“Housing prices are going to hit a wall. Now it is important for everyone who is thinking of a purchase to keep their nerves. Wait a while and I bet prices will fall.”
Your coffee companion, as is his wont, predicted the future. “I’d bet my own house that the current housing bubble is as bubbly as it gets.”
He knows he’s swimming against the tide when he predicts prices will fall. “There won’t be a market slump – but I’m convinced that houses and apartments will become cheaper,” he enthuses.
He assured me that a certain Vladimir Putin would turn the Irish property market upside down. The western world is on the brink of recession. Record high energy prices are just the tip of the iceberg.
The cost of living has already gone up. Inflation will hit savings – and interest rates will certainly rise. As in days gone by, mortgage repayments are becoming a mini-nightmare for many homeowners.
One consolation is the upturn in the labor market. But in the face of the pervasive darkness, he suggests employment will also take a hit.
The argument is that a whirlwind of economic troubles will cause spending on high-profile items to fall. And, of course, the biggest single financial obstacle in most people’s lives is securing a mortgage to buy a home. Unlike the Celtic Tiger era, the central bank’s strict lending rules have limited things this time. But as house prices continued to rise in recent years, they would eventually hit a buffer.
What the typical buyer can muster in deposits and loans is at its peak. With this in mind, sales prices generally cannot go higher. The market has outstripped its core buyer base.
Of course, the elephant in the room is in short supply. There are far too few properties available to meet the current demand.
My coffee companion warned that we should not be blinded by this very real problem. “One of the great certainties of human history is the law of supply and demand. It’s an unstoppable force,” he said.
“When people are desperate for something – and are willing to pay a reasonable price for it – there will always be those who will give them what they need. When it comes to money, there is usually no shortage of takers.
“Remember when we had all these ghost towns scattered across the country? Our fortune tellers assured us that the housing market would be in the doldrums for a long, long time.
“As soon as they finished their gloomy forecasts, the housing scene rebounded after a disaster. Sometimes a market takes on a life of its own. It can be mysterious and inexplicable. A feel-good factor is a strong driver – just like a feel-good factor can put a damper on overnight.”
The average three-bedroom semi-detached home rose by €9,000 in the first quarter of this year. But that was before the aftermath of Putin’s attack in Ukraine. Although 27,000 apartments may be built in 2022, this is still well below demand. However, my guru of the moment insists that all this pent-up demand will bring old and new developers back onto the scene.
“We know there are problems acquiring building land, not to mention the specifics of our planning laws, but the dam rupture will open. Soon we will see the hum of more and more construction sites across the country.
“We may also see changes in people’s housing preferences. Expensive parts of Dublin are simply no longer an option for most first-time buyers. The possibility of working full-time or part-time from home is also a big unknown in the real estate scene.”
And that’s how my cappuccino buddy ended his sermon.
To change the subject entirely, I asked him if he had any insights into the census company’s time capsule department.
“Only a fool is sure of the future,” he wrote. “Someone in 100 years may or may not be comforted by that,” he mused.
https://www.independent.ie/opinion/comment/my-cappuccino-break-companion-reads-the-tea-leaves-41528106.html My cappuccino break companion reads the tea leaves