Do you believe rent is "dead money"?

prinz

ronbyrne2005 wrote: »

Rent controls in Germany. Also there an excess of properties there too and demogrpahics are bad.

There is an excess of properties in Ireland too. We spent years building thousands more houses than were required. Yet prices and rents remained, and remain artificially high. Not to mention the total glut of run down and derelict buildings around Dublin which should have been subjected to CPO's, renovated and rented by the state for reasonable income to the exchequer.

greendom

if you consider rent to be dead money then you would also consider food, for example, in the same light. Food keeps you alive on a day to day basis but you get no long term reward for it. Ditto rent.

prinz

prinz wrote: »

There is an excess of properties in Ireland too.

Some reading on this...

Irish Examiner 14/05/2005

40% of 2004 new houses vacant
By Brian O’Mahony, Chief Business Correspondent
MORE than 30,000 of the 77,000 new houses built in 2004 are vacant, according to a stockbroker.This is close to 40% of the houses built last year and it suggests a sharp reduction in building levels is on the cards in the years ahead.

http://www.finfacts.com/irishfinancenews/article_1015142.shtml

Greatest Bubble in History: Warnings ignored in US and Ireland; Vacant Irish housing units rise 150% to 350,000 in period 2002/08

http://www.tribune.ie 13/01/2008

Almost 220,000 houses and apartments are lying vacant across Ireland as the country's rental crisis worsens, the Sunday Tribune has learned. Despite an increase in rent of up to 20% in the last 12 months, 41,600 apartments and 174,900 houses remain unoccupied as the reality of over-building in the past five years starts to hit home.

http://www.irishtimes.com/blogs/business/2008/10/29/how-big-are-irelands-ghost-towns/

Just keep your eyes open around the country. Developers and builders are not selling properties because they are waiting for the non existant return to bubble prices to make the usual greed fuelled profits they are used to gettting. So supply and demand has been corrupted in this country, thereby rendering the supply and demand argument over house prices and by proxy rental prices void.

di2772

prinz wrote: »

There is an excess of properties in Ireland too. We spent years building thousands more houses than were required. Yet prices and rents remained, and remain artificially high. Not to mention the total glut of run down and derelict buildings around Dublin which should have been subjected to CPO's, renovated and rented by the state for reasonable income to the exchequer.

I hear Roscommon or Leitrim have plenty of empties if you want to live there.

prinz

di2772 wrote: »

I hear Roscommon or Leitrim have plenty of empties if you want to live there.

Thanks for that intelligent and insightful contribution.

Figures confirmed by the Central Statistics Office (CSO) show that nearly 11,000 housing units lie vacant in the Fingal area of Dublin, 10,000 in the Dublin City Council region, 3,000 in South Dublin and nearly 2,400 in Dun Laoghaire Rathdown. In Cork City, the figure is over 4,000. Limerick has over 3,000 empty houses and apartments, Galway around 1,300 and Waterford over 1,200.

gurramok

Free tours to anyone who wants to see the hundreds of empties in the Dublin Docklands area! :P

There are a few hundred in Tallaght also, the likes of Priorsgate beside the Square comes to mind.

ronbyrne2005

prinz wrote: »

There is an excess of properties in Ireland too. We spent years building thousands more houses than were required. Yet prices and rents remained, and remain artificially high. Not to mention the total glut of run down and derelict buildings around Dublin which should have been subjected to CPO's, renovated and rented by the state for reasonable income to the exchequer.

How are rents artificially high? I agree with rest though. I think maybe a lot of these properties arent in places that are popular with renters and also many properties werent let out and just held for capital gain and losses on not renting could be offset aginst other rental income elsewhere.

beeno67

greendom wrote: »

if you consider rent to be dead money then you would also consider food, for example, in the same light. Food keeps you alive on a day to day basis but you get no long term reward for it. Ditto rent.

Well food gives you the reward of keeping you alive. Pretty important I would have thought.

greendom

beeno67 wrote: »

Well food gives you the reward of keeping you alive. Pretty important I would have thought.

A roof over your head is considered a pretty basic need too. The reward being keeping warm and dry. Pretty essential I would have thought. Food is of course more important for our existence, but it wouldn't be nasty, brutish and short if we had to live without accommodation.

beeno67

In the long term rent is dead money. Just because for the last few years it has made more sense to rent than buy this does not mean it is right for ever.

Even at current prices it makes more long-term sense to buy rather than rent. That assumes it is a straight choice between buying now or renting for ever more (ie never buying). Obviously the cheaper you get the property the better so holding out at present will save you money. However over the long term (40-50 years) it makes more financial sense to buy rather than rent.

greendom

beeno67 wrote: »

In the long term rent is dead money. Just because for the last few years it has made more sense to rent than buy this does not mean it is right for ever.

Even at current prices it makes more long-term sense to buy rather than rent. That assumes it is a straight choice between buying now or renting for ever more (ie never buying). Obviously the cheaper you get the property the better so holding out at present will save you money. However over the long term (40-50 years) it makes more financial sense to buy rather than rent.

So how much longer will house prices continue to fall - when do you think the bottom will be reached ?

the_syco

I think rent is only dead money when you stop getting paid as much for your pension, and have to downgrade to a smaller room, as opposed to having had a house rent free for about 10 years...

beeno67

the_syco wrote: »

I think rent is only dead money when you stop getting paid as much for your pension, and have to downgrade to a smaller room, as opposed to having had a house rent free for about 10 years...

Lets take 2 situations. Buy a property now for €300,000 with a 20 year mortgage or rent same property for €1000 a month.

After 40 years if you bought, you will have paid out a total of €500,000 (assuming average interest rates of 6%, which is way higher than current rates) Even if house prices rise only 2% a year your property will be worth €660,000

After 40 years renting (assuming rents only increase 2% a year) You will have paid out over €700,000 and own nothing. Indeed you will still be paying out over €2,000 a month interest.

So not only have you paid out less, you own an asset worth €660,000. The savings by buying get even higher when you consider that for the 20 years you owned the house you would have earned interest on the rent you were not paying if you get what I mean.

There are advantages to renting but financially it is better to buy. Even if you think rent will not go up at all over the next 40 years and that house prices will not go up at all over the next 40 years it still makes more financial sense to buy.

prinz

ronbyrne2005 wrote: »

How are rents artificially high?

You said it yourself, supply and demand. Hundreds of thousands of apartments and houses empty helps steady the supply side, you said rents were high because demand was so high... why in that case would there be 30,000 odd empty residences in the Dublin area alone? Surely the demand is there

the_syco

beeno67 wrote: »

So not only have you paid out less, you own an asset worth €660,000. The savings by buying get even higher when you consider that for the 20 years you owned the house you would have earned interest on the rent you were not paying if you get what I mean.

So you agree with me that rent is dead money as you are f**ked once your money runs out, as opposed to having a rent-free asset.

dearg lady

greendom wrote: »

if you consider rent to be dead money then you would also consider food, for example, in the same light. Food keeps you alive on a day to day basis but you get no long term reward for it. Ditto rent.

Can't really see how the two are comparable, a place to live is something that can be used again and again, food, once consumed, is gone.

greendom

the_syco wrote: »

So you agree with me that rent is dead money as you are f**ked once your money runs out, as opposed to having a rent-free asset.

As long as you make all the repayments back to the bank over the lifetime of the mortgage. Otherwise you are even more f***ed than you would be if you'd stuck to renting

greendom

dearg lady wrote: »

Can't really see how the two are comparable, a place to live is something that can be used again and again, food, once consumed, is gone.

But rent is short term compared to buying a house isn't it?

dearg lady

greendom wrote: »

But rent is short term compared to buying a house isn't it?

well that would depend if you chose to rent short term or long term. Either way, doesn't make them comparable!

greendom

dearg lady wrote: »

well that would depend if you chose to rent short term or long term. Either way, doesn't make them comparable!

I think we actually agree with each other - I'm obviously not very good at making my point. What I was trying to say is that saying renting is "dead" money is a bit silly as you need to rent as a basic necessity of life - just as with food.

dearg lady

greendom wrote: »

I think we actually agree with each other - I'm obviously not very good at making my point. What I was trying to say is that saying renting is "dead" money is a bit silly as you need to rent as a basic necessity of life - just as with food.

Ok, I think I see what you mean now, I was interpreting your post differently!
shelter being a basic human need, doesn't matter what way you pay for it, as long as you have access to it, it can't really be 'dead money'

timbel

What happens in Ireland when people retire from working who are living in rented accomodation?
Is there rent allowance along with your pension?
Or do you have to pay rent out of your pension?

In europe there is a bigger culture of renting over house ownership.
I wonder what happens in the above situation in Europe.

Anyone know?

greendom

timbel wrote: »

What happens in Ireland when people retire from working who are living in rented accomodation?
Is there rent allowance along with your pension?
Or do you have to pay rent out of your pension?

In europe there is a bigger culture of renting over house ownership.
I wonder what happens in the above situation in Europe.

Anyone know?

I don't know for a fact but I imagine it's means tested. If you have enough disposable income then you pay the rent yourself, if not then presumably the state would step in ?

beeno67

greendom wrote: »

As long as you make all the repayments back to the bank over the lifetime of the mortgage. Otherwise you are even more f***ed than you would be if you'd stuck to renting

Only if you are in negative equity. Otherwise you simply sell and either rent or buy again.

greendom

beeno67 wrote: »

Only if you are in negative equity. Otherwise you simply sell and either rent or buy again.

Provided you avoid repossession of course

beeno67

greendom wrote: »

Provided you avoid repossession of course

Well if you are not in negative equity it would be pretty stupid to be repossessed.

fricatus

I think this property crash has clouded people's thinking somewhat. Yes, we've been overpaying for houses lately, yes FF are an incompentent bunch of shi'ites, but that doesn't change the fact that rent is dead money. You never see it again, and you never get a return for it. I laugh when I hear people saying we have a post-colonial addiction to land and owning property that we need to get over!

I'm paying the guts of a grand as a mortgage. It's a big burden, but so was £12 a week to my parents when they were starting out.

I might suffer a pay cut or increased taxes, so the burden might increase. I am probably in negative equity, so I won't be moving for a while. However I had the good sense to live in an area I wanted to settle down in, so I can live with that.

However, when I'm 65 I will own my own home and I won't need to pay for accommodation ever again. Meanwhile, those who are advocating renting forever will still be forking over goodness-knows-how-much a month to their landlord.

It's common sense...

greendom

beeno67 wrote: »

Well if you are not in negative equity it would be pretty stupid to be repossessed.

It does happen though and not always due to stupidity

nouveau_4.0

prinz wrote: »

Why am I not comparing like with like? Rent is not a service, or a product that you can blame labour costs, manufacturing costs, etc into explaining the difference. There is no logical reason at all that a double room in Dublin can cost €400 - €600, and an apartment in a sizeable German city could costs half of that amount to rent. Granted some German cities are more expensive. The only reason is greed. Everyone thought they could cash in here. There was a false economy of supply and demand, there largely still is. Rather than letting supply hit the market, leading to a price fall, supply is being regulated to keep prices artficially high. Outside Straffan, Co. Kildare, lovely small town, perfect commuter site for Dublin etc, there is a large housing estate, just completed in the last year or so....... the whole estate is lying empty. The entrance has been blocked up, not one house has been sold. Similarly with many apartment blocks around the city. Prices are not coming down far enough, or fast enough.

As had been said before, its simply supply and demand.

Rent prices will always find their naturally correct level.


I've put all your fallacies in bold, and will simply repeat - supply and demand. When you grasp the concept, you'll understand.

prinz

nouveau_4.0 wrote: »

As had been said before, its simply supply and demand. Rent prices will always find their naturally correct level.
I've put all your fallacies in bold, and will simply repeat - supply and demand. When you grasp the concept, you'll understand.

What fallacies are those? I understand supply and demand mate, simple fact is 200,000+ empty apartments and houses.... why are they empty? I'd rent a house or apartment if the price was right. Why are housing estates within a 45 minutes of Dublin boarded up, i.e. they are not even being offered for sale. Supply and demand only works where both are reflective of each other. It's obviously not working in north Dublin, where we have an empty apartment block beside my workplace because the rent is non negotiable, and yet accommodation is hard to come by in the area in general.