News
Housing will never be the same

L
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.
News
Massive Park Road housing development given green light
A private developer has been given planning permission to build 249 new residential units at Upper Park Road. The development, which will be built on a recently cleared site near […]

A private developer has been given planning permission to build 249 new residential units at Upper Park Road.
The development, which will be built on a recently cleared site near An Post’s sorting office, will include a variety of properties from five-bed houses to single apartments, along with a crèche and over 500 car spaces and over 300 bike spaces.
The development has been welcomed by local councillor Martin Grady.
“Killarney has a massive housing shortage so this is very positive. It will retain young families in the area, stimulating economic growth,” he said. “After 17 years of different planning applications it’s finally coming to fruition.”
News
Ballydribeen residents living in fear due to anti-social behaviour
Residents in the Ballydribeen are living in fear as a result of increased anti-social behaviour in the estate. Several serious incidents in the estate have resulted in several Garda visits […]

Residents in the Ballydribeen are living in fear as a result of increased anti-social behaviour in the estate.
Several serious incidents in the estate have resulted in several Garda visits in the last week.
Local councillor Martin Grady told the Killarney Advertiser that residents are “living in fear” as a result of very serious incidents in the last week alone.
One house in the estate was badly damaged when fire crackers were placed inside a letter box.
Another house had its windows smashed in over the weekend.
“It’s a major problem,” added Grady after meeting residents there earlier this week.
One of the most serious incidents occurred on Tuesday night.
A passing motorists had rocks thrown at his car while driving along the bypass whch is adjacent to the estate.
Taking to social media, local primary-school teacher Pádraig O’Sullivan posted:
“Travelling home tonight, at 11.05pm on the Killarney side of the bypass our car was hit by a rock – not a pebble – from the Ballydribben side , which hit the passenger door.
“It was centimetres away from hitting the window where my father, who is visually impaired, was sitting.
“This could have caused catastrophic permanent injury to him.
“The Killarney Garda were on the scene within three minutes.
“They can’t be patrolling the bypass all night.
“It comes down to parenting. You should know where your children are at this hour and be able to teach them what’s funny and what ruin a person’s life or cause a fatal crash.“
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