Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Why Ireland's housing bubble burst

worksinprogress.co

Post reply on HN
Print view View original

31–40 of 166 posts

Re: Why Ireland's housing bubble burst

#31

Post by tmnvix »

skeeter2020 wrote: post #11
jwond wrote: post #3

Earlier quoted context omitted.

People predicting the Canadian housing bubble would burst probably didn't think the government would resort to such absurdly high levels of immigration. https://globalnews.ca/news/10386750/canada-41-million-popula...

I'm interested that you used the word "absurd" - how come? Historically nothing sets up a country better for future success than lots of immigrants - if it's paired with government policy that doesn't discourage growth...

> ...if it's paired with government policy that doesn't discourage growth...

Well, exactly. Bringing in large amounts of immigration to support an economy that that largely revolves around property transactions will contribute to an increase in property prices but will drag down GDP per capita and drive up infrastructure costs. This is NZ.

Re: Why Ireland's housing bubble burst

#32

Post by wwweston »

tmnvix wrote: post #10
hackerlight wrote: post #8

Earlier quoted context omitted.

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.

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 determinin…

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.

Re: Why Ireland's housing bubble burst

#33

Post by tmnvix »

TulliusCicero wrote: post #29
tmnvix wrote: post #5

> 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. (emphasis mine) That wasn't the accepted wisdom at the time. Prices going up spelled 'supply shortage' to most. When the tide went out (i.e. credit availability) it revealed an oversupply. We should learn fr…

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.

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.

Re: Why Ireland's housing bubble burst

#34

Post by TMWNN »

me_me_me wrote: post #26
skeeter2020 wrote: post #11

Earlier quoted context omitted.

I'm interested that you used the word "absurd" - how come? Historically nothing sets up a country better for future success than lots of immigrants - if it's paired with government policy that doesn't discourage growth...

> Historically nothing sets up a country better for future success than lots of immigrants Ummm citations needed urgently. I would point out, immigration policy vs anyone without a passport is welcome are two complete scenarios that the only thing in common is that outsiders are coming in. Unchecked immigration policy as a good thing is a myth. People from clashing cultures dont mix naturally. Only results are natura…

> I would point to Sweden and their current problems, also to the change of mind of the pro-unchecked immigration politicians. Who now are openly and publicly stating they were wrong.

Context for others: Sweden has no language, income, employment, or skills requirement https://www.migrationsverket.se/English/Private-individuals/...> for obtaining citizenship.

In completely unrelated news, Arabic is now the second most spoken language in Sweden https://digitaledition.chicagotribune.com/tribune/article_po...>.

Re: Why Ireland's housing bubble burst

#35

Post by mytailorisrich »

tmnvix wrote: post #23
mytailorisrich wrote: post #19

Earlier quoted context omitted.

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.

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…

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.

Re: Why Ireland's housing bubble burst

#36

Post by wredue »

jwond wrote: post #3
wredue wrote: post #2

I’m not sure what’s different, but I will chime in to say that I’ve been reading about Canada imminent bubble burst for 15 years. I mean, eventually someone may be right, but had I let this get to me and not buy my house 12 years ago, I would be in a much worse position today. Be careful with people trying to predict how markets will move.

People predicting the Canadian housing bubble would burst probably didn't think the government would resort to such absurdly high levels of immigration. https://globalnews.ca/news/10386750/canada-41-million-popula...

The immigration “issue” is actually because ain’t nobody having kids, and capitalism demands constant growth.

Re: Why Ireland's housing bubble burst

#37

Post by eek2121 »

tmnvix wrote: post #10
hackerlight wrote: post #8

Earlier quoted context omitted.

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.

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 determinin…

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.

Re: Why Ireland's housing bubble burst

#38

Post by mitthrowaway2 »

hackerlight wrote: post #8
tmnvix wrote: post #5

> 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. (emphasis mine) That wasn't the accepted wisdom at the time. Prices going up spelled 'supply shortage' to most. When the tide went out (i.e. credit availability) it revealed an oversupply. We should learn fr…

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.

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.

Re: Why Ireland's housing bubble burst

#39

Post by refurb »

wredue wrote: post #2

I’m not sure what’s different, but I will chime in to say that I’ve been reading about Canada imminent bubble burst for 15 years. I mean, eventually someone may be right, but had I let this get to me and not buy my house 12 years ago, I would be in a much worse position today. Be careful with people trying to predict how markets will move.

Canada had a massive housing crash in 1990. Housing pricing dropped in Toronto by 30% on average (less in the core, up to 50% in the suburbs). Home owners were screaming for relief. If you bought in 1989, you didn’t break even accounting for inflation until 2005 or later.

The last decade has been Groundhog Day compared to the 80’s. Complaints of limited supply, people saying “these prices are the new normal”, people taking on more and more debt.

To me the most obvious indicator of a bubble is the disconnect between wages and home prices.

Toronto has almost the same home prices as San Francisco yet: 1) wages are lower, 2) taxes are higher and 3) mortgages can’t be fixed for 30 years.

Fundamentally it just doesn’t make sense. Sure immigration can drive demand, but the affordability issue remains. What’s driving it is speculation - people think they’ll make a lot of money so they take bigger and bigger risks - fraudulent mortgages, “interest rates have to come down” mentality, “the government will never let housing prices drop” mentality, private mortgages that let borrowers leverage up way beyond government standards.

I have no idea when it will correct but I’m confident that they will - they always do.

Re: Why Ireland's housing bubble burst

#40

Post by RowanH »

tmnvix wrote: post #22
takinola wrote: post #12

Earlier quoted context omitted.

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 location…

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 impre…

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.

Post reply on HN