So What should the prices be?

Johnny Bitte

Hi All,
Me and the misses are talking about buying this year and I will be going to view a few later this month.

Obvoiusly the price of a house is determined by location and size and other aspects but when I go see these houses and begin negoiationing the sale price rather than the riduculas on the site could I use examples of other houses that are similiar but cheaper to get it down.

Like here

Thanks

John

gurramok

Whats it worth to you?

Athy is getting slaughtered, its commuterland. You have got a rake of choices down there, a huge oversupply to choose from. 133 3bed semi-d's on Daft at the moment in a town with a population around 8,000.

You're spoilt for choice, you know the answer to the question.

spockety

"Back to basics no frills!"..

170k of your hard earned spondoolicks and no kitchen :eek:

Johnny Bitte

spockety wrote: »

"Back to basics no frills!"..

170k of your hard earned spondoolicks and no kitchen :eek:

Yeah that what I am asking.
How much do you think this kinda house would have been worth if the prices hadn't shot through the roof.

I m currently look at a house thats advertised as €399,999 but thats obvoiusly not going to sell for that.

A cousin got a similiar house in Portlaise for €250,000 in Dec 08. My reasoning would be that I could go to the seller and say that this house sold in Portlaise for this much. Why should I pay you 400k?

ionapaul

A lot of people base the price they are willing to pay for a house on a function of what that property will rent for on a monthly basis. This is one of the 'fundamentals' that professional investors base their investments on. I think this is the way to go as rent will automatically take into account all of those factors you mentioned, such as location, size, specification, etc (a well-kept 3-bed in Rathfarnham will rent for much more than a shoddy 3-bed in Darndale, etc).

The equation I like the look of is: Monthly Rent x 11 x 16 = a good price to have in mind when thinking of buying. This equates to around a 6% yield, not spectacular but decent. So for an apartment that rents for €1200 per month, a guide price of €211,200. For a house in rural Longford that rents for €400 a month, a guide price of €70,400. As rents are plummeting, so the fundamental value of a property (if there is such at thing) at any given time will change.

Using an accurate rent will allow you to discount any EA nonsense and set yourself up for future movement : 'the day you buy is the day you sell'

Of course, using the above method, the vast majority of properties in Ireland are very overpriced, with a small minority to be seen as good value as far as investments go.

AARRRGH

I wouldn't pay more than 100k for three bed in the commuter belt.

hotredhead

AARRRGH wrote: »

I wouldn't pay more than 100k for three bed in the commuter belt.

+1

dny123456

ionapaul wrote: »

The equation I like the look of is: Monthly Rent x 11 x 16 = a good price to have in mind when thinking of buying.

Why 16? Seems a little random. 25 would more realistic?
giving 330,000 for the example you gave.

ionapaul

16 gives an annual yield of 6.25% - not great but not terrible. 25 gives an annual yield of 4% - I can do better than that leaving my money in the bank! No professional investor would accept a 4% yield IMHO, what with the capital depreciation likely. A 10% yield is more my style in any case

Murtinho

Can someone explain this equation

Rent x 11 x 16

What is the 11 from (should it not be 12, as in months)
and the 16?

and do professionals actually use equations when valuing property?

ntlbell

Murtinho wrote: »

Can someone explain this equation

Rent x 11 x 16

What is the 11 from (should it not be 12, as in months)
and the 16?

and do professionals actually use equations when valuing property?

i thought 11 is to assume you won't have a 12 monty occupancy every year

people leave takes time to replace a tenant where you can lose a month's rent?

ionapaul

Murtinho wrote: »

Can someone explain this equation

Rent x 11 x 16

What is the 11 from (should it not be 12, as in months)
and the 16?

and do professionals actually use equations when valuing property?

11 is, as ntlbell pointed out, to account for vacant periods, etc. It also reflects costs that every landlord can incur that are not tax deductable and management fees.

Of course professional investors crunch the numbers before buying property - it wouldn't be very 'professional' to invest in anything without doing so! Which isn't to say an amatuer property investor who listens 'to their gut' won't make loads of money, it just isn't a very professional approach.

Johnny Bitte

How did this turn into arenting conversation.
I ll be buying to live in simple as. Meeting the seller on Sat to have a look around and go from there.

ntlbell

The_Goose135 wrote: »

How did this turn into arenting conversation.
I ll be buying to live in simple as. Meeting the seller on Sat to have a look around and go from there.

it's not a renting conversation we're talking about how one might value a property

you're asking a question that has no answer people are offering places to start to get a real figure

but we can sit here and pull them out of our arse if you think you'll find that more helpful

Johnny Bitte

ntlbell wrote: »

but we can sit here and pull them out of our arse if you think you'll find that more helpful

Calm down :rolleyes:

First off my original question was what would you think the house prices would be at now if not for the boom.

I cant see how what the renting value in an area has to do with the price of a property when it wont be rented and due to the area couldnt be rented. (Small village).

I can see how this would a reasonable process in Dublin or other major populated areas tho.

From what I can remember of the prices 300000 would have bought a mansion before the boom.

ntlbell

The_Goose135 wrote: »

Calm down :rolleyes:

First off my original question was what would you think the house prices would be at now if not for the boom.

I cant see how what the renting value in an area has to do with the price of a property when it wont be rented and due to the area couldnt be rented. (Small village).

I can see how this would a reasonable process in Dublin or other major populated areas tho.

From what I can remember of the prices 300000 would have bought a mansion before the boom.

it's just a bit of maths so you can give the a rough estimate of what the house might be worth at that moment in time based on what someone would be willing to rent it for

as i said there is no way to know exactly how much a house is worth so putting some math to it so you have somewhere to start with is better than whipping something out of your back side no?

francish

The_Goose135 wrote: »

Calm down :rolleyes:

First off my original question was what would you think the house prices would be at now if not for the boom.

I cant see how what the renting value in an area has to do with the price of a property when it wont be rented and due to the area couldnt be rented. (Small village).

I can see how this would a reasonable process in Dublin or other major populated areas tho.

From what I can remember of the prices 300000 would have bought a mansion before the boom.

Renting has everything to do with value of property.

MG

ionapaul wrote: »

A lot of people base the price they are willing to pay for a house on a function of what that property will rent for on a monthly basis. This is one of the 'fundamentals' that professional investors base their investments on. I think this is the way to go as rent will automatically take into account all of those factors you mentioned, such as location, size, specification, etc (a well-kept 3-bed in Rathfarnham will rent for much more than a shoddy 3-bed in Darndale, etc).

The equation I like the look of is: Monthly Rent x 11 x 16 = a good price to have in mind when thinking of buying. This equates to around a 6% yield, not spectacular but decent. So for an apartment that rents for €1200 per month, a guide price of €211,200. For a house in rural Longford that rents for €400 a month, a guide price of €70,400. As rents are plummeting, so the fundamental value of a property (if there is such at thing) at any given time will change.

Using an accurate rent will allow you to discount any EA nonsense and set yourself up for future movement : 'the day you buy is the day you sell'

Of course, using the above method, the vast majority of properties in Ireland are very overpriced, with a small minority to be seen as good value as far as investments go.

Hugely sensible post, I've heard this guide used a few times and while it's values appear low to us as we've been used to bloated values, it's logic and intuitiveness is hard to argue with.

sadista

what does the 16 represent?

MG

sadista wrote: »

what does the 16 represent?

6.25% (1/16th so to gross back up, multiply by 16)

6.25% is being considered an adequate return

sadista

ah I see. Thanks! So for example a 5 bed detached I saw advertised for 1750 per month could be valued at roughly 308k? Thats crazy because that exact house is up for sale for 675k on another website. Thats EA's for ya :rolleyes:

Surely you couldnt make an offer like that on a property? Or else thats what they want us to think?

Freddie59

GO TO:

www.treesdontgrowtothesky.com

www.thepropertypin.com

www.irishpropertywatch.com

www.irishhometruths.com

Then decide.:)

oceanclub

sadista wrote: »

ah I see. Thanks! So for example a 5 bed detached I saw advertised for 1750 per month could be valued at roughly 308k? Thats crazy because that exact house is up for sale for 675k on another website.

Yep, it's crazy. That's why it's called a property bubble.

See also when 17th Dutch merchants thought a tulip bulb was worth 12 acres of land, or the recent dot.com bubble when idiotic companies which never had a hope of ever turning a profit were worth millions.

P.

MG

sadista wrote: »

ah I see. Thanks! So for example a 5 bed detached I saw advertised for 1750 per month could be valued at roughly 308k? Thats crazy because that exact house is up for sale for 675k on another website. Thats EA's for ya :rolleyes:

Surely you couldnt make an offer like that on a property? Or else thats what they want us to think?

The monthly rent x 11 x 16 (ish) formula would be considered a long term norm price - given economic considerations it could be over or under at any given time but over the long term prices would be expected to reasonably track the formula

sadista

oceanclub wrote: »

Yep, it's crazy. That's why it's called a property bubble.

See also when 17th Dutch merchants thought a tulip bulb was worth 12 acres of land, or the recent dot.com bubble when idiotic companies which never had a hope of ever turning a profit were worth millions.

P.

so how long is it going to take before the crazy EAs and developers start accepting offers like 300k for a house that is according to them worth 600k+?

oceanclub

sadista wrote: »

so how long is it going to take before the crazy EAs and developers start accepting offers like 300k for a house that is according to them worth 600k+?

God only knows; we're still in the denial phase. daft.ie shows a glut of rental properties which can only be ascribed to landlords preferring to lose a year's worth of rent rather than drop their price.

And sellers, rather than drop their price straight away to a price that will sell, are dropping their prices only incrementally _behind_ the rate of change.

P.

sadista

Well thats not necessarily a bad thing for me seeing as Im still saving for a deposit. I'll be looking to buy in a year and a half to two years hopefully.

And I'll want to spend my hard earned cash on the biggest,cheapest, most badass house I can get me hands on!

johnnyskeleton

sadista wrote: »

so how long is it going to take before the crazy EAs and developers start accepting offers like 300k for a house that is according to them worth 600k+?

To be fair, it's not up to the EAs to accept or reject offers it's up to the vendors. However, the EAs could be accused of instilling unrealistic expectations in their clients.

From what I can see, the Developers have been to the forefront of price drops, to the extent that you will see in areas such as the IFSC 2 bed apartments being sold by the developer for €250k and private vendors trying to sell a similar property for €500k. Of couse, the private vendors will argue that their apartment is much better than the developer's apartment, and it might be, but it would be nowhere near twice the price.

sadista

Sorry my bad, what I should have said is how long will it take for EAs to cop on and start negotiating more ideal prices with the vendors. I know they are only doing their job but they need to come back down to earth.