Irish property market bound for recovery

ZYX

Diarmuid wrote: »

If that's the exercise you want to perform you need to do a far more detailed analysis. ie how much will you spend on management charges/maintenance? How much interest would you have accrued on the difference between the rent and the mortgage payments? What happens if housing market underperforms/outperforms inflation etc.

Most will agree (me included) in the ideal market conditions you will be better off buying than renting. However we are not in those market conditions now.

Well infairness I assumed property prices would not rise from current position for next 25 years. I also assumed rents would not increase. I think most people would expect both these to rise in 25 year period. This would more than negate all the other costs.

ZYX

smccarrick wrote: »

If the ECB consider normalisation or rates to be in the 4.25-4.5% range for overnight rates- and the international norm is for margins to be 1.25-1.5% above ECB base rates- its a reasonable assumption that long term rates might be in the 5.75-6% range?

I agree with you which was pretty much the point I made to Spockety which makes the idea of fixing for 10 years at 4.21% very attractive.

Diarmuid

ZYX wrote: »

Well infairness I assumed property prices would not rise from current position for next 25 years. I also assumed rents would not increase. I think most people would expect both these to rise in 25 year period. This would more than negate all the other costs.

Did you factor in the interest gained on the difference between rent and mortgage repayments? The difference between the repayments and €900 rent put into a savings account at 3.5%(AIB regular saver) will be worth €308k after 25 years. I think you are glossing over what seems like small figures but make a major difference to the bottom line after 25 years.

BTW I don't think it makes sense to pursue this scenario. There are too many hypothetical assumptions made.

ZYX

Diarmuid wrote: »

Did you factor in the interest gained on the difference between rent and mortgage repayments? The difference between the repayments and €900 rent put into a savings account at 3.5%(AIB regular saver) will be worth €308k after 25 years. I think you are glossing over what seems like small figures but make a major difference to the bottom line after 25 years.

BTW I don't think it makes sense to pursue this scenario. There are too many hypothetical assumptions made.

Yes there are but as I said I did not include rent rises. You could realistically expect rent to be higher than mortgage repayment after 10 years so for the next 15 the gain is in favour of the mortgage.

Diarmuid

ZYX wrote: »

Yes there are but as I said I did not include rent rises. You could realistically expect rent to be higher than mortgage repayment after 10 years so for the next 15 the gain is in favour of the mortgage.

I'd strongly suggest making a spreadsheet for yourself.

ZYX

Diarmuid wrote: »

Did you factor in the interest gained on the difference between rent and mortgage repayments? The difference between the repayments and €900 rent put into a savings account at 3.5%(AIB regular saver) will be worth €308k after 25 years. I think you are glossing over what seems like small figures but make a major difference to the bottom line after 25 years.

By the way I forgot to add obviously you own the property aswell. Assuming property does not go up in value from current levels in next 25 years, then you also have a property worth €290,000 added to your €80,000 and whatever you gain when rents rise (less DIRT of course). You also have to add to all this that after the 25 years if renting you still have rent to pay.

Diarmuid

http://www.boards.ie/vbulletin/showpost.php?p=62468482&postcount=276

johnnyskeleton

Is this the antithesis of the housing bubble burst thread?

gdael

Diarmuid wrote: »

http://www.boards.ie/vbulletin/showpost.php?p=62468482&postcount=276

http://www.boards.ie/vbulletin/showp...&postcount=276 Maybe you should make one for your own benefit too:D

There is never going to be agreement here. Each persons case should be taken and investigated for themselves thoroughly. They should make their own spreadsheets. All i can say for sure, is that in our own case the figures work out for us that we save a nice chunk of cash each month by buying the house down the road instead of renting the one we are in. Also, the point someone made about being able to decorate the nursery is very relevant in our case too.

Even though we're a taking a 25 year mortgage we're planning on having it paid in 10 years (even if we dont at least we wont be paying rent in 25 years) by banking excess money at a nice interest rate and then paying it off the mortgage when the savings by paying it down overtake the savings from the current interest rate in the account.

In our case it is serious savings over renting right away. But that might not be the case for everyone. As you said, spreadsheets will tell all.

Diarmuid

gdael wrote: »

Maybe you should make one for your own benefit too:D.

eh? I have.. a few years ago too.

20goto10

oflahero wrote: »

Good God. We've found an exception to market forces, unique in this world. You should bring your argument to the couple whose apartment I looked at to rent a few months back when my lease was up. They'd bought in 2001 and subsequently bought a gaff to live in two years ago, but figured they'd hang on to the apartment because, well, sure it's a handy investment and property only ever goes up. They had overpriced the rent initially but had brought it down after no bites, still a bit overpriced, and were clearly very keen to get a tenant in, as they were feeling the two-mortgage pinch. I don't think I was the first to leave saying, "em thanks, but no thanks". It's still on the market today, with another hundred off, still empty after six months. There's a lot of people out there in similar positions, and these guys sure as hell didn't drop the rent because they could 'afford' to.

This is just the old argument of "I can't sell for less than I paid for it", repackaged for the amateur landlords. This is keeping prices sticky, both in sales and lettings. It's been said before, but it's no different from marching into Goodbody's brandishing your AIB shares saying "look here, I bought at €14 for these, I can't possibly sell them for €1, it's less than what I paid for them!"

You've just backed up my point that there is a limit to how much a landlord can drop. Btw, not everyone is in the situation you describe.

As for the I won't sell for less than I paid. Well that just so happens to be my situation and it's quite simple, it either sells for what I paid or it doesn't sell at all. No mysterious market force is going to force me to pay towards someone elses mortgage, which is in effect what I would be doing.

TJJP

Hint: Asset = ongoing loss = sell

20goto10

TJJP wrote: »

Hint: Asset = ongoing loss = sell

House = home. Not everyone is a desperate investor with burnt fingers. It's funny the amount of people who go into the viewing and offer process starting off on the assumption that you are desperate and the property boom some how justifys their demands that you must contribute to their mortgage payments.

TJJP

Fair comment,

House = home
___________ = 0
Asset = ongoing loss

Zero sum game, likely the way it should be for non-investors.

Amhran Nua

20goto10 wrote: »

You've just backed up my point that there is a limit to how much a landlord can drop.

No, there isn't. If a landlord can't find tenants at any price they either cover their mortgage themselves or sell/hand the property back to the bank and repay any surplus after the bank sells it. This is the same as any business that can't find customers, they just fold. There were people renting out properties long before the boom with no mortgage who are quite capable of undercutting everyone else.

20goto10

Amhran Nua wrote: »

No, there isn't. If a landlord can't find tenants at any price they either cover their mortgage themselves or sell/hand the property back to the bank and repay any surplus after the bank sells it. This is the same as any business that can't find customers, they just fold. There were people renting out properties long before the boom with no mortgage who are quite capable of undercutting everyone else.

There aren't many landlords who were not caught up in the bubble. If property was your business would you just stand in the sidelines watching everyone else make a killing? Not many would.

Yes again you're backing up my point. They will not drop rent indefinitely and subsidise someone elses living expenses. It's simply doesn't make sense.

spockety

20goto10 wrote: »

There aren't many landlords who were not caught up in the bubble. If property was your business would you just stand in the sidelines watching everyone else make a killing? Not many would.

Yes again you're backing up my point. They will not drop rent indefinitely and subsidise someone elses living expenses. It's simply doesn't make sense.

Again, please give us the statistics to back this up?

Amhran Nua

20goto10 wrote: »

Yes again you're backing up my point. They will not drop rent indefinitely and subsidise someone elses living expenses. It's simply doesn't make sense.

Its not about making sense to investment property owners, its about business realities. If they keep rents up too high, they will get no money at all. So rents will drop to a level that people are willing to pay, not that landlords are willing to rent at. Or they will get nothing.

The_Conductor

Amhran Nua wrote: »

Its not about making sense to investment property owners, its about business realities. If they keep rents up too high, they will get no money at all. So rents will drop to a level that people are willing to pay, not that landlords are willing to rent at. Or they will get nothing.

Very many landlords don't have any knowledge of business fundamentals though- they bought into the hype during boom time- where it was nigh impossible not to make a profit- and if that meant sitting on an empty property- so be it (thousands of vacant properties were left vacant on this basis).

It really is the unfortunate reality that there are large numbers of landlords out there who quite simply are not au fait with business realities. Its all well and good hoping changed circumstances teaches them harsh lessons- and it is going to do so- but it would make far more sense to try to educate them (perhaps akin to DCCs apartment dwellers forum)?

20goto10

spockety wrote: »

Again, please give us the statistics to back this up?

Wy do you need statistics? Are you denying there was a bubble?

gdael

smccarrick wrote: »

Very many landlords don't have any knowledge of business fundamentals though- they bought into the hype during boom time- where it was nigh impossible not to make a profit- and if that meant sitting on an empty property- so be it (thousands of vacant properties were left vacant on this basis).

It really is the unfortunate reality that there are large numbers of landlords out there who quite simply are not au fait with business realities. Its all well and good hoping changed circumstances teaches them harsh lessons- and it is going to do so- but it would make far more sense to try to educate them (perhaps akin to DCCs apartment dwellers forum)?

Its not rocket science though is it. Thats why so many people did it.

I have a friend who bought an apartment to rent out in 2006. Hes actually making a loss on it. But hes not bothered. He says after all expenses and taxes he'll average paying around €3000 a year to it out of his own pocket. Hes fixed for 5 years on a fairly high rate too.

He doesnt seem to mind that. to quote him "If i told you you could own an apartment in 25 years for €3000 a year you would bite my hand off."

It wouldnt be ideal for me at all, but this guy can well afford €3000 a year or more even. Hes loaded already and a few thousand a year wont hurt him a bit.

spockety

20goto10 wrote: »

Wy do you need statistics? Are you denying there was a bubble?

Quite the opposite.

But I question your assertion that there is not an ample supply of pre-bubble investments out there to be able to undercut the bubble investors significantly enough to ensure we continue to see a viable falling rental market.

20goto10

Amhran Nua wrote: »

Its not about making sense to investment property owners, its about business realities. If they keep rents up too high, they will get no money at all. So rents will drop to a level that people are willing to pay, not that landlords are willing to rent at. Or they will get nothing.

Thats not business reality. Do you see any business out there simply taking what they can get? You give as much discount as you can and beyond that its just not worth it. Unless you're running a charity of course.

20goto10

spockety wrote: »

Quite the opposite.

But I question your assertion that there is not an ample supply of pre-bubble investments out there to be able to undercut the bubble investors significantly enough to ensure we continue to see a viable falling rental market.

Well I think you underestimate the magnitude of the problem. Do you have any statistics to back up your counter claim?

All I'll say is my opinion is that you cannot have a bubble and bust of the magnitude we have seen and with the tiny population we have without an overwhelmingly large amount of people getting involved. And as the landlords business is property its a safe assumption that a lot of them have been involved in some way, whether it be buying new property, rennovating or simply cashing in equity.

Amhran Nua

20goto10 wrote: »

You give as much discount as you can and beyond that its just not worth it.

So what do you suggest a landlord do if they can't rent a place out at a price that suits them, but still have to pay the mortgage?

ChicagoEoin

I've been in Chicago 9 years and have seen the rise and fall of the property market. The market here has definitely turned the corner but the sun won't be at high noon for a while yet.

Based on the pace at which things have been moving here, I don't see the same happening in Ireland for at very least 5 years and more likely to be longer than that. Thats simply my opinion, but maybe there are factors I'm unaware of.

Eoin Burke

_______________________________________________

20goto10

Amhran Nua wrote: »

So what do you suggest a landlord do if they can't rent a place out at a price that suits them, but still have to pay the mortgage?

what's so difficult to understand here? What does any business that has no prospects do? Does a car showroom buy in cars for 10k and sell them for 5k because that's what people want to pay and he had better bloody take what he can get.

Stick it to the man all you like but don't expect people to bend over and take one.

asdasd

What does any business that has no prospects do? Does a car showroom buy in cars for 10k and sell them for 5k because that's what people want to pay and he had better bloody take what he can get.

is that not what they do, or go out of business? See heres the thing. Selling a car at a loss - say at 14K if the wholesale was 15K - is a loss of 1K. Not selling the car is a loss of 15K.

This is business, even economics, 101.

( Instead of reducing the headlin proce sometimes they give 0% interest, which is a cost to them over the lifetime of the loan. That is just smokes and mirrors, though.)

nouveau_4.0

20goto10 wrote: »

what's so difficult to understand here? What does any business that has no prospects do? Does a car showroom buy in cars for 10k and sell them for 5k because that's what people want to pay and he had better bloody take what he can get.

Stick it to the man all you like but don't expect people to bend over and take one.

You really have to think about this. The landlord doesn't have many options.

1) Keep rents at high price and have no tenant, pay the full mortgage yourself
2) Sell the house (probably for a loss) and pay off the surplus
3) "bend over and take one" and subsidise your mortgage payments

20goto10

asdasd wrote: »

is that not what they do, or go out of business? See heres the thing. Selling a car at a loss - say at 14K if the wholesale was 15K - is a loss of 1K. Not selling the car is a loss of 15K.

This is business, even economics, 101.

( Instead of reducing the headlin proce sometimes they give 0% interest, which is a cost to them over the lifetime of the loan. That is just smokes and mirrors, though.)

oh please, don't patronise me. You do what you can to survive and generate the business but in the landlord business your costs are fixed and your flexibility is limited. There is no chain of suppliers and manufacturers to share the brunt, you have your mortgage to pay and that's that. When things get so bad that you're simply haemoraging money and putting up with a whole load of bull**** from the tenants, the sort of attitude you witness on boards, then the sensible thing and the sound business move is to cut your losses and get a real job.