Are we 3 years from another property bubble crash?

murphyebass

riclad wrote: »

Prices are going up in dublin, areas, of high demand,
I have not seen prices going up on rural areas.
I ,d say the average price in dublin is closer to 130k, than 250k.
ITS much harder to get a mortgage now.
I don,t think theres much chance of a property crash in 3 years.

Its harder to get a mortgage now but for good reason. That doesnt mean however that the right people are being approved for mortgages. They are and they are buying houses. I work in a bank doing the life cover for said mortgages.

Average price is not closer to €130k.

And eh your last comment makes me think you could be our next finance minister.

Zamboni wrote: »

House prices in Dublin are decoupled from earnings (at the moment).
A significant portion of houses are being bought with cash.

What I will say is this - based on people's experience from the last crash - when a mere hint of another crash looms, and it will, people will offload properties like lunatics and the market will nosedive at a much faster rate this time around.

I'm not even sure if it will take three years to see another crash in Dublin.

I completely agree with your last comment. More likely the next within the next 24 months.

Demand is far outweighing supply currently. People are outbidding each other by silly amounts. I saw a regular 3 bed semi in Dublin recently go for over 250k which started at 180k.

Only a matter of time imo. Only a matter of time.

Ray Palmer

marathonic wrote: »

It's difficult to build a reasonably sized portfolio of 5+ properties when the yields aren't there and you are relying solely on capital gains. This is made more difficult with CGT tax at 33% compared to 20% in recent years..

Why do you need a portfolio? You aren't relying on capital gains at all.

marathonic wrote: »

You can only subsidise so many properties where the mortgage is more than the rent before you become asset rich and cash poor. A true, professional, landlord will try to avoid this situation.

Not true it completely depends on your income and also when you bought your other property if you have it. You could own more than one property and having a loss making property is considered in your tax. So in effect you pay more out you pay less tax. So it makes good business sense for a professional LL.

marathonic wrote: »

It is totally different. Over the long term (30+ years), it's unsensible to expect that properties will rise by much, if any, above the level of inflation (recent times have been out of the norm).

Not true either. if you buy right the property will rise more than inflation by a large margin. Property in cities will normally rise above inflation in most countries year on year and certainly over a longer period.

marathonic wrote: »

A company that you by shares in makes profits and pays dividends out of those profits. However, they usually own assets that also rise with inflation and reinvest profits in themselves to grow and make more profits. Over the long term, one would expect shares to increase by a few percent above inflation.

Very few people buy shares based on the dividends expected. It is mass gamble on rises and losses.

You have taken a very simplistic view of how to invest in property giving me the impression you have never been involved. 30 years ago are you suggesting houses bought the previous 30 years only went up in line with inflation? Just wondering what time lines you are looking at to be so misguided about property price rises

marathonic

Ray Palmer wrote: »

Why do you need a portfolio? You aren't relying on capital gains at all.

A portfolio of five properties means you lose 20% of your rental income if one goes empty or needs refurbishment. You know yourself what the impact to rental income will be if you only have one.

Ray Palmer wrote: »

You could own more than one property and having a loss making property is considered in your tax. So in effect you pay more out you pay less tax. So it makes good business sense for a professional LL.

How on earth does it make good sense for a professional landlord to have loss making properties just so he can reduce his income tax bill? As a professional landlord, you should have your business as tax efficient as possible - but aim to be paying as much tax as possible because the more you are paying, the more you are making.

Ray Palmer wrote: »

Not true either. if you buy right the property will rise more than inflation by a large margin. Property in cities will normally rise above inflation in most countries year on year and certainly over a longer period.

I have no comment on this one. Speak to some of the 'professional' landlords who had the so-called 'good business sense' to buy these loss making properties during the last decade. A lot of them have been wiped out completely after losing their jobs in the recession and being unable to subsidise their mortgages.

You should not be wiped out if you are making a good yield because your properties are paying for themselves - especially if you have a portfolio of properties as opposed to just the one.

Ray Palmer wrote: »

Very few people buy shares based on the dividends expected. It is mass gamble on rises and losses.

You are talking about stock market speculators, not stock market investors. All stock market investors that know what they're doing realise that dividends are a major factor in their long-term return.

Ray Palmer wrote: »

You have taken a very simplistic view of how to invest in property giving me the impression you have never been involved. 30 years ago are you suggesting houses bought the previous 30 years only went up in line with inflation? Just wondering what time lines you are looking at to be so misguided about property price rises

Have a look at my comments above. I know other readers of this thread will. They'll realise who makes the most sense without putting too much thought into it.

The capital gains model is a model that landlords used in the late pard of the 90's and during the first 7 years of this century. It's a model that wiped out most of them. I, for one, think yield is the way forward.

If property prices went up by 2% more than salary inflation over 30 years, a property costing 4 times average salary today would cost 7.1 times salary then. In 50 years time, that same house would cost 10.5 times salary. Therefore, whilst it's perfectly reasonable to expect share prices to rise by 2% above inflation when dividends are taken into account over any timescale imaginable, it cannot be reasonable to expect the same for property prices.

I would compare someone relying on Capital Gains in property to a stock market speculator.

I would compare someone relying on Rental Yield in property to a stock market investor.

In the stockmarket, speculators, on average, lose and investors, on average win. Sure, the speculators that peform best do have perfomance that, in general, will exceed that of the investors. But I prefer to have an acceptable return with a strong chance of success than an amazing return with a strong chance of failure.

Ray Palmer

I am a professional LL. I worked on stock market system for investors. Everything you said indicates a lack of knowledge and understanding. People used to coming here know my experience.
You picked the wrong person to suggest doesn't know about about property investment. It still isn't capital gains you misunderstand.

marathonic

Ray Palmer wrote: »

I am a professional LL. I worked on stock market system for investors. Everything you said indicates a lack of knowledge and understanding. People used to coming here know my experience.
You picked the wrong person to suggest doesn't know about about property investment. It still isn't capital gains you misunderstand.

On the contrary, everything I said on post 34 makes complete sense.

Go you ahead and purchase your loss-making properties so that you can reduce your tax bill and work on your stockmarket system for investors that don't think dividend yield is an important part of their return. I'll continue to look for rental yield.

It's not capital gains I'm looking for as an investor, it's income. All being well, I have no intentions of ever selling a property. My intention would be to hand them over to a management company when I retire and no longer wish to manage them myself. That being said, if another bubble were to form, I thought prices were too high and the yields weren't there, I would sell them off. Maybe you could buy one to reduce your tax bill

Anyway, we'll agree to disagree and leave it at that because BTL isn't really the topic of this thread and we're derailing it.

Eldarion

I'd have preferred you guys thrashed it out even more to be honest! Ye're not the first two to hold opposing views on yield vs gains and I was very interested to see it in this context. If ye had kept things like "my experience > your experience, so end of discussion" lines out of the argument it'd be nice though!

But you're probably right, might be slightly derail-y in this thread.

gaius c

marathonic wrote: »

But my point is that, if someone is waiting for the cash buyers to dry up so that there's a subsequent fall in property prices allowing them to purchase a nice property at a knock-down price, they may be in for a long, long wait.

Yup, that's all people with financial resources ever want to do, buy houses.
Forget other investment classes, cash reserves for your business or possibly saving any for a rainy day, it's property that every cent of spare cash is going to be spent on. If there's a tenner on deposit in a credit union, it'll be going towards the deposit on a 4th BTL apartment!

cson wrote: »

It'll be interesting to see what happens when the cash buyers dry up.

Other than that; with Dublin becoming even moreso the economic centre of the country you'll probably see something of a mini boom happen here imo - if you look at the rental market and what people are paying, the amount turning up to viewings, the amounts people are willing to bid on rentals... that classic Irish boom mentality is still alive and well. It will probably translate to house buying whenever the cash buyers dry up and the banks start lending. In my opinion; there will probably be a sweet spot in between the cash buyers drying up and the lending market heating up again that'll be the perfect time to buy. When that'll happen is anyones guess.

Any day now...

marathonic

gaius c wrote: »

Yup, that's all people with financial resources ever want to do, buy houses.
Forget other investment classes, cash reserves for your business or possibly saving any for a rainy day, it's property that every cent of spare cash is going to be spent on. If there's a tenner on deposit in a credit union, it'll be going towards the deposit on a 4th BTL apartment!

The sarcasm in this post highlights my previous thoughts about people VASTLY underestimating the amount of cash that's out there.

Of course all cash won't end up in property - but a good portion of it will. I'd argue that a lot of large investors will be looking to increase the property exposure in their portfolios this year - as with last year.

Stockmarket's have surged over the past 5 years, so much so, that anyone with an adequate percentage of their portfolio invested in shares in 2009 will now be over-allocated to shares and should be looking to diversify.

Assuming such a persons intended asset allocation today is similar to that they had in 2009, the drop in property prices since then (albeit not as big in some parts of Dublin now than in 2012) also means that their property allocation will have reduced to below their desired level.

If an investor is using an asset allocation model and this model is split between property and shares (bonds and other investments may be included for some, but not all), then that investor will need to sell some of their shares to realise the gains and buy property with the proceeds to bring their property exposure back up to their overall desired portfolio percentage.

In investment terms, a lot of investors will be looking to 'rebalance their portfolio'.

Roger_007

marathonic wrote: »

In my opinion, people are VASTLY underestimating the amount of cash out there. I myself am aiming to be a cash buyer of a BTL next year and am on below average earnings. If someone like me can afford to buy in cash, god knows how much cash is out there - enough to purchase absolutely everything on the Dublin market I would imagine.

It seems that property prices are being driven primarily by cash buyers, (especially in Dublin). Some estimates put the amount of cash on deposit in Irish banks at around €100 billion. That's not counting the amount in state savings. You could be right that there is still a huge amount of cash out there. At the moment, property is generating anything up to 10% rental yield as opposed to 2% or so for bank deposits. That's why people with cash are going for property.
However if bank interest rate go up or the price of property goes up substantially, (thereby lowering the yield), the market could start to turn down again. Cash buyers are only interested in what return they can get. So we could be in for a yo-yo period in property prices over the next few years as the cash buyers get in and out.

gaius c

marathonic wrote: »

The sarcasm in this post highlights my previous thoughts about people VASTLY underestimating the amount of cash that's out there.

Of course all cash won't end up in property - but a good portion of it will. I'd argue that a lot of large investors will be looking to increase the property exposure in their portfolios this year - as with last year.

Agreed. Doesn't mean they are going to see the level of returns that they are expecting though and frankly "but a good portion of it will" is an extremely weak attempt to flap away the fact that proper investors will invest across multiple asset classes and that the current flow of robopaddies MKII's haven't a breeze what they are doing.

Stockmarket's have surged over the past 5 years, so much so, that anyone with an adequate percentage of their portfolio invested in shares in 2009 will now be over-allocated to shares and should be looking to diversify.

Assuming such a persons intended asset allocation today is similar to that they had in 2009, the drop in property prices since then (albeit not as big in some parts of Dublin now than in 2012) also means that their property allocation will have reduced to below their desired level.

Two bits to this. 1. Stock markets are doing well because of QE, which Yellen has indicated will be coming to an end. 2. "The investment is cheaper than it was at the top of the bubble so therefore it is a good investment now" may or may not work out as anticipated.

marathonic

gaius c wrote: »

Agreed. Doesn't mean they are going to see the level of returns that they are expecting though and frankly "but a good portion of it will" is an extremely weak attempt to flap away the fact that proper investors will invest across multiple asset classes and that the current flow of robopaddies MKII's haven't a breeze what they are doing.

Anyone that read my whole post would understand that I'm fully aware of the fact that investors will invest across multiple asset classes. Therefore, my argument wasn't a "weak attempt to flap away the fact that proper investors will invest across multiple asset classes". Instead, your cutting my post in two and removing part of it was a weak attempt to try to give the impression that I didn't understand this.

gaius c wrote: »

Two bits to this. 1. Stock markets are doing well because of QE, which Yellen has indicated will be coming to an end. 2. "The investment is cheaper than it was at the top of the bubble so therefore it is a good investment now" may or may not work out as anticipated.

Which of these two points disputes my point that, with a high stock-market and a low property market, most investors that rebalance their portfolio this year will be selling shares and buying property? As far as I can see, neither of your points dispute my argument.

Also, with regards to the piece you put in quotes, where did I actually say that? Do you really need to put words into my mouth to try to argue your point with me?

Jaybor

marathonic wrote: »

Anyone that read my whole post would understand that I'm fully aware of the fact that investors will invest across multiple asset classes. Therefore, my argument wasn't a "weak attempt to flap away the fact that proper investors will invest across multiple asset classes". Instead, your cutting my post in two and removing part of it was a weak attempt to try to give the impression that I didn't understand this.



Which of these two points disputes my point that, with a high stock-market and a low property market, most investors that rebalance their portfolio this year will be selling shares and buying property? As far as I can see, neither of your points dispute my argument.

Also, with regards to the piece you put in quotes, where did I actually say that? Do you really need to put words into my mouth to try to argue your point with me?

I can only speak for myself but you are correct in my case.
I have a property portfolio built up over a good few years that is performing quite well. Over the last couple of years I noticed that my other investments (funds, equities, pension etc) have been performing even better and have a rather skewed weighting at this point. So the last couple of years I have been taking advantage of what I believe is the bottom of the property market (even if its not the bottom its still very low) to re-balance. This means that I am shifting some of my investments to uk and Irish property from my other investments.

gaius c

All sounds very sensible but the fact that you're sharing this market with robopaddies MKII's should be a wee bit of a warning sign.

Jaybor

gaius c wrote: »

All sounds very sensible but the fact that you're sharing this market with robopaddies MKII's should be a wee bit of a warning sign.

Sure we all know that its easier to look from the sidelines and comment on how players are playing. And there is a significant amount of people actually trying to talk down the market in Ireland for whatever reason. Im thinking they missed their stop and are now trying to get the bus to turn around.
You cant talk a market up or down though. Might think you can, but you cant.
No amount of cherry picking of stats and reports for whatever way we happen to be leaning is going to convince the rest of the market of our views.

Best just following your own judgement. Thats what ive always done and will continue to do. Its been pretty good so far for me, so im happy with it.

gaius c

Jaybor wrote: »

Sure we all know that its easier to look from the sidelines and comment on how players are playing. And there is a significant amount of people actually trying to talk down the market in Ireland for whatever reason. Im thinking they missed their stop and are now trying to get the bus to turn around.
You cant talk a market up or down though. Might think you can, but you cant.
No amount of cherry picking of stats and reports for whatever way we happen to be leaning is going to convince the rest of the market of our views.

Best just following your own judgement. Thats what ive always done and will continue to do. Its been pretty good so far for me, so im happy with it.

You didn't actually say that, did you???

Don't be too speculative on my (or anybody elses') "agenda". Maybe, I've taken advantage of the current bump to do some offloading for example. ;-)
Besides which, it makes for a pretty unpersuasive argument.

In fairness to you guys, you're not alone in looking for investments with a decent return. The global monetary system is awash with cheap cash looking for a better yield and some of the big guys are staying put.

Jaybor

gaius c wrote: »

You didn't actually say that, did you???

Don't be too speculative on my (or anybody elses') "agenda". Maybe, I've taken advantage of the current bump to do some offloading for example. ;-)
Besides which, it makes for a pretty unpersuasive argument.

In fairness to you guys, you're not alone in looking for investments with a decent return. The global monetary system is awash with cheap cash looking for a better yield and some of the big guys are staying put.

Please dont take that personally, it wasnt meant for you.

But having now just read a lot of your old posts I can see how you might think its meant for you.

And dont be so proud of your offloading a property last year.
In a few years, if property prices havent risen, you can proclaim yourself a genius then.
What I see is someone who offloaded a property basically as the property market is trundling along the bottom. Nothing smart about that at all that I can see. But I'm sure you had your reasons.

Theboinkmaster

Shedite27 wrote: »

Last year it was 14% of households earn over 100k, so yes, these people can afford the mortgages of the more affluent areas.

Source?

Iristxo

Not true, not according to the CSO. Not even the top 10% of households, never mind individuals

Shedite27

Theboinkmaster wrote: »

Source?

http://www.ictu.ie/download/pdf/m_collins_living_wage_ictu_jan_24_2013.pdf

Qualitymark

A piece in the Guardian is terrifying - "My old council flat sold for half a million" - but what's really scary is the comments from readers; reminiscent of the attitudes of (many) Irish people during the bubble here:

http://www.theguardian.com/commentisfree/2014/apr/02/london-housing-bubble-property-market-madness

Here's a typical comment:

So people, ordinary people, are benefitting from a buoyant property market in London, whether that be through appreciation in the valuation of their properties, or higher rents from tenants. Be happy for them, because hard work has enabled the purchase of those properties in the first place, and investment is required to maintain the value. Lighten up!

The London market *should* have stabilised last year, when a new law - that all property must be transparently declared for tax, whether owned by British people or those abroad - was due to come into force. However, this law seems to have sunk without trace, and the market is showing all the signs of a bubble now.