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Housing Bubble Bursting
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There are tonnes of possible factors. Usual suspects are:
1. Net immigration
2. Relaxed lending rules/lower interest rates
3. Drop in building output
There are also other more subtle things such as people's confidence in the economy/perception of job security and so forth.
No.3 has happened on a major scale, but obviously there will be a lag effect before its benfits can be seen, if any. If people simply aren't buying it will make no difference, leading onto your last point, peoples confidence. Believe it or not this is mainly my argument (admitedly I've been side tracked
). There are people out there who can afford to buy right now, but who are scared to do so. 0 -
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A simple rule of thumb when working out if residential property is fairly valued is the 12-times-the-rent rule. You simply multiple the annual rent by 12 to roughly work out what it's fair value is.
This means that a property renting for 1500 p/m (bringing in18,000 per annum) should be valued at around 216,000. If average property prices were around this level, then you would start to get a lot more transactions in the market and the downward spiral would petter out. At this level, the monthly cost of a 20 year mortgage is comparable to the rent.
Afuera, are you in the property biz / mortgage lending? Is this a recognised formula? Would seem a little outta kilter ?? in that case most dublin property is multiples overvalued !
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No I'm not involved with the property business. The concept I mentioned is known as the Gross Rent Multiplier (GRM) and can be used for all types of assets. It's only rough but historically it has been found that for residentional property around 12-15 times is the norm. This equates to a yield of around 8%. Everyone from the OECD to the IMF have been pointing out that Irish property prices have been overvalued for years. It shouldn't really be such a great surprise to hear this but it seems the PR guys in the Irish banks did a great job of pulling the wool over everyones eyes.Afuera, are you in the property biz / mortgage lending? Is this a recognised formula? Would seem a little outta kilter ?? in that case most dublin property is multiples overvalued !0 -
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lads whats the average house price these days in dublin for a decent gaff!?
Depends on your definition of decent.
You can get an average 3-bed semi in Darndale for €265k,
here
in Clonsilla for €350khere, or in Terenure for €670k hereAccording to bulls, around an affordable 450k. Its nothing, isn't it?
Or you can believe bullshìt like this ^^.0 -
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Hahaha, the only one talking about those price drops over 10-15 years here is you. Your prediction has already been proven wildly inaccurate. Would you like me to dig it up again for you?A 40% drop counting inflation over 10-15 years is the very definition of a soft landing. Or are you still enjoying trying to get a rise out of people (by your own admission)?
Its gas alright, in the event of a nuclear war you can just imagine them picking over the glazed and still ticking ruins, squinting out of their bleary third eye and telling themselves it still doesn't constitute a hard landing.ionapaul wrote:Ludicrous trying to argue that what we are seeing now (falls of about 10% over the last year, if you want to factor in inflation that's an annual fall of 15%) is a soft landing - feck it, if you want to argue that why not go the whole hog and argue that this is exactly what all the property cheerleaders expected all along?0 -
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In reference toA simple rule of thumb when working out if residential property is fairly valued is the 12-times-the-rent rule. You simply multiple the annual rent by 12 to roughly work out what it's fair value is.
This means that a property renting for 1500 p/m (bringing in18,000 per annum) should be valued at around 216,000. If average property prices were around this level, then you would start to get a lot more transactions in the market and the downward spiral would petter out. At this level, the monthly cost of a 20 year mortgage is comparable to the rent.
And thenScary if true! The place I'm renting (GF and myself) costs 650pm so that would put the house value at 93600. The ll bought the place for 230k which means that he might be in real trouble.
No, it is not abolutely not scary. It is actually dead on the money (this from an ex-landlord in France, Germany and the UK). I used to get 25% for students in F1s for years, and wouldn't look at anything I couldn't at least get half that (12.5%) out of. Any less and the returns are usually outstripped by pure financial-type products. Now, that's entirely small-scale investor bubble-free reasoning, mind you (believing in the "one in the hand" of property purchase price/RoI from rent, rather than the "two in the bush" of property purchase/maybe get a tenant/who gives a f*ck about the RoI/prices are climbing forever)
EDIT & Disclaimer - of course, the return on investment will at all times be proportional to the original purchase price, which is why landlords of much earlier tenure may in fact still be laughing (or at least, sleep sound) even by the time 2006 prices get halved... say, if they bought in the early 90s. But in a bubble-free market, the rule of 12 should still hold over the years.0 -
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RuggieBear wrote: »i think the "value" of the house i'm renting is 36 times the annual rent.
Got you beat - 43 here: €1250 pm, a conservative €650k estimate (4 bed semi in D16). Return: 2,31% gross. Take tax, agency fees, maintenance provisions, insurance etc. off and... well... I've got a much much smaller figure than the house price estimate, that's made much much more babies (net of tax) than what the landlord's got from us in 4 years, over the same period
EDIT & Disclaimer (copy/paste) - of course, the return on investment will at all times be proportional to the original purchase price, which is why our landlord may in fact still be laughing (or at least, sleep sound) even by the time 2006 prices get halved... say, if he bought in the early 90s, at which time the house price may have been, I dunno, say €120k? In that case, return gross atm is closer to 12.5%, which is eminently still acceptable as an investment (unhinged from capital appreciation).0 -
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Got you beat - 43 here: €1250 pm, a conservative €650k estimate (4 bed semi in D16). Return: 2,31% gross. Take tax, agency fees, maintenance provisions, insurance etc. off and... well... I've got a much much smaller figure than the house price estimate, that's made much much more babies (net of tax) than what the landlord's got from us in 4 years, over the same period
EDIT & Disclaimer (copy/paste) - of course, the return on investment will at all times be proportional to the original purchase price, which is why our landlord may in fact still be laughing (or at least, sleep sound) even by the time 2006 prices get halved... say, if he bought in the early 90s, at which time the house price may have been, I dunno, say €120k? In that case, return gross atm is closer to 12.5%, which is eminently still acceptable as an investment (unhinged from capital appreciation).
Folks, I'm not convinced that the Formula here is entirely accurate, given the huge number of rental properties available on the market due to the large number of people who bought second properties for this purpose.
I'm not bullish on the property market in General as it happens.0
This discussion has been closed.
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