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Irish property market bound for recovery
Comments
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Wow. Just wow.Not of all of us have the divine right to be able to buy a house.
The economy is not the same as the property market. The property market in fact did tremendous damage to the real economy, and its still doing damage courtesy of the acrobatics being pulled by FF to resuscitate it.None of us know really though do we?
The only thing we do know is that economies recover and collapse every so often. Cycles.0 -
The economy is not the same as the property market. The property market in fact did tremendous damage to the real economy, and its still doing damage courtesy of the acrobatics being pulled by FF to resuscitate it.
+1
There seems to be a real failure to grasp the property bubble causal link to the current economic morass we face.0 -
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The idea that lower wage people may or should never be able to afford to buy a place is simply wrong. The only given should be that you need to have built up a good enough credit rating to borrow. If someone builds up a good enough credit rating, through working full-time and earning a steady wage and paying off all debts, then they will be able to buy something.
There wage level is irrelevant to this argument. By law it must be above minimum wage (caveats accepted). Higher wages means you can buy in a better serviced, more desirable area.
With both these comments you are missing the important part. They must be able to afford the repayments. Someone near minimum wage working full time will earn less than 20K a year. After paying for things like food, clothing, light, heat +/- tax etc they may not have sufficient money left over to pay a mortgage.
It is not that they cannot ever buy a house. It is that they should not have an expectation of a right to own their own home. Especially in cities.0 -
The modern state will only invest in accommodation if it can provide said accommodation for much cheaper than the private sector. In other words the premium being charged by the private sector is too high. .
This is not true. The state does not rent out property with a view to making a profit. Indeed it is a huge loss maker. It can always undercut a private landlord as the private landlord has to make a profit.0 -
It is not that they cannot ever buy a house. It is that they should not have an expectation of a right to own their own home. Especially in cities.
Actually I'd prefer to see a society not accept rubbish like this but work to change it.
Admittedly the way in which it was changed - messing, for example, with affordability criteria and lending terms - was not a good way to do it. A positive way is for property prices to fall so that we don't cause some sort of social exclusion based on income.
Amongst the people excluded in city terms from buying a house - and still so - in this country are people on 60KE. Of course, they can buy a poorly designed and badly built one bedroomed apartment with increasing management fees but that's not the point. 20 years ago, someone on the equivalent income level could buy a house that they might never move from.
We're not talking, in other words, about people on the minimum wage because the level at which you were excluded from purchasing was way, way above it, is still way above it.0 -
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Actually I'd prefer to see a society not accept rubbish like this but work to change it.
Well what amount of a mortgage do you feel a person on minimum wage should be able to afford. You should allow for an average interest rate of 6 or 7%.Amongst the people excluded in city terms from buying a house - and still so - in this country are people on 60KE. Of course, they can buy a poorly designed and badly built one bedroomed apartment with increasing management fees but that's not the point. 20 years ago, someone on the equivalent income level could buy a house that they might never move from.
Again you are looking at cities only. Anyone earning 55K a year, single income, can buy the average house in Ireland based on your criteria of house price being 4 times income. Also someone earning 60K a year could choose from 545 houses with 3 or more bedrooms in Dublin city.0 -
This is not true. The state does not rent out property with a view to making a profit. Indeed it is a huge loss maker. It can always undercut a private landlord as the private landlord has to make a profit.
I never said they did try to make a profit nor would I state something so silly. I merely said there was a balance between private and state. The state will gladly pay the margin of profit to the private landlord if it is not too much over the cost of them providing the accomodation themselves. You missed the point there.
At the end of the day the state funds accommodation be it private or public to help those who can't afford to pay it themselves. It is simply not in societies interest to have a market whereby the state has to fund a huge amount of the populace due to them being priced out of the market. This is unbalanced and unsustainable. Where does the money come from to sustain this; from taxes on those in the middle, which reduces what they can then pay. It's all circular.
In a balanced market the state would only be funding those that can't sustain or hold down a minimum wage job and as such are unable to provide accommodation themselves be it private rented or owned.
Investors need to make a profit. So the rental yield needs to be high enough relative to the capital costs. Rent is a factor of wages after all. In a balanced market, if you can't afford to be you equally can't afford to rent.
You fundamentally do not seem to understand the basic socio-economic arguments being put forward in response to your posts. I take it you've never studied economics or social policy then?0 -
I never said they did try to make a profit nor would I state something so silly. I merely said there was a balance between private and state. The state will gladly pay the margin of profit to the private landlord if it is not too much over the cost of them providing the accomodation themselves. You missed the point there.
At the end of the day the state funds accommodation be it private or public to help those who can't afford to pay it themselves. It is simply not in societies interest to have a market whereby the state has to fund a huge amount of the populace due to them being priced out of the market. This is unbalanced and unsustainable. Where does the money come from to sustain this; from taxes on those in the middle, which reduces what they can then pay. It's all circular.
In a balanced market the state would only be funding those that can't sustain or hold down a minimum wage job and as such are unable to provide accommodation themselves be it private rented or owned.
Investors need to make a profit. So the rental yield needs to be high enough relative to the capital costs. Rent is a factor of wages after all. In a balanced market, if you can't afford to be you equally can't afford to rent.
You fundamentally do not seem to understand the basic socio-economic arguments being put forward in response to your posts. I take it you've never studied economics or social policy then?
Robd, you said "The modern state will only invest in accommodation if it can provide said accommodation for much cheaper than the private sector. In other words the premium being charged by the private sector is too high."
That reads to me that private landlords are charging too much and the proof of this is that the modern state can provide the accomodation much cheaper. If you meant something different then you should have said so and not simply attack me.
In relation to the "basic socio-economic arguments being put forward in response to your posts"
I am making 3 points.
1. The idea that you can pick a figure of 4 times income as a basis for average house price is a nonsense. As I said why not 3 or 5 times income. 4 times income is based on historical trends but are not relevant now.
2. My second point is that supply and demand dictate prices. Demand for houses within a few miles of Dublin city has increased hugely in last 20 years but supply has not increased at anywhere near the same level. Therefore even when the market settles down these properties will cost more than 20 years ago relative to average income.
3. Not everyone should expect to be able to own their own home unless they can afford to pay the mortgage. Someone on minimum wage is unlikely to be able to afford mortgage repayments.
Where are the basic socio-economic arguments being put forward in response to my posts?0 -
3. Not everyone should expect to be able to own their own home unless they can afford to pay the mortgage. Someone on minimum wage is unlikely to be able to afford mortgage repayments.
Where are the basic socio-economic arguments being put forward in response to my posts?
As I said 3 time now, rents and mortgages are intrinsically linked from an economic perspective. In a normal sustainable market in equilibrium, rents will be higher than mortgages to cover the margin or profit an investor needs to make. Why invest otherwise? If someone on minimum wage cannot afford mortgage repayments then they also couldn't afford the rent. This can never work long term.
Sure houses in good areas close to Dublin may be higher than 20 years ago. This is because earning potential is higher and cost of funds is cheaper for those looking to live there though. Sure, not everyone can live close to Dublin city, but there was plenty of accommodation built in the Greater Dublin Area over the last decade, well more than needed. Places like Greystones, Sandyford and surrounds, Balmayne, Swords, Malahide and Blanch are awash with over priced supply.
In essence there's a property there somewhere for everyone.
I think you are confusing the semantics of small pockets of the market with the whole macro-economic market.0 -
As I said 3 time now, rents and mortgages are intrinsically linked from an economic perspective. In a normal sustainable market in equilibrium, rents will be higher than mortgages to cover the margin or profit an investor needs to make. Why invest otherwise? If someone on minimum wage cannot afford mortgage repayments then they also couldn't afford the rent. This can never work long term.
That is the point; long term. Landlords aim to make a profit in the long term not necessarily every year. So for example when buying a property they estimate the return they can get, their costs and their interest payments. They use this to base their profits. If the figures are good they buy, if not they don't.
So say they estimate intrset rates will average 7%. If rates suddenly jump to 14% (as they did about 15 years ago) the savvy landlord will be ok and simply ride it out knowing rates will eventually go down. If a person on minimum wage has a mortgage they will not be able to cope with such increased costs (and lets face it no one is stress testing themselves at 14% these days). Someone earning more can make cuts elsewhere but on minimum wage you do not have that luxury.
Likewise if say the roof needs to be repalced at say €10,000. The landlord will pay it and spread the cost over the next few years. The owner on minimum wage is now in a catastrophic situation where they need to get a loan for 10k on top of their mortgage.
Also a landlord is looking at income over a number of years. So may not take enough income in year 1 or 2 to cover all costs but knows with inflation after a few years he can then increase the rent and start making profits. A buyer has the high cost from year one. In otherwords the mortgage repayments may be significantly higher than rent initially which the low income worker cannot afford. Also as a buyer he will have extra costs that he may not have had to incur otherwise eg life assurance.
Finally you are assuming that landlords always make a profit. Like any business this is not always the case.
I am not saying they can never buy their own house, just that they should not expect to do so.Sure houses in good areas close to Dublin may be higher than 20 years ago. This is because earning potential is higher and cost of funds is cheaper for those looking to live there though. Sure, not everyone can live close to Dublin city, but there was plenty of accommodation built in the Greater Dublin Area over the last decade, well more than needed. Places like Greystones, Sandyford and surrounds, Balmayne, Swords, Malahide and Blanch are awash with over priced supply.
In essence there's a property there somewhere for everyone.
I think you are confusing the semantics of small pockets of the market with the whole macro-economic market.
Don't tell me. Tell those who believe otherwise. You are argreeing with my point.0 -
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