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Housing will never be the same

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Last week I wrote about the pathetic investment options out there for Irish investors.

Despite high ongoing fees (mortgage, maintenance, insurance etc.) and the actual headache of being a landlord, it's easy to see why real estate functioned as the de facto investment portfolio for an entire generation.

Wealth creation was a rinse-and-repeat function where couples put money away until they had enough for the 'next house'. As a result, we have an economy where 70% of household wealth is tied up in real estate.

Driven by the profits it created, Ireland became obsessed with owning real estate.

But real estate as an investment won't be nearly as successful for our generation. (If you are able to get a house, that is)

All you have to do is look at the anecdotal evidence all around us to confirm this.

My parents bought the house they currently live in for 30k (pounds) 35 years ago. The house is now worth roughly 450k.

I typically despise these back-of-the-envelope calculations when It comes to property, given the endless variables and ongoing costs involved, but bear with me.

That's a gross return of 15 times the original value. Now there are upgrades, a change in currency and other adjustments to consider here, so for argument's sake, let's call it 10X.

To achieve the same level of growth over the next 35 years, you would be left paying 4,500,000 euros for what is a pretty modest house.

Sure, we will still see property prices increase over time, but the rate of growth won't be anywhere near as meaningful for one simple reason.

Interest rates.

Artificial Growth

Over the last 30 years, real economic growth has been stagnant, yet Ireland has experienced enviable nominal growth.

How did we manage it?

We created imaginary wealth.

We pushed interest rates lower and lower to stimulate economic growth.

And it worked.

After all, if you make 100k/year you can probably afford a 400k mortgage at 4%. At 2%, with the same 100k/year salary you can now take on 600k in debt.

So, were we getting richer, or was the debt just easier to afford?

Where do we go from here?

We have now squeezed interest rates as low as they can go.

The house price appreciation we have seen was justifiable because the mortgage rates on housing continued to fall in recent decades. This allowed people to take on more debt without severely impacting their ability to repay that debt.

If we go back to my parents, they were paying 14% on their mortgage. Mortgage rates are currently between 2 to 3%.

A relentless drop in interest rates gave way to higher and higher prices for houses, but interest rates are now on the floor.

The juice has been squeezed.

In fact, the trend has started to reverse, with rates expected to rise 1.5% in the first half of 2023

Be mindful that the same credit expansion cannot happen again.

How the next generation thinks about their investment options has to change.

Banks offering 0% returns for the use of your money and a housing ladder you can't get on are not your only two options.

If you need help creating your own investment portfolio, just reach out to me at mike@theislandinvestor or simply scan the QR code above.

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Start clocking up those ‘Kingdom Kilometres’

With an increase in daylight hours there’s no better time to clock up the ‘Kingdom Kilometres’ on foot or by cycling along the county’s two new Greenways. The recently opened […]

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29 March 2023

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With an increase in daylight hours there’s no better time to clock up the ‘Kingdom Kilometres’ on foot or by cycling along the county’s two new Greenways.

The recently opened Kingdom of Kerry Greenways between Tralee and Fenit and between Listowel and Abbeyfeale are already proving hugely popular with locals and visitors to Kerry.

Representatives of the tourism Industry, local public representatives, travel writers and influencers gathered in Kerry on Monday to experience the exciting new tourist attractions and welcome the arrival of the longer daylight hours as the clocks changed over to summertime.

Sarah Hanrahan, a social media influencer who posts about Irish travel and has more than 100,000 Instagram followers, described the experience.

“Ireland has some of the most amazing outdoor spaces. For a lot of my followers and other people, connecting with green spaces has become much more important to their overall sense of well-being as well as their health and fitness. It’s been really gorgeous to experience the Tralee to Fenit, and Listowel to Limerick Kingdom of Kerry Greenways; a fantastic trip sampling the warm hospitality of Kerry and a great reminder of the active holiday options that are right on our doorstep.”

The new purpose-built trails provide an accessible and inclusive experience for visitors of all abilities.

Mayor of Tralee, Cllr Mikey Sheehy and the Mayor of Listowel, Cllr Aoife Thornton, said that the greenways offer an exceptional recreational amenity for everyone to enjoy.

“The greenways are situated in some of Kerry’s most scenic landscapes and offer spectacular and safe off-road facilities for people of all ages to enjoy as the landscape comes into bloom. They also offer warm hospitality at the trail head towns of each route.”

Visit www.kerrygreenways.ie to find out more.

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St Patrick’s Day parade winners announced

Killarney Valley Classic and Vintage Club has won the sought-after overall award in recognition of their colourful and action-packed entry to this year’s St Patrick’s Day parade in Killarney. Delighted […]

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29 March 2023

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Killarney Valley Classic and Vintage Club has won the sought-after overall award in recognition of their colourful and action-packed entry to this year’s St Patrick’s Day parade in Killarney.

Delighted club representatives were presented with the Seán O’Keeffe Perpetual Trophy – in memory of the former Mayor of Killarney and parade stalwart – at a gala presentation of prizes in the International Hotel, Killarney on Tuesday night.

The award for the Best Interpretation of the Theme, which was Killarney: Experience More, went to the Wander Wild Festival who received the Michael Courtney Perpetual Trophy which is dedicated to the memory of another former mayor of the town who spearheaded the annual St Patrick’s Day celebrations for many years.

The John ‘Killer’ O’Callaghan Perpetual Trophy for the Best Sporting Entry was won by Killarney Athletic AFC and the Peter Irwin Memorial Trophy for the Best Marching Group and Cultural/Arts Entry went to Millstreet Pipe Band.

The Best Sports Club was Spa GAA, the Best Children’s Group prize was won by Kilcummin Comhaltas and the Best New Entry was Killarney Rugby Football Club.

There was an international flavour to the Best Musical Entry which was scooped by the Glenridge High School Marching Band from New Jersey.

The prize for the Best Voluntary Group went to the Kerry Stars Special Olympics Club, the Best School Award went to the Fiona Crowley Stage School and the Best Activity Group was deemed to be Scorchers Cheerleading Club.

The Most Entertaining Entry went to the Killarney Tidy Towns group, the prize for the Most Original Entry was won by Liebherr Container Cranes and the Most Imaginative Entry in the parade was the Art House, Killarney.

The Most Stylish Entry prize was awarded to the Ukrainian community whose representative said they were delighted to play a part in Ireland’s national holiday and thanked the people of Killarney for the warm welcome they have received.

Other prizes presented on the night included the Best Window Display which went to Christy Healy’s on New Street who were celebrating 100 years in business on St Patrick’s Day, while the Europe Hotel and Resort won the Best Green-Themed Building prize.

The judges for the parade were Br Pat Lynch, Guardian, Franciscan Friary, Pam Brosnan, Killarney Musical Society and Denis McMahon.

The awards were presented by Killarney St Patrick’s Festival Chairman Paul Sherry, Mayor of Killarney Cllr Niall Kelleher, Killarney Chamber of Tourism and Commerce Senior Executive Bridget O’Keeffe, and parade grand marshal Cathal P Walshe.

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