PEOPLE keep asking me what I think will happen to property prices after the Covid-19 pandemic.
The truth is nobody knows, and, at best, anybody talking about it is giving their best estimates based on the things they can hold to be factual.
We know things have changed — but it’s hard to tell how because, unlike other crises where they unfolded over a period of years, this time it’s happening in weeks.
The Great Recession had obvious imbalances when it came to property and credit — but this time we had a healthy economy and then out of the blue . . . BANG!
What I can’t understand is some people who say prices will drop and stay down.
This is the same thing we heard during the last crisis.
However, prices don’t go down and stay down any more than they go up and stay up — prices are naturally volatile.
Let’s take a look at the things we know.
We know that there was a housing need for quite some time. We know that there were, and still are, about 10,000 people in homelessness.
We know that rents and house prices were rising, even in February — which was the most recent data available from the Central Statistics Office.
The other thing we know is asset prices always respond to systemic shocks. We already saw the stock market crash (even though it has recovered significantly). There is no reason to expect that property prices won’t do the same thing.
There are lots of reasons for this. People will have lost jobs, banks are responding with harder criteria and people who can buy may decide pulling out of a purchase now might be what they feel is best for them.
But none of this changes housing need. For that to fundamentally change, we would need a few of the necessary ingredients which create a crash.
The first would be oversupply — and nobody seems to be saying we have that.
The next would be an imbalanced economy or a credit bubble, we have neither.
Another ingredient would be an ability to substitute housing — in other words, having sufficient choice for alternatives.
However, the hallmark of the market is that there aren’t enough homes for social housing, private renters or buyers — so it’s no choice really. So, how does this all play out?
Simple: activity will drop off and this will create a natural pent-up demand.
However, sentiment is also temporarily shot and that will mean people will seek new price discovery.
Add those two things together and you get a fairly quick downward adjustment that then stops.
Prices will stabilize and then, lest I get in trouble for saying it, prices will then start to rise again.
Prices can rise despite what people are saying or thinking, I listened back to an interview I did with Pat Kenny at the end of 2012 where I was saying prices would rise.
All the forces were there to make it happen — bearing in mind we were still in the middle of an IMF-led bailout programme then.
I remember that interview because of some angry reactions to it. People called me names, said I was a shill trying to kick-start a market that would never rise again.
I didn’t answer most of them back — hindsight did that for me.
We don’t have enough housing, a virus doesn’t change that.
Short of tens of thousands of people dying or leaving this country, then the sad reality is we’ll have the same housing shortage after all of this that we had before it.
It’s just a question of how prices (which aren’t the same thing as supply) respond.
WE are giving up the Irish way of life in order to save Irish lives.
This isn’t without trade-offs. In the UK, economists estimate that for every month of lockdown an economy shrinks 2.5 per cent.
That makes a two-month lockdown equal to the five per cent fall in output from the financial crisis.
This leaves hard choices given Leo Varadkar said he doesn’t want to pay for it with higher taxes.
It’s a typical ‘I’d like to eat chipper and not gain weight’ story. The one thing not mentioned that they should is to reduce public pay.
If you earn €80,000 in the public sector you are still paid the same, lockdown or not, working or not. If you do that in the private sector you get nothing.
Government workers are designated vital workers, most of the rest of society isn’t.
Increasing taxes on the middle classes is electoral suicide, in particular in the wake of a pandemic that was thrust upon us by forces outside of our control.
There are things we could do to tax wealth, raising property taxes would be a good start while reducing income taxes.
This way people who are productive and working make more and those who hold assets, be they working or not, pay more. You also can’t hide from property tax unlike residency!
GOOD GRUB
SOME people get upset when bad things happen, others are galvanised into action. One such person is Denis Reilly, who started Good Grub in response to the pandemic.
His idea was to help deliver fresh food to the kids’ families who attend DEIS schools.
At these schools, children get meals with their education because they come from disadvantaged areas. So when school shuts, fresh food may shut too.
Within a short amount of time they raised over €100,000 and this will help to feed 5,000 families across Dublin for a month. So far they have raised over €120,000 with a goal of €250,000.
They are distributing via Glanmore Foods who already supply non-fresh foods, and this takes care of the logistics. This is some good news, worth hearing more of!
Source: Thesun
