Connect with us

News

More money, more problems

Published

on

0241679_M_O_Connor_1000x600.jpg

By Michael O’Connor

This week, the Central Bank eased their lending limits to allow first-time buyers to borrow up to four times their income, an increase from 3.5 times set in place following the housing bubble fiasco of 2008.

I appreciate that for those looking to buy a house in the current market, this represents an opportunity to finally get on the property ladder and is welcome support.

However, the reality is, it is these extended credit facilities that have driven house prices higher over the last 30 years. Creating financial mechanisms to allow home buyers to tie themselves to more and more debt is not the solution that is needed.

Imaginary Wealth

Wage increases are not the factor driving the housing market to 'unaffordable' prices. Our new-found ability to justify these surging prices is thanks to some banking wizardry.

Longer mortgage terms and lower and lower interest rates have ensured that monthly payments are as affordable as they have ever been.

Yes, €500,000 is a sizeable mortgage, but if you spread it out over 35 years at historically low-interest rates, suddenly it seems justifiable, manageable even. The bidder most willing to shackle themselves to this life sentence 'wins'.

But what happens as interest rates rise? The very thing we thought we could afford is no longer affordable as the terms of the deal change.

All this credit in the system stops working when the cost to borrow starts to increase. We no longer can afford the things we thought we could afford. The imaginary wealth we thought we had, disappears.

And yet the solution from the Central Bank is to allow more leverage in the system in a rising interest rate environment.

Can't afford a home?

Not to worry, we will just lend you more money so we can prop up this house of cards just a little longer.

Pumping more money into an already inflationary environment does the exact opposite of what is needed. Instead of addressing supply issues and regulatory issues, they continue to focus on mechanisms to help justify current prices.

The Root of the Problem

Increasing the leverage in the system just kicks the can down the road. Currently, the data shows that home sales are slowing dramatically in the face of higher interest rates and a slowing economy. We are in the middle of a stand off between buyers and sellers. Buyers who can't afford to purchase at current prices as interest rates rise and sellers who don't want to sell at a price lower than their neighbour sold for.

Instead of leaving the market dynamics of supply and demand play out, allowing some downward pressure on house prices, the Central Bank has thrown a bone to sellers and disguised it as a benefit for buyers. They hope that this attempt to 'help' buyers stretch just a little further will be enough to keep the wheels turning. It won't.

Once Again

Allowing more leverage in the system to help justify higher and higher prices is not the answer. Doing it in the face of inevitably higher interest rates is simply thoughtless.

We simply didn't build enough homes following the last housing crash to meet the demand coming from millennials reaching their household formation years.

Perhaps addressing this generationally undersupply would be a more worthwhile endeavour instead of extending lines of credit, the very thing that facilitated this price surge in the first place.

Just a thought.

To learn what companies to invest in, and for direct access to my personal investment portfolio, go to www.theislandinvestor.com.

Advertisement

News

Paralympic legend Jason Smyth visits St Brendan’s

Published

on

By

Paralympic legend Jason Smyth visits St Brendan’s


World renowned Paralympian and world record holder Jason Smyth paid a visit to St Brendan’s College on Wednesday afternoon as part of a high profile visit to Killarney.


The six time Paralympic gold medallist spoke to second year students from St Brendan’s College, alongside students from neighbouring schools St Brigid’s Presentation Secondary School and Killarney Community College.
The interactive talk and interview took place ahead of World Sight Day, with the legendary sprinter sharing his personal journey with Stargardt disease, a genetic eye condition that left him legally blind at eight years old.
The Derry native, who holds the world record as the fastest Paralympian on earth over 100 metres, offered inspiring insights into overcoming physical adversity and achieving success at the highest level of world sport.
The school visit formed the opening leg of his Killarney schedule before he took centre stage later on Wednesday evening at The Killarney Plaza Hotel & Spa.
Smyth headlined An Evening with Paralympian Jason Smyth, an event organised by the Killarney Chamber of Tourism and Commerce as part of its winter schedule, sponsored by AIB.

Attachments

Continue Reading

News

Deerpark Retail Park placed on market for fifteen million euro

Published

on

By

Deerpark Retail Park in Killarney has officially been placed on the market with a guide price in excess of 15.4 million euro, excluding VAT.

International real estate firm Cushman & Wakefield has been appointed as the sole sales agent to handle the high-profile commercial property sale on behalf of its current owner, Investcorp.

Investcorp, a global investment management firm headquartered in Bahrain, had previously acquired the prominent shopping complex.


The sale represents one of the largest commercial property offerings to launch in County Kerry this year.

Located roughly 1.3 kilometres west of Killarney town centre, the scheme enjoys strong regional connectivity and sits adjacent to independently owned operations including a Tesco Extra store, a Tesco petrol filling station, JYSK, and Aldi.


Constructed in 2006, the development extends across approximately 10,482 square metres, or 112,835 square feet.

The scheme comprises a mix of modern retail warehouse units and a complementary neighbourhood centre, offering 13 individual units in total with Part Open and Part Bulky Use planning permission.

The units range in size from 94.6 square metres up to 1,994.9 square metres. Visitors have access to approximately 248 customer parking spaces across the commercial grounds.

The park is currently 100 per cent occupied by a strong line-up of established national and international brands.

Key retail tenants include Marks & Spencer, Boots, DID Electrical, Maxi Zoo, and Mountain Warehouse.

The neighbourhood centre element accommodates service and convenience operators such as Costa Coffee, Card Factory, and Salon B.

The first-floor accommodation is fully let to Peak Performance Academy, which provides additional rental diversification.

Additionally, the scheme benefits from an agreement with Tesla to operate eight electric vehicle charging bays within the customer car park.


Commercial figures show that the property generates a total current rental income of 1,326,458 euro per annum, with a weighted average unexpired lease term of 4.45 years to break options and 6.46 years to lease expiry.

Cushman & Wakefield noted that the quoted guide price of 15.4 million euro reflects a net initial yield of 7.83 per cent, assuming standard purchaser costs of 9.96 per cent.

The selling agents highlighted that the fully occupied asset offers investors an attractive income profile alongside scope for additional income generation through parking commercialisation.

Attachments

Continue Reading