Housing Bubble Bursting

Aishling

jmayo wrote:

Do you happen to work for estate agent or financial institution?
Just the use of the term market stabilising sounds very estate agentist.

Yes, people have to accept personal responsibility for their actions.
If they took out a huge 100% mortgage for an over valued square box out in a commuter town that they cannot afford once interest rates rise by a point or two, then all I say is tough.

But the vested interests, including the government, have painted a very rosey picture for buyers over the last 5 odd years. It was in their interst to screw as much money out of the buyers and indeed the sellers.

No I don't work for an EA or an institution related to property. I have to say that my use of stabilising was very tongue in cheek I think that this is a new way of V.I's trying to pull the wool over peoples eyes.

And yes V.I's have painted a very rosy picture, but then I don't believe everything that I read. Im buying a car at the moment and I think that Ive put more research into that than friends of mine that bought houses. And Im not talking about researching whether houses will go down or not, as this is only a discussion that has happened publicly in the last year or so, but Im talking about researching whether I can actually afford it, if rates go up, or if one of us has to take time off.

iguana

My first apt was a 2 bed (1dbl, 1sngl) in Ranelagh in 2002. It was €1200pm. Obviously it could be a complete sh!thole, but this place in Rathmines has 2 dbl rooms and is also €1200pm.

Glenbhoy

Iguana, having recently delved into the rental market again, I can assure you that when there's no picture up on daft, there's a reason. €1200 p.m. for an apt in Rathmines is not realistic, more likely to be €1800 - I've seen some unbelievable sihtholes that were €1600, so if your first apt was 1200, then we're talking at least 33% inflation since 2002, (I reckon €1600 is about fair enough for a 1 dbl and 1 single room apt).

babytooth

Glenbhoy wrote:

Iguana, having recently delved into the rental market again, I can assure you that when there's no picture up on daft, there's a reason. €1200 p.m. for an apt in Rathmines is not realistic, more likely to be €1800 - I've seen some unbelievable sihtholes that were €1600, so if your first apt was 1200, then we're talking at least 33% inflation since 2002, (I reckon €1600 is about fair enough for a 1 dbl and 1 single room apt).

sorry there lads but as an on-off renter i'm not seeing this increase in rents.

what i'm seeing is that prices are very very sticky and the real yard-stick to use in comparrission is the quality of the rental property.

Remember, alot of these landlords are afraid that if they raise the rent too much then your tennants would wake up and realise that rent is "dead" money.

No, rents are pretty much flat,

My personal pad costs 1 million, as per the last one that was sold. The management fees are 1350k per annum.

My rent is 2k per month. I have exclsuive lease with rent reviews etc for 5 years.,,,my landlord thinks this is gift as its guaranted money for him.
He replaced my washing machine and couch. at his cost.


Tell me again who's better off....anyone...???....is it me or him?..

A Random Walk

patrickolee wrote:

Do you really believe that? Have you actually convinced yourself that its true?
How can you think that rents have risen 0% in the last 5 years?

Daft Rental report says so.

Are any of those bullish on this thread interested in facts or is it all going to be anecdotes?

"Uncle Mick was in a house that cost 12 euros in 2002, today it's 4,000 euros all you renters are going to be penniless"

A Random Walk

Glenbhoy wrote:

I would have thought that 3% was a very fair figure to put on rent inflation, probably on the low side.

Well you stick to what you think is fair on your planet, I'd suggest that anyone who wants an accurate comparison of renting versus buying should stick to the published facts on rental inflation.

daveirl

This post has been deleted.

iguana

Glenbhoy wrote:

Iguana, having recently delved into the rental market again, I can assure you that when there's no picture up on daft, there's a reason. €1200 p.m. for an apt in Rathmines is not realistic, more likely to be €1800 - I've seen some unbelievable sihtholes that were €1600, so if your first apt was 1200, then we're talking at least 33% inflation since 2002, (I reckon €1600 is about fair enough for a 1 dbl and 1 single room apt).

This one for €1395pm looks pretty nice. Definitely quite a bit nicer than my old place. And there's a 1 dbl bedroom in my old building up for €950pm, although they are setting it a twin. That seems very similar to the prices I was seeing in spring 2003 when my flatmate was doing my head in and I needed to move.

mathie

micmclo wrote:

I don't ask for much from the government, just spend my tax money wisely please.

Must .... resist ... comment!

The_Conductor

chump wrote:

On another point, isn't it insane/glorious that a FTB couple will be subsidised by 333 per month after the next election for purchasing a home. That's almost 4k a year. Madness

Its only for 7 years- and the average FTB couple are now getting 40 year mortgages...... Actually why don't we just call a spade a spade and start up those perpetual Japanese mortgages over here?

mathie

babytooth wrote:

No, rents are pretty much flat,

Trolly take your pick of any of these stories ...

Rent up by 12%
Rent inflation is at 5 year high report says
Rents increasing 11.9% annually - report
Interest rate rises blamed as rents up €150 a month
Rents up 10% in past year due to huge fall in supply

Source
http://news.google.ie/news?hl=en&ned=en_ie&ie=UTF-8&q=dublin+rent+increase

I could list more but I think you're well fed now.
M

The_Conductor

babytooth wrote:

what i'm seeing is that prices are very very sticky and the real yard-stick to use in comparrission is the quality of the rental property.

I think thats a very good comment. There is a massive difference however in the quality of accommodation at both ends of the market.

babytooth wrote:

Remember, alot of these landlords are afraid that if they raise the rent too much then your tennants would wake up and realise that rent is "dead" money.

I fundamentally disagree with this statement. Rent is not "dead-money". Rent is a payment for the provision of a service. If I go out an eat a meal out in a restraunt- I don't consider it dead money. I am paying a price for renting an asset when I am renting- renting an asset that I either cannot afford to buy or do not want to buy for any of a number of reasons. The rental element is currently only a portion of the interest element of the mortgage repayments- so not only is rent not dead-money, but the landlord is defacto subsidising you to stay there.

babytooth wrote:

My rent is 2k per month. I have exclsuive lease with rent reviews etc for 5 years.,,,my landlord thinks this is gift as its guaranted money for him. He replaced my washing machine and couch. at his cost.

Thats a very decent arrangement- normally exclusive leases with rent reviews like you have are on, would be on commercial leases. Re: his replacement of washing machine and couch- its not exactly at his cost- its a tax deductable expense for him- all furniture and fittings are depreciated for tax purposes in a flatline manner over a 5 year period (20% per annum). So- its the Revenue Commissioners who are paying for your washing machine and couch.......

babytooth wrote:

Tell me again who's better off....anyone...???....is it me or him?..

At the moment its a situation which suits both of you. He has a good tenant and is happy to keep you. You are renting a very expensive property for far below its traditional rental yield. He has a decent tenant who is keeping his property in a good condition. Its difficult to rent nice property at the moment though- if he sought new tenants in the morning he would most probably have a queue at his door. So- everything else being equal- I think you, the tenant, are probably doing quite well out of the arrangement........

daveirl

This post has been deleted.

Calina

mathie wrote:

Trolly take your pick of any of these stories ...

Rent up by 12%
Rent inflation is at 5 year high report says
Rents increasing 11.9% annually - report
Interest rate rises blamed as rents up €150 a month
Rents up 10% in past year due to huge fall in supply

Source
http://news.google.ie/news?hl=en&ned=en_ie&ie=UTF-8&q=dublin+rent+increase

I could list more but I think you're well fed now.
M

The key point of interest there is the last one "Rents up 10% in past year due to huge fall in supply.

This fall in rental supply is entirely coincidental to the doubling in sales supply leading to a fall off - to some extent - in asking and sales prices, of course, and they couldn't possibly be related. (oh - sarcasm alert in force here)

Rents are up at the moment, this is agreed. However, prior to the past six months or so (which is when I noticed them starting to rise), they had been pretty much static for the past five or six years. This is the first year that I am paying nominally more for rent than I was 7 years ago.

If rental supply increases again - and there is some evidence to suggest it might - then the likelihood is that rents will start to slide again. The problem for landlords is that rent is not a function of the mortgage they have to pay - which is tough on some of them but I have little sympathy because this is the way things have been for three or four years now anyway - but it is a function of supply and demand. The more people need accommodation, the more rent that can be commanded.

As it happens, rental supply in my locality is up around 20% now over what it was a couple of months ago. I suspect the days of 1500E for a three bedroomed house there are numbered.

patrickolee

daveirl wrote:

This post has been deleted.

Empty link.. just redirects to a webhosting site. Anyway, to be honest I would not take a report from Daft as gospel. There are many things that could skew such statistics, intentionally or not. We really would need to know the method used to derive the 'index'. Is it taken nationally? Has the national/dublin mix changed over the years? Are the same types of properties compared against their previous prices. Better to rely on your own experience, luckily for me I went flat hunting almost 5 years ago to the day and know for a fact that the statement that rents have not increase in 5 years to be incorrect. Not even close to being correct.

Babyface, you are very 'special' tenant being able to afford that much rent a month and are not typical. Of course your landlord is delighted to have to stay, there are not many people who could afford/justify paying 2000 a month on rent.

"He replaced my washing machine and couch".
Cost maybe 1500?
You're paying him 24,000 a year! If that keeps you happy and means you'll stay another year or more, it's money very well spent.

Zambia

2000 a month in rent is bloody good rent ....

Glenbhoy

A Random Walk wrote:

Well you stick to what you think is fair on your planet, I'd suggest that anyone who wants an accurate comparison of renting versus buying should stick to the published facts on rental inflation.

You really are being incredibly obtuse.
http://www.daft.ie/news/2007/daft-rental-report-june-2007.daft

What's more accurate the latest stats on the rental market, the 5 year trend (which you favour) or maybe, say, a 20 year trend, 50 year trend??

For a direct 9 year comparison, a similar property in the same D1 development to one I rented in 1998 which cost £650 per month then, now costs approx €1500 per month. That's an increase of approx 82% in 9 years.

Glenbhoy

smccarrick wrote:

Its only for 7 years- and the average FTB couple are now getting 40 year mortgages...... Actually why don't we just call a spade a spade and start up those perpetual Japanese mortgages over here?

I don't think that 40 year terms are being taken out by most FTB's - I could be wrong, I imagine 35yrs.
Whilst the initial relief of €333 per month will only last for 7 years, the secondary relief will still 166 per month (for a couple) for as long as interest is being paid. This obviously makes sense as fewer homebuyers would still be paying 20000 in interest anyway by year 7 (or at least that's the theory).
I think the OECD have called for this practice of subsidising home owners to be stopped, which is why of course the govt (if they manage a budget) have decided to increase it (of course the reason they're going to increase may not be to directly contravene OECD advice, it may just be to try and prop up a sector of the economy they've truly made a mess of). The logic is of course frightening, pay us 20K in stamp duty and we'll give it back to ye over the years - of course that means that successive govts have to pay back what the current one has in its coffers to spend at present!!

A Random Walk

Glenbhoy wrote:

What's more accurate the latest stats on the rental market, the 5 year trend (which you favour) or maybe, say, a 20 year trend, 50 year trend??

Frankly if you want to make the biggest financial decision of your life based on a 3 month subset of a 5 year trend that's your business.

The most accurate figures we have for rents is a 5 year trend (stories and anecdotes don't count).

Let's not get started on interest rates - we have a 100 year history of them, and rates in the 4% level are still on the low side of the average. With bond yields rising I think it will be a long time (baring a shock) before we see 2% ever again.

micmclo

micmclo wrote:

I don't know about all areas but in North Tipperary, people say the best built houses in recent years are council houses. What this basically means is the council employs engineers to ensure standards are met and they certainly aren't slapped up with shortcuts taken like a lot of privatly built estates.
Not all developers take shortcuts but a lot do.

I don't ask for much from the government, just spend my tax money wisely please.

Council houses are usually built to the same standards (build quality) as public buildings to reduce the "total cost of ownership" ie. they won't put in cheap windows that will need replacement in ten years or a boiler that could fail after a couple of winters etc
After all they retain the property after building it.

The main problem with council houses is that people don't like the occupiers!!!:rolleyes:

Anyway, I believe that prices are too high mainly because financial institutions have allowed people to borrow too much.

Lenders should always take into account ability to pay, taking into account factors such as, interest rate rises & children etc.

Both of these factors are severly testing the finances of people who borrowed to the hilt last year, well definitly the first one anyway thus making it impossible for these couples to be able to afford to raise children.

Glenbhoy

A Random Walk wrote:

The most accurate figures we have for rents is a 5 year trend (stories and anecdotes don't count).

Why 5 years but? Whilst my story may be anecdotal to you - that doesn't change the fact that it's more accurate than any trend figure - it is after all a direct comparison in terms of quality and location.

A Random Walk wrote:

Let's not get started on interest rates - we have a 100 year history of them, and rates in the 4% level are still on the low side of the average. With bond yields rising I think it will be a long time (baring a shock) before we see 2% ever again.

I have no intention of getting started on interest rates, they're only going one way in the near future - however, where they go after that?????

D'Peoples Voice

Glenbhoy wrote:

However, what my initial post was supposed to clarify, was that it's not the mortgage repayment itself that people should be comparing with rent - it's the interest element of the mortgage repayment.

Very good point and I one I looked at before using an excel spreadsheet showing the breakdown of the monthly mortgage premium.
the problem i ran into was where do you draw the line,

I tried to enter a monetary value for the time spent commuting, after all it's easier to rent in a locality close to city centre than it is to buy- Government policy?

Easier to rent in a locality where schools/creches/kids facilities are adequate than buy

if i don't like a neighbourhood, i can leave easier if i'm renting

I don't live in fear of being unable to pay my mortgage of a month, if i can't pay rent, my deposit is lost and i move on to a cheaper place to crash for a while

minimal additional costs - anyone i know who owns a house claim that they are ALWAYS spending money on tehri house

if you are renting, you are more mobile to move house if your job requires it

social cost of not being able to socialise because you live too far from city

Anyway after trying to price in all of the above factors and the rest(which I can't think of now), I got so frustrated I went down to my local off licence for some Dutch gold to relieve my stress. Should you find a way of incorporating all of the above into a monetray formula, I'd be grateful if you could put me out of my misery- because it's the only FAIR comparison to make!

Glenbhoy

D'Peoples Voice wrote:

Very good point and I one I looked at before using an excel spreadsheet showing the breakdown of the monthly mortgage premium.
the problem i ran into was where do you draw the line,

Yeah, and the other main thing to consider, which I decided not to bother mentioning thusfar is how you invest the capital portion of the mortgage repayment if you decide to rent!! Like all models, it's only as good as its assumptions (and of course I've already been strongly admonished for my assumptions).

miju

patrickolee wrote:

There are many things that could skew such statistics, intentionally or not. We really would need to know the method used to derive the 'index'. Is it taken nationally? Has the national/dublin mix changed over the years? Are the same types of properties compared against their previous prices.

If i'm not mistaken there is an allowed / estimated error in the figures of somehwere around the 3% mark.All the data is recorded like you asked but the data is only being recorded for a year now so historical data is not possible.

patrickolee wrote:

Better to rely on your own experience, luckily for me I went flat hunting almost 5 years ago to the day and know for a fact that the statement that rents have not increase in 5 years to be incorrect. Not even close to being correct.

so your basing your opinion on you looking for a flat 5 years ago????. I was looking at the price of houses 5 years ago as well ............ :rolleyes: :rolleyes: :rolleyes: :rolleyes:

patrickolee

miju wrote:

so your basing your opinion on you looking for a flat 5 years ago????.

Emmmm no... I was evaluating how reliable a 'random walk' was when he said
"the past 5 years when rents rose by 0%". I know that to be untrue based on my own experience. It makes me question all the 'facts' and figures I see quoted in this thread.

miju wrote:

I was looking at the price of houses 5 years ago as well ............ :rolleyes: :rolleyes: :rolleyes: :rolleyes:

Ok, good man. Not quite sure what the relevance of it is, but... good for you anyway.

babytooth

mathie wrote:

Trolly take your pick of any of these stories ...

Rent up by 12%
Rent inflation is at 5 year high report says
Rents increasing 11.9% annually - report
Interest rate rises blamed as rents up €150 a month
Rents up 10% in past year due to huge fall in supply

Source
http://news.google.ie/news?hl=en&ned=en_ie&ie=UTF-8&q=dublin+rent+increase

I could list more but I think you're well fed now.
M

ok, would you agree that geogg tucker, head economist of hooke and mcdonald is going to portray property in its best light, agreed?...fair enough.

Right, now look at the latest daft rental report, presented by him, lovely reading, nice graphs, i particualry like page 5.

http://www.daft.ie/report/Daft-Rental-Report-March-2007.pdf

Now, is it me, or is the rent index for 2002 (115.6) higher than the one for 2007 (112.9). 2006's one is 103.3. So yes, you are right, rents have increased this year. They now are almost at the levels they were at in 2002....thats great news, almost back to where we started.

And these figures aren't adjusted for inflation, so, in nominal terms we are still down.

So, yes, i stand corrected my dear friend, the pyrrhic victory is all yours, but would you like a tissuse for all that egg

babytooth

smccarrick, i was being very much tongue in cheek...i beleive that over the odds purchases are dead money. Anything above fair value is a loss.

2k a month is not huge rent at all.
i get use of an asset priced at 1m, 1.090 including stamp duty

l.lord gets 22,000 per annum (net of maintainence fee)

he gets returns of 2.018%.

He would get 43.6k in readily accessible cash fund at any main bank, thats using a rate of 4%, which is below the highest available.

So of course i'm getting a good deal.

As some have said, 2k a month is alot, so what should the house cost then...

flip side of that, my rent is equivalent to having 550k in the bank, except he has abit more hassle and costs and can't liquidate his position.

he's losing 25k a year plus, by holding this house and renting it out.

In the long term, things will return to their fair value, rents will rise abit and property prices will drop abit until equib is reached.

SimpleSam06

patrickolee wrote:

It makes me question all the 'facts' and figures I see quoted in this thread.

Tell you what, Patrick, you go and invest all your money in property and leave us to our dodgy figures, and we'll all meet back here in three years and see how everyone got on. Mmkay?

You can get free internet access down the library by the way. Just thought I'd mention that.

jdivision

Do you know how much he paid for the house. That's how you work out his return, not on current market value.

babytooth

jdivision wrote:

Do you know how much he paid for the house. That's how you work out his return, not on current market value.

i suggest you look at yield, and how its calculated