Making the numbers work

Sean Keyes, writing about Irish property prices for TheCurrency online news publication this week noted that “for private landlords, times are changing”. Well, yes. He chronicles the consistent drip of private landlords choosing to exit the Irish market (approx. 4,000 in 2019 and 2020) and the reduction in the number of buy-to-let mortgages being drawn down (only 2 percent of all drawdowns over recent years). But these are symptoms, merely clues to the problem. And the problem? “It’s hard to make the numbers work.” Yes folks, it is as simple and as complex as that, it is hard to make the number work. The financial journalist attributes this difficulty to credit – it is too cheap and accessible to some (home buyers), but not cheap or accessible enough for others i.e. private investors.

The above commentary was in reaction to a more in-depth analysis piece by Ronan Lyons, which analysed more than half a century of Irish housing data. The finding of this analysis is that in order to make the numbers work, the only way of delivering upon the Housing for All targets is for Irish house prices to rise 24 percent, or for construction costs to go down 40 percent. This is the epitome of picking your poison – either housing delivery fails, or house prices increase 24 percent, or the construction industry turbo-charges its digital revolution to achieve 40 percent savings (apparently policy won’t budge). This is quite a disheartening start to the new year. But, ironically, for cash investors the outlook has rarely been more positive. It is unlikely that house prices will fall in the immediate term, given the record-level savings of Irish consumers (and potential home buyers) right now. And it is unlikely that construction costs will fall, given the unfolding impacts of Brexit, ongoing critical labour and other resource shortages, and the fact that most within the industry are still playing catchup on the lost months of 2021. All of which points to output levels that fall short of Housing for All targets and, more tellingly, a continuation of the supply/demand mismatch that is maintaining current house prices and driving further growth. 

Keyes sums it up well: “With my citizen hat on, what we’re learning about the housing market is depressing. The problems are deep and hard to fix. But with my investment columnist hat on, it’s hard to conclude that house prices will fall any time soon. Ireland is an expensive place to build, and lots of Irish people can afford to pay”.

Ian Lawlor
086 3625482

Managing Director 
Lotus Investment Group