Asking Price????

johndaman66

TommyT wrote: »

If we all had the same opinions boards.ie would be a pretty boring place.

Certainly agree with you there TommyT and I do feel it is refreshing at times to read somebody else's take on a particular situation whether or not it concurs with your own.

TommyT wrote: »

The problem with todays society in my opinion is that people believe what they see on TV and read in the papers. They take it as gospel. None of us know what is going to happen in the future, prices may fall for a while yet, but I think they will come back. We will never see the madness of 2005 to 2007/8 again, but in the long term prices will rise. (eventually).

Would agree with your general sentiment there also. Think that we Irish and Brits have become much more like the Americans in recent years in that we crave sensationalism and have perhaps made our brains somewhat redundant in applying a thought process or logic to particular siuations whether that be out of lazyiness or a follow the pack mentality which has set in.

Sofiztikated

TommyT wrote: »

Its only land, no one should be emotionally attached to it. Like anything else it can be bought cheaply and sold on.

Are you serious? Your first house, where you had your first kid, where you had hundreds of break ups and make ups, painting for the very first time, cutting the grass, planting the garden?

Of course people get sentimental over a house, its human nature. This sentimentality can increase or decrease the price asked.

Now, I have absolutely nothing to do with the housing market, but I have seen that equation floating about as well, and while its not a hard and fast rule, it give people a quick estimate of what the house can make.

dudara

Look, that equation may not give answers to everyone's liking, but it is a valid, commonly accepted method for providing a rough value on a property.

You need to be capable of separating emotion from logic when it comes to the debate on property and value.

I fail to see how asking a poster what he does for a living accomplishes, other than establish that you have not provided an alternative method of valuation.

AARRRGH

TommyT wrote: »

You could not build the house for 140k, never mind buy it.

Correct. And if you lived in the real world (which you claim you do) you would know it sometimes costs more to manufacture something than it does to buy it. For example, if there is mass oversupply and no one is buying. Like the Irish property market.

If that still doesn't click with you, here's another example. I make websites. Sometimes I create and sell websites. Sometimes it costs me more to make a website than it does to buy it. That's because the demand isn't there.

You can't always make a profit on things. And that includes property in Ireland.

In other words, it doesn't make financial sense to build or buy property in Ireland at the moment.

ei.sdraob

AARRRGH wrote: »

Correct. And if you lived in the real world (which you claim you do) you would know it sometimes costs more to manufacture something than it does to buy it. For example, if there is mass oversupply and no one is buying. Like the Irish property market.

If that still doesn't click with you, here's another example. I make websites. Sometimes I create and sell websites. Sometimes it costs me more to make a website than it does to buy it. That's because the demand isn't there.

You can't always make a profit on things. And that includes property in Ireland.

In other words, it doesn't make financial sense to build or buy property in Ireland at the moment.

considering that it costs anything from 75 to 120+ (depending on your taste) euro per square foot to build and furnish a house while following all latest regulations (there are many detailed discussions over at the construction and planning forum)

one can do a 2000sq ft house to a very nice standard for about 200K

but this would be in countryside on own land

now in cities where average semi'd/terraced is about 90sq m (~1000 sq feet)
me thinks it would cost 100K for construction company to build one

probably even 80K since large construction companies would have the economy of scale on their side, and they are not exactly known for following regulations either....

tho the problem in cities is the cost of land, then again the density is much higher

so yes a "typical" house in the city in an estate if you use the "building cost + land approach" would be 100-150K range... rest is profit

Treehouse72

TommyT wrote: »

So you want to fob us off with a one fit all meaningless equation, but you wont tell us what line of work you do or if you are in any way qualified to tell us that your opinion is fact and everyone else is wrong.

Everyone else is wrong?? Erm, you do realise you are the only one saying that yield calculations have no bearing on house prices, right?

Look, I don't want to have a puerile fight about this. Instead I'll post some reading on yields. Here's Ronan Lyons, long time Daft economist and one of the leading economists on property in the country:

Yields are a hugely important indicator in property markets, especially in property markets where the rental segment is significant, as it is in Ireland’s urban centres. Indeed, given the much greater integration of rental and sales segments of the market over the past decade (i.e. you can now rent accommodation of the same standard as accommodation you can buy), yields are one of the most important medium-term indicators of health.

http://www.ronanlyons.com/2009/06/19/yields-on-residential-property-point-to-scale-of-the-challenge/

Here he is again in the Irish Times, where you can see the bulk of his analysis is based on yields:

http://www.irishtimes.com/newspaper/finance/2009/0925/1224255204048.html

The article below discusses property valuation methods. It shows that both The Economist newpaper and chartered surveryors use yields to value property, while it has a quote from a Davy's economist relating yields to prices as a means of judging prices:

http://www.independent.ie/business/irish/dont-bet-your-house-on-end-of-price-falls-2133614.html

AARRRGH

ei.sdraob wrote: »

so yes a "typical" house in the city in an estate if you use the "building cost + land approach" would be 100-150K range... rest is profit

Sorry I was talking about an individual buying land and building a house. I agree building companies can do it all for a lot less money, but I think your figures are a bit optimistic.

ei.sdraob

AARRRGH wrote: »

Sorry I was talking about an individual buying land and building a house. I agree building companies can do it all for a lot less money, but I think your figures are a bit optimistic.

optimistic about building own home in country?

nope 100 eur a square foot is quite a good guide price to follow when self-building, checkout this forum and its many threads on the subject

im currently building own home, and so far its well on target for coming under 100 euro per sq foot, ive budgeted up to 130 btw (in case i do go with oak+marble flooring, custom kitchen and for any overruns)

my budget and existing spend includes the land and the groundworks (extensive in my case) the actual building, and budgets for things like solar water heating, extra insulation, triple glazing, sewage treatment etc which you would expect (and required by regulations/laws in some cases) in modern homes

AARRRGH

ei.sdraob wrote: »

optimistic about building own home in country?

No, optimistic for building companies in a city.

I don't completely agree with your 200k figure either. A friend of mine recently built a beautiful house to a high standard for 250k. He got the land for free and managed the building work himself.

Maybe we just have different definitions of "high standard".

ei.sdraob

AARRRGH wrote: »

I don't completely agree with your 200k figure either. A friend of mine recently built a beautiful house to a high standard for 250k. He got the land for free and managed the building work himself.

Maybe we just have different definitions of "high standard".

of course :
the sky is the limit on how much you can spend, tho on bright-side costs (especially labour have plummeted)
if I had more money growing on the money tree I have plenty ideas where i could stick em

at ~2450 square feet my final bill should come close enough to that figure of yours above

AARRRGH wrote: »

No, optimistic for building companies in a city.

Yeh alot of deduction in my case, there are differences between building in country and city
maybe ask any of the (now unemployed) builders to pitch in with their know how
the big question about city building is the price of land per location, it could very well be that prime locations would fetch more than the build cost

anyways thats one of the reasons why i didnt buy in city I just couldn't for the life of me justify the prices being asked here in Galway, considering that i work from home too...

Shazanne

Hi Talluah. I've just sold a house (cant believe it myself:D) that I had on market for under a year. Asking price started at 220,000, dropped to 195,000 and sold at 170,000 - and I was glad to get it in the current market.
Put a bid of about 150 - 160 on it - you will be surprised how you'll get on. But be cautious of the fact that its on the market two years. I know only too well how the market is at the moment, but make sure you have the house fully surveyed and have a chat with the locals as well. Sometimes, though rarely, there's a reason why a house does not sell.
I wish you the very best with your house-buying - your bid will make someone like me very happy:):)

billybigunz

I think the investors formula is useful but shouldn't be used in all situations. I think you have to look at wage multiples when buying to live in. What are the wages in that area, demographics, unemployment. Now where does this house rank in local housing stock. Where do your wages rank? If the house is more than 5 times your yearly wage then it is overpriced.

If you can't afford it at that reasonable level then nobody local can either.

Sconsey

TommyT wrote: »

So you want to fob us off with a one fit all meaningless equation, but you wont tell us what line of work you do or if you are in any way qualified to tell us that your opinion is fact and everyone else is wrong.

Meaningless equation to you, meaningfull to economists, property investors, anyone else that has read up on valuations. I'm not a qualified economist but I can tell you (as many others have) that yield calculation is one of the most reliable value indicators there is, it is an emotionless estimate, which is just what you want when considering such a big purchase. I believe the OP was looking for a guide price and the yield gives you just that.

billybigunz wrote: »

I think the investors formula is useful but shouldn't be used in all situations. I think you have to look at wage multiples when buying to live in. What are the wages in that area, demographics, unemployment. Now where does this house rank in local housing stock. Where do your wages rank? If the house is more than 5 times your yearly wage then it is overpriced.

If you can't afford it at that reasonable level then nobody local can either.

Good point, but I think you'll find in most cases that yield calculations will be relevant in most situations as the rent price will reflect the wages/demographic in the area the house is situated in (rents higher in Dublin versus Cavan).

TommyT

Sofiztikated wrote: »

Are you serious? Your first house, where you had your first kid, where you had hundreds of break ups and make ups, painting for the very first time, cutting the grass, planting the garden?

Of course people get sentimental over a house, its human nature. This sentimentality can increase or decrease the price asked.

You can take your memories with you.

TommyT

Sconsey wrote: »

Meaningless equation to you, meaningfull to economists, property investors, anyone else that has read up on valuations. I'm not a qualified economist but I can tell you (as many others have) that yield calculation is one of the most reliable value indicators there is, it is an emotionless estimate, which is just what you want when considering such a big purchase. I believe the OP was looking for a guide price and the yield gives you just that.

Where were these economists with their yield calculations during the last 5 years. And as for the property investors, maybe they were with the economists with their head buried in the sand.
What I am trying to say regarding your equation is that it does not work for all properties. It may work for your average 2 up 2 down, or identikit houses in a sink estate somewhere out the N7. You cannot use it for one off housing in desirable areas.

Colonel Sanders

TommyT wrote: »

Where were these economists with their yield calculations during the last 5 years.

The non vested interest ones like Morgan Kelly, David McWilliams, Karl Whelan etc were shouting it from the roof tops

Colonel Sanders

TommyT wrote: »

We are currently renting, we sold our house nearly 2 years ago and have just got planning permission after a rather protracted planning process.
We live in a house that even in todays depressed market is conservatively worth €500000. Going by your calculations, the house that we currently occupy is only worth somewhere in the region of €140000, we pay €950 per month in rent. I would gladly pay double that for this house.

So by your reckoning the house is still hugely over valued, you'd be prepared to pay 1900 a month for it, 500k over 30 years (and remember 30 year mortgages were non standard up to about 10 years ago) at 4.5% APR would cost over 2500 a month

TommyT wrote: »

Those of us that were sensible can now get great value in the housing market

Speak for yourself. This is your opinion, IMO houses are still enormously over values in Ireland and that is backed up by rental yields, prices compares to incomes, the presence of massive over supply, rents still dropping, take home pay being decimated through pay cuts and tax hikes etc etc

TommyT wrote: »

the rest of us still need to buy and build homes

Again speak for yourself, I don't need to own a house and will continue to rent until I feel it makes financial sense to buy. I could buy tomorrow but don't want to. I have no problem renting (although a lot of people in Ireland look at renters as some kind of 2nd class citizens)

TommyT wrote: »

We will never see the madness of 2005 to 2007/8 again

The "madness" started LONG before 2005

TommyT wrote: »

but in the long term prices will rise.

In nominal terms yes, however if we ever get back to 2006 prices in real terms then someone somewhere will have f**ked up big time

TommyT wrote: »

The people who are telling us that the market has a long way to fall are the same people who were telling us that rent was dead money a few years ago.

Couldn't disagree more. Again the likes of McWilliams & Morgan Kelly have sang the same hymns for years now

TommyT wrote: »

Its only land, no one should be emotionally attached to it.

I agree that no people should be emotionally attached to land, bricks & mortar etc but this is not what happens in reality for a lot of people. How many threads are on here, askaboutmoney and thepropertypin with people fawning that they've found their "dream home" and asking is it the right move to make as it would be the end of the world not to be able to live in a certain address

Colonel Sanders

Colonel Sanders wrote: »

The "madness" started LONG before 2005

Things were crazy long before 2005. In fact most commentators look to around 1996/97 to when Irish house prices began to diverge from any semblance of what fundamentals indicated they should be. Attached are charts providing some graphical evidence of this

douglashyde

This an article in the Independent by David McWilliams.

You need to skip through it to get to the relevant part to this Thread.

Basically, a normal yield return on a house should be 7% . Based on average prices around Ireland that means property prices need to drop by 45%.

So OP, find a similar rented property in the area and backward work this formula.

Of course, you will have to think that David McWilliams is smarter than some of the posters in this thread. I for one do.

TommyT

Colonel Sanders wrote: »

So by your reckoning the house is still hugely over valued, you'd be prepared to pay 1900 a month for it, 500k over 30 years (and remember 30 year mortgages were non standard up to about 10 years ago) at 4.5% APR would cost over 2500 a month

I wouldnt be prepared to pay €1900 a month for it, no way. You are twisting what I am saying, but the house is worth way more than the €140k that the equation says that it is worth.

Colonel Sanders

eh you said you pay 950 a month but would gladly pay double that. In case you can't work it out 950x2 = 1900. I didn't twist anything, this is exactly what you said

Treehouse72

TommyT wrote: »

The people who are telling us that the market has a long way to fall are the same people who were telling us that rent was dead money a few years ago.

Tommy, I have come to realise that you are really just typing words and saying stuff - you are not actually making a coherent argument. Moreover, you are re-writing history and getting it hopelessly wrong. On the whole the people who called the bubble were not saying rent was dead money, since those folks realised the importance of yield all along....yield calcs is what helped them spot the bubble. By contrast, it was the bubbleistas who said rent was dead money because we were in a "new paradigm" where old-fashioned notions like yield didn't matter. They were totally wrong then, just as you are totally wrong now.

Really, you're all over the shop here and my worry is that people looking for advice might actually take heed of what you're saying. Not trying to be rude, it's just your advice and opinions are, well, eccentric. Good fun to argue about on the internet, but downright dangerous to anyone looking for serious advice.

AARRRGH

TommyT wrote:

The people who are telling us that the market has a long way to fall are the same people who were telling us that rent was dead money a few years ago.

Quite the opposite in fact.

In my own experience reading boards.ie and askaboutmoney.com, the people who think rent is dead money are nearly always the people who believe in property ladders and whatever other nonsense an EA has told them.

TommyT

Colonel Sanders wrote: »

eh you said you pay 950 a month but would gladly pay double that. In case you can't work it out 950x2 = 1900. I didn't twist anything, this is exactly what you said

I said that according to the equation the house I was renting was worth 140k (ish) 950x12x12=136800. I would glady pay €280000 for this house. I certainly wouldnt want to increase the rent I pay at the minute.

Colonel Sanders

TommyT wrote: »

I said that according to the equation the house I was renting was worth 140k (ish) 950x12x12=136800. I would glady pay €280000 for this house. I certainly wouldnt want to increase the rent I pay at the minute.

and it would cost a lot more than 950 a month to finance a 280k mortgage

I make it 1400ish over 30 years at 4.5% APR

and almost 1550 per month at 4.5% over 25 years

Both are before mortgage interest relief (which will surely be a thing of the past soon enough anyhow)

billybigunz

TommyT wrote: »

I said that according to the equation the house I was renting was worth 140k (ish) 950x12x12=136800. I would glady pay €280000 for this house. I certainly wouldnt want to increase the rent I pay at the minute.

Why not buy another for 280K and rent it for 900 if you think it is a fair price.

Colonel Sanders

In terms of looking at yields then yes they are a very good indication for a property as an investment, and are a decent guide for prices for a home (rather than an investment property)

House X rents for 1500 a month (for example), if I liked said house would I be prepared to pay more than 1500 per month on a mortgage? Probably. Would I be prepared to pay over twice that (which are the kind of levels you'd pay on a mortgage on most houses I look at)? No way

Take TommyT's house. 950 to rent. You reckon it would fetch 500k? That would be over 2700 a month over 25 years at 4.5%. That's some size buyers premium and indicates clearly, IMO, that the price you reckon it would fetch massively over values it

Yield is not the be all and end all if it's a non investment property but is still important nevertheless

Treehouse72

TommyT wrote: »

I said that according to the equation the house I was renting was worth 140k (ish) 950x12x12=136800. I would glady pay €280000 for this house. I certainly wouldnt want to increase the rent I pay at the minute.

Tommy, you are calculating for a high yield there. If we calculated for a 6% gross yield, that prices the place at €190,000. By all means add a premium for ownership too that might get the value up to €200,000. Or perhaps we could calculate for a higher yield %age, a bigger ownership premium and a lower value (7%/25k/€175k for example). One way or the other, a €175,000 - €200,000 ballpark seems not unreasonable. You say you would pay €280,000 now (and I am taking you at your word that there is no exaggeration in that number - I strongly suspect you would actually look for a wee bit off that figure....say €250,000?).

Anyway, the yield + ownership premium says €175,000 - €200,000. You say €250,000 - €280,000. That's a 30%-40% difference between your figures and mine, which, by coincidence, is precisely the amount a report published last week by independent mortgage brokers said the market was still overvalued by:

Based upon valuations using four different methodologies, residential investment property is overvalued currently by an average of 37% in Dublin, 43% in Cork, and 39% in Galway.

http://www.mortgagebrokers.ie/blog/index.php/2010/05/13/irish-property-investor-report-spring-2010/

(Note they are discussing "investment property", but since we have factored an ownership premium into our calcs that should level the playing field).

To me, that's a pretty big coincidence. I put it to you Tommy that your €280,000 figure is essentially arrived at by looking at current asking prices. Your valuation is probably perfectly reasonable on those terms. But if one thinks that the market is not yet at the bottom, then the figure looks c.40% too high...this would perfectly account for the difference between your valuation and what the yield calc says.

So it's not that we are really disagreeing about yields or prices....we're actually disagreeing about whether we're at the bottom of the market or not. You say either that we are and so the €280k price is correct, or that you don't care if we're at the bottom and would still pay €280k now anyway. I say that we are not at the bottom, and that the yield figure will be closer to the actual "value" of the house in a few years. Heck, if look at it like that, we are almost agreeing with each other!

TommyT

When will we know when we have reached the bottom though? I reckon we are pretty close to the bottom, others like you say we are 40% too high as it stands. If the market were to fall by another 40% I would be delighted, I am renting after all. I just cannot see things falling that far. Everything is overpriced in this country, from a litre of milk to the cars we drive and the homes we live in. If house prices fall another 40% then I think we need everything to fall in line with them. Somehow I cannot see that happening, can you?

billybigunz

TommyT wrote: »

When will we know when we have reached the bottom though? I reckon we are pretty close to the bottom, others like you say we are 40% too high as it stands. If the market were to fall by another 40% I would be delighted, I am renting after all. I just cannot see things falling that far. Everything is overpriced in this country, from a litre of milk to the cars we drive and the homes we live in. If house prices fall another 40% then I think we need everything to fall in line with them. Somehow I cannot see that happening, can you?

800 let go in pfizer. Massive tax increases in the next 5 years. Zombie banks for the forseeable future. We have only started this journey.