Property Market 2015

April 73

You could say that about any assets you manage to accumulate while working. Is it better not to bother, so you don't have to pay for nursing home care in the future - which may or may not ever be required?

In a way I agree with Leinsterdude - a rental property is a troublesome asset if you rent it out as you pay off the mortgage. In fact it often costs money when you factor in the tax. But when you start eroding the mortgage principal and eventually pay it off it does generate useful monthly income as part of pension planning. Private pensions are a gamble, it's no harm to have a second string to the pension bow.

As long as you don't end up needing a nursing home of course!

joe_six_cans

The_Conductor wrote: »

Have you ever had a mortgage?
You can do pretty much as you please with the property- as long as you keep with the terms of the mortgage.
The whole purpose of debt- is to shelter as much of the gross rental income as possible. If the shelter is worth less than the net interest you'd gain from employing the capital elsewhere- which it would have to a remarkably good investment to be- you'd be right about debt being over-rated. However- in times of low returns elsewhere- good luck finding an ROI on the capital- greater than net tax benefit associated with the debt.

It is an anamoly- but its a global anamoly- and its not solely in the residential sector- its across business in general.

The Economist and the LSE have some very good papers discussing and debunking debt myths- if you've subscriptions to either- they're easy to find- if not- there are hard copies all in county libraries.

everything bar sell it , if the bank has a charge on a property , you must pay off the loan before it can be sold

that to me is a negative versus owning something outright , instead of spending half the rent from a property on paying the mortgage , id prefer spend half the rent investing in a global index fund every year , that way im growing wealth in a diversified manner

i make these points within the context of investment properties BTW

brownbeard

In case anyone didn't see it, front page of the times this morning;

http://www.irishtimes.com/business/economy/noonan-wants-review-of-first-time-mortgage-cap-1.2355909

Not sure if this is just pre-election hot air or if a genuine push will be made in this direction (ie with Patrick Honohan's successor). Hopefully the former.

That's some mighty lobbying by the Construction Federation. Noonan met them on Wednesday, gave these quotes to the Irish Times yesterday for publication today.

The construction lobby want the government to put up 15% of the deposit (as a loan and/or guarantee to the banks) with the buyers (FTBs only) having to find 5% of the purchase price. That's nearly as loose as things were in boom/bubble times.

On the Central Bank rules, Noonan argues that what the 'independent' Central Bank did in the past may have been prudent at the time but everything should be reviewed. Seriously. The rules came in in February and if you had approval prior to that it was good for six months. So they are basically in full force since the summer.

Of course, Noonan is preparing to appoint a new governor of the CB so this kind of talk helps him set out his expectations for the new independent governor.

It's farcical really. They are walking us into the same place that FF took is last time. And we are letting them.

I dearly hope these rules are not wiped out but between one thing and another it seems the government are intent on neutering mortgage regulation.

I say all of this as someone whose mortgage cheque was released yesterday! It might seem appealing for prices to go up after buying but if the price is another crash - and the broad economic horror show that came with the last one - I'd prefer price stagnation.

The_Conductor

The whole premise of this- is that they are starter homes that first time buyers will flip at a future date- in order to buy a more suitable property further down the road. It would appear that we haven't learnt anything- at all, from our boom and bust cycle.

dearg lady

As someone in negative equity on a shared property who's been saving like crazy to try buy my own place this is just depressing. I thought I was close to being able to buy but the more I look around, even the crappiest properties are pretty much out my range now. How many more years of renting and saving...

Cuddlesworth

The_Conductor wrote: »

The whole premise of this- is that they are starter homes that first time buyers will flip at a future date- in order to buy a more suitable property further down the road. It would appear that we haven't learnt anything- at all, from our boom and bust cycle.

You don't need to be a genius to see that we were cautious for about 3 years and then abandoned that.

From earlier in the week:

While Ms Burton said no detailed discussion has taken place in relation to this Budget, she said that helping young people access finance to get onto the property ladder is a major priority for the Coalition.


"The issue of young people and others, who are in a position where traditionally they would have been able to afford to buy a house, clearly that's something that we want to see people who are in that position, being facilitated in terms of finance."

The OECD says:

"The Government should avoid subsidies for first-time buyers, as these will be capitalised into prices, aggravating a potential price spiral and making it even harder for those with lower incomes to purchase homes," the assessment states.

OECD have seen it all before. But so have Joan and Enda and Michael and Brendan. Yet they cannot help themselves.

"Property Ladder" invokes such irritation.

swampgas

Deleted User wrote: »

"Property Ladder" invokes such irritation.

"Property pyramid" might be a better name for it.

gaius c

Interesting just how quickly Tom Parlon and the boys get some action out of the government. They only met them during the week and already the government is adjusting policy to suit them.

The_Conductor

gaius c wrote: »

Interesting just how quickly Tom Parlon and the boys get some action out of the government. They only met them during the week and already the government is adjusting policy to suit them.

Oh, they're taking soundings- they do it all the time.
Watch this space- they'll flip- if sentiment is shown to be against their measures........

The issue at the moment- is even with prices where they are- the CIF won't build more houses. Pay rates for construction workers were never pared back to the levels they need to be at- to get construction going again.

fret_wimp2

The_Conductor wrote: »

Oh, they're taking soundings- they do it all the time.
Watch this space- they'll flip- if sentiment is shown to be against their measures........

The issue at the moment- is even with prices where they are- the CIF won't build more houses. Pay rates for construction workers were never pared back to the levels they need to be at- to get construction going again.

Pay rates cant be the brunt of the issue, i mean are all the construction workers all sitting at home refusing work until the rates rises to boom time levels, or are they taking work at a lower rate so they are at least earning a decent living?

I hope its the latter.

MarkAnthony

Deleted User wrote: »

"Property Ladder" invokes such irritation.

I prefer it to rental trap tbh, not that either system is functioning properly.

Villa05

Deleted User wrote:

On the Central Bank rules, Noonan argues that what the 'independent' Central Bank did in the past may have been prudent at the time but everything should be reviewed.

The average age of a first time buyer is 33. If you can't save the 10% by that age. How the he'll do you expect to pay the remaining 90% + interest over your remaining working life. Surely a school teacher can see this problem.

Review completed.

<snip>

Cuddlesworth

fret_wimp2 wrote: »

Pay rates cant be the brunt of the issue, i mean are all the construction workers all sitting at home refusing work until the rates rises to boom time levels, or are they taking work at a lower rate so they are at least earning a decent living?

I hope its the latter.

I don't think there is a defining factor. You have a couple of issues at play.

Site cost is prohibitive. From a quick gander on daft people seem to expect that a site will sell at roughly 30-50% of the value of the finished property. And why would anybody sell a site for less, it has no cost involved in retaining it in perpetuity. Slap a fence around it, less the grass grow. Hundreds of sites around Dublin are testament for that.

Construction costs are high. That includes labour but is not limited to labour. I know materials keep going up, especially as the house standard required today is far beyond what was required 50 years ago. Insurance has undoubtedly gone up too, which on a building site must be monstrous.

The industry itself isn't exactly fast to innovate and cut costs. Pretty much every house I've seen going up recently is the same tired concrete build in a estate of a 100 houses the exact same.

House prices are currently volatile. What comes up must come down and with the 10-20% year on year growth recently, it's difficult to accurately predict that after buying and building a large estate what those houses might actually make you in Ireland at the end. Banks might be trying to get loose with the money for mortgages again but I doubt they are with developer loans. That's really where they were burned last time.

tharmor

lads...are there any preclosure charges for mortgages ?i.e. if its paid and closed before the tenure ends ?

The_Conductor

tharmor wrote: »

lads...are there any preclosure charges for mortgages ?i.e. if its paid and closed before the tenure ends ?

Depends.
Fixed term will almost certainly have charges- however, floating variable rate mortgages, nearly always not. Its best to check with individual lenders though- as some of them may have charges, or terms and conditions, that don't apply to others.

matrim

Cuddlesworth wrote: »

I don't think there is a defining factor. You have a couple of issues at play.

Site cost is prohibitive. From a quick gander on daft people seem to expect that a site will sell at roughly 30-50% of the value of the finished property. And why would anybody sell a site for less, it has no cost involved in retaining it in perpetuity. Slap a fence around it, less the grass grow. Hundreds of sites around Dublin are testament for that.

What is happening with the site / development land tax that has been mooted for the last few years?

The_Conductor

There is going to be a cost associated with sitting on sites- a specific site tax- going forward. Once a site has been zoned- it will attract 0% tax in year 1, 1% in year 2, 2% in year 3, 3% in year 4 (and so on- topping out at 9% in year 10 and subsequent years).

There is going to be an active disincentive to sitting on zoned sites in future.

desertcircus

Anybody using the phrase "property ladder" for purposes other than dismissing the concept should be barred by statute from holding public office.

alastair

desertcircus wrote: »

Anybody using the phrase "property ladder" for purposes other than dismissing the concept should be barred by statute from holding public office.

Have you a preferred term for the process of iteratively investing in, and trading up property to gradually attain a property you couldn't initially afford? Something snappy perhaps?

Villa05

alastair wrote:

Have you a preferred term for the process of iteratively investing in, and trading up property to gradually attain a property you couldn't initially afford? Something snappy perhaps?

Pyramid Scheme

The_Conductor

alastair wrote: »

Have you a preferred term for the process of iteratively investing in, and trading up property to gradually attain a property you couldn't initially afford? Something snappy perhaps?

When you allow for the likes of Dublin City Council last week passing a motion allowing 'starter' and 'boutique' apartments be 20% smaller than regulation size- the writing is on the wall.

In most cultures there is an acceptance that a majority of the population cannot and will not ever, afford to buy a property. We insist in creating a new lowest layer of purchasers- to offload shoeboxes on- while instilling in them an expectation that they will trade up to their 'for-ever home' at some stage in the future.

All we have done is created families living in shoebox apartments, with no facilities or amenities for children, and councils abdicating all responsibilities towards residents in the area to both the private sector and also to people- and sure, if they can find themselves a shoebox apartment with a 30-35 year mortgage- sure, they have a roof over their heads, and they'll be grand...........

There is so much wrong in the 'Irish' way of doing things...............

alastair

Villa05 wrote: »

Pyramid Scheme

Not quite. A pyramid scheme implies you're shafting someone lower down in the process. That's really not a part of the scenario I outlined.

alastair

The_Conductor wrote: »

When you allow for the likes of Dublin City Council last week passing a motion allowing 'starter' and 'boutique' apartments be 20% smaller than regulation size- the writing is on the wall.

In most cultures there is an acceptance that a majority of the population cannot and will not ever, afford to buy a property. We insist in creating a new lowest layer of purchasers- to offload shoeboxes on- while instilling in them an expectation that they will trade up to their 'for-ever home' at some stage in the future.

All we have done is created families living in shoebox apartments, with no facilities or amenities for children, and councils abdicating all responsibilities towards residents in the area to both the private sector and also to people- and sure, if they can find themselves a shoebox apartment with a 30-35 year mortgage- sure, they have a roof over their heads, and they'll be grand...........

There is so much wrong in the 'Irish' way of doing things...............

The writing is in the wall for what exactly? People will never trade up again?
Even if you are opposed to shoebox development, and believe that local authorities are absconding their responsibilities, and that only a minority can afford to own, there's still the reality that people can, and do, manage to trade up. You can call that a property ladder, or whatever alternate works better for you, but it's still a real, undeniable, scenario.

caviardreams

The_Conductor wrote: »

When you allow for the likes of Dublin City Council last week passing a motion allowing 'starter' and 'boutique' apartments be 20% smaller than regulation size- the writing is on the wall.

In most cultures there is an acceptance that a majority of the population cannot and will not ever, afford to buy a property. We insist in creating a new lowest layer of purchasers- to offload shoeboxes on- while instilling in them an expectation that they will trade up to their 'for-ever home' at some stage in the future.

All we have done is created families living in shoebox apartments, with no facilities or amenities for children, and councils abdicating all responsibilities towards residents in the area to both the private sector and also to people- and sure, if they can find themselves a shoebox apartment with a 30-35 year mortgage- sure, they have a roof over their heads, and they'll be grand...........

There is so much wrong in the 'Irish' way of doing things...............

I fully agree with this, however my understanding was that the new regs would allow for a proportion of studios at 45m (a decent size for a studio tbh) to be built, but these are not for owner-occupiers but solely for the rental/investment market? This would make sense to me. There are a lot of people out there who don't want to share a house with strangers, and want their own space, but can't pay 1200 for a 1 bed in rent.

But yes, regarding your general point, we are returning right back to everything that caused the mess of 2003-2007 all over again :mad:

MouseTail

Cant really see a problem with small inner city dwellings, it makes sense to build small and high, ie have higher density in the inner city.

The_Conductor

MouseTail wrote: »

Cant really see a problem with small inner city dwellings, it makes sense to build small and high, ie have higher density in the inner city.

It makes massive sense to have higher density developments- however, this is not what is proposed- they want the same limits on height etc- but extra units.

As to the 45m2 units being solely for investors- good luck on that front. I'm not aware of any developers actively buying into the market at present- any I know (and I do know a few) are actively divesting at increasing speed. There is blood in the water for investors- not least because of the appalling tax treatment of landlords- it is not an environment conducive to encouraging investors into the market (even if units were available at attractive prices.

MouseTail

I thought there was increased heights in the free development zone?