Obsession - englightenment please!

iguana

soma wrote:

..this example has absolutely squat to do with the situation in Ireland. Equivalent properties do not exist in Ireland (if they did - I'd be all over them like a rash) and doubly so in urban areas.

Yes they most certainly do. Dublin is not Ireland. This house in Limerick rents for the same as the mortgage payments on a 90% mortgage on this house on the next street. Both are a 15 minute stroll from the city centre, so definitely an urban area. It's not a good buy-to-let investment unless you have a better than 10% deposit and are confident of a rise in property prices. But if you're looking for a home, especially one to raise a family then there is nothing that could convince me that renting is the better choice.

I know that area, and both are family estates, it's not exactly Ranelagh, but I would compare it to perhaps Kimmage. The house is under the stamp duty threshold and it's big enough to raise an average family. Plenty of people I was in school with lived in similar houses until they grew up and moved out.

Oh, and the OP asked about the obsession of Irish people, which I still am regardless of my current location. And I am hoping to return to Ireland in the next five years or so, as my husband and I want to raise our family in Ireland. As that will most likely be in Dublin the raises in value of my property are very important to me as it's the only way I can afford to buy something similar at home.

EDO

talkingclock wrote:

Dear all,

I'm German and I have a question: could someone please explain to a foreigner why Irish people are obsessed with buying houses?

I have a 21 year old colleague here and he is talking about nothing else then if it would be better buying a house or a flat with his fiancé. FFS he's just 21! He has his full life in front of him and doesn't know what's going to happen in 5 years with his job or the Irish economy...He has to repay his mortgage for 30yrs!

A lot of us from the continent (not only Germans, let's say west European foreigners) are just baffled about this determination to buy a property...

Could someone please lift the veil for me?

THX!


TC

Just to throw my two cents in on this question and very good question it is too. This Irish fixation with the property should be qualified - in that I believe it is a fixation with land - there is a subtle difference and I believe it goes way way back before the famine , The penal laws , Cromwell etc etc. I've just moved apartment and the individual who rented before me left a rake of books on Irish history - a topic I really haven’t looked at since I finished Uni a decade and half ago - so I’ve been doing a bit of reading !

One thing that really hit me was how agrarian- I mean really really agrarian Irish society has been since the records began until the last 2 decades or so of the 20th century. The vast majority of urban dwellers in Ireland are only a couple of generations off the farm. An understanding of this and the mindset that has been result of this is crucial. Land, the romantisization of land and the rural community has been at the heart of Irish culture since god knows when and still is today. What has gone hand in hand with this has been the creation of property rights and the primacy of property rights over all else that is far in excess of anything on mainland Europe today and has been Irelands (both Catholic and Protestant) main contribution to the society of the United States of America.

Nearly every Irish person I know when asked the question you have posed - will say our property fixation goes back to Faminetimes and the fact that we never owned our own property - being conqured by the Brits and we are new to the whole property owning world. I beg to differ - in fact I would say it is perversely the opposite. Of nearly all Europeans we Irish are used to owning our own land . It comes down to geography - Ireland's position on outer western extremities of the Eurasian continent gave us, like all far off communities a great liberty to do things our own way. We were never part of the Roman world, thus missed out on the great city and urban life builders of Europe prior to the Renaissance and also the primacy of an organised state to dictate and influence property rights - which could be very tenuous if you fell foul of the emperor and his praetorian guard. Our clan system of local governance ensured land for all the clan with the Taoiseach as the defender of that land against other clans - if you look at the annals of Irish history it is littered with clan wars over disputed land and cattle stealing with the odd bit of wife kidnapping here and there.

The arrival of the Normans and after them the British crown did very little to alter this state of affairs until the 16th/17th century at the earliest. British rule of Ireland for the vast majority of those "800 years of oppression" was tenuous and minimal to say the least. the crowns writ didn't run much further than 20-30 miles outside Dublin and the majority of the invaders assimilated with the native Irish and more of more concern to us - the majority of native Irish clan leaders took the titles and the creation of estates fixity of tenure and revenue and most importantly the concept of primogeniture (the first born inherited all - the rest can feck off and earn a living elsewhere) offered by the crown like ducks to water. The fact that primogeniture did not filter down the social strata below the newly enfeoffed lords was to shape the Irish nation right up to this day.

The minor clansmen gradually evolved into a tenant farmer with conditions that were the envy of all other who worked in the land in rest of Europe. This is very important. It meant in the main that the vast majority of Irish people were able to live off the land and the tenant farmer would divide his land between his male offspring and try and cadge another few acres thru marriage or by persuading the lord to give him more to farm with the promise of increased productivity.

This ensured generations of the same families farmed the same land for decades, centuries. Once the landlord had his cut, it was yours to do as you like. With the notable exception of the Ulster plantations in the 1600's, for the vast majority of the population up to the mid 19th century all that changed in the various civil wars and periodic uprisings was the landlord - depending on the crowns favour and who was the crown. Compared to the virtual enslavement and serfdom that was the lot of those who worked the land over the vast majority of Europe - The Irish Tenant Farmer had it good. Even the campaigns of the Bete Noire of Irish History - Oliver Cromwell (the first European republican head of state since Roman times, defender of the parliament and decapitator of the British King - eat your heart out Sinn Fein) had little effect on the agrarian Irish (unless you happened to be fighting for the British monarchy - Yeah , to paraphrase Martin Sheens character in Apocalypse Now " the contradictions and paradoxes in Irish history pile up so high you need wings stay above it!") .

The 1695 Penal laws, apart from putting the Catholic church on the run and persuading a few Papist landlords to convert to the C of I - after a few decades petered out to nothing - where they had been enforced in the first place. They had little or no effect on the peasantry who were living a subsistence existence and couldn't even dream about being a position to be effected by some of the economic sanctions. The only effect was they got a lyin on Sunday morning - the beloved hedge schools of popular myth were few and far between - the peasantry of Europe were illiterate until the coming of the Industrial society that required higher skillsets. Because of the nescessary nation and myth building required of the newly independent Irish state - not much of that made into the history textbooks that most Irish people of today were subjected to in our first and second level education system. If you're going to unify and then control a disparate group of individuals the easiest way is to do this is to find or create a common enemy - in Irelands case it was the British how they were totally and utterly responsible for all the woes that befell us. We're not alone in this - damn near nation state has got the hatred of another nation or people to thank for the fact that they are not in a perpetual state of civil war.

To come back to topic - by the mid 18th century the Irish tenant farmer was probably as close as it was possible to owing his own land in a time when the crown owned everything given to him by divine right by the Big Fella in the sky. Land passed down from generation to generation of tenant farmer in a continuous cycle which pretty much gave a De Facto , if not De Jure recognition of a sense of squatters right to the land- once the crown and his appointed agent - the landlord - was paid his due . Unless of course you lived in the American Colonies which were too far away for much of the crowns writ to run contained vast quantities of unclaimed land and unless of course you had the misfortune to be an native american or black.

If you're still with me - you will see that the Irish have had a good sense of propriatorship going back a long long way. This is why what happens in the tumultuous century and half from the 1750's is seared onto the national conciousness as ground zero for the Irish Nation. It had very little to do with the British in the end and there was very little that they could do to prevent the calamity that befell the country - even Geldof and Bono would have been hard pushed.
The famine years - 1761 , 1767 1792 , 1820 -1824 , 1828- 1830 ,1845-1849, 1872-1876 - were , to be perfectly blunt , an horrific example of when a stratified fossilised agrarian community with an demographic explosion fuelled by monoculture agriculture (the spud) runs head on into the Industrial age and the modern agricultural methods required to feed it. Simple as that. The issue of primogeniture that I brought up earlier just compounded the issue - farms were divided and subdivided ad infinitum to cope with growing numbers of mouths to feed and stay on the land if all possible - which dramatically reduced the land available to grow the cash crops required to pay the rent , which was being bidded up to extreme levels by tenants competing with each other desperate for more land to feed their growing families. the whole edifice was hanging by a thread and the potato blight was the puff of wind that knocked the house of cards over.

Yes it was a calamity a tragedy but not genocide - this was the era of Laisse faire economics and compassion politics was still a good fifty years away. Many were driven off the land ,but lets be brutually honest here , what future did they have on it? - and those that stayed and survived (and there were many - the famine was quite a regional phenomenon) got lucky when a combination of British Guilt over the famine, Fenian agitation and series of bombings in mainland Britain and the bankrupt state of a good share of the Landlord class gave William Gladstone the opportunity to fund the buyout of many estates by sitting tenant farmers - a unique matter which didnt happen anywhere else in the British Isles - I think a lot of the current property madness stems from there ,a long rooted jealousy at the luck of some families to be literally given their land (Im not talking 3-4 acre plots - we're talking 100+ acre farms here - which outraged my local MP of the time - Arthur Kavanagh of Carlow - in his biography he steamed at the injustice of the gov - blaming the famine on the landlords and taking away their land - He was from a long established Irish Grandee family who traced their roots back to the ancient kings of leinster - it wasn't just the "blowin "planters of Irish mythology whose lands were broken up.) while millions of others had to emigrate to the 4 corners of the world ,never having a chance to stake their claim in the land giveway at the end of 19th century.

It is interesting to contemplate what would have happened if Gladstone had approached the matter in a different way. Rather than going full throttle and deciding to buy the landlords out - what would have happened if the government had simply strengthened tenure, tenants rights and other matters more than the piecemeal way that they ended up doing? - Really, when you think about it - This was about as revolutionary as Ireland ever got - the tenant farmers that became landowners were very bit as conservative and possessive of their rights as their lords and masters who preceded them. The abysmal failure of the Irish State to industrialize and provide employment outside of the public service and small scale mechantile activity cemented the desire for ownership as a means of security in the Irish mind that exists to this day.

All the Easter rising and subsequent war of independence did was change the name of the door - nothing more radical than that despite the desires of many in the IRB.The yeomanry in the country wouldn't stand for revolution on the scale that engulfed most of Europe during this era - when property rights were quite literally thrown up in the air. They had their precious land and all they wanted was to get kick out the British government who gave it to them so they wouldn't have to finish paying off the mortgage (land annunities) . Its no co-incidence that most of our laws relating to property date back to Gladstone and Balfour's administration. Very little has been done since then to rebalance the equation - for the propertied classes - we have what we hold - and for the aspiring there is no way that they want rules changed now the tidal wave of cheap credit has them in reach of their goal.

William E Gladstone,Leader of Whigs, Prime minister of Britain - possibly the most revolutionary figure in Modern Irish Society –Theres one to ponder over your morning coffee and Danish eh!!

Afuera

iguana wrote:

Yes they most certainly do. Dublin is not Ireland. This house in Limerick rents for the same as the mortgage payments on a 90% mortgage on this house on the next street. Both are a 15 minute stroll from the city centre, so definitely an urban area. It's not a good buy-to-let investment unless you have a better than 10% deposit and are confident of a rise in property prices.

Hang on, you're not exactly playing fair here. There are plenty of places to rent around there for around the 700 mark. Also, you can't just take a 90% mortage and discount the 20 grand deposit that the buyer would have to come up with.
A 195,000 mortgage over 25 years at todays super low interest rates would cost the bones of 1,100 per month. Add in insurance, maintenance, furniture costs and that's going to bring it up another few hundred.
Comparing 700 p/m rent to 1,300 odd costs per month to the buyer is not far off twice the outgoings.

iguana wrote:

But if you're looking for a home, especially one to raise a family then there is nothing that could convince me that renting is the better choice.

And how about if the rent cost 10% of the comparable cost of buying or we had better protection for tenants? Where's the line where you you would actually sit back and think, renting might not be a bad choice all things considered? Or are you just totally biased in your opinion and happy to follow the herd into a spiral of debt?

Moonbeam

In reply to the above questions - I bought my house about 2 years ago.

The rent/mortgage amount does depends on the area in cheaper areas you prob won't get enough rent from the full house to take care of the monthly payments and the same at the other extreme but in the middle section the rent and mortgage repayments for a house are very similar.

Afuera

Moonbeam wrote:

In reply to the above questions - I bought my house about 2 years ago.

No surprise there.

Moonbeam wrote:

The rent/mortgage amount does depends on the area in cheaper areas you prob won't get enough rent from the full house to take care of the monthly payments and the same at the other extreme but in the middle section the rent and mortgage repayments for a house are very similar.

I agree that the ratio of rent/mortage depends on the area but you'll be very hard pushed to find anything in Ireland these days where the rent and mortage would anywhere near similar. Soma gave a good exampe earlier when he stated that he was paying 35% of the cost of the mortgage for his rent. This is not unusual.

Can you support your opinion with an example or maybe suggest a "middle section" area where the monthly rent and the mortage would be similar?

iguana

Afuera wrote:

Hang on, you're not exactly playing fair here. There are plenty of places to rent around there for around the 700 mark. Also, you can't just take a 90% mortage and discount the 20 grand deposit that the buyer would have to come up with.

Ok show me an example of two identical houses which are within 10 meters of each other. The house asking for €900pm is in a better area than the ones asking for €700. To that extent there are houses in those areas which cost less to buy. I chose those two examples because I know the area, because the houses are on two different streets on the same development built for private ownership in the 90's and because Soma specified somewhere urban. I was playing as fair as you can get. I could have used this house in Garryowen which is a 5 minute walk from the two houses in my example, but is a 60's ex-corporation house on a corporation estate. Despite the fact that most of those houses are now mostly privately owned the origins are still reflected in the price and so despite the fact that it is even closer to the city centre it is €35,000 cheaper.

And most people outside of Dublin pay the standard 10% deposit. Two professional people in their 20's have little to stop them saving that much especially as they are not paying stamp duty. Yes they may have to pay €20k at the start which renters do not, and they have to insure their house, but you keep discounting the fact that when 30 years have passed they will not have anymore mortgage to pay and will own the full value of the house, which they can sell or leave to their children. When you rent you get nothing.

Yes the insurance costs are higher than if you rent, but good insurance affords you much greater protection. If I or my husband falls ill our payments are made for us. If one of us dies or suffers long-term ill-ness the whole mortgage is paid off. If one of us gets an ill-ness such as cancer or has a heart attack, even making a full recovery the whole mortgage is paid off. There is no equivalent protection for renters, my life assurance of £75,000 wouldn't buy a studio. I don't want myself or my husband to get sick or die, but I'm secure knowing that if it happens we don't have to worry financially.

Insurance brings security, as does owning property. Renting leaves you vulnerable. Even the more secure forms of renting that are the norm in the rest of Europe doesn't give you that kind of security or freedom. You still have to move if your landlord want to move into your home in most cases. You are in a limbo if your home burns to the ground. You have very little protection if you or your spouse gets sick or dies. And you have no asset in your retirement or to leave your children.

Being aware that life can sometimes go really, really sh!ttily and taking steps to secure you and your family is not being a sheep. Being aware that you will not always be the person you are now and sacrificing a little of your present to ensure you are taken care of in old age or infirmaty is not being a sheep. Wandering blindly along the path of least resistance is.

seamus

Moonbeam wrote:

The rent/mortgage amount does depends on the area in cheaper areas you prob won't get enough rent from the full house to take care of the monthly payments and the same at the other extreme but in the middle section the rent and mortgage repayments for a house are very similar.

Depends too on what you mean by "middle section". I would consider a €350k two bed apartment to be "middle section". I would also consider a €450k three bed house to be "middle section".

Examples:
Ground floor two bed apartment in Knocklyon, €395k:
http://tinyurl.com/22t4ya
Mortgage (Roughly, assuming 92% mortgage): €1,800/month

2nd Floor two bed apartment in Knocklyon:
http://tinyurl.com/ynm38n
Monthly rent: €1,275

I've been in both sets of apartment blocks, and they're not small apartments. That's a massive difference in cost to the resident. How much would that €525/month extra be worth to someone?

It's actually at the cheaper end, and with new buys that buying and renting become closer;
http://tinyurl.com/3anqyh
http://tinyurl.com/yntcwf

Afuera

iguana wrote:

And most people outside of Dublin pay the standard 10% deposit. Two professional people in their 20's have little to stop them saving that much especially as they are not paying stamp duty. Yes they may have to pay €20k at the start which renters do not, and they have to insure their house, but you keep discounting the fact that when 30 years have passed they will not have anymore mortgage to pay and will own the full value of the house, which they can sell or leave to their children.

You can't just discount this 10% deposit though when comparing the cost of renting to buying.

Also, I'm not ignoring the fact that after 30 (or 40) years they will own the property outright if they chose to buy it. I'm simply pointing out that it's not always the best thing to buy ("whatever the cost"). I think that a lot of people ignore the option of renting out of hand without really thinking all their options through.

Take these examples of two properties on the same estate in North Dublin. One rents for 950 p/m (www.daft.ie/230669) and the other costs 335,000 to buy (www.daft.ie/197774). Who's getting the best deal here?

iguana wrote:

When you rent you get nothing.

I disagree with your opinion on this. At current prices the amount of money the renter will save is sizeable and can be channeled into many other investments of their chosing. The mortgagee is relying on either wage inflation to eat into their mortgage or capital appreciation to gain from their investment.

iguana wrote:

Insurance brings security, as does owning property. Renting leaves you vulnerable.

A homeowner with a large debt hanging over them could also be considered vulnerable. There are many factors outside their control that could put everything they have worked for at risk.

At the end of the day I think that your beliefs are consistent with the vast majority in Ireland, but this is not shared by all other cultures. EDO's post was very informative in showing how this view may have formulated over time but the OP clearly has difficulty seeing things in this way. Who's right and who's wrong? Or does it just come down to blind faith?

Kinetic^

Afuera, point taken on the disposable income that can be used for investments. However like the home owner, your investments like their home, has a chance of going belly up. I'm a home owner and I'd rather have a property when my mortgage finishes than have paid rent for the past 30 years and invested and maybe end up with less or nothing then with what I started with. That's just IMO though and I'm quite content to carry on with those beliefs.

Am I right or wrong? Well who knows, only time will tell....will I have any regrets if it goes belly up? Like all investments, there's a risk so no I won't have any regrets. I'll still be happy with owning the roof over my head, regardless of value.

iguana

Afuera wrote:

I disagree with your opinion on this. At current prices the amount of money the renter will save is sizeable and can be channeled into many other investments of their chosing. The mortgagee is relying on either wage inflation to eat into their mortgage or capital appreciation to gain from their investment.

Not in my example. The point of which was that Dublin is not Ireland, and what is happening in Dublin is irrelavant to the rest of the country.

What is someone going to do with £20k that will guarantee at least 10x that investment over 30 years. There are better investments than that of course, but there is also a big chance that over 30 years the house will be worth more than £195k. They wouldn't be saving anything monthly by renting. However while over 30 years their mortgage repayment will remain constant, becoming less of a burden in real terms as inflation rises, in 30 years the odds are the rent will just rise and rise. My grandmother was paying something like £2 a week in her mortgage which in the mid-80's when she finished paying it was a negligible amount of money. The rental on houses on that estate at the time was 20 times as much.

Afuera wrote:

A homeowner with a large debt hanging over them could also be considered vulnerable. There are many factors outside their control that could put everything they have worked for at risk.

Such as?

megadodge

When have the Olympics ever raised the prices of properties in a host city?

I know it's a number of posts back and off-topic but I just couldn't let such a startingly ignorant quote go unchecked.

Maybe people should do a little homework before they start spouting rubbish that is actually the complete opposite to the truth !


Here's a link

http://news.bbc.co.uk/1/hi/business/4656927.stm

and there are any amount of others if you just google 'Olympic effect on property prices' and words to that effect.

soma

iguana wrote:

Soma specified somewhere urban.

Perhaps I should have specified somewhere Urban and livable. I find it interesting that Iguana had to resort to using corporation estates in Stab City. Speaks volumes. :rolleyes:

Also saying that what happens to the market in Dublin has no impact on the rest of the market.. displays no understanding of City-State economics.

soma

iguana wrote:

What is someone going to do with £20k that will guarantee at least 10x that investment over 30 years.

Absolutely no comment. Although the word 'gibberish' springs to mind..

iguana wrote:

but there is also a big chance that over 30 years the house will be worth more than £195k.

Meaningless without taking inflation into account.

They wouldn't be saving anything monthly by renting.

Boy I guess all that cash just 'appeared' by itself in my savings & investment accounts, great.

iguana wrote:

However while over 30 years their mortgage repayment will remain constant

Only a negligible amount of Irish people use fixed rates, and interest rates are still ultra-low.

in 30 years the odds are the rent will just rise and rise.

Again meaningless, without taking into account wage inflation this time.

iguana wrote:

My grandmother was paying something like £2 a week in her mortgage which in the mid-80's when she finished paying it was a negligible amount of money.

Sweet jesus someone get this woman a dictionary, preferably opening it on the page containing the word 'inflation'.

Kinetic^

Let's say you've got 2 people. 1 rents and invests whereas the other buys.

First person's investments after 25 years, goes belly up and is still renting.

Second person's house value crashes to nothing after 25 years(only an example) and there is no mortgage outstanding.

Which person would you like to be? I know it's an extreme example before anyone says it.

I'd rather be the person with no mortgage and a roof over my head rather than the guy with a few share certificates. It's about security. That's why so many people buy houses instead of renting.

Afuera

megadodge wrote:

I know it's a number of posts back and off-topic but I just couldn't let such a startingly ignorant quote go unchecked.

Maybe people should do a little homework before they start spouting rubbish that is actually the complete opposite to the truth !


Here's a link

http://news.bbc.co.uk/1/hi/business/4656927.stm

and there are any amount of others if you just google 'Olympic effect on property prices' and words to that effect.

You don't do yourself any favours by linking to a report originating from one of the UKs biggest mortgage lenders. The "Olympic effect" is a term coined for pure spin and has actually no basis in reality. Failing to recognise that is ignorance of the highest order.

If you look at any country that has had a trend of rising house prices the gains in the major cities have always outstripped the gains on a national level. The countries mentioned in this report from Halifax were all experiencing a trend of national price rises during the dates mentioned.

If you think that London house prices are somehow protected from falling, just because they're holding the Olympics in 2012, then you seriously need to get your head checked.

Afuera

Kenny 5 wrote:

Let's say you've got 2 people. 1 rents and invests whereas the other buys.

First person's investments after 25 years, goes belly up and is still renting.

Second person's house value crashes to nothing after 25 years(only an example) and there is no mortgage outstanding.

Which person would you like to be? I know it's an extreme example before anyone says it.

I'd rather be the person with no mortgage and a roof over my head rather than the guy with a few share certificates. It's about security. That's why so many people buy houses instead of renting.

I see where you're getting at but I don't think you're taking into account the number of diverse investments that someone with a lot of spare liquidity could have. The golden rule of investing is "not to have all your eggs in the one basket" so the situation you describe for the first person is very unlikely to arise.

If we want to think more about extreme examples, we could take the case where after ten years there is a serious global recession and both people lose their jobs. Who would you rather be now?

iguana

soma wrote:

Perhaps I should have specified somewhere Urban and livable. I find it interesting that Iguana had to resort to using corporation estates in Stab City. Speaks volumes. :rolleyes:

Read back, the examples I used were of two private developments of houses built in the 90's. Which are by the way in a city with less serious crime per capita than Dublin or Cork. 7 and a half times less, per capita than Dublin. http://www.garda.ie/angarda/statistics/report2005.html

If your level of argument is making ill-informed denegrating statements about peoples homes then your arguments aren't up to much.

Kinetic^

Afuera wrote:

I see where you're getting at but I don't think you're taking into account the number of diverse investments that someone with a lot of spare liquidity could have. The golden rule of investing is "not to have all your eggs in the one basket" so the situation you describe for the first person is very unlikely to arise.

If we want to think more about extreme examples, we could take the case where after ten years there is a serious global recession and both people lose their jobs. Who would you rather be now?

I agree with all of the for and against arguments........the point is......everyone's taking a risk........everyone on here thinks they're right......there is no right or wrong answer atm......only time will tell.

While the Olympics may or may not affect prices, the change in transport infrastructure will.

Personally I think the thread should be locked as it's getting out of hand.

iguana

soma wrote:

Boy I guess all that cash just 'appeared' by itself in my savings & investment accounts, great.

I was talking about a specific choice between the two housing examples I used. I sure haven't noticed a big difference between €900pm and €900pm.

soma wrote:

Again meaningless, without taking into account wage inflation this time.

My grandmother's mortgage payment was £2 a week from when she and my grandfather bought the house in 1963. I think my grandfather earned about £12 then. So the mortgage accounted for roughly 16% of their income. In the 80's she was still paying £2 and her pension was I think £65 at that time. So she was paying about 3% of her income on accomodation.

That point is all about wage inflation. People renting in the area for £40 a week were going to be earning more than £15 but they weren't earning £1220 a week which is what they would have needed to be earning to have the same income to accomodation ratio as my grandmother.

Soma wrote:

Sweet jesus someone get this woman a dictionary, preferably opening it on the page containing the word 'inflation'

I think you are the one who need to get a dictionary. Or math lessons.

Ok, again using my example;
Two couples move into each house. One pays €900pm rent. The other €900pm mortgage repayments. They both earn, say, €2700pm. So they are each paying a third of their income on housing.

10 years pass, inflation has risen by 33%* . They each now earn €3600pm. Rents have risen with inflation and is now £1200pm, still a third of the monthly income of the renters. However the mortgage payment remains constant and is still €900pm. Therefore the mortgage payment is now one quarter of the income of the homeowners.

*That is not a prediction, just a figure that makes the math easy.

SkepticOne

I think what has happened in Ireland (and also Britain) is that people have become blind to the downside risks. They look at the capital appreciation of the last few years and simplistically assume that this trend can only continue. Compare this with Germany where there has not been such gains and you can understand the difference in mentality.

hmmm

Kenny 5 wrote:

First person's investments after 25 years, goes belly up and is still renting.

Second person's house value crashes to nothing after 25 years(only an example) and there is no mortgage outstanding.

As mentioned here, first rule of investing is don't lose it all when something goes wrong. Most investors have % allocated to various asset classes and tries to minimise correlation, something most property "investors" don't understand.

Let's try a different example - property has increased in value by around 1% a year over the past 100 years (ref Malkiel). The (US) stock market has averaged around 10%. Where would you rather have the money that pays for your retirement?

hmmm

iguana wrote:

Ok, again using my example;
Two couples move into each house. One pays €900pm rent. The other €900pm mortgage repayments. They both earn, say, €2700pm. So they are each paying a third of their income on housing.

You're not comparing like with like. Rental yields are running at about 2-3% (max) in Dublin at the moment. In your example, for an identical property the rent would be about half of the (repayment) mortgage.

Your example in reality would be "Renter A is renting a nice apartment in the city centre for €900 from which he walks to work and enjoys an active social life, whereas purchaser B is commuting 5 hours a day from a small house in Mullingar in which he has 1 room rented out to a stranger and on which he pays €900. After 10 years, who will be the happier?"

megadodge

Afuera wrote
When have the Olympics ever raised the prices of properties in a host city?

That was your original statement (phrased as a question), which basically suggests that the Olympics have NO effect on prices of properties in a host city.

I give you the very first example I googled up, telling you that there are numerous other links all showing that YES the Olympics and more importantly, the billions that are invested in the city's infrastructure as a result of hosting the Olympics (not to mention the millions of extra people visiting as a result of the showcase) do indeed have a very positive effect on the city's property values and you dismiss it all as mere spin and coincidence ! Wow !

Add this in to the fact that the Financial heart of the City has just recorded record bonuses (over £4billion) and London has a serious undersupply of property in relation to demand and more people are entering the country than leaving/dying and after a rather stale few years where London property inflation was below the national average, in 2006 it outperformed all other areas in the country and I think I'm way, way closer to the mark in saying that the Olympics will cause a serious rise in London property prices over the next 5 years than you are in telling me to get my head tested because I think that !!

I know I'm not going to teach an old pessimistic dog new tricks, so rather than tell me why I'm in for an awful rude awakening (no doubt based on fact rather than your negative outlook) I guess we'll just have to wait til 2012 and see which one of us was right. Suits me fine.

soma

iguana wrote:

I was talking about a specific choice between the two housing examples I used. I sure haven't noticed a big difference between €900pm and €900pm.

For 99% of people who will simply not live in these areas, your argument is rubbish.

The fact remains that mortgages and rents have diverged to truly astounding levels.

Whether you like it or not (and Im speaking as someone who *hates* Dublin and is way happier when in non-leinster counties) this country is completely dominated by and completely dependent on Dublin. "Equity locusts" (as my US property investor buds would refer to them) have helped to dramatically ramp up prices in these counties.

The price drops awaiting Dublin are very large - but the plummets the rural areas will see will be astounding.

One last thing here, I have actually completely lost interest in actual price of houses in this country because the elephant in the room is that the economy is an absolute shambles, built on nothing but asset speculation and a consumer binge.

You only have to keep an eye on the papers to see the 'death by a thousand cuts' that is happening. Mark my words, motorola's announcement yestrerday will be followed in the short term by Vodafone, Xerox & Pfizer. And In the medium term by Dell & Intel.

When the tide goes out, we find out who's been swimming naked.

jesus_thats_gre

megadodge wrote:

I know it's a number of posts back and off-topic but I just couldn't let such a startingly ignorant quote go unchecked.

Maybe people should do a little homework before they start spouting rubbish that is actually the complete opposite to the truth !


Here's a link

http://news.bbc.co.uk/1/hi/business/4656927.stm

and there are any amount of others if you just google 'Olympic effect on property prices' and words to that effect.

I think the Olympics is one fo the contributing factors in the housing boom and recent fizzling out of Sydney's housing market also.

Afuera

megadodge wrote:

That was your original statement (phrased as a question), which basically suggests that the Olympics have NO effect on prices of properties in a host city.

And my question still stands... You've failed to show me a single objective report to support the "Olympic effect" on house prices. Any of the reports I've seen on this suggest that these rises would have happened anyway, Olympics or no Olympics.

megadodge wrote:

I think I'm way, way closer to the mark in saying that the Olympics will cause a serious rise in London property prices over the next 5 years than you are in telling me to get my head tested because I think that !!

I know I'm not going to teach an old pessimistic dog new tricks, so rather than tell me why I'm in for an awful rude awakening (no doubt based on fact rather than your negative outlook) I guess we'll just have to wait til 2012 and see which one of us was right. Suits me fine.

Don't say that nobody told you so then if things don't work out as you planned!

Afuera

jesus_thats_gre wrote:

I think the Olympics is one fo the contributing factors in the housing boom and recent fizzling out of Sydney's housing market also.

Have you got anything that compares the housing boom in Melbourne with that of Sydney during the same period? I'd suspect that the "contributing factor" of the Olympics would be negligible.
I think that the fizzling out of the housing boom there had more to do with the fact that they had to raise their home lending interest rates up to 8%.

soma

soma wrote:

You only have to keep an eye on the papers to see the 'death by a thousand cuts' that is happening. Mark my words, motorola's announcement yestrerday will be followed in the short term by Vodafone, Xerox & Pfizer. And In the medium term by Dell & Intel.

Ok my timing was impressive/flukey[delete as appropriate]. But Vodafone are now officially on the band wagon:

RTE.ie wrote:

Vodafone seeks 100 voluntary redundancies
Wednesday, 31 January 2007 12:27

The mobile phone group, Vodafone, has confirmed that it is seeking 100 voluntary redundancies at its Dublin headquarters.

A newspaper report this morning said the company told employees last week that it was responding to an increasingly competitive Irish mobile phone market.

The company employs around 1,800 people in the Republic.
Advertisement

The news came as Vodafone said it added 59,000 Irish customers in the three months to the end of December, bringing its total subscriber base to 2,178,000.

Despite this increase in subscription, the amount of money it takes from each customer continued to fall.

Average monthly revenue per user was €45.60, down from €46.90 at the end of September and €50.20 in the same period last year.

This is still well above the equivalent figures in its other main European markets.

ronbyrne2005

soma wrote:

Ok my timing was impressive/flukey[delete as appropriate]. But Vodafone are now officially on the band wagon:

Announced today 200 high end jobs going in limerick to add to the 300 in Motorola in Cork and Dell will soon be leaving too.

Afuera

Afuera wrote:

Have you got anything that compares the housing boom in Melbourne with that of Sydney during the same period? I'd suspect that the "contributing factor" of the Olympics would be negligible.

Ok, I managed to track down the actual statistics for this from the Australian Bureau of Statistics (http://www.abs.gov.au/AUSSTATS/abs@.nsf/second+level+view?ReadForm&prodno=6416.0&viewtitle=House%20Price%20Indexes:%20Eight%20Capital%20Cities~Sep%202006~Latest~15/11/2006&&tabname=Past%20Future%20Issues&prodno=6416.0&issue=Sep%202006&num=&view=&).

The following figures represent the annual change in house prices in Melbourne and Sydney and I've taken them from 5 years before, until 5 years after the Olympics which were held in 2000.

Just to make it interesting, I've left out which is which... Can you spot the "Olympic effect"?

City A
1995 +2.5%
1996 +2.4%
1997 +5.9%
1998 +9.5%
1999 +10.7%
2000 +5.9%
2001 +17.2%
2002 +22.4%
2003 +15.5%
2004 +0.0%
2005 -3.9%


City B
1995 -0.6%
1996 +4.0%
1997 +12.2%
1998 +9.8%
1999 +15.2%
2000 +9.7%
2001 +20.6%
2002 +12.5%
2003 +12.5%
2004 -1.5%
2005 +2.9%


Hint:
City A = Sydney
City B = Melbourne