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Do you believe rent is "dead money"?

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    #182
    von Neumann
    Closed Accounts Posts: 272 ✭✭von Neumann


    Buying is better in all but the current market.

    I think a lot of people forget that you only pay a mortatage for at most 40yr where as could be paying rent till you die which in most cases will be more than 40yr.


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    #183
    Kipperhell
    Closed Accounts Posts: 1,477 ✭✭✭Kipperhell


    prinz wrote: »
    What fallacies are those?:confused: 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.

    You are misunderstanding supply and demand. Supply is not only effected by demand. If you feel the supply is some how being restricted there is a reason thus effecting supply at the demand level. So if it makes more sense to board up a house then rent it at current market rates it would effect the supply of housing .

    As pointed out if you have a property that is a loss and can be written off against your profitable property. You may not choose to put it on the market as you would not make enough money for it to be worth their while. Just because a property exists you do not have to have it on the market.

    The same way you would rent if the price is right the landlord will only rent if the price is right. That is supply and demand.


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    #184
    jhegarty
    Registered Users Posts: 6,440 ✭✭✭jhegarty


    von Neumann wrote: »
    Buying is better in all but the current market.

    I think a lot of people forget that you only pay a mortatage for at most 40yr where as could be paying rent till you die which in most cases will be more than 40yr.

    People forget three things when doing the math.

    1) You have to keep paying rent , even when the mortgage would have been paid off. You have to do the calculation until the day you die (on average).

    2) Rent increases inline with regular inflation , but the mortgage does not. So rent will increase 3% every year (over the long term) , but your mortgage will be within a few % total change over the 30 years.

    3) It doesn't matter if you are in negative equity in the short term. No one has ever been in negative equity the day they paid their final mortgage payment.


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    #185
    prinz
    Registered Users Posts: 14,598 ✭✭✭✭prinz


    Kipperhell wrote: »
    You are misunderstanding supply and demand. Supply is not only effected by demand. If you feel the supply is some how being restricted there is a reason thus effecting supply at the demand level. So if it makes more sense to board up a house then rent it at current market rates it would effect the supply of housing...

    :confused: Rental prices on many properties are not being reduced. Therefore demand remains higher for those properties which are being rented out, which leads to an artificial scenario of high rent on available properties, 30,000+ empty properties in Dublin, and yet someone on the minimum wage is unlikely to be able to afford to live on their own.
    Kipperhell wrote: »
    As pointed out if you have a property that is a loss and can be written off against your profitable property. You may not choose to put it on the market as you would not make enough money for it to be worth their while. Just because a property exists you do not have to have it on the market....

    Er that backs up my point... places are not empty because the demand doesn't exist. They are kept empty for financial reasons of the owners.
    Kipperhell wrote: »
    The same way you would rent if the price is right the landlord will only rent if the price is right. That is supply and demand.

    So you think an empty apartment block, renting apartments at just under €2000 per month, with a refusal to negotiate on price is reflective of an efficient supply and demand market :confused:... the demand IS there.... but at realistic market prices.


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    #186
    Kipperhell
    Closed Accounts Posts: 1,477 ✭✭✭Kipperhell


    prinz wrote: »
    :
    So you think an empty apartment block, renting apartments at just under €2000 per month, with a refusal to negotiate on price is reflective of an efficient supply and demand market :confused:... the demand IS there.... but at realistic market prices.

    You really don't get it! Supply is dictated by profit if there is no profit people don't supply. Until demand reaches the point where an increase in supply and there is still profit increased supply won't happen. Supply tries not to supply at a loss.

    So the answer is yes supply is acting in accordance to how it works. Demand and supply are not the only factor as they both have their own nature. You appear to have the very basics of supply and demand.

    You are arguing the nature of supply should change or you could be suggesting a tax change to have the government stop the practice. No matter what supply is acting correctly given current circumstances.


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    #187
    dearg lady
    Closed Accounts Posts: 2,091 ✭✭✭dearg lady


    prinz wrote: »
    So you think an empty apartment block, renting apartments at just under €2000 per month, with a refusal to negotiate on price is reflective of an efficient supply and demand market :confused:... the demand IS there.... but at realistic market prices.

    Supply and demand won't necessarily make a market 'efficient'. If it is more beneficial for a person to leave a house/apartment empty rather than rent it out, that's what they'll do. That's how supply and demand works, there's pulls on both sides. Yes you want accomdation, but the owner doesn't want to rent it out. That's the market, it's then up to yourself to decide if you are willing to pay the rent you can avail of currently.


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    #188
    prinz
    Registered Users Posts: 14,598 ✭✭✭✭prinz


    Kipperhell wrote: »
    You really don't get it! Supply is dictated by profit if there is no profit people don't supply. Until demand reaches the point where an increase in supply and there is still profit increased supply won't happen. Supply tries not to supply at a loss.
    dearg lady wrote: »
    Supply and demand won't necessarily make a market 'efficient'.

    :confused: You're really misinterpreting what I'm saying. Other posters were earlier explaining the high rents in Dublin say, on the basis that there was a demand driving the rents up / keeping them up.

    My point was that this isn't the case anymore. There is not a queue outside the block next door clamouring to rent. The high rent is being set because it is in the interest of the owners/landlords, not because they can actually get the high rents they are charging. i.e. people were saying rents are x, because that is what people are willing to pay etc ( and they were ) but nowadays IMO people are looking for more value for money for rent, and rent reductions, renegotiations etc are commonplace because landlords are depserate to keep tenants in situ. They know it's a renters market at the moment. Like I said I already moved down one street because the previous landlord refused to drop the rent, and since I left he has not been able to rent the place, i.e. he's not offering value for money anymore.

    There's no point in saying charging €500 pm for a double room is reflective of the market when the room is empty for a long period of time, and nobody is interested in taking it at that price.


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    #189
    dearg lady
    Closed Accounts Posts: 2,091 ✭✭✭dearg lady


    People will always(well they always should!! :)) look for the best value, same as a person renting will want to achieve the highest rent. Obviously a lot of landlords are dropping rents, but if a landlord chooses not to, and their room stays empty they're perfectly entitled to do that, same as you can refuse to pay rent that is too high and find someplace else to live!

    there may be factors which make it more beneficial for a person to leave a dwelling empty, or some landlords might just hold out longer before dropping rents further.

    You made the point earlier that rents in general, as opposed to one barmy landlord charging twice what the rest charge, are still too high. the point being, if people are willing to pay average rental prices(and they are!) then rents are fine for the current market.


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    #190
    Salvelinus
    Closed Accounts Posts: 272 ✭✭Salvelinus


    jhegarty wrote: »
    People forget three things when doing the math.

    1) You have to keep paying rent , even when the mortgage would have been paid off. You have to do the calculation until the day you die (on average).

    2) Rent increases inline with regular inflation , but the mortgage does not. So rent will increase 3% every year (over the long term) , but your mortgage will be within a few % total change over the 30 years.

    3) It doesn't matter if you are in negative equity in the short term. No one has ever been in negative equity the day they paid their final mortgage payment.

    I don't think people are talking about renting until they drop, just long enough to get a deposit, interest is dead money.
    I'd say there are people who bought int he last 5 years who won't get back the price they paid in treal terms.


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    #191
    Salvelinus
    Closed Accounts Posts: 272 ✭✭Salvelinus


    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.

    What about current economic conditions? Not much point buying if yuo don't have a secure job.


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    #192
    munchkin_utd
    Registered Users Posts: 7,882 ✭✭✭munchkin_utd


    and not much point buying if you think you might have to emmigrate/ reclocate within ohhhhh say the next ten/ fifteen years. If you have to shift a property you wont manage it in a hurry if you manage it at all.

    And even at that.
    If you buy in rural Mayo or the likes and need to relocate for a job to Dublin or abroad, you could be paying a mortgage for 40 years on a place you cant shift and you dont live in. And also a place that you cant rent out as nobody will be living there any more.

    Its a doomsday scenario but thats the way things are going as the boom days are not coming back any day soon.


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    #193
    beeno67
    Registered Users Posts: 1,218 ✭✭✭beeno67


    Salvelinus wrote: »
    What about current economic conditions? Not much point buying if yuo don't have a secure job.

    Absolutely. So you continue renting. That does not change the fact that rent is dead money. I am not saying everyone should buy. I am saying in the long run it is far cheaper to rent rather than buy, for the reasons I gave earlier. If you are unable to buy that is unfortunate it does not mean buying is wrong.
    By the way I know it would be better to wait another 12 -24 months before buying, but, even buying now is better financially than never buying.


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    #194
    markpb
    Registered Users Posts: 9,304 ✭✭✭markpb


    beeno67 wrote: »
    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 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.

    That's a very simplistic view. You're ignoring (impending) property taxes, service charges (for managed estates), repairs and maintenance, replacing kitchen appliances at life-end and re-painting the exterior - all of which an owner has to pay but the tenant will not. You're also ignoring the non-financial benefit that the tenant has when it comes to working location. Heck, they can even leave the country easily if they want to.


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    #195
    beeno67
    Registered Users Posts: 1,218 ✭✭✭beeno67


    markpb wrote: »
    That's a very simplistic view. You're ignoring (impending) property taxes, service charges (for managed estates), repairs and maintenance, replacing kitchen appliances at life-end and re-painting the exterior - all of which an owner has to pay but the tenant will not. You're also ignoring the non-financial benefit that the tenant has when it comes to working location. Heck, they can even leave the country easily if they want to.

    As I keep on saying financially it makes sense. There are other raesons to rent rather than buy but financially it makes sense. Someone age 30 now who is going to rent forever will be renting for 50 years on average. At €1000 a month that is €600,000 in total if we assume as best case scenario for rents and that they will never go up.

    The person buying the same house now will pay a total of €500,000. So even if they have to pay out €100,000 and their house is totally worthless they are better off.

    But lets face facts, rents will go up over the next 50 years and house prices will also go up over next 50 years.

    Edit: perhaps you should show a financial scenario that does not make sense for average person in long run.


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    #196
    Kipperhell
    Closed Accounts Posts: 1,477 ✭✭✭Kipperhell


    prinz wrote: »
    :confused: You're really misinterpreting what I'm saying. Other posters were earlier explaining the high rents in Dublin say, on the basis that there was a demand driving the rents up / keeping them up.

    Demand is based on what is being supplied not what could be supplied.
    prinz wrote: »
    There's no point in saying charging €500 pm for a double room is reflective of the market when the room is empty for a long period of time, and nobody is interested in taking it at that price.

    It has already been explained that there is a reason to leave a place empty. Bad economics of a personal matter is just bad sense but it is the market. You weren't going on about single lets in a house but entire accommodations. It is only one factor for rents in Dublin higher employment opportunities is another.

    I think I know what you are trying to say but you are not correct in what you are actually saying.


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    #197
    Salvelinus
    Closed Accounts Posts: 272 ✭✭Salvelinus


    beeno67 wrote: »
    As I keep on saying financially it makes sense. There are other raesons to rent rather than buy but financially it makes sense. Someone age 30 now who is going to rent forever will be renting for 50 years on average. At €1000 a month that is €600,000 in total if we assume as best case scenario for rents and that they will never go up.

    The person buying the same house now will pay a total of €500,000. So even if they have to pay out €100,000 and their house is totally worthless they are better off.

    But lets face facts, rents will go up over the next 50 years and house prices will also go up over next 50 years.

    Edit: perhaps you should show a financial scenario that does not make sense for average person in long run.

    What do you consider the point of no return for renting, ie the point it becomes too long
    I agree renting for 50 years is pointless, not really dead money as you're getting a service but mis-spent might be a better term. I don't think there are many out there who want to rent for that long and want to buy but don't want to bury themselves in debt. Whatever side you take on this debate you have to admit we didn't have a sensible (or smart or ballsy) attitude to property in Ireland for the last 6 or 7 years.


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    #198
    markpb
    Registered Users Posts: 9,304 ✭✭✭markpb


    beeno67 wrote: »
    But lets face facts, rents will go up over the next 50 years

    That's one possible outcome. The other is that we will move more towards the European model by establishing good legal protection for tenants (including rent control) and move away from speculators buying and renting a second house in favour of professional landlords. In that scenario, it's possible and even likely that renting could be cheaper in the long term than buying.


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    #199
    beeno67
    Registered Users Posts: 1,218 ✭✭✭beeno67


    Salvelinus wrote: »
    What do you consider the point of no return for renting, ie the point it becomes too long
    I agree renting for 50 years is pointless, not really dead money as you're getting a service but mis-spent might be a better term. I don't think there are many out there who want to rent for that long and want to buy but don't want to bury themselves in debt. Whatever side you take on this debate you have to admit we didn't have a sensible (or smart or ballsy) attitude to property in Ireland for the last 6 or 7 years.

    But that is the point. People constantly go on about how rent is not dead money (dead money/ mis-spent, take your choice. I mean the money isn't actually dead) on this site. The reality is that it is dead money on average. You can argue that it is better to wait to buy, but that is simply trying to get the best price possible.


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    #200
    Salvelinus
    Closed Accounts Posts: 272 ✭✭Salvelinus


    beeno67 wrote: »
    But that is the point. People constantly go on about how rent is not dead money (dead money/ mis-spent, take your choice. I mean the money isn't actually dead) on this site. The reality is that it is dead money on average. You can argue that it is better to wait to buy, but that is simply trying to get the best price possible.

    It's best to wait to buy until it suits, there is a development somewhere near Malahide where the developer is going tits up and people bouhgt expensive apartments off the plans and lost the deposit. In order to get the leather bound brochure you had to pay 750, when you have nonsense like that going on it's best to wait.


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    #201
    beeno67
    Registered Users Posts: 1,218 ✭✭✭beeno67


    markpb wrote: »
    That's one possible outcome. The other is that we will move more towards the European model by establishing good legal protection for tenants (including rent control) and move away from speculators buying and renting a second house in favour of professional landlords. In that scenario, it's possible and even likely that renting could be cheaper in the long term than buying.

    As I said before, care to show us an example of how this will work?


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    #202
    beeno67
    Registered Users Posts: 1,218 ✭✭✭beeno67


    Salvelinus wrote: »
    It's best to wait to buy until it suits, there is a development somewhere near Malahide where the developer is going tits up and people bouhgt expensive apartments off the plans and lost the deposit. In order to get the leather bound brochure you had to pay 750, when you have nonsense like that going on it's best to wait.

    Then the question is not "do you believe rent is dead money". It becomes "do you think it is better to rent for the next year or two and buy then"


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    #203
    prinz
    Registered Users Posts: 14,598 ✭✭✭✭prinz


    Kipperhell wrote: »
    It has already been explained that there is a reason to leave a place empty....

    Yeah there is. But the very fact that things are being left vacant shows the shift in the market. You don't leave a rental property vacant when the rents are going up and up, and you have a queue of people looking to rent your property.
    Kipperhell wrote: »
    You weren't going on about single lets in a house but entire accommodations...

    IMO the same logic applies. In the current market, if landlords want to rent a property rents will have to come down (as they are doing), and there's enough choice on the market for renters in most places not to have to jump at the first apartment / house available. I remember getting that whole spiel off a number of agents and landlords.."o it's a steal at just €x euro, if you don't take it now there are 20 more to view tonight" etc... despite the fact that it's a shoebox on the quays and the place was a dump. It was unrealistic for a while, and there's a good distance to go before it evens out to value for money levels.


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    #204
    beeno67
    Registered Users Posts: 1,218 ✭✭✭beeno67


    prinz wrote: »
    Yeah there is. But the very fact that things are being left vacant shows the shift in the market. You don't leave a rental property vacant when the rents are going up and up, and you have a queue of people looking to rent your property.

    A vacant property is not necessarily a rental property.

    prinz wrote: »
    IMO the same logic applies. In the current market, if landlords want to rent a property rents will have to come down (as they are doing), and there's enough choice on the market for renters in most places not to have to jump at the first apartment / house available. I remember getting that whole spiel off a number of agents and landlords.."o it's a steal at just €x euro, if you don't take it now there are 20 more to view tonight" etc... despite the fact that it's a shoebox on the quays and the place was a dump. It was unrealistic for a while, and there's a good distance to go before it evens out to value for money levels.

    Market rate is set by renters not landlords. Average rents are the rents people are willing to pay. They have come down.


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    #205
    Salvelinus
    Closed Accounts Posts: 272 ✭✭Salvelinus


    beeno67 wrote: »
    Then the question is not "do you believe rent is dead money". It becomes "do you think it is better to rent for the next year or two and buy then"

    And if people knew the answer to that then they would be a proper property developer.


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    #206
    prinz
    Registered Users Posts: 14,598 ✭✭✭✭prinz


    beeno67 wrote: »
    Market rate is set by renters not landlords. Average rents are the rents people are willing to pay. They have come down.

    ....and they will continue to come down for another while IMO. As for market rates set by renters not landlords, I would say it's a combination of both actually. There are still landlords in Dublin expecting ridiculous rent for their properties.


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    #207
    beeno67
    Registered Users Posts: 1,218 ✭✭✭beeno67


    prinz wrote: »
    ....As for market rates set by renters not landlords, I would say it's a combination of both actually. There are still landlords in Dublin expecting ridiculous rent for their properties.

    But it is not a combination of the two. I think that is why you are misunderstanding what everyone is saying to you. The market rate is the rate people are willing to pay. The asking price is irrelevant.


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    #208
    AARRRGH
    Closed Accounts Posts: 12,382 ✭✭✭✭AARRRGH


    beeno67 wrote: »
    The reality is that it is dead money on average.

    Do you think most expenses in life are dead money?
    If not, could you explain why renting is an exception?

    If your point is "you don't get an asset for your money", have you heard of paying for a service? For example:
    • Paying for a doctors visit
    • Paying for a dentists visit
    • Paying for use of a mobile phone network
    • Paying for electricity
    • Paying interest on a mortgage
    • Paying for a holiday
    • Paying to see a football game
    • ... etc.

    Not every expenditure results in an asset.

    Seriously, realise you've been brainwashed by vested interests and imbeciles.


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    #209
    prinz
    Registered Users Posts: 14,598 ✭✭✭✭prinz


    beeno67 wrote: »
    But it is not a combination of the two. I think that is why you are misunderstanding what everyone is saying to you. The market rate is the rate people are willing to pay. The asking price is irrelevant.


    It's fairly relevant when there are many properties out there which the owners etc aren't able to rent out because the asking price is too high. I don't think many people are willing to pay what they would have a year or two ago for the same property, and in my opinion the drop in the rate people are willing to pay has been greater than the drop in actual asking price rates in many places so far, so back to my original point they will continue to drop another bit before a real value for money balance is attained.


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    #210
    beeno67
    Registered Users Posts: 1,218 ✭✭✭beeno67


    AARRRGH wrote: »
    Do you think most expenses in life are dead money?
    If not, could you explain why renting is an exception?

    If your point is "you don't get an asset for your money", have you heard of paying for a service? For example:
    • Paying for a doctors visit
    • Paying for a dentists visit
    • Paying for use of a mobile phone network
    • Paying for electricity
    • Paying interest on a mortgage
    • Paying for a holiday
    • Paying to see a football game
    • ... etc.
    Not every expenditure results in an asset.

    Seriously, realise you've been brainwashed by vested interests and imbeciles.

    We are comparing renting to buying. Which is cheaper renting or buying. The answer is buying. In all the examples you gave would you go for a dearer or a cheaper option? It is about getting your service for as cheap as possible.

    I will ask you this time to show me how renting is better value than buying. I have asked twice before but no one else has done it. I have already given a clear example. Can I see yours?


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    #211
    AARRRGH
    Closed Accounts Posts: 12,382 ✭✭✭✭AARRRGH


    beeno67 wrote: »
    We are comparing renting to buying. Which is cheaper renting or buying. The answer is buying. In all the examples you gave would you go for a dearer or a cheaper option? It is about getting your service for as cheap as possible.

    I will ask you this time to show me how renting is better value than buying. I have asked twice before but no one else has done it. I have already given a clear example. Can I see yours?

    Buying is nearly always more expensive than renting. If you don't believe me, pick any decent house and compare how much it's mortgage would cost compared to its rent. We don't even have to talk about negative equity or what you can do with the excess money you save (mortgage payment minus rent payment).

    For example, I can rent a lovely house in Blackrock for about a fifth of what the mortgage would cost.


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