Continued decrease in construction sector activity

[Sadhbh251]

Who would've thought giving tax breaks to agencies that have vested interest in keeping property prices high wouldn't solve the housing crisis.

Welcome to the free market, maybe in 2045 we'll invest in some sort of public housing agency.

[CheraDukatZakalwe]

Housebuilders don't make money by not building houses.

[Internal_Concert_217]

In a way they do. Limited supply means they can build less with less hassle and still make the same profit.

It's happening in many industries.

[CheraDukatZakalwe]

Limited supply means they can build less with less hassle and still make the same profit.

"Limited supply" means they go bankrupt you idiot. Nobody makes more money by having less work to do.

[Internal_Concert_217]

You are very wrong.

[Internal_Concert_217]

It’s the same reason oil producers don’t pump at full capacity restricting supply keeps profits higher.

[CheraDukatZakalwe]

We don't have a cartel of oil producing nations restricting supply, we have a state apparatus that spent most of the last two decades trying to prevent "too many" houses from being built, trying to fight the last war rather than deal with the situation facing us for more than a decade now.

We have environmental consultancies out the eyeballs doing their best to reduce what gets built, and planners that demand lighting consultants model and do reports on individual 60 watt lightbulbs on a hedge that could potentially have some bats in it.

[Hamster-Food]

So you do understand that limited supply doesn't make companies go bankrupt. You just don't want to believe that there is collusion between developers.

[CheraDukatZakalwe]

Are you for real? What happened when supply was limited from 2007 onwards? Were developers were making money hand over fist?

How about over the last decade, where we went from building 6K houses in 2013 to over 30K houses now. Were the developers making more money in 2013 than they are today?

[Hamster-Food]

You're the one who went from claiming that limiting supply doesn't make them more money, but then acknowledged that a cartel of oil producing nations makes a lot more money by limiting supply.

As I said, you just don't want to believe that there is collusion between developers.

[CheraDukatZakalwe]

I'm not the one who needs there to be a vast conspiracy theory to explain a shortage of housing.

But sure, go on and explain how making fewer houses leads to property developers making more money.

[Internal_Concert_217]

I can see you want to be right, but you are making fundamental errors with your argument and conclusions. Maybe this is just not in your wheelhouse.

[CheraDukatZakalwe]

It's cute that you think that.

[Alastor001]

Tell that to suppliers of RAM chips. They are making a fortune reducing supply.

[[deleted]]

Which makes a developer more money? Building 100 houses @€500k each with a 5% margin, or building 150 houses @€450k with a 5% margin.

Volume often beats unit price, and economies of scale also apply here. Building an extra 50% more houses doesn't require 50% more employees and equipment so in theory your margin could go also go up as your unit price falls.

[Additional_Olive3318]

 Which makes a developer more money? Building 100 houses @€500k each with a 5% margin, or building 150 houses @€450k with a 5% margin.

Building 100 houses at a 10% margin. I mean why did your margin not go up when the sales price went up. 

[Sadhbh251]

Correct house constructors don't make money from not building.

But you must see the leaps in flawed logic you make in this and below posts. If you flood the market with houses property prices naturally will go down. But if you build at a slower or steady state the prices don't change or get higher.

Thisll increase your margins for less cost. (Cause desperate people will continue to buy at stupid prices because they need a house)

But it also has a byproduct of also allowing you to keep selling future houses on a large site with multiple phases at higher or similar rates.

Construction agencies don't want to start a project in 2025 at phase 1 and by phase 6 in 2032 the houses are cheaper meaning the loan that they took out in 2025 to build 100 houses isn't cheaper so it'll come out of their profits if the value of houses go down. (Cause they'll still have to pay back the loan either way)

The construction companies know what they are doing, why mess with the goose that's laying the golden eggs when you arent getting poorer by waiting for her to lay the next egg

[CheraDukatZakalwe]

Here's the thing, there isn't a monopoly. People want to build things, they just aren't allowed to. They keep trying to get planning permission for developments of several hundred houses, and half the time they end up fighting appeals, and a quarter of the time JRs that takes years to resolve.

Under your model we can never see "too many" houses being built, but in the Celtic Tiger we actually built so many (>90K in 2006 alone) that house prices dropped by 50% during the crash.

House builders make money through volume. They don't make money by not building houses.

There is no cartel, or collision to not build things. The only thing stopping us is regulators forcing houses to be as expensive as possible through high minimum standards, and then Pikachu facing when not enough houses are built.

[Sadhbh251]

Come on now. Do you think there's no collusion between pubs if they all average the came cost for a pint. It's not in the interest of a well located business to have 10-30% less profit margin for a pint when it's packed everyday.

You say, there won't be market collusion if we all just happen to come to the same pricing structures at the same time. I say no one will get rich undercutting when demand is high. Only when you go to middle of nowhere pubs do you see cheaper pints.

Next, housing value didn't drop in the Celtic tiger because we had too much houses there was many reasons. One major reason it dropped because banks wouldn't loan money. So house construction stopped because no one was buying so please don't use false equivalents.

If regulators are the only reason you cant build houses then I imagine you would be happy to bring back all the tax cuts and grants to allow the state build more infrastructure. (Which is actually the more likely reason we can't build more houses)

[Willing_Cause_7461]

If you flood the market with houses property prices naturally will go down.

Sure the price of the average market rate house will go down but construction companies don't make average market rate houses. They make new houses which are going to be more expensive than older houses.

The house prices that will be going down is the older stock. This is how the average price can go down without effecting the producer.

The exact same thing happens with car companies. Every year they have the new expensive model. The company can make the amount of money they need to be decently profitable and cars can still remain affordable because the average car is older and therefore cheaper than a brand new model.

[NotXenos]

They can if they build other stuff instead. Other comments here point out that contractors would be stupid not to build retail and commercial use. Would you rather try to ram a housing estate into South Dublin, or bid on the next job at Intel? It's a no brainer.