Irish property market bound for recovery

asdasd

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.

So sell up then? We mentioned that as an option. Selling at a loss may enable the next guy to reduce rents as he is getting it cheap. ( If he is getting it as a BTL).

Either way rents go down.

You also seem to forget that there are investors out there with ten or more propertys, some bought before the boom, some during the boom. Actually not getting rent in any house is - clearly - a much worse position than reducing the rent on that house by 10, 20, or 30%. These guys may not see a loss, even, if their oldest few properties are clear of mortgages. They will reduce prices to get any income at all.

20goto10

You're really just clutching at straws here trying to justify an attitude which quite simply stinks. Stick it to the man, offer half the asking price/rent and the money robbing bastards had bloody just take it. You'll get one place and one place only with an attitude like that and it's nowhere.

asdasd

You're really just clutching at straws here trying to justify an attitude which quite simply stinks. Stick it to the man, offer half the asking price/rent and the money robbing bastards had bloody just take it. You'll get one place and one place only with an attitude like that and it's nowhere.

What are you talking about. Far from clutching at straws I ( and others) have given you pretty clear reasons - utterly simple economic reasons - why rents will have to fall and have no real floor.

And what exactly stinks about a renter trying to half his rent? Surely that is an economic right, as right as the ability of landlords to double the rent in a boom. What "stinks" about that?

SLUSK

20goto10 wrote: »

You're really just clutching at straws here trying to justify an attitude which quite simply stinks. Stick it to the man, offer half the asking price/rent and the money robbing bastards had bloody just take it. You'll get one place and one place only with an attitude like that and it's nowhere.

What options do the landlords have with the hughe amounts of empty houses around?

Amhran Nua

20goto10 wrote: »

You're really just clutching at straws here trying to justify an attitude which quite simply stinks. Stick it to the man, offer half the asking price/rent and the money robbing bastards had bloody just take it. You'll get one place and one place only with an attitude like that and it's nowhere.

I'm honestly trying to understand the point of view here - you're saying that a landlord will rather leave the house empty and work to pay off the mortgage himself in some other job, than take a rent below what he thinks he should be getting?

gdael

Amhran Nua wrote: »

I'm honestly trying to understand the point of view here - you're saying that a landlord will rather leave the house empty and work to pay off the mortgage himself in some other job, than take a rent below what he thinks he should be getting?

i thought what he was saying was that a landlord has costs and effort.
If the rent doesnt meet these costs and effort then there is not much point putting in the effort of renting it. Better off having no costs or effort and no rent. Kinda like working for peanuts.

It probably only applies to those landlords that are not desperate for any sort of money though. Those who can afford to just leave it sitting there are fine. Those who are struggling must take any money they can get though to put towards the mortgage.

The_Conductor

gdael wrote: »

i thought what he was saying was that a landlord has costs and effort.
If the rent doesnt meet these costs and effort then there is not much point putting in the effort of renting it. Better off having no costs or effort and no rent. Kinda like working for peanuts.

It probably only applies to those landlords that are not desperate for any sort of money though. Those who can afford to just leave it sitting there are fine. Those who are struggling must take any money they can get though to put towards the mortgage.

Fine- but the fact of the matter is that the vast majority of rental property is financed through bank borrowings- it simply is not the case that someone can afford to leave it sitting- rather than accept their 'peanuts' rent. There is an opportunity cost associated with not renting the property- its the cost of leaving it empty. Perhaps there are some out there, even in todays market, who think its not worth their while to rent out a property at below a certain level- and in an era of capital appreciation- this was infact the wise course of action. Its not anymore though.

oflahero

20goto10 wrote: »

You're really just clutching at straws here trying to justify an attitude which quite simply stinks. Stick it to the man, offer half the asking price/rent and the money robbing bastards had bloody just take it. You'll get one place and one place only with an attitude like that and it's nowhere.

Attitude has nothing to do with the most basic law of supply and demand. And I didn't hear any landlords complaining when rents were going consistently up for years, that this attitude of 'sticking it to the tenant' might possibly 'simply stink'.

The only person going nowhere here is the landlord that harrumphs on the sidelines and refuses to take on tenants for 'less than it's worth' - while others with a bit of business savvy undercut him all around, and get in some cashflow during the bad times as opposed to zero.

Diarmuid

20goto10 wrote: »

oh please, don't patronise me.

In fairness you're asking for it. There are a handful of posters here that are trying to point out the problem with your logic. It's hard to believe that you are still not getting the point.

The_Conductor

Guys- don't personalise it.
If you disagree with a point someone makes- refute it, without any personalisation.......

S.

stepbar

Pre Nama sale on!!!!!!!!!!

I would love to meet the marketing guys and............. beat their heads off...... Muppets :rolleyes:

"Pre Nama Bargains"....... FFS :rolleyes:

20goto10

Amhran Nua wrote: »

I'm honestly trying to understand the point of view here - you're saying that a landlord will rather leave the house empty and work to pay off the mortgage himself in some other job, than take a rent below what he thinks he should be getting?

I'm saying its a business like any other business. What you are describing is a guaranteed recipe for failure and if it were me I would be looking to cut my losses and get out - i.e sell and get out of the trade. Why on earth would anybody sit back and take in €500 in rent with a €1000 mortgage and a whole load of hassle and other expenses that comes with it. It's utter nonsense and anyone who says it's good business sense has clearly never run a business in their life. Actually, correction, they probably have run a business and like most business over the past 10 years they have probably been running off borrowed money :rolleyes:

20goto10

oflahero wrote: »

And I didn't hear any landlords complaining when rents were going consistently up for years, that this attitude of 'sticking it to the tenant' might possibly 'simply stink'.

Its called running a business. I'll let you into a little secret

Landlords are in it for the money

20goto10

gdael wrote: »

i thought what he was saying was that a landlord has costs and effort.
If the rent doesnt meet these costs and effort then there is not much point putting in the effort of renting it. Better off having no costs or effort and no rent. Kinda like working for peanuts.

It probably only applies to those landlords that are not desperate for any sort of money though. Those who can afford to just leave it sitting there are fine. Those who are struggling must take any money they can get though to put towards the mortgage.

Well yes kind of. I was more thinking the sensible thing to do is sell but if you can afford to hang on to it and have another use for it, say as a family holiday home, then maybe hanging on to it is a good option too. But you're right, I'm pretty much saying who wants to work for peanuts.

Calina

The problem, 20goto10 is a lot of landlords are screwed either which way. They either take an ongoing rental loss or they take a major capital loss on selling. This is the market they are operating in right now. The ones who are not going to take a capital loss are the ones who can afford to take lower rents also.

They may well have been in it for the money - but that doesn't mean that they'll get that money. Both rental and sales wise....

There is no point in saying "I can't afford to sell for less" or "I can't afford to rent for less" if no one wants to buy or rent at the price they "require".

20goto10

Calina wrote: »

The problem, 20goto10 is a lot of landlords are screwed either which way. They either take an ongoing rental loss or they take a major capital loss on selling. This is the market they are operating in right now. The ones who are not going to take a capital loss are the ones who can afford to take lower rents also.

They may well have been in it for the money - but that doesn't mean that they'll get that money. Both rental and sales wise....

There is no point in saying "I can't afford to sell for less" or "I can't afford to rent for less" if no one wants to buy or rent at the price they "require".

It all depends whether you want a slow painful death or a quick painful death. I know which I'd take.

The_Conductor

The proposals on a voluntary liquidation/solvency test for private indivuals floating around after the programme for government talks last week- may change the landscape, particularly for landlords who simply can't make the finances work. Its not an intended use of the instrument- but it may be pertinent nonetheless.....?

spockety

stepbar wrote: »

Pre Nama sale on!!!!!!!!!!

I would love to meet the marketing guys and............. beat their heads off...... Muppets :rolleyes:

"Pre Nama Bargains"....... FFS :rolleyes:

I saw a clothes shop with a big sign in the window saying "NAMA SALE!" last week.. baffling.

Duckjob

spockety wrote: »

I saw a clothes shop with a big sign in the window saying "NAMA SALE!" last week.. baffling.

Thats for developers who've lost their shirts.

alfranken

gdael wrote: »

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.

It also depends on the capital appreciation, let's say at the lowest point it falls to is 30% of what he bought it for, it then has to rise by ore than 40%. Also many people who bought places to rent didn't have the financial safety net your friend has.

johndaman66

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.

I don't think its quiet that simple when it comes to a one of investment such as a house or an apartment by an individual 20goto10. Sure somebody buying and selling cars everyday of the week who finds that they are now buying them at 10k each and selling them at 5k each would no longer buy and sell cars, shut down, or cease this segment of the business and concentrate on other segments as the case may be. They may well and probably would sell of their remaining stock at the market clearing rate as lets face it, an asset such as a car is only going to depreciate further all other things being equal.

On the other hand individuals or even investors with a portfolio would be unlikely to sell an apartment or house which they bought for 250k only a few years back for 125k today. Granted some will sell and moreso if further price falls are anticipated and moreover some may be force to sell. In general it would be much more likely that any rational investor would hang onto the property in anticipation of a turnaround. Of course there are some who won't rent out the place below a certain level but not all are affored this luxury. They may have to rent it out at whatever the market is willing to pay after it being idle for months in order not to fall behind in the mortgage repayments. Of course there are those too who may well be afforded the luxury of leaving the property idle but finds it makes better business sense to rent it out at whatever the market is willing to pay.

gunsofbrixton

Take two houses identical side by side both owned by investors interested in a rental yield and capital appreciation.

First investor bought it at €399,000 peak house prices end of 2007
Second investor bought it at the new recession price of €270,000
Both on 25 year mortgages.

Investor 1's rental income from the property during the peak years was equal or even ahead of his monthly mortgage obilgation all the while the property appreciated in value. Good for him!!

However reality has changed Investor 1 is now in Negative equity to the tune of 130,000euro his tenants are demanding rent reductions. He can reduce the rent due to the fall in interest rates and therefore does it to hold onto his valued tenants. This however can and will not last France/Germany are coming out of recession interests will be begin to rise he's no longer covering his mortgage in fact he's throwing his own money in to make the mortgage payment. The comfort of capital appreciation is gone the property is a) still falling in value or b) stagnating or rising in small increments.

His tenants one day move out.

Investor 2 enters the market at the new price point (€270,000) over a third cheaper his mortgage is considerably lower than investor 1.

Both put the houses up on daft.ie for rent:

Investor 1 wants 850 p/m

Investor 2 want 650 p/m ( 25% lower than investor 1)

Which house gets rented/ Which one lies vacant

All over the country Investor 2's will crowd out the investor 1's leading to a wave of 'celtic tiger landlords' going tits up.

My two cents

Gurgle

gunsofbrixton wrote: »

Take two houses identical side by side both owned by investors interested in a rental yield and capital appreciation.

First investor bought it at €399,000 peak house prices end of 2007
Second investor bought it at the new recession price of €270,000
Both on 25 year mortgages....

All over the country Investor 2's will crowd out the investor 1's leading to a wave of 'celtic tiger landlords' going tits up.

And if Investor 1 had bought €400k worth of shares in BoI instead?
What would those same shares have cost Investor 2 this year?

IMO, the property market will stabilise when the economy stabilises. It will probably start to grow when the economy starts to grow.

gunsofbrixton

the point is that a class of landlord investor that bought post -2003 will be effectively squeezed out of the market

Leading to a second/third wave of defaults. The first will be those who lost their jobs and are only just making their mortgage due to historically low interest rates.

Property price declines have only started in my opinion the two "price shocks" above are yet to hit the market

Kipperhell

gunsofbrixton wrote: »

All over the country Investor 2's will crowd out the investor 1's leading to a wave of 'celtic tiger landlords' going tits up.

My two cents

The problem with that logic is you are assuming the investor bought at the peak. Now you could be using it as an exaggerated example. However there are many investors who bought before the peak. It is a relatively small amount that bought at the peak.

I know a few people who geared their home and now have less of a mortgage on two properties than anybody who bought at the peak. It isn't just those who bought very early on. If people used the equity in their house with some intelligence they may be paying more than they would like but are no where near the situation where the rental property is 100% mortgaged dependent.


Investor A 400k with 100k mortgage 2005 re mortgage and buy 2nd rental property

400k + 200k new mortgage 300k mortgage, rental income minus tax and expense pays 50% mortgage repayments on the rental property

Neighbour sells home and new neighbour gets a 90% mortgage or 360K

Prices go up and then back down again over the 4 years bringing us to 2009

Investor has two property worth 400K+200K and mortgage of 300K
New neighbour has property worth 400K and mortgage of 360k

Neighbour pays 100% of the mortgage of 360k
Investor pays 100% of 100K and due to reduced rent 70% of 200k (no longer 50% off set from rental income and down to 30%)

Investor is paying 80% of a 300K mortgage versus neighbour 100% on 360k.

Now I know the valuations aren't bang on and no deductions for the years of mortgage payments. It gives an example of how many investors are not as screwed as people would like to think.

Maybe the neighbours earn different salaries and the investor is actual in trouble but it more likely going to be the person with the bigger debit. I got a new neighbour who paid 200k more for their place than mine. I would rather have an extra property that can generate rent than than not if I had 200K extra debit.

asdasd

Maybe the neighbours earn different salaries and the investor is actual in trouble but it more likely going to be the person with the bigger debit. I got a new neighbour who paid 200k more for their place than mine. I would rather have an extra property that can generate rent than than not if I had 200K extra debit.

What does that mean? If he bought that property at peak ( after you) then he lost the deposit. His rental may not cover the mortgage.

( I love the boldified bit. It shows why we are in such trouble. It is better to trade money for property even if property is in decline).

The rest of your convulited post proves that people can , and will, reduce rents if they have lower mortgages repayments because they are competing for tenants.

Kipperhell

asdasd wrote: »

What does that mean? If he bought that property at peak ( after you) then he lost the deposit. His rental may not cover the mortgage.

( I love the boldified bit. It shows why we are in such trouble. It is better to trade money for property even if property is in decline).

The rest of your convulited post proves that people can , and will, reduce rents if they have lower mortgages repayments because they are competing for tenants.

You obviously didn't follow what I was saying which I admit has some grammar mistakes.
I was saying that of two neighbours if A was 360k in debit for one property worth currently 400k and B was 300K in debit with two properties worth 400K and 200k I know which I would prefer to be especially considering the 2nd property would be generating income also.
Your post suggested the majority of Celtic tiger landlords are all in trouble which I am pointing out is a gross exaggeration. I never said it is better to have property than money you are making that up as a view I have not expressed. If in debit it is better to have more than less. By no means are all recent landlords in any financial trouble and some are in a better position their neighbours. Some will suffer but it is most likely FTB in recent times who will suffer the most before landlords. I think you are expecting some kind of Karma type thing on landlords based on what you have said.

Euroland

Finally, some of the consultants begin to wake up and recognise clear improvements on the Irish residential property market:

EBS DKM Affordability Index

http://www.dkm.ie/uploads/pdf/reports/EBS%20DKM%20Affordability%20Index%20FINAL%20October%202009.pdf

asdasd

Pretty sure the EBS said the boom would continue two years ago. Or there would be, at worst, a soft landing.

bangersandmash

“Looking ahead, the housing market is expected to continue adjusting to normal levels of growth,” predicts Dara Deering, Director of Membership Business, EBS Building Society. “It will take some time for positive sentiment to fully return in the market. House prices will continue to ease back - probably in the order of 5 per cent in 2008, with some areas impacted more than others. I would expect to see this trend reverse in the second half of 2008 with the period of interest rate stability and a lack of further price increases encouraging buyers back.

EBS DKM Affordability Index - January 2008

http://www.dkm.ie/uploads/pdf/news/FINAL%20RELEASE%20JAN%203.pdf