Boycott Of The Housing Market

whizzbang

Gurgle wrote:

Most investors, or at least their financial advisors, aren't in the business of burning money. If they aren't getting the money they want/expect for their house, they're not going to sell.

Buy dear, sell cheap has never been a good business plan.

This is true for seasoned investors, but I think the issue is that there are a lot of inexperienced investors with property right now. I could well see them panic if their "property only goes up" rule is broken.

Afuera

SkepticOne wrote:

Generally, estate agents and others simply state that prices will slow to a soft landing or a more sustainable rate of growth etc. Is there any theory of how it might work that I might have missed?

No, you haven't missed anything. The fact that nobody has given an actual theory on how a soft landing would work in Ireland is the problem.

Let's say we reach the soft landing stage, where prices are not rising or are only rising in line with wage inflation. What would happen to demand under this scenario?

Why would investors continue to risk investing in the property market if they are not seeing any capital gain (in real terms)? Why would a FTB stretch themselves to get on the ladder if they can wait another year or two until they are more comfortable financially? Why would some investors not decide to cash in some of their existing property and transfer the cash to something that will give them a better return with less risk?

It's estimated that there are going to be another 100,000 new homes built this year so the supply doesn't look like it's going down in the short term. To try and guess how demand would be affected by a soft landing, we need to be able to estimate how much buying is due to speculation at the moment (either investors expecting capital appreciation or FTBs afraid of being priced out of the market). This is not so easy to work out but indicators show heavy involvement in the market by investors and this alone could cause a serious drying up of demand should things slowdown.

SkepticOne

Gurgle wrote:

Most investors, or at least their financial advisors, aren't in the business of burning money. If they aren't getting the money they want/expect for their house, they're not going to sell.

Buy dear, sell cheap has never been a good business plan.

Neither is hanging on to a depreciating asset. I agree though that in the event of a crash, many investors will ride it all the way to the bottom.

FillSpectre

SkepticOne wrote:

If you are only getting 2% then it makes more sense to take your deposit and put it into a decent investment account adding in the equivalent of your monthly mortage payment per month. The figures have been worked out on this very thread. Work it out for yourself though.
.

Did you miss the point that a 2% of a large amount is more than 4.5% on a smaller amount and after years the yeild increases and you now own an asset?

I have seen people work it out incorrectly here and no consideration for gains other than to say the asset may not appreciate enough while ignoring the annual dividents. Comaprison also often show as if the person had the cash to buy a house outright at the start.

Just pointing out it is not as terrible as some make out and that is still ignoring the other attributes of property which can benifit an investor or be part of the investment.

FillSpectre

whizzbang wrote:

I take your point about needing movable people to allow this to happen but that is why I think the high numbers of allegedly empty investment properties are such a risk. If there is really no-one living there is makes the properties much easier to sell. Ie everyone in Ireland could stay living where they are and the empty properties alone could pull the market down on their own. IE no movement of people needed.

edit; of course some areas will be hit harder than others, the old addage "Location, location,location" still applies

THe high number of vacant properties really is over exagerated. THe number makes no difference unless it is a large portion of the market than is standard. The reports in the papar on was one professor quoting an old report which expressed the vacant properties asnormal percentage and teh other was anecdotal evidence provided by people who could not access lots of properties. They were on Joe Duffy explaining how they could check and get into loads of properties. It seems strange that a report than comes out saying they checked with all these different people to establish vacancy when I know loads of people who didn't get censes forms. The figures tehy suggested would have menat a 20% vacancy rate country wide. I think we would notice. There is always vacant properties it only matters if there is a huge abnormal amount of them and not the fact some people don't want offical information on their property. As I don't see masses of empty property got reports of no censes forms and I know people who would "hide" their properties I think it is far more beleivable to assume we don't have 20% vacancy rate in Ireland. The proof isn't up to much IMHO and it doesn't make much sense

SkepticOne

FillSpectre wrote:

Did you miss the point that a 2% of a large amount is more than 4.5% on a smaller amount and after years the yeild increases and you now own an asset?

I got your point. It is simply a wrong point.

I have seen people work it out incorrectly here and no consideration for gains other than to say the asset may not appreciate enough while ignoring the annual dividents. Comaprison also often show as if the person had the cash to buy a house outright at the start.

No, this is the point you failed to get the last time. You do not need any capital to start with other than the equivalent of the deposit.

Just pointing out it is not as terrible as some make out and that is still ignoring the other attributes of property which can benifit an investor or be part of the investment.

No it is a terrible way to invest. The only reason it seems good is historical capital appreciation.

You have simply dismissed my calculations. You have not done any of your own.

whizzbang

FillSpectre wrote:

THe high number of vacant properties really is over exagerated...

I agree it is hard to get accurate figures everyone can agree on but if the numbers are high it could spell serious trouble for the market.

miju

FillSpectre wrote:

THe high number of vacant properties really is over exagerated. THe number makes no difference unless it is a large portion of the market than is standard. The reports in the papar on was one professor quoting an old report which expressed the vacant properties asnormal percentage and teh other was anecdotal evidence provided by people who could not access lots of properties. They were on Joe Duffy explaining how they could check and get into loads of properties. It seems strange that a report than comes out saying they checked with all these different people to establish vacancy when I know loads of people who didn't get censes forms. The figures tehy suggested would have menat a 20% vacancy rate country wide. I think we would notice. There is always vacant properties it only matters if there is a huge abnormal amount of them and not the fact some people don't want offical information on their property. As I don't see masses of empty property got reports of no censes forms and I know people who would "hide" their properties I think it is far more beleivable to assume we don't have 20% vacancy rate in Ireland. The proof isn't up to much IMHO and it doesn't make much sense

so on your anedotal evidence there's no over supply , BUT on anecdotal evidence from the CSO there is

get the boat , ffs , you can't dismiss something as tosh because it's anecdotal (which you have been doing a decent bit of in this thread) and then later on come back with anecdotal "evidence" of your own small part of the world (your locality / circle of friends) and compare that nationaly

FillSpectre

miju wrote:

so on your anedotal evidence there's no over supply , BUT on anecdotal evidence from the CSO there is

get the boat , ffs , you can't dismiss something as tosh because it's anecdotal (which you have been doing a decent bit of in this thread) and then later on come back with anecdotal "evidence" of your own small part of the world (your locality / circle of friends) and compare that nationaly

THe CSO did not release the figures on vacant properties it was information reported by their collectors it is is not a CSO official figure.

I never suggeted anything about supply just that the empty property figures banded around as fact don't add up to anybodies personal experience and are based on misunderstanding of the information given out. ANybody you know live in a place with over 20% vacancy becuase they have to take the vacncy rate that is nowhere near my friends, family, collegues, businesses etc... I reckon you need an 80% vacncy rate in parts of the countryside to off set the massive DUblin areas that have less vacncy rate and higher density.

I also said it is my personal opinion. Do you think there is a 20% vacancy rate in Ireland? Do you trust the figure that you thought was from the CSO even thought it is not? I dismissed nothing I just pointed out what some of those figures mean and how that doesn't add. Can you tell me where all these vacant proeprties are?

FillSpectre

SkepticOne wrote:

I got your point. It is simply a wrong point.

Then explain how you make more money

SkepticOne wrote:

No, this is the point you failed to get the last time. You do not need any capital to start with other than the equivalent of the deposit.No it is a terrible way to invest. The only reason it seems good is historical capital appreciation.

Why do you assume people are doing it without capital? An investement that pays out a divident linked to to inflation is not a bad asset or investement.

SkepticOne wrote:

You have simply dismissed my calculations. You have not done any of your own.

You have not considered the additional values I think are important. I am trying to figure out a good formula that actually shows the information the best way. You are dismissing everything I say by saying I am wrong without any evidence and then saying an economic priciple is wrong becuase historically people got massive gains. You don't need capital appreciation.

daveirl

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jdivision

RE: vacant houses, has everybody forgotten about holiday homes in Ireland?
Re: Price crash, I wouldn't call a 10 per cent drop a crash simply because prices are up 14 per cent so far this year. It'd be 20 per cent plus for me to call it a crash and even then we'd only be back to prices last year.

miju

re: joydivision , the holiday homes weren't included in that figure

re: fill spectre , 2 things:

1: i gave an example of where i live of at least a 10% vacancy rate but having now really settled into the area and having explored it i can tell you it's more like 25%

2: my point about CSO figures is that it's anecdotal evidence from the enumerators likewise your view on unoccupnacy is anecdotal , you can't dismiss one and replace it with the other (particularly when yours is localised and the CSO anecdotal is more nationalised)

miju

also let's not get hung up on the cso thing , we still have the other report stating 70,000 unit over hang not including holiday homes , now given that's a few years old and the MASSIVE increase in the completion of homes then it will only serve to reason that there's more unoccupied properties

so we kind of have 1 anecdotal piece of evidence being backed up by a proper well done report compared to what you can see in your locality fill spectre , i know which one i'm inclined to hold more weight to

SkepticOne

FillSpectre wrote:

Then explain how you make more money

Why do you assume people are doing it without capital? An investement that pays out a divident linked to to inflation is not a bad asset or investement.

At the beginning in both scenarios you start with a base capital of 28k (based on the figures you supplied). Both scenios then involve a monthly payment of 600 euros over 30 years.

In the case of the property investment, the 28k is the deposit on the house.
In the case of the alternate investment, the 28k is the principal of the investment.

In the case of the property investment, the 600 is the total interest payment minus the rental income (you see I am taking this into account).
In the case of the alternative investment, it is the amount you put in each month.

In both cases you need to dig 28k out of the pocket. You also need 600 a month out of the pocket

[basically you need to think of the property (with its rental income) as well as the loan (with its repayments) as a single combined investment. You then compare this combined investment with the alternatives]

It is what comes out of the pocket that is the same in both cases.

It is a standard financial calculation to find out what a certain amount down over a given period with regular fixed payment at a given interest rate will come to.

Doing this calculation reveals that a comparatively low rate of return is required to match your property investment.

Now there are a number of simplifications involved here. I have not taken tax into consideration on either side for example. I have not taken cost of selling, and buying on either side into account although this will work against the property invester more than the saver. High inflation will work in the borrower's favour where as low inflation will work in the saver's favour though the higher interest rate after a period of inflation may work for the saver.

Go to your financial advisor for all these things to be taken into account. I think someone has already advised this.

You have not considered the additional values I think are important. I am trying to figure out a good formula that actually shows the information the best way. You are dismissing everything I say by saying I am wrong without any evidence and then saying an economic priciple is wrong becuase historically people got massive gains. You don't need capital appreciation.

Your financial advisor will have the means of comparing one form of investment against another.

FillSpectre

miju wrote:

also let's not get hung up on the cso thing , we still have the other report stating 70,000 unit over hang not including holiday homes , now given that's a few years old and the MASSIVE increase in the completion of homes then it will only serve to reason that there's more unoccupied properties

so we kind of have 1 anecdotal piece of evidence being backed up by a proper well done report compared to what you can see in your locality fill spectre , i know which one i'm inclined to hold more weight to

THe other report was selectively quoted. THe report showed vcancy rates over the years and the 70,000 may sound high but as a percentage it was only marginally higher than the norm.

So you have anecdotal evidence backing up a misleading quote that nobody seems to actually confrim with their own experience. I am sure there are areas with vacncies of 10% and up to 25-30% vacncies at the monment but I very much doubt there is nationally 20% condidering the population breakdown is hevily orintated around Dublin. THere woul need to be vast areas in and outside Dublin vacant for this to bbe correct. The newspapers would be all over such places and we would notice. 10% vacancy is really really noticable let alone 20% natonally

FillSpectre

SkepticOne wrote:

At the beginning in both scenarios you start with a base capital of 28k (based on the figures you supplied). Both scenios then involve a monthly payment of 600 euros over 30 years.

Again you aren't listening or actually considering what I have said.

I'll express it simply

At the end of 20 years
those investing will have say 144000 plus interest if stocks have not failed
those investing in a house now have something worth only 140000 alone (maybe less for either)

SOunds like investment is great except what is the divident.


ASsuming no expenditure of the lump sum who is getting paid the most money purely from their investment? Rent tends to stay in line with inflation in the long term so it is probably worth more than the interst on the cash investement. If that investment was a pension plan it dies with you and family can't inherit it etc... You seem to be obsessed with capital appreciation being the only way property makes money.

Property prices may fall but many investemts have lost money but property as a long term investment in priciple isn't bad. I don't know anybody forking out €600 a month to subsidise rent and you are also ignoring as time goes on rent will likely cover the mortgage as inflation tends to outstip mortgage payments. A large lump sum now may not be worth that much in the future and is not really linked with inflation very well.

There is logic to property investment and while I personally don't see the risks are worth it it does not eliminate how it maybe a good idea depending on circumstance. I have friends the same age who own two properties with a smaller property payment than mine and they are doing the long term thing and won't panic. In fact I know nobody who is has property investments acting like many suggest the majority of investors are. I stll don't get why so many people insist investors are fools.

ronbyrne2005

god theres some financial fools on boards.

daveirl

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CiaranC

Hey Ron, heres an idea, how about you stop calling everyone who disagrees with your outlook a fool?

Im getting tired of your obnoxious posts.

DublinWriter

daveirl wrote:

This post has been deleted.

Again, apples and oranges.

Comparing the West of Ireland with the East is a bit like comparing the South of England with the North.

You wouldn't expect the property market to be tremediously bouyant in an area that needs to advertise on national radio for people to move there.

But as Sean Lemass once said, a rising tide lifts all boats.

miju

FillSpectre wrote:

THe other report was selectively quoted. THe report showed vcancy rates over the years and the 70,000 may sound high but as a percentage it was only marginally higher than the norm.

you keep going on about the percentage of housing , can you put it into perspective for me , what is 70,000 as a percentage of the current housing stock (not including the other 130,000 vacant homes) and back it up with a link

FillSpectre wrote:

So you have anecdotal evidence backing up a misleading quote that nobody seems to actually confrim with their own experience. I am sure there are areas with vacncies of 10% and up to 25-30% vacncies at the monment but I very much doubt there is nationally 20% condidering the population breakdown is hevily orintated around Dublin. THere woul need to be vast areas in and outside Dublin vacant for this to bbe correct. The newspapers would be all over such places and we would notice. 10% vacancy is really really noticable let alone 20% natonally

there's been 2 examples already posted where high unoccupancy exists , one in galway and one where i live for starters. do you spend alot of time driving around the country noting empty houses ??? i'm pretty sure you don't

FillSpectre wrote:

You seem to be obsessed with capital appreciation being the only way property makes money.

.....

I don't know anybody forking out €600 a month to subsidise rent and you are also ignoring as time goes on rent will likely cover the mortgage as inflation tends to outstip mortgage payments.

given that current rental yields are approx 2% and factoring in tax / maintenace etc how else does a property make money aside from capital appreciation that doesnt involve "releasing equity"

i know my landlord subsidises our rent by €170 a month ,i know this as i negotiated a new rental rate that actually took money out of his pocket and he made it very clear about that fact , obviously he appreciates good tenants who look after his property , so work out how long it will take before inflation outstrips that €170 a month

daveirl

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Beta2

FillSpectre wrote:

I never suggeted anything about supply just that the empty property figures banded around as fact don't add up to anybodies personal experience and are based on misunderstanding of the information given out. ANybody you know live in a place with over 20% vacancy becuase they have to take the vacncy rate that is nowhere near my friends, family, collegues, businesses etc... I reckon you need an 80% vacncy rate in parts of the countryside to off set the massive DUblin areas that have less vacncy rate and higher density.?

Its easy 20% in Naas. Its often not easy to spot as vacancy rates are low in most established estates but there are many new apartment complexes empty or nearly empty. I know of 3 large apartment complexes 2 of which were finished over a year ago where nearly 60% are empty! despite the fact that they sold off plans 2 years ago!

Also like for like rents are down by 10% ish in the last year for apartments and 3 bed semis, 4 bed detached are around the same, maybe down slightly.

Pa ElGrande

daveirl wrote:

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Beta2 wrote:

Its easy 20% in Naas. Its often not easy to spot as vacancy rates are low in most established estates but there are many new apartment complexes empty or nearly empty. I know of 3 large apartment complexes 2 of which were finished over a year ago where nearly 60% are empty! despite the fact that they sold off plans 2 years ago!

Suitable housing is not being built in the areas where people desire to live and raise a family, so some areas like Galway are expensive, whereeas apartments that are build far away from services/transport/emplotment are empty and will continue that way, in fact Jim Power hints at this in his report I also noticed he used the word "exuberence". It's a much more sane report than the previous pitches from Austin Hughes and Dan McLaughlin which can be basically summed up as "we're up to our eyeballs in debt, but, we're rich because our property is worth more"

It is difficult to see this exuberance ending anytime soon. Over the coming year the market will continue to be driven ahead by strong demand as a result of SSIA monies coming into the market, good growth in disposable incomes, the young demographic profile and inward migration. House prices in 2006 are likely to rise by around 10% and growth of around 7% looks possible in 2007.

Election 2007: The Economic Parameters
Jim Power, Friends First, Chief Economist
http://www.friendsfirst.ie/artman/uploads/quarterly_economic_outlook_july_2006.pdf

SkepticOne

FillSpectre wrote:

I don't know anybody forking out €600 a month

What about your post here?

Sonnenblumen

mkdon05 wrote:

If everyone on the boards, and all their friends and family, plus anyone else they could influence, decided not to buy a house for a ridiculous consideration for a set period of time,
Would this not be an effective drive to reduce house prices? If no one is willing to pay 380000euro for a house thats worth 250000euro, that would cause a lot of sellers to reduce their asking price.


If you push a rope up the hill you might be on to something, IMHO you're bloody daft if you think you can hold everyone in suspense whilst a minority get their way!

Only see two possibilities start a war or make it illegal to buy a house.

Meanwhile Keep digging lalala land ain't much further!

Gurgle

Sonnenblumen wrote:

If you push a rope up the hill you might be on to something, IMHO you're bloody daft if you think you can hold everyone in suspense whilst a minority get their way!

Only see two possibilities start a war or make it illegal to buy a house.

Meanwhile Keep digging lalala land ain't much further!

How helpful of you to bring the thread back onto the OP's topic after 24 pages.

DublinWriter

Gurgle wrote:

How helpful of you to bring the thread back onto the OP's topic after 24 pages.

Yes, but wasn't it a fun 24 pages?

I also heard that la-la-land are having a bit of a property boom too.

FillSpectre

miju wrote:

you keep going on about the percentage of housing , can you put it into perspective for me , what is 70,000 as a percentage of the current housing stock (not including the other 130,000 vacant homes) and back it up with a link

Well the 70,000 came from a housing report in 2002 which explained vacant housing was 11% that year. It examined 30 plus years showing during the 80s vacant housing was around 9% and about 10% the persiod before. I can't remeber who contacted the proffessor to get the study I thought it was you.

The other 130,000 properties do not exits for sure and the figure is highly suspect considering the other reports from the same group of people saying they could get into places and reports of people not getting censos forms.

When we worked out using the guesstimated unreliable figure it came to 20%. Using some over all property figure. If you can tell me how too look back on the property section threads I can show you.

miju wrote:

there's been 2 examples already posted where high unoccupancy exists , one in galway and one where i live for starters. do you spend alot of time driving around the country noting empty houses ??? i'm pretty sure you don't

Highish vacacancies but not enough to off set the occupancy in heavily density popluated areas. eg. 100@20%= 20 while 1000@5%=50. 1100 with 70 vacancies is only is actually only 6.4%. So as I said for the 20% vacancy rate to exist there would need to be massive areas vacant to make up for Dublin's lack of vacancies. Statistically and practically, newly built properties can cause an anomoly. Considering our growth in construction this means there will be a skew anyway

miju wrote:

given that current rental yields are approx 2% and factoring in tax / maintenace etc how else does a property make money aside from capital appreciation that doesnt involve "releasing equity"

I don't think it is a great investment either but it doesn't make people fools as there are many other benifits and possibilities from property that other investments don't have . I also don't beleive the 2% figure as the landlords I know are getting a lot more plus their rental yield is a lot higher now. Using current market values to work out actual investors rental yield is a little nieve. Stock and shares and all investements have risks. All investment is speculitive. CGT and other expenses of selling restrict people from movement and panic

miju wrote:

i know my landlord subsidises our rent by €170 a month ,i know this as i negotiated a new rental rate that actually took money out of his pocket and he made it very clear about that fact , obviously he appreciates good tenants who look after his property , so work out how long it will take before inflation outstrips that €170 a month

I know 10 landlords getting over €1000 a month from their property after expenses. There are lots of people doing bad business everywhere it doesn't mean every business is failing or bad. If there is a property slump of what ever all the bad investors will more likely be swallowed up by the good investors. THe thought that clever regular punters will pick up bargins is a little hopefull.

The people most likely to suffer from any type of adjustment will be FTBs and stupid investors. THe investors may also not really be in that much trouble as if they bought there home early enough they could in fact have less out going than thier neighbour who bought after them. THe real loosers will be FTBs. Investors may invest their money better but it still doesn't maen it is a bad thing. I know quite a few people who pay less on property than I do yet they own more property. Only one person I know has a intrest only mortgage and they own outright 4 other properties and there are other reason for it than speculation. You know intrest relif on one property can be speread on all rental property owned. In short some people have a very limited view or propety investment and how it can be managed.