Property Market 2015

Bob24

gaius c wrote: »

Rents *have* to be higher than mortgages. Landlords can't make money otherwise.

Having mortgages higher is a sign as clear as daylight of a bubble.

But what does it mean to say rents must be higher than mortgages?

If I buy an apartment with 50% LTV over 30 years, my repayments will be much less than if I buy the same apartment with 70% LTV over 20 years. Which one should be used as the reference minimum rent?

Bob24

My 2 cent (adminingly a simplistic view): there are indeed massive problems with housing in Dublin, but any policy to address these would hurt the people who bought during the bubble as well as the banks. The government doesn't want that as hurting the first group would cause social and political issues and hurting the second one would cause financial issues; and they have probably made a call that these issues would be an even bigger headache.

El_Dangeroso

johnnyskeleton wrote: »

Sorry if there is already a thread on this:

http://www.daft.ie/report/marcus-ohalloran-2015q2-rental/infographic?gclid=COCXyJ7ZsscCFYGy2wodVrQIdg

How are they coming up with average rent for a 3 bed is €812 in Galway city? Currently there are only 4 out of 30 three bed properties in the city under 850, how is the average so low?

gaius c

Bob24 wrote: »

All you are saying is correct, but when comparing renting vs buying aren't you overlooking the fact that a mortgage has a limited duration and at some point you stop paying; while renting is for life?

Doesn't the fact that you are acquiring the asset vs renting it justify higher monthly payments?

Depends what the interest repayments are because at a basic level, you have rented the capital required to purchase the property.

athtrasna

Greyian wrote: »

I just posted a rather long response that other thread, and it seems it has now disappeared

The threads were merged, if there had been any responses they would have merged with the OP. Might be an issue of you hitting reply during the merge.

Greyian

athtrasna wrote: »

The threads were merged, if there had been any responses they would have merged with the OP. Might be an issue of you hitting reply during the merge.

I'd imagine that is what happened. I was using the quick reply box, posted it, went to check my followed threads, then noticed the thread had been moved/merged, and my post had ceased to exist.

Probably something the development team should look at (pop up a javascript alert if you're posting in a moved/merged thread, to alert people to copy/paste the post into the working thread).

gaius c

Greyian wrote: »

Not necessarily. Rents have to be higher than the interest portion of the mortgage.

If you had to pay mortgage of €1000/month, and could get €990/month in rent (ignore taxation for this scenario), would you not consider that a good deal? Pay €10/month (on top of the rent) for the duration of the mortgage, and at the end have an asset worth hundreds of thousands of euro?

You can't ignore taxation or any other costs because they are a vital part of the rent v buy equation. The people who made calculations based on the logic above and ignored everything else are the very same accidental landlords who clog up our rental market.

Other than that, there are personal choices to make as to whether renting or buying is a better choice. The extreme disparity in rent v mortgage for family size houses in Dublin in particular suggests that folk are paying way over the odds to "own" a family home versus what they would be paying in rent for the same house. And that's with crazy rents.

Bob24

gaius c wrote: »

Depends what the interest repayments are because at a basic level, you have rented the capital required to purchase the property.

Yes it was kind of my point ... higher or lower than a mortgage doesn't mean much really since the repayments depend on what you had borrowed. But for someone who didn't get a crazy mortgage where they are giving the bank as much in interests as the property is worth, the fact that they are paying money to acquire an asset can't really be directly compared to the cost of renting that same asset.

Greyian

gaius c wrote: »

You can't ignore taxation or any other costs because they are a vital part of the rent v buy equation. The people who made calculations based on the logic above and ignored everything else are the very same accidental landlords who clog up our rental market.

The point was to simplify the example, but you'd probably find that a fairly large chunk can be written off in expenses in the early years of a rental (when the mortgage interest is at its highest), so you could still charge under the total monthly mortgage and actually have it be a good investment.

gaius c wrote: »

Other than that, there are personal choices to make as to whether renting or buying is a better choice. The extreme disparity in rent v mortgage for family size houses in Dublin in particular suggests that folk are paying way over the odds to "own" a family home versus what they would be paying in rent for the same house. And that's with crazy rents.

In my post that got lost in the merge, I addressed a lot of that.
From a purely financial perspective, on larger (3/4+ bed properties) in urban areas, there are 2 possible scenarios to explain the current imbalance between mortgage and rental costs:
1) Property prices are right, meaning rental prices are too low.
2) Rental prices are right/too high, meaning property prices are too high.

With all the mentions of a rental crisis, I don't think that "rental prices are too low" is the correct scenario, leaving us with #2, that property prices are too high, even when compared against excessive rental prices.

ronan45

Bob24 wrote: »

My 2 cent (adminingly a simplistic view): there are indeed massive problems with housing in Dublin, but any policy to address these would hurt the people who bought during the bubble as well as the banks. The government doesn't want that as hurting the first group would cause social and political issues and hurting the second one would cause financial issues; and they have probably made a call that these issues would be an even bigger headache.

Theres houses and apartments flying up every bit of spare land in dublin available ! Tis all good as far as i can see, you cant build houses on top of houses in Dublin:cool:

handlemaster

http://www.irishtimes.com/news/social-affairs/housing-and-homeless-crisis-out-of-control-1.2320783

more calls for rent allowance review from the Simon community

Bob24

ronan45 wrote: »

Theres houses and apartments flying up every bit of spare land in dublin available ! Tis all good as far as i can see, you cant build houses on top of houses in Dublin:cool:

Enough zoned land in Dublin for 46,000 houses - "Developments would meet demand for next six years"

Dublin city audit finds 282 vacant sites ahead of land-hoarding levy - and it is not just unattractive sites in the middle of nowhere: "More than 61 hectares of vacant or derelict land, spread over 282 sites in central Dublin, could be developed for homes or commercial buildings"

ronan45

So who is stopping all the development, the government? Is there a conspiracy? :rolleyes:
Obvviously not enough money in it at the moment when ass is said and done... if there was.... they would be building
Its all money:cool:

Bob24

ronan45 wrote: »

So who is stopping all the development, the government? Is there a conspiracy? :rolleyes:
Obvviously not enough money in it at the moment when ass is said and done... if there was.... they would be building
Its all money:cool:

No one said there was a conspiracy ... original post was just saying that the government isn't implementing all the policies it could in order to fix the housing crisis for fear of hurting boomtime buyers and banks. You said the explanation was rather a lack of available land, but as per my reply I don't think there is any shortage.

The_Conductor

handlemaster wrote: »

http://www.irishtimes.com/news/social-affairs/housing-and-homeless-crisis-out-of-control-1.2320783

more calls for rent allowance review from the Simon community

As long as private rental accommodation is the preferred manner of accommodating those incapable of accommodating themselves- you can set rent allowance levels to whatever you like- it is not going to matter one iota, there will be no increase in supply.

The whole abdication of housing responsibility to the private sector and sale of council and social housing units- has been an unmitigated disaster.

What Simon should be suggesting- in my opinion- is that the government embark on the purchase where feasible, or the building of, where not, thousands of units which would be placed in perpetual ownership of councils- tenants would not have a right to buy them- nor would they have the right to reside in them forever- there would be an assumption that they would eventually manage to house themselves somehow (if this didn't happen- this could be revisited).

The current system is not working- no-one is denying that- but raising rent allowance levels- isn't the answer either.

gaius c

Greyian wrote: »

The point was to simplify the example, but you'd probably find that a fairly large chunk can be written off in expenses in the early years of a rental (when the mortgage interest is at its highest), so you could still charge under the total monthly mortgage and actually have it be a good investment.



In my post that got lost in the merge, I addressed a lot of that.
From a purely financial perspective, on larger (3/4+ bed properties) in urban areas, there are 2 possible scenarios to explain the current imbalance between mortgage and rental costs:
1) Property prices are right, meaning rental prices are too low.
2) Rental prices are right/too high, meaning property prices are too high.

With all the mentions of a rental crisis, I don't think that "rental prices are too low" is the correct scenario, leaving us with #2, that property prices are too high, even when compared against excessive rental prices.

A critical problem with such rent/buy calculations is that they are only valid for that point in time, which is something of a problem when one commits you to a 30 year mortgage for something that is suitable for that point in time but perhaps not at others. That's why I think extra "safety factor" needs to be built in.

On top of that, the twenty something couple renting the apartment may well be thinking "our rent is dead money" but they don't have a deposit saved to buy the identical apartment next door and they've ignored things like management charges, property taxes, maintenance, stamp duty and solicitors fees. By the time they have saved the deposit to buy the apartment, they have kids and need a house instead.

The debate on this is far more complex than "rent is €10 per month more than the mortgage => buy" logic suggested above.

P.S. You mention writing expenses off on rentals. I'm only talking about rentals from the point of view of accidental landlords. For professional landlords, the discussion is entirely different.

On the latter part of your post, I agree completely.

gosplan

Anyone see all of these auction properties come up in North Dublin City?

Is this a regular occurrence?

Piriz

gosplan wrote: »

Anyone see all of these auction properties come up in North Dublin City?

where do you see these advertised?

alastair

gosplan wrote: »

Anyone see all of these auction properties come up in North Dublin City?

Is this a regular occurrence?

Alsop job lots are fairly regular, but there hasn't been a Dublin-centric one for a bit.

The_Conductor

alastair wrote: »

Alsop job lots are fairly regular, but there hasn't been a Dublin-centric one for a bit.

The September one is up on their website now- seems to strongly feature Donegal, Cavan/Monaghan and Galway counties- with a small smathering of other locations. 382 lots- people could be there for a while! Prices seem to be amr'ed at reasonable enough levels- aka people are genuinely trying to shift them.

Link here

Have there ever been as many lots in an Allsops auction before?

gosplan

Piriz wrote: »

where do you see these advertised?

Apologies, came up in my daft app.

North Dublin City/recent

Bob24

gosplan wrote: »

Anyone see all of these auction properties come up in North Dublin City?

Is this a regular occurrence?

Also got a couple of auctions today on my alert email for apartments in South Dublin. It has happened before, but not very often.

Shedite27

I'm guessing he means this

ronan45

Any reason the ALLSOP site they have feck all pictures of the insides? Are they not allowed to go into these houses as they are repos or are they just not bothered?
Are all these Houses on ALLSOP repossesions????:eek:

zl1whqvjs75cdy

The head of the Irish construction industry federation (forget his name) has been doing the rounds saying that a VAT exemption would help bring down the cost of houses, but surely if the bubble taught us anything its that property developers are greedy. The money saved on the VAT exemption would not be taken into account in the selling price and the developed clears an extra 15-20k per unit. This does not seem like the answer to me.

The other major cost to building a house is wages of the workers. Is there still a hangover from the bubble days when guys were bring paid silly money to build houses? Are trades people on sites still expecting astronomical wages? Surely this would also drive up costs to unreasonable levels.

gaius c

donkeyoaty0099 wrote: »

The head of the Irish construction industry federation (forget his name) has been doing the rounds saying that a VAT exemption would help bring down the cost of houses, but surely if the bubble taught us anything its that property developers are greedy. The money saved on the VAT exemption would not be taken into account in the selling price and the developed clears an extra 15-20k per unit. This does not seem like the answer to me.

The other major cost to building a house is wages of the workers. Is there still a hangover from the bubble days when guys were bring paid silly money to build houses? Are trades people on sites still expecting astronomical wages? Surely this would also drive up costs to unreasonable levels.

Totally. Remember how the first time buyers grant brought down the cost of houses for them!

Daith

donkeyoaty0099 wrote: »

The head of the Irish construction industry federation (forget his name) has been doing the rounds saying that a VAT exemption would help bring down the cost of houses, but surely if the bubble taught us anything its that property developers are greedy. The money saved on the VAT exemption would not be taken into account in the selling price and the developed clears an extra 15-20k per unit. This does not seem like the answer to me.

"Whut, whut, we would need the VAT exemption just to break even, too expensive to build houses in Ireland, that's why we aren't building"

would probably be the answer you get back.

Likewise a 20% reduction in space for studios doesn't mean a 20% reduction in price either.

Bob24

donkeyoaty0099 wrote: »

The head of the Irish construction industry federation (forget his name) has been doing the rounds saying that a VAT exemption would help bring down the cost of houses, but surely if the bubble taught us anything its that property developers are greedy. The money saved on the VAT exemption would not be taken into account in the selling price and the developed clears an extra 15-20k per unit. This does not seem like the answer to me.

The other major cost to building a house is wages of the workers. Is there still a hangover from the bubble days when guys were bring paid silly money to build houses? Are trades people on sites still expecting astronomical wages? Surely this would also drive up costs to unreasonable levels.

Agreed, if tax incentives are introduced for new builds (which might or might not be a good idea - not sure), the money need to go directly to the pocket of the buyers - and preferably only when these buyers are individuals buying a primary residence.

waxon-waxoff

donkeyoaty0099 wrote: »

The other major cost to building a house is wages of the workers. Is there still a hangover from the bubble days when guys were bring paid silly money to build houses? Are trades people on sites still expecting astronomical wages? Surely this would also drive up costs to unreasonable levels.

The cost of labour has come down for contractors but they are unlikely to pass this on, and instead pocket the savings themselves. The days of breakfast-roll eating brickies earning €1500 a week are gone. Theres a huge pool of Eastern European tradespeople who are willing to work for smaller wages than the Irish.

jay0109

donkeyoaty0099 wrote: »

The head of the Irish construction industry federation (forget his name)...

Tom Parlon...heard him earlier. I don't know whether to laugh or scream when I hear that shrill playing the poor mouth:mad: