather than spent. Most people's jobs carried on as normal or were protected by the government. As a concrete example, bank account deposits in the UK rose 10% during COVID.
    - coldtea 5y ago
      >The markets absolutely soared. The markets are not invididuals, if we're talking about stock markets. And in Europe they don't represent most of the population as asset holders or anything like that. Case in point for France: "There was an 8.3% decrease in France’s economy in 2020, and the country has not seen a recession to this extent since World War II. For example, France’s travel and tourism sector’s contribution to the French economy decreased by 48.8% due to travel restrictions. As a result, that sector alone lost 193,000 jobs. (...) Before the pandemic, 9.3 million people lived below the 1,063-euros-per-month poverty line in France. Those who were poor had little opportunity to improve their lives, especially during the pandemic when unemployment rates reached a two-year high. As a result, retail workers, artisans and self-employed people were among those the pandemic most affected. Further, the number of French people in poverty has significantly increased to more than 1 million people during the pandemic. (...)" >As a concrete example, bank account deposits in the UK rose 10% during COVID. That's one disconnect. Most people don't have bank account deposits (or don't have any to write home about). That's apparently true for the US too... https://www.cnbc.com/2019/01/23/most-americans-dont-have-the-savings-to-cover-a-1000-emergency.html https://www.cnbc.com/2019/01/23/most-americans-dont-have-the... - though I guess those people don't go out buying houses either.

mandmandam 5y ago

I object to the characterization of Ireland's housing issues as somehow accidental, or solely due to broad market forces. At every major decision point there were intelligent people screaming in the ear of media and politicians that property developers were getting away with murder. I knew teenagers who emigrated as the writing was so clearly on the wall, and the entire time our print and TV media were inflating the bubble with every tool at their disposal. Trails of brown envelopes (bribes) have been sniffed out repeatedly, and then left to grow cold. Large scale developments were made and begun without any plan whatsoever to connect them to basic and necessary infrastructure such as sewage, or schools. The media have pointed fingers at immigrants, dole scroungers, and market forces - anything but policy. They give airtime to politicians who have been repeatedly proven to be actively working against us and caught in lies over and over. They smear anyone speaking truth. And when it all went tits up the same fuckers - property developers and politicians and media - made even more money. For example, with NAMA, which this author inexplicably ignores completely. Irish housing policy for the last decade has been to sell property to vulture funds and foreign investors at firesale prices tax free, while the average Irish worker has none of the same advantages and no chance of getting on the ladder whatsoever. Our Minister of State for Housing recently tried to get his monkeys to find flaws in an ESRI report saying we could borrow billions for social housing. Our Minister for Housing has come through with just 5% of his promised build number. THIS IS POLICY. Our government funds landlords with schemes such as HAP (1.5 billion euro directly to landlords since 2017) instead of building fucking houses. They then use those schemes to twist the numbers, pissing in our face and telling us its raining despite clear record homelessness and child poverty. We give foreign companies billions to build houses which we then rent off of them for decades and don't own at the end. It's sheer, clear insanity. And this Oxford chap seems completely unaware, yet wholly confident in his "understanding" of the issues we have. This crisis was NOT built on misunderstandings, or myth, or innocent mistakes and apathy. It was CONSTRUCTED. And at every point, the wrong people have profited at the expense of the 40% of Irish who don't own a house. And if I'm not wrong, neoliberals and banks are running this scam all over the world.

ploika 5y ago
> Trails of brown envelopes (bribes) have been sniffed out repeatedly, and then left to grow cold. Large scale developments were made and begun without any plan whatsoever to connect them to basic and necessary infrastructure such as sewage, or schools. Can't argue with this, in fairness. > The media have pointed fingers at immigrants, dole scroungers, and market forces - anything but policy. They give airtime to politicians who have been repeatedly proven to be actively working against us and caught in lies over and over. They smear anyone speaking truth. This is just not true. It's almost libellous it's so wide of the mark. I don't know where you're getting this from. Nobody of any substance has ever blamed the crash or the housing crisis on immigrants, people on the dole, direct provision or anything like that. Immigration in particular has been an absolute non-issue the entire time. > Irish housing policy for the last decade has been to sell property to vulture funds and foreign investors at firesale prices tax free, while the average Irish worker has none of the same advantages and no chance of getting on the ladder whatsoever. This is not true either. Vulture funds buy non-performing loans (not property, loans), of which there are many, and for which reason we have higher than average mortgage rates. It's distasteful, but without them our current account fees and loan rates would be higher than they already are. REITs are not vulture funds. They generally build to rent: they finance the construction, and then collect the rent. Without them there would be thousands fewer apartments in Dublin in particular. Cork city went a full decade without a single apartment complex being built. They serve a purpose. They don't pay corporation tax, but they do pay tax. See here: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-25a/25a-00-01.pdf https://www.revenue.ie/en/tax-professionals/tdm/income-tax-c... The funds swooping in post-construction and buying entire blocks of houses or apartments that would otherwise have gone on the open market, they're a different story. They can die screaming. > Our government funds landlords with schemes such as HAP (1.5 billion euro directly to landlords since 2017) instead of building fucking houses. They then use those schemes to twist the numbers, pissing in our face and telling us its raining despite clear record homelessness and child poverty. We give foreign companies billions to build houses which we then rent off of them for decades and don't own at the end. It's sheer, clear insanity. And this Oxford chap seems completely unaware, yet wholly confident in his "understanding" of the issues we have. HAP is a bad scheme. Totally agree. The "Oxford Chap" is a Trinity academic who writes the daft.ie reports on housing in Ireland. He knows what's going on as well as you do. > This crisis was NOT built on misunderstandings, or myth, or innocent mistakes and apathy. It was CONSTRUCTED. And at every point, the wrong people have profited at the expense of the 40% of Irish who don't own a house. Nobody manufactured the crisis on purpose. That's tinfoil hattery.

yawaworht1978 5y ago

Let's see. Prosperity, low-interest rates, wider mortgage product offerings, and easy to access credit cause pricing bubbles. Now, forces that make a housing bubble pop include a downturn in the economy, a rise in interest rates, as well as a drop in demand. We've had all that and credit is getting more expensive. Theres only so many people who can live somewhere or buy to rent scheme spaces, developers building as much and fast they can and you can't renew all the older buildings. In the end, follow the money, all the stake holders and you'll find it is always universal greed at the root. I am not so sure that building houses for non business purposes should be handled so liberally.

coldtea 5y ago

Because that's the nature of bubbles? Though bubbles are a bad analogy: actual bubbles burst, economic bubbles deflate - not because of a puncture, but because they were continuously filled with air from a source that at some point can't provide it anymore.

yojo 5y ago
While true, this misses the point of the article. What was the source of the air? The author claims cheap homebuyer credit and laxer lending requirements explains 90+% of the run up. They also claim this is non-obvious.
- coldtea 5y ago
  They do claim it, but how is "cheap homebuyer credit" and "laxer lending requirements" non obvious? I call BS - especially since there have been warning spelling those exact issues out time and again...
  - eliasmacpherson 5y ago
    People were a lot more economically illiterate before the GFC, and it was an awful lesson for a large section of the global population.
capableweb 5y ago
> actual bubbles burst [...] not because of a puncture, but because they were continuously filled with air from a source that at some point can't provide it anymore. Don't they burst because the source doesn't stop before the bubble gets larger than what it can be? The source stopping would just lead to a deflation where it slowly gets smaller if the air hole is still open, or remain the same size until tiny leaks make it not be the same size anymore.
- coldtea 5y ago
  >*Don't they burst because the source doesn't stop before the bubble gets larger than what it can be? (...) The source stopping would just lead to a deflation where it slowly gets smaller if the air hole is still open To continue my analogy, I prefer to visualize them as flying uncontrollably while shrinking very quickly (but not immediately as a puncture would), propelled by their own deflation discharges... So, this kind of thing: https://www.youtube.com/watch?v=6CTnTi1Lq60 https://www.youtube.com/watch?v=6CTnTi1Lq60

rossdavidh 5y ago

I'm not sure how many HN readers we have in Ireland, but as an American I'd be interested to hear their perspective on this article.

mrspuratic 5y ago
Almost certainly more than one reader... Since the terms "transport", "landlord" and "highest mortgage interest rates in the eurozone" appear nowhere, I believe the article is a relatively shallow analysis, though some good points are made. This is probably the most important assertion, to my mind: Put another way, nobody worried about the cost of building a home rising from €125,000 to €225,000 when credit had pushed prices up from €150,000 to €350,000. But when prices crashed back down to €175,000, the system had a real problem on its hands – one that policymakers have been loath to touch. It's long been my opinion (I have no economic background) that the last decade or so has seen successive governments sit out the problem: stalling until the indebted inflate their way out of debt. Attempts to stimulate supply have been wrong footed, attempts to reduce demand have resulted in grants and tax relief being withdrawn from the renter/owner (in stark contrast to the ever increasing reliefs granted to the investor, but I understand supply and demand). The lower end of the market is particularly competitive as a result. The Central Bank borrowing limits referenced have kept price growth partly in check, but favours foreign investment (pension funds in particular get bad press). Small scale private landlords are exiting the market, there's general unease with large scale commercial operations (a novelty here) given tight supply and not so ancient Irish history. A particular issue in Dublin city is the scale of privatised student accommodation to avail of various tax reliefs (recently some 18k units, in over 50 individual developments). I have a reluctance to take on personal debt, I was able to save and needed only a small mortgage for a house in Dublin city (and more importantly, within cycling distance of work). I consider myself one of the lucky ones. My mortgage repayments are approximately my previous rent, I rented for more years than my mortgage term (but ability to move according to work was my preference for a long time). It's no small irony that the house I live in was built in the 1950s, local authority housing designed by Dublin corporation architect HG Simms - back in the original Dublin housing crisis ... https://www.irishtimes.com/culture/art-and-design/hugh-linehan-to-understand-dublin-s-current-problems-you-must-understand-its-past-1.4725913 https://www.irishtimes.com/culture/art-and-design/hugh-lineh...

e12e 5y ago

> Ireland had arguably the world’s largest housing bubble and crash in the 2000s, with prices quadrupling in the decade to 2007, even while supply soared, before crashing by more than half between 2007 and 2012. So, prices doubled in the years from 2000 to 2012 - a little under 5% yearly growth. Is that really a crash? Or am I misunderstanding "quadrupled then halved"?

namdnay 5y ago
The crash is if you bought a house in 2006 and needed to sell it in 2012 :) > So, prices doubled in the years from 2000 to 2012 - a little under 5% yearly growth. Is that really a crash? 2008 was still a stock market crash, even if the average growth from 2000 to today is very good
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iso1210 5y ago
https://data.cso.ie/ https://data.cso.ie/ Has price index since 2005, but not before. For all residential properties it was 2005-01: 125 2007-07: 163 (peak) 2013-03: 73 (trough) 2021-11: 155 (latest) Even just looking at Dublin houses (where people want to live due to centralisation of economic activity), it follows the same pattern 2005-01: 112 2007-04: 155 (peak) 2012-04: 65 (trough) 2021-11: 141 (latest)

greesil 5y ago

It's like this guy has never heard of a speculative bubble, and sets up a series of straw men to nock down instead. Even though "bubble" is in the title. Edit: oh I get it, his point is that yes there was a bubble, and that's why prices went up. Without extra supply it would have been worse. I think that's putting the horse before the cart, because without the bubble the extra supply wouldn't have been built. This post is all over the place.

dwighttk 5y ago
I think the horse goes before the cart.
onlyrealcuzzo 5y ago
In lot of housing markets (most) - one cannot simply build more housing. The localities do everything they can to limit supply. In fact - places like Ireland are shockingly rare exceptions where supply actually went up with demand. That's why this article is interesting.
simplestats 5y ago
Looks like the links in the second paragraph are examples or perhaps origins of the myths he is attacking. The topic is apparently his phd thesis.