How high will the rental rates go ?

Browney7

Ray Palmer wrote: »

Rents will keep going up and will fluctuate. When they dropped many tenants broke leases with no consequences. That was when property was in negative equity leaving many landlords with a mounting debt. The ones that survived now have to try and recover those losses. People like to talk about landlord greed but many have huge debts where rental income has not covered expenses.

By expenses I assume you are including the capital repayment proportion of the mortgage? That's not an expense since when the mortgage is paid off you'll have a nice asset paid for that you can sell. Not sure why landlords feel that tenants should be paying enough to cover the capital and interest and expenses to be honest but that's what the "market" decides I guess.

Xrok12

House prices (both sales and rentals) rise and fall in a cyclical manner. A strange behavior I have observed is the groupthink that whatever is currently happening is the trend that will continue forever. For example, from 2000->2007 everyone thought house prices would keep rising forever, or settle with "soft landing". Then from 2009->2013 everyone thought house prices would keep falling forever, or settle at a really low price. Now from 2015->? the same pattern is repeating. Everyone thinks this upward trend of house/rent prices will continue until the "soft landing" at the top. It clearly doesn't work like that. This aspect of human behavior is documented in a book from 1949 called Human Action: A Treatise on Economics. Well worth a read. The problem now is most people can't wait until the next downturn because of family/work/age and other variables.

Browney7

Smoked Tuna wrote: »

Its not all roses elsewhere either.

Read the Australian forum, you will find people complaining there too.

http://forums.whirlpool.net.au/forum-replies.cfm?t=2574694

However there are other reasons to emigrate too like better job opportunites, perhaps work life balance, not to mention... sun and sand :cool:

Yeah €1500 for a nice spacious one bed in Bondi Beach Sydney is so much worse than paying €1400 for a pokey one bed in the Beacon or Dundrum?

At the end of the day, Dublin is Dublin, a small capital city on an inconsequential island on the periphery of Europe. It's not London, Paris or Sydney or New York yet rents are heading that way. It's bananas.

How can anyone justify a market whereby people are able to make gross yields of anywhere from 7 - 10% when the risk free rate is effectively zero?

Ray Palmer

Browney7 wrote: »

By expenses I assume you are including the capital repayment proportion of the mortgage? That's not an expense since when the mortgage is paid off you'll have a nice asset paid for that you can sell. Not sure why landlords feel that tenants should be paying enough to cover the capital and interest and expenses to be honest but that's what the "market" decides I guess.

It's a pretty standard business model and price of supply. Alternatively you are suggesting all companies should wait 25+ years to make a profit. There would be little to none rental properties and they are needed.

beauf

appfry wrote: »

beauf wrote: »

In other countries it's a bigger market so more options outside the capital cities.

Its not just capital cities that have high rents.
Any city where you have conditions which attract people to them over and above the surrounding area will have high rents.

Its all about how many people are competing against each other.

Capital cities will generally be more expensive and more in demand for exactly that reason.


But there is a vast difference in living midlands Ireland and some city in the north ok UK in terms of salary, rent and cost of living, balance.

zl1whqvjs75cdy

Browney7 wrote: »

Yeah €1500 for a nice spacious one bed in Bondi Beach Sydney is so much worse than paying €1400 for a pokey one bed in the Beacon or Dundrum?

At the end of the day, Dublin is Dublin, a small capital city on an inconsequential island on the periphery of Europe. It's not London, Paris or Sydney or New York yet rents are heading that way. It's bananas.

How can anyone justify a market whereby people are able to make gross yields of anywhere from 7 - 10% when the risk free rate is effectively zero?

Because some people actually want to live in Dublin? Always find this flippant "why doesn't everyone just leave" to be a ridiculous attitude. Sydney is roasting in the summer and is miles away from friends and family. There are pluses and minuses to both Dublin and Sydney (or wherever else) but these places are not perfect despite what some people try to peddle on here.

beauf

donkeyoaty0099 wrote: »

Because some people actually want to live in Dublin? Always find this flippant "why doesn't everyone just leave" to be a ridiculous attitude. Sydney is roasting in the summer and is miles away from friends and family. There are pluses and minuses to both Dublin and Sydney (or wherever else) but these places are not perfect despite what some people try to peddle on here.

It's not flippant. The reality is people are priced out of Dublin. In many cases people are priced out of the areas they grew up in and in which perhaps their family and friends live in.

You can move to places in the rest of the country or the uk etc. People have to be drama queens and blather on about going to the other side of the world.

beauf

KwackerJack wrote: »

, then the landlords will cry save us, the government will step in and public money will be used to help the landlords who put themselves into this position!!

Nice rant. Except the govt has never done anything for landlords. In general LLs are leaving the market and the supply of rental properties is reducing. New builds are in general not going to worthwhile for buy to let either.

beauf

beauf wrote: »

In other countries it's a bigger market so more options outside the capital cities.

There are plenty of jobs around the other cities in Ireland also but for some reason unknown to me people want to pay through the nose to live in Dublin*.

*excluding people from Dublin who want to stay there close to family etc.

beauf

Browney7 wrote: »

...How can anyone justify a market whereby people are able to make gross yields of anywhere from 7 - 10% when the risk free rate is effectively zero?

Risk fee? what do you think that means.

Ray Palmer

Stella Clever Strapless wrote: »

There are plenty of jobs around the other cities in Ireland also but for some reason unknown to me people want to pay through the nose to live in Dublin*.

*excluding people from Dublin who want to stay there close to family etc.

Some reason? There are higher paying and more varied jobs in Dublin. If a company you are working for closes you have other options or maybe you just want to change jobs.

Browney7

beauf wrote: »

Risk fee? what do you think that means.

Bank deposits at 0.5% for instant access, .3% on ten year German gov bonds, take your pick.

Browney7

Browney7 wrote: »

By expenses I assume you are including the capital repayment proportion of the mortgage? That's not an expense since when the mortgage is paid off you'll have a nice asset paid for that you can sell. Not sure why landlords feel that tenants should be paying enough to cover the capital and interest and expenses to be honest but that's what the "market" decides I guess.

Of course the mortgage repayment is an expense. If I wasn't at the absolute minimum braking even on everything but ideally clearing profit after mortgage capital payment, interest and all expenses I wouldn't get into the business of being a LL. Why on earth would you invest in something that you know would cost you money every month.

Ray Palmer

Ray Palmer wrote: »

Some reason? There are higher paying and more varied jobs in Dublin. If a company you are working for closes you have other options or maybe you just want to change jobs.

It very much depends on the job but in general I would very much question how much more jobs pay in Dublin than else where. An engineer in a multinational medial device company in Cork or an IT project manager in an IT multinational bin Galway will earn pretty much exactly the same as someone in the same job and grade in Dublin. Their cost of living will also be lower so even if they earned a bit less they could be better off after rent is paid.

appfry

Xrok12 wrote: »

House prices (both sales and rentals) rise and fall in a cyclical manner. A strange behavior I have observed is the groupthink that whatever is currently happening is the trend that will continue forever. For example, from 2000->2007 everyone thought house prices would keep rising forever, or settle with "soft landing". Then from 2009->2013 everyone thought house prices would keep falling forever, or settle at a really low price. Now from 2015->? the same pattern is repeating. Everyone thinks this upward trend of house/rent prices will continue until the "soft landing" at the top. It clearly doesn't work like that. This aspect of human behavior is documented in a book from 1949 called Human Action: A Treatise on Economics. Well worth a read. The problem now is most people can't wait until the next downturn because of family/work/age and other variables.

And what people fail to realise, in the last economic shock and for the future shocks is that if they are waiting they also need to take into account that they wont have a job.

I have seen about 4 major shocks now.
Just taking the last two.
In the .com bubble high tech people lost their jobs in huge numbers. Some never recovered and got out of the business altogether.
Then during the global financial crisis it was tech jobs that were actually safest and everyone else was hit.

You just dont know, when the next one comes, if you will be any kind of position to live day to day, let alone buy a house.

But memories are short. Very soon people will have forgotten and will be back to the days of lets build 50000 houses a year and pay the people huge sums to work on them, because they will be the ones buying them. Big shock, and ghost estates all over again.

When will it happen. Who knows. Certainly not me. But it will happen

appfry

Browney7 wrote: »

Yeah €1500 for a nice spacious one bed in Bondi Beach Sydney is so much worse than paying €1400 for a pokey one bed in the Beacon or Dundrum?

At the end of the day, Dublin is Dublin, a small capital city on an inconsequential island on the periphery of Europe. It's not London, Paris or Sydney or New York yet rents are heading that way. It's bananas.

How can anyone justify a market whereby people are able to make gross yields of anywhere from 7 - 10% when the risk free rate is effectively zero?

Average the yields over 10 years and see what they are. No point taking the figure when they are at their peak or their trough. The cyclical nature means that in business you always try and make as much as is possible so you can cover the times when you will be up against the wall.

Browney7

Browney7 wrote: »

By expenses I assume you are including the capital repayment proportion of the mortgage? That's not an expense since when the mortgage is paid off you'll have a nice asset paid for that you can sell. Not sure why landlords feel that tenants should be paying enough to cover the capital and interest and expenses to be honest but that's what the "market" decides I guess.

I've just paid my rental income tax on an apartment in Dublin 15.
Bought in 2004 as a home so a 92% mortgage, final phase ended up being 50% higher in cost so i'm nowhere near the highest mortgage and I make a small loss when the interest, property tax, insurance, repairs, maintenance and management fees are added up.

Of course in tax terms I made a profit, if the market doesn't collapse before spring of next year I'll sell and walk away with nothing. Not complaining, did a stupid thing buying somewhere to live, but many landlords are making nothing out of this, the government are getting income and property tax though.

appfry

Deleted User wrote: »

I've just paid my rental income tax on an apartment in Dublin 15.
Bought in 2004 as a home so a 92% mortgage, final phase ended up being 50% higher in cost so i'm nowhere near the highest mortgage and I make a small loss when the interest, property tax, insurance, repairs, maintenance and management fees are added up.

Of course in tax terms I made a profit, if the market doesn't collapse before spring of next year I'll sell and walk away with nothing. Not complaining, did a stupid thing buying somewhere to live, but many landlords are making nothing out of this, the government are getting income and property tax though.

How were your profits in 2009 / 2010 and did the government do anything to help you out if you were hurting?

appfry

appfry wrote: »

How were your profits in 2009 / 2010 and did the government do anything to help you out if you were hurting?

Never made a profit, renting out since January 2010.

beauf

Browney7 wrote: »

Bank deposits at 0.5% for instant access, .3% on ten year German gov bonds, take your pick.

You're inferring something. I'm not entirely sure what orv what the relevence of deposits is here.

_Jamie_

Stella Clever Strapless wrote: »

Of course the mortgage repayment is an expense. If I wasn't at the absolute minimum braking even on everything but ideally clearing profit after mortgage capital payment, interest and all expenses I wouldn't get into the business of being a LL. Why on earth would you invest in something that you know would cost you money every month.

If market rate drops in the future due to increased demand then that's an inevitable scenario. You could try to have the rent high enough to cover all your mortgages and expenses and make some profit but if every other property in the area charges much lower rent, see how you get on with that. In a landlord's market, you have a chance of making a profit. In a tenant's market, you'd be lucky to even break even. The expenses of owning a property and the rate of rent are two separate things. A tenant doesn't care about your expenses. If they are offered a similar property at a lower rent than yours, that's the one they'll go for. To not plan for this scenario is foolish.

Donal55

I read an article this morning re govt considering a rental allowance for families earning upto €55k. so as to try and keep them in homes.

I welcome the fact that the govt are trying to protect families and keep a roof over their head. However my concern would be if a landlord saw that more rental assistance is now available will landlords now increase rents even further.

Donal55

Donal55 wrote: »

I read an article this morning re govt considering a rental allowance for families earning upto €55k. so as to try and keep them in homes.

I welcome the fact that the govt are trying to protect families and keep a roof over their head. However my concern would be if a landlord saw that more rental assistance is now available will landlords now increase rents even further.

Exactly will they just stop messing up the market and build more homes!

Baby01032012

Browney7 wrote: »

By expenses I assume you are including the capital repayment proportion of the mortgage? That's not an expense since when the mortgage is paid off you'll have a nice asset paid for that you can sell. Not sure why landlords feel that tenants should be paying enough to cover the capital and interest and expenses to be honest but that's what the "market" decides I guess.

On the other side I'm not sure why you think landlords should not make a profit on their investment - income less expenses equals profit! Cash flow or yield you could also call it. And have higher taxable income as capital and 25% of interest is not allowable. Which is why it hasn't been worthwhile for landlords to stay in the business which in turn has led to reduced supply.

Donal55

[Deleted User] wrote: »

Exactly will they just stop messing up the market and build more homes!

Thats my feeling entirely. Prior to Kelly getting involved a few years back my daughter would have incremental increases between her self and her landlord which she could manage. Then the property tax was levied which was explicitly stated was for the land lord to pay but that was passed onto her.

Then the landlords were told they couldn't adjust rents for 2 years so she was hit with a further increase before the act was enacted.

As you state if they just pumped the same money into supply it would improve things for people who are not or cannot go on housing lists.
My daughter would qualify for this scheme as she earns less than €55k but all that will happen will be the landlord taking the excess and she will continue to pay as normal.
This wont address the problem.

Lumen

Stella Clever Strapless wrote: »

Of course the mortgage repayment is an expense. If I wasn't at the absolute minimum braking even on everything but ideally clearing profit after mortgage capital payment, interest and all expenses I wouldn't get into the business of being a LL. Why on earth would you invest in something that you know would cost you money every month.

Like a contributory pension?

Browney7

Baby01032012 wrote: »

On the other side I'm not sure why you think landlords should not make a profit on their investment - income less expenses equals profit! Cash flow or yield you could also call it. And have higher taxable income as capital and 25% of interest is not allowable. Which is why it hasn't been worthwhile for landlords to stay in the business which in turn has led to reduced supply.

But you are making a profit on your investment. The repayment of borrowed money (the principal) you didn't originally have is not an expense.

Would you borrow 200k to invest in Coca Cola shares?

Lumen

Lumen wrote: »

Like a contributory pension?

A contributory pension is the equivalent of saving money how on earth can you say that's costing you money?

it the income from your rental is not at the very least covering your mortgage (capital + interest), your expenses and your tax bill then it's costing you money which you won't get back again.

Browney7 wrote: »

But you are making a profit on your investment. The repayment of borrowed money (the principal) you didn't originally have is not an expense.

Would you borrow 200k to invest in Coca Cola shares?

That's simply not good enough, the idea isn't to just pay off the capital it's for the rental to cost you nothing and preferably make clean after tax profit which you can supplement your salary with or put in a savings account.

I have no idea where you have gotten this idea you have of how a rental should work as its similar not how anyone in the business (or otherwise) operates or would even consider operating. Now that's not to say you can't end up in a situation where you aren't covering everything but absolutely nobody enters the business without the intention to cover everything and/or make actual clean profit.

Lumen

Stella Clever Strapless wrote: »

A contributory pension is the equivalent of saving money how on earth can you say that's costing you money?

But you have to pay money out every month as an "expense" according to your logic?

Stella Clever Strapless wrote: »

it the income from your rental is not at the very least covering your mortgage (capital + interest), your expenses and your tax bill then it's costing you money which you won't get back again

You get the money back when you sell the property after paying off the mortgage. Plus capital appreciation.

Interest is an expense. Capital repayment is saving.

Lumen

Lumen wrote: »

But you have to pay money out every month as an "expense" according to your logic?


You get the money back when you sell the property after paying off the mortgage. Plus capital appreciation.

Interest is an expense. Capital repayment is saving.

The money you put into your pension is not an expense anymore than the money you pay into your savings account is an expense.

But to pick a random example the money you would have to pay in property tax if the rent isn't covering it is an expense out of your pocket that you will not see back again.