Everybody is getting more optimistic about the world economy. The inflation fight could get tricky from here - bad for interest rate prospects. Brexiteers disappear down the conspiracy rabbit hole
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I understand that housing can and does move like other financial assets correlated with interest rates however we had 12 years of mostly low interest rates, why did low interest rates not bring money into housing development to stabilise prices? I would suggest that policy is the reason, policy that allows NIMBYs and a system that enriches some lucky land owners. If policy reform did happen would it go a long way to fixing the problems in your opinion or am I missing some macroeconomic factor in my simplistic analysis?
Of course what policy are necessary is a matter of debate and not easy to balance property rights and peoples right to object with the need to get s**t built.
I am of the opinion that the price that houses are selling for is important but the price and availability of rent is a much bigger issue. If you can not afford to buy a house you can still get ahead in life and will not be homeless if the rental market was functional together with the right safety nets however what we have is a highly dysfunctional rental market that appears to be getting worse. I float the unpopular question, has our rent controls made the matter worse by driving out supply?
On the subject of interest rates, would low interest rates put upward or downward pressure on rents in your opinion? I would have actually assumed downward pressure as property would have appeared better value compared to other assets.
Great podcast again lads. Housing economics must be the most complicated and in my view fascinating topic.
Supply is actually the easiest bit to understand. Demand is less intuitive. Supply is one of the few things local government can actually affect. In my view, that feeds into the obsession with banging on about housing supply while the demand factors get far less discussion. It’s an easier discussion. Demand is multifactorial and less transparent; personal, corporate; local; global; monetary and fiscal policies, etc.. On top of that you have the time lags.
When it comes to corporate investment, the demand is a function of the returns available elsewhere. For example, since year end, 10 year swap rates are down around 30 to 40bps, and spreads on corporate bonds are down around 20bps. So comparatively, yields on property investment becomes slightly more attractive compared to six weeks ago, and that leads to demand for both properties and construction resources going up.
For domestic residential demand, why did the central bank loosen its rules recently? A tad nervous about the interest rate and spread trajectory over last year and what it might do for property prices in Ireland as that demand dries up?
But there’s no free lunch. If central banks don’t let people borrow more, who does that benefit? It keeps prices lower, but only for the cash rich, at the expense of locking out the ordinary Joe from home ownership. Although I doubt that enters their policy discussions much.
Finally if people cannot buy, they rent, so rent prices go up. And if rent pressure zones keep rent prices artificially down, then new renters subsidise the older.
I understand that housing can and does move like other financial assets correlated with interest rates however we had 12 years of mostly low interest rates, why did low interest rates not bring money into housing development to stabilise prices? I would suggest that policy is the reason, policy that allows NIMBYs and a system that enriches some lucky land owners. If policy reform did happen would it go a long way to fixing the problems in your opinion or am I missing some macroeconomic factor in my simplistic analysis?
Of course what policy are necessary is a matter of debate and not easy to balance property rights and peoples right to object with the need to get s**t built.
I am of the opinion that the price that houses are selling for is important but the price and availability of rent is a much bigger issue. If you can not afford to buy a house you can still get ahead in life and will not be homeless if the rental market was functional together with the right safety nets however what we have is a highly dysfunctional rental market that appears to be getting worse. I float the unpopular question, has our rent controls made the matter worse by driving out supply?
On the subject of interest rates, would low interest rates put upward or downward pressure on rents in your opinion? I would have actually assumed downward pressure as property would have appeared better value compared to other assets.
Great podcast again lads. Housing economics must be the most complicated and in my view fascinating topic.
Supply is actually the easiest bit to understand. Demand is less intuitive. Supply is one of the few things local government can actually affect. In my view, that feeds into the obsession with banging on about housing supply while the demand factors get far less discussion. It’s an easier discussion. Demand is multifactorial and less transparent; personal, corporate; local; global; monetary and fiscal policies, etc.. On top of that you have the time lags.
When it comes to corporate investment, the demand is a function of the returns available elsewhere. For example, since year end, 10 year swap rates are down around 30 to 40bps, and spreads on corporate bonds are down around 20bps. So comparatively, yields on property investment becomes slightly more attractive compared to six weeks ago, and that leads to demand for both properties and construction resources going up.
For domestic residential demand, why did the central bank loosen its rules recently? A tad nervous about the interest rate and spread trajectory over last year and what it might do for property prices in Ireland as that demand dries up?
But there’s no free lunch. If central banks don’t let people borrow more, who does that benefit? It keeps prices lower, but only for the cash rich, at the expense of locking out the ordinary Joe from home ownership. Although I doubt that enters their policy discussions much.
Finally if people cannot buy, they rent, so rent prices go up. And if rent pressure zones keep rent prices artificially down, then new renters subsidise the older.