Board index » The IRISH PROPERTY BUBBLE » The Republic of Property

Post new topic Reply to topic  [ 25 posts ]  [Go to page]   1, 2  Next
Author Message
 Post subject: It's the demographics stoopid
PostPosted: Tue Feb 12, 2008 4:05 pm 
Offline
Too Big to Fail

Joined: Feb 6, 2007
Posts: 4200
We had a net increase of population by 106,100 for the year ending April 2007. Link

Quote:
Immigration was responsible for nearly two-thirds of the population increase.

Immigrants don't usually buy houses so there were 67,300 looking to rent places. In a best case scenario (for builders), you are looking at two per household, which means that at best 33,650 properties can expect to be housing new immigrants. A more realistic figure of 3 per household means approx 22,000 extra properties required for rent.

The 38,800 born last year are all wee nippers and thus won't be buying houses or renting just yet. Let's just assume that they'll be absorbed by keeping the 2.8 per household figure that we have for Irish families. That means 13,800 properties are required to house the wee kiddies born.

To look at it from another angle.
52,500 were born in 1990. They turn 18 this year and can reasonably be expected to require homes over the next decade or so. Assuming that number was not decreased by their parents emigrating etc, and that they all get married and live as couples they can reasonably be expected to require approx 26,000 homes over the next decade but for the purposes of this thread, we'll assume they buy all in one big chunk which means 26,000 "this year".

Nowhere do these figures remotely justify building over 80,000 homes a year. If net migration drops, which is almost a certainty, a huge amount of the real demand for new housing disappears into thin air.

These figures don't even take account of the annual death rate which predicts 28,000 deaths in Ireland per annum and even if we assume they were all married senior citizens with no children, they would be expected to release approx 14,000 homes a year onto the market.

Doing the sums:
+22,000 houses required for new immigrants to rent
+14,000 houses required to house new babies
+26,000 houses required to house the 18 year old generation
-14,000 houses released due to death of occupants

Thus 48,000 new homes required (in a best case scenario for builders) and if immigration slows, this will drop even further.
If migration was to become static, then you'd be looking at only 26,000 homes being required per annum.
250,000 is a conservative estimate of the number of empties in Ireland right now which could in theory house the next five years worth of demand, before you consider that this empty overhang is likely to increase even further during this year.

I've deliberately set this up to give the rosiest picture possible for builders by using multiples that would up the number of homes required.
Flaws? Mistakes? Thoughts?


Last edited by gaius on Tue Feb 12, 2008 8:37 pm, edited 1 time in total.

Top
 Profile  
 
 Post subject:
PostPosted: Tue Feb 12, 2008 4:28 pm 
Offline
Holiday Home Owner
User avatar

Joined: Jan 8, 2008
Posts: 348
I still think there's a bit of a pent up demand from the 25-35 age bracket that have been out of the loop when it comes to house buying due to the affordability issue.

Don't ask me to back this up with anything as trivial as statistics, but I know from speaking to friends and acquaintances that many have been priced out of the market and are now looking around for somewhere to buy, now that the affordability issue is addressed and there is some value to be had.

I'd be surprised if this phenomenon isn't widespread. How much this will affect demand? I think anyones guess is as good as mine.


Top
 Profile  
 
 Post subject:
PostPosted: Tue Feb 12, 2008 4:42 pm 
Offline
Under CAB Investigation

Joined: Oct 11, 2007
Posts: 1557
Poc wrote:
now that the affordability issue is addressed and there is some value to be had.

Have 5-20% drops in asking prices really addressed the underlying affordability issue? At 2008 levels many people in the 25-35 bracket are still priced out of the market. Surely stricter controls on credit will also impact on their purchasing power.


Top
 Profile  
 
 Post subject:
PostPosted: Tue Feb 12, 2008 4:46 pm 
Offline
Real Estate Developer

Joined: Feb 18, 2007
Posts: 776
Location: Dublin
I came up with a similar figure just by dividing the population increase by the average household size which was about 2.7 in the 2006 census.

E.g. 106,000 / 2.7 = 39,259

The net population increase would already take account of deaths, so there is no need to bother with that. There would be a certain number of demolitions per year, but I doubt it is very significant.

BTW, about the lowest avg. household size in the EU is ~2.1, so any VI suggesting that our household size are similar to Germany and Finland is clearly full of shit.


Top
 Profile  
 
 Post subject:
PostPosted: Tue Feb 12, 2008 4:49 pm 
Offline
Private Tenant

Joined: Jan 31, 2007
Posts: 28
Location: Galway
Hmm ... What % of the 106,000 came here to build houses and work in other spin-off businesses?


Top
 Profile  
 
 Post subject:
PostPosted: Tue Feb 12, 2008 4:54 pm 
Offline
Too Big to Fail

Joined: Feb 6, 2007
Posts: 4200
That's a fair point Poc and there's no real way to quantify it.
I can only speak of personal experience and I'm the only one of 2 in my college class of 30 who has not bought (we're all 28-32 now). In my social circle in Dublin, 3 out of the 10 of us (26-31) have no stake in property. In my social circle in Cork where I'm from (ages 25-35), it's about 50/50.

It's not very scientific but if my mates in Cork were to be taken as a representative sample of the 25-35 age bracket with an average birth rate of 55,000 for those years, we're looking at 27,500 people per year as "pent up" demand. 11 times 27,500 makes 302,500 people and 150,000 houses required assuming that they all buy as couples which still won't clear the overhang but there's something a bit too rosy here.
My college classmates are all chemical engineers, i.e. high earning professionals. My Dublin mates are all professionals, some of whom are high-earning. However, my Cork mates are for the most part hippy alternative-lifestyle types and some of them would never have got a mortgage during the boom let alone the coming crunch. Most of them are low-to-average earners with only one real Celtic tiger in the group.

I think there is pent up demand. After all, I'm part of it but I do suspect that it won't be enough to sustain house price levels as those who haven't bought by now can hang on, rent and wait & see.

Can the stubborn buyers please stop sitting on their hands, do their duty for Ireland and start buying up empties snappish? You can get great value out there now that the average house price is only 9 times your salary!

Edit: corrections.


Last edited by gaius on Tue Feb 12, 2008 5:00 pm, edited 1 time in total.

Top
 Profile  
 
 Post subject:
PostPosted: Tue Feb 12, 2008 4:57 pm 
Offline
Planning Tribunal Attendee

Joined: Nov 8, 2006
Posts: 1255
Location: D4 hob-nob..ex Dublin NW sub-district Gurraland
It really is clutching at straws trying to make the best possible case for numbers of units needed. That pent-up demand has indeed an affordability issue, most(78%) earn under 35k p.a.(based on govt stats).

To add to affordability, alot will be single, a further bunch wouldn't give a hoot about buying and rent(single&couples), another bunch will have outstanding debt(credit card, personal loans) which reduces their affordability(tiger splashing cubs), another bunch wouldn't even qualify for a mortgage (single&couples, your skanger type demographic :lol ) AND all these will have to have a 9% deposit with no loans outstanding in best case scenario.

If lending does return to historic norms(via credit crunch) to corresponding huge reduction in prices, then the ones who cannot afford now and are single will buy and soak up some normal demand p.a.
And then the immigrants as pointed out. They are mostly in low wage jobs with a pull factor to buy in their home countries hwere its hell of alot cheaper. You'll be looking at the health sector, better part of I.T., maybe finance to source some real buyers from this group and that ain't much in numbers!


Last edited by gurramok on Tue Feb 12, 2008 4:59 pm, edited 1 time in total.

Top
 Profile  
 
 Post subject:
PostPosted: Tue Feb 12, 2008 4:58 pm 
Offline
Holiday Home Owner
User avatar

Joined: Jan 8, 2008
Posts: 348
jost wrote:
Poc wrote:
now that the affordability issue is addressed and there is some value to be had.

Have 5-20% drops in asking prices really addressed the underlying affordability issue? At 2008 levels many people in the 25-35 bracket are still priced out of the market. Surely stricter controls on credit will also impact on their purchasing power.


Maybe it'd be better put in the present tense. i.e. "The affordability issue is being addressed." Prices are dropping, albeit slowly, this factor and wage inflation is narrowing the affordability gap.

I think the point is still valid; that there are a number of people who are looking to get into the market that aren't represented in the aforementioned figures.


Top
 Profile  
 
 Post subject:
PostPosted: Tue Feb 12, 2008 5:12 pm 
Offline
Of Systemic Importance
User avatar

Joined: Jan 27, 2007
Posts: 5131
Location: Elsewhere
There is only 1 source of homegrown people to feed the demand for housing, and that's the houseshares.

Any family unit that is currently renting and decides to buy, will by definition be leaving an empty place behind, they have no net impact on empties.

In a house share situation you could have anything from 2 to 4 individuals (perhaps more) who might be willing to go their seperate ways and buy their own places. In some cases they'll be linking up with others from the same house share or another house share to create a family unit.

Immigration will always be hard to predict in advance, and if we are relying on immigrants to support the rental market then we'll always have a knife hanging over us, unless we can create an economy that a)welcomes immigrants, and b) creates enough of the kinds of jobs that will keep them here.

Bringing in immigrants to build houses for immigrants is not the kind of sustainable jobs I'm talking about.

-Rd

_________________
www.IrishHomeTruths.com


Top
 Profile  
 
 Post subject:
PostPosted: Tue Feb 12, 2008 5:26 pm 
Offline
Under CAB Investigation

Joined: Oct 11, 2007
Posts: 1557
Poc wrote:
I think the point is still valid; that there are a number of people who are looking to get into the market that aren't represented in the aforementioned figures.

I certainly agree that it's an important factor that is very difficult to quantify. I personally know a number of people in that bracket who have stated their intention to buy sooner rather than later. However, external factors (e.g. credit restrictions or economic downtown) are likely to impact these intentions even in the short term. Many people seem to assume that we can have 2008 affordability with 2006 economic/lending conditions.


Top
 Profile  
 
 Post subject:
PostPosted: Tue Feb 12, 2008 5:30 pm 
Offline
Too Big to Fail

Joined: Feb 6, 2007
Posts: 4200
gurramok wrote:
It really is clutching at straws trying to make the best possible case for numbers of units needed.

That's the point I'm trying to make. I fixed a glaring error in my last post and it is clear that even if half of all 25-35'ers have yet to buy houses, the current empties can only be filled if every one of them buys a house each. If a significant proportion of them buy as couples or with a friend, then the empties will not be cleared by the 25-35 age bracket pent up demand.

If you look at non-immigrant influenced demographics, there is demand for at best 25,000 homes per annum.


Top
 Profile  
 
 Post subject:
PostPosted: Tue Feb 12, 2008 6:09 pm 
Offline
Holiday Home Owner
User avatar

Joined: Jan 8, 2008
Posts: 348
Another factor to consider is the empties, just because a house is empty there's no guarantee that it will be coming back on the market as a rental or sale anytime soon. It's another impossible to quantify figure, what amount will come back on the market and how many the owners will be content enough to sit on their hands as regards their empty property? The only thing we can say for certain that it won't be 100% of the figures for empty houses that will contribute to availability.

Once again, I'm not going on anything other than what I'm seeing in my own life. For example there's a gaff a few doors up from me that has been vacant for over 1 year and possibly longer, it looks like a good bit of money has gone into a complete renovation and yet it lies idle. I'm only deducing that, from the rents in the area, that whoever owns it can afford to/or is forced to forgo the 18k-20k that it would bring in each year in rent. There's no sign of it coming back to the market for rent or sale and yet it would be included in the empties figure estimated above.


Top
 Profile  
 
 Post subject:
PostPosted: Tue Feb 12, 2008 6:19 pm 
Offline
Under CAB Investigation

Joined: Apr 19, 2007
Posts: 2856
Location: Berlin, Germany
Poc wrote:
For example there's a gaff a few doors up from me that has been vacant for over 1 year and possibly longer, it looks like a good bit of money has gone into a complete renovation and yet it lies idle. I'm only deducing that, from the rents in the area, that whoever owns it can afford to/or is forced to forgo the 18k-20k that it would bring in each year in rent. There's no sign of it coming back to the market for rent or sale and yet it would be included in the empties figure estimated above.

This kind of thing made sense in the era of rapid capital appreciation - why go to the effort (and expense) of letting the place out when you get most of the profits from holding on to it.

In fact if you assume that it would take a similar amount of money to:
  • Pay the deposit to buy a place plus fit it out for rental
  • Pay the deposit for two places
then given massive capital appreciation, you'd be better off owning two idle places than owning and renting the one.

Of course, you'd be paying the mortgage on two places with no rental income to offset it with, but when prices were rising maybe 40K a year and interest rates were low, doubling that to 80K was more significant than a few grand a month.


Top
 Profile  
 
 Post subject:
PostPosted: Tue Feb 12, 2008 7:53 pm 
Offline
Planning Tribunal Attendee
User avatar

Joined: Feb 6, 2008
Posts: 1198
Location: County Galway/Poland
Quote:
Immigrants don't usually buy houses so there were 67,300 looking to rent places. In a best case scenario (for builders), you are looking at two per household, which means that at best 33,650 properties can expect to be housing new immigrants. A more realistic figure of 3 per household means approx 22,000 extra properties required for rent


Actually this ratio would be much higher, it is not unknown to have 8-10 eastern European immigrants per dwelling. As most of them plan to come just for limited period of time, they are not into "wasting" money on living costs so they can maximize profits from visit. Of course families with children would tend to have separate dwellings, but they are min 3 people.

It leads to interesting results. In some places, like London, immigrants "push" out families from many locations, as even well-off two income couples may not be able to compete on price against low income but multiple income groups.

Last but not least, main thing that brings people to Ireland, is availability of jobs. Once economy would stop creating new jobs at this pace, the flow will stop - who know, maybe even reverse.


Top
 Profile  
 
 Post subject:
PostPosted: Tue Feb 12, 2008 8:09 pm 
Offline
Too Big to Fail

Joined: Feb 6, 2007
Posts: 4200
Quote:
Actually this ratio would be much higher, it is not unknown to have 8-10 eastern European immigrants per dwelling.

I'm aware of that but the object of the exercise was to take a pro-VI slant on things and demonstrate how the "fundamentals" actually still work against the builders.

Everything in the OP is slanted to give the best possible outlook for bulls and the sums still aren't adding up to a recovery any time soon.


Last edited by gaius on Tue Feb 12, 2008 8:11 pm, edited 1 time in total.

Top
 Profile  
 
Display posts from previous:  Sort by  
Post new topic Reply to topic  [ 25 posts ]  [Go to page]   1, 2  Next

    Board index » The IRISH PROPERTY BUBBLE » The Republic of Property

Who is online

Users browsing this forum: No registered users and 2 guests


You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum

Jump to:  

Follow, Retweet @dailypinster



Pyramid Built, Is Better Built! - Latest Property Discussions www.thepropertypin.com