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> 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, befor

• hackerlight 3y ago
  Did rents also go up? I'd expect investment demand to cause a dislocation between rent and price. If it's a supply issue then both will go up.
  • tmnvix 3y ago
    Haha. Do rents ever not go up? Edit: But seriously, it's available housing that matters. We can have a shortage of available housing with an oversupply if investment demand is high enough. That is what the Irish experience demonstrates. Only second homes and investment properties can be underutilised... This is why I believe that any government serious about tackling an accommodation crisis should start by determining what proportion of homes are being used as a primary residence.
    • akavi 3y ago
      Rents came down significantly during 2020 in San Francisco (I paid ~2500 $/mo in Nov 2020 for a place that rented for 3300 $/mo the year before)
      • chgs 3y ago
        Demand for tiny city centre apartments collapsed during covid. That’s no surprise and just supports the economic principle of supply and demand
    • hugh-avherald 3y ago
      Rents fell during the pandemic in Australia.
      • tmnvix 3y ago
        I noticed that at the time. As an aside, I'm quite shocked by what has happened to the property market in Australia since (particularly Sydney). It stands in stark contrast to NZ. I'm pretty confident that it won't continue this way for too much longer. A recent new report suggested the majority of recent sales in Sydney were to cash buyers. How long can that last? The higher rates will eventually have an effect.
        • donavanm 3y ago
          Im in Sydney as well. I suspect the immediate effect of rates shook out in Q2/Q3 last year when there was a big dip. Since Q4 inner west-ish prices are up another 10% for properties Im tracking. Clearance rates are still around 70%, though I see a fair number withdrawn beforehand instead of passed in. > new report suggested the majority of recent sales in Sydney were to cash buyers. How long can that last? A long long while. Every existing owner, 60% of the population, is at the top of the pyramid scheme. Anecdotally from agents and my observation is the ones selling an existing proprry are cashing out, doing a price insensitive downsize, and/or buying a “first home” for family members. More pressure on the middle market. Similarly our net new residences and net inward migration is still insane. Something like 40k residences and 500k new people. Interest at a historical norm of 7% isnt going to do anything in light of that. Especially with good odds on RBA decrease this year or next. Extends to the rental market as well. Minus the inner city covid pause rents are also tracking 10% or higher gains year after year. So yes tax insanity, finance, and “investment” memes have cooked us. But I dont see anything getting materially better in light of that supply and demand.
    • wwweston 3y ago
      Rents go down under pretty much one circumstance: demand drops. People leave an area, or local economics suffer so people double up in housing, or people die. If there are any examples of times/places where rents have fallen in nominal or real terms, they will almost all coincide with this kind of demand drop. Supply-related rent drops are theoretical and almost never happen in real life. Supply is important anyway, because otherwise rent growth accelerates faster, but the market will almost never supply housing to the point where rent change is negative.
      • Spooky23 3y ago
        They happen in parts of the market. Subsidy creates a price floor, but new construction will knock down older premium priced apartments outside of highly desirable areas. People who advocate for tenements usually do so to eliminate the price floor.
    • eek2121 3y ago
      That is a rather broad question IMO. I do not own a home due a perfect storm of things (tragedies, health issues, etc), despite making north of 200k/year for many years. My rent in my single family home has only ever gone up when we had a large property tax increase in the area. I actually looked the increase up for our place and the landlord ate most of the cost. They have NOT raised rent outside of that. They are super responsive to repairs and stuff as well. Broadly, I'm sure rent prices are on the rise, but there are many reasons for that, with rent comparison/adjustment software being a big part of that. I have alluded to this on social media platforms, but really, the only permanent solution to stopping explosive price increases on renting or buying. We did this for health insurance and it really did a lot (more than most people realize), if property sales and rent were limited to say, inflation, or even inflation + 5% I suspect things would change quickly.
  • mitthrowaway2 3y ago
    I can't speak to Ireland, but at least in Canada, between 1990 and 2020, rent increased by about 1.6x whereas house price increased by about 6x. I personally believe that declining interest rates are responsible for this decoupling. This also coincided with an increase in investor ownership, just as you suggest. Interest rates have started rising recently, and we are now seeing a rapid growth in rent costs while housing prices have basically flatlined or fallen slightly. This makes sense if you relate the two in terms of the price a rational investor would pay in order to own an asset providing a certain stream of rental income.
• takinola 3y ago
  From the article, it seems like the distortions were introduced by policy makers. There was a tax benefit from building new homes in certain places. In those places, prices went down. However, the policy allowed the tax benefits to be claimed against any homes the developer built. This meant a developer could build in tax advantaged locations even though there was already over-supply there. This did not help locations where there were no such benefits so prices continued to rise there. This creates a situation where supply increases (in tax advantaged locations) and price increases (everywhere else). This is a policy failure not a market failure.
  • tmnvix 3y ago
    Yes, the author (correctly, in my opinion) raises the issue of tax incentives. There are similar distortions in the Australian and NZ tax systems (mostly around taxation of capital gains). What the author fails to emphasise more - and really should given the title of the article - is the part played by availability of credit. This was the nail in the coffin. It's possible to come away from this article with the impression that oversupply caused the crash, rather than the more correct take that it was a collapse in investment demand due to availability of credit (in my opinion). Just overlay any graph of interest rates together with house prices for pretty much any market with an accommodation crisis and the correlation becomes pretty obvious. Interest rates go up and booms stop. Sometimes they crash spectacularly.
    • RowanH 3y ago
      Kiwi checking in ... crossing fingers we're not about to enter the crash stage, but certainly the contrast in the past 2-3 years from property just flying out the door (low interest rates) to now (high-ish interest rates, lots of low rate mortgages rolling over) are very stark. Auction clearance rates are well, well down. Lots of houses getting passed in at auction which would have been unthinkable a few years ago. Still having massive migration numbers which may stave off a full crash as ultimately there is an element of supply and demand - very very hard to get rentals.
      • 3y ago
• mytailorisrich 3y ago
  Supply soared but I believe that population soared as well and continues to soar. Exuberance may have been created by easy credit and speculation but the root cause was indeed a growing market fuelled by real demand, which is a common pattern. Growth attracts investors and speculators.
  • tmnvix 3y ago
    I live in NZ. We have a rapidly growing population with one of the highest levels of immigration in the world. From late 2021 mortgage rates went from as low as 2.5% up to around 7%. Subsequently, in my city, prices quickly dropped 20% and both the number of properties available for sale and for rent increased by as much as 50%. Where did those properties come from? In my opinion the increase is representative of the underlying existence of underutilised properties that are a result of excessive investment demand that has now fallen dramatically. I am firmly of the belief that a property boom can cause an increase in the proportion of underutilised properties even in the face of growing demand for homes - especially now that short term rental markets are playing a bigger part.
    • mytailorisrich 3y ago
      It's the same situation as described in my comment. You have a robustly growing market so it attracts investors and then speculators, especially if money is cheap. This drives increase in supply but that lead to a bubble. For instance, new builds can be snatched by speculators even if they remain empty because market value increases 10% year on year so who cares... until something happens and the bubble pops. Again, this is a common pattern in growing markets. People might also try to sell to avoid repossession if rate hikes make mortgages no longer affordable.
    • lostlogin 3y ago
      There has been an absolutely huge amount of building going on - and while developers are sensitive to mortgage rates, they would have started building prior to interest rate increases. That said, had building slowed? It’s building sites everywhere I go.
• TulliusCicero 3y ago
  Rising prices will usually indicate a supply shortage, but for property there's also the element of speculation. In contrast, rents are a more reliable indicator of a shortage, no speculation there.
  • tmnvix 3y ago
    Strictly speaking, rents (for long term rentals) can be an indicator of a shortage of available housing, but not necessarily a shortage in the total housing stock.
    • chii 3y ago
      What's the difference between > shortage of available housing and > a shortage in the total housing stock. I dont think there is any.
      • spacebanana7 3y ago
        Social housing, tax incentives, rent controls and ownership restrictions can cause the two to diverge.
      • tmnvix 3y ago
        Second homes, short term rentals, and land banked properties are not available to use as a primary residence but are part of the total housing stock. I call these underutilised properties and suspect that there are more than most suspect. Demand for purchasing these properties is not the same as demand for homes. That is what is often overlooked when people consider solutions to the accommodation crisis (i.e. usually happy to think no further than 'build more houses' without considering everything that pushes up demand).
  • randomdata 3y ago
    The most reliable indicator of a shortage is abandonment of a price-based mechanism in favour of something else, like a lottery or needs-based selection. If price is able to select the buyer, then you can't possibly have a shortage.
• xeromal 3y ago
  Your second demand is what China is going through right now. It's causing a massive upheaval.
  • chii 3y ago
    The situation in china has a difference between the situations you find in the west (like canada/australia). The local gov't in china does not have any NIMBY's at all (they have no rights like that in china), so the local gov't allows developments as long as somebody is willing to pay the price of the land. After all, this is how the local gov't gets their funding. The central gov't decided to pop the bubble early (before it became the Japan level of bubble back in the late 90's early 2000's). It's hurting of course, but probably a right sort of hurt as it's really investors that lose out (and china actually, imho, doesn't want an investor class being large and demanding more rights as they become richer and richer). In the west, such a bubble is difficult to form if NIMBY's stop high density development.
• pixelatedindex 3y ago
  > Demand comes in two forms. Demand for housing and demand for property investments. We should not lose site of the drivers of the second type of demand. Has the US ever lost sight of the second kind? To me (as someone who feels hopeless about home ownership) that seems to be the only demand we care about. There’s barely anything new being built, constant blocking by NIMBYs, and investors buying up so much property when interest rates were dirt cheap. I really wish there would be some form of housing market crash but it’s nowhere in sight. My biggest fear is it’s going to come the moment I do end up buying after saving so much.
  • disgruntledphd2 3y ago
    > My biggest fear is it’s going to come the moment I do end up buying after saving so much. Honestly, I figured this was gonna happen after Covid, when we finally bought (in a good area, but a small house for far too much money). However, here we are almost three years later, and prices have again increased such that I'm looking at a nominal gain of like 10% (now obviously inflation played a role, and we've put a bunch of money into the house). The irish housing market just defies all understanding. We have whole areas of the capital city where the median price of housing is 650k euro, when the top 10% household incomes start at about 100k, and you can only borrow 4 times (for the last year or so) of your total household income. It. Makes. Absolutely. No. Sense. And this insanity cost me a bunch of money as I didn't purchase in 2019 because prices seemed too high. Something something markets irrationality, me solvent.
    • reducesuffering 3y ago
      It makes sense if you don't expect the median housing price to be determined by the immediate 4x income loan without any savings. If you think housing price should be income * borrow rate, then you're entirely discounting any amount of time saving up, like a 22 year old graduate that rents for 13 years and then after saving up for that time decides to dump 300k into property and take out a loan of 350k (4 * 87.5k/yr). Also a huge factor, housing price is determined at the margins. If 70% of people already own homes, it doesn't matter what their incomes are. Only the 30% that are competing and trying to outbid each other, which of course is going to skew high income. I.e in the extreme, you could have all of Ireland own their 300k homes and make 30k euro, but if you suddenly get 1% new population that needs to buy a home, and no one wants to sell, then the new 1% can outbid each other to the tune of offering 800k for homes, and it wouldn't matter that the people making 30k euro couldn't afford 800k homes, they already have them.
• CalRobert 3y ago
  Ireland taxes income and capital gains very heavily, and has some truly obscene structures like deemed disposal (taking 41% of your _unrealized_ gains in ETF's). I remember how much it stung handing over 52% of my options to the government so they could waste it on being stupid and incompetent. They even have a history of going after people's private retirement savings after the fact - https://www.oireachtas.ie/en/debates/question/2024-02-22/119/ https://www.oireachtas.ie/en/debates/question/2024-02-22/119... - and I have ZERO confidence they won't simply steal people's retirement savings when convenient. How else are they going to bail out the farmers destroyed by climate change? (See the IFA's recent complaints about the "weather" that they caused) """ It was charged on the market value of assets in pension schemes held on 30 June in each year at a rate of 0.6% (2011 to 2013), 0.75% (2014) and 0.15% (2015).""" Not to mention that the companies handling retirement plans, etc. have gotten used to ripping off the whole country for ages because there were no better options. Want to put €100 in to a retirement plan? Well, we're going to take €5, just because, and also 1% of your investment every year, all so we can underperform a simple index fund (thankfully you can't invest in good index funds in Europe because the US ones won't file a KID form). BUT! Your primary residence? You can sell that for 10 million more than you paid for it and not owe a cent in taxes. Too bad for all the chumps who rent and have to invest in the market! I wonder why everyone puts their money in houses? It's an absurd ripoff of a country in every way.
  • tmnvix 3y ago
    A similar story in NZ. 0% tax on capital gains when selling a property. There is a so-called 'brightline test' which means that if you hold a property for less than two years or purchase a property with the intention of selling it for a profit you are expected to pay tax on those gains, but in practice this doesn't happen. Still waiting for the day that the tax department gets serious about questioning people's intent (as it is plain to everyone that yield is abysmal and capital gains is the real game - has been for decades).
    • CalRobert 3y ago
      The dialog about this in Ireland is "you can't tax HOUSES that's your gran's HOME you MONSTER!" (gran lives in dun laoghaire, poor thing) but 4 people renting a flat commuting to Dublin from Athlone with a few euro in trading212 or whatever are robber barons who should be taxed to the hilt. Not to mention the health service is appallingly bad and getting anything done takes an eternity. And I failed to mention, it's not just the lack of capital gains tax, it's the lack of meaningful property tax. My own prop taxes were €103 a year (for a dump in Offaly admittedly) but they're close to zero for the most part. So local renters work hard and pay mountains of tax to provide infrastructure (though most of it is crap stroads admittedly) making your own house worth more, so making you richer, and that value is never captured at any point or allowed to help the people who made it possible.