Is there any point?

MayBea

Abu94 wrote: »

It's super annoying as it's a third house already that it has happened to so I can add minimum of 25% to the asking no matter the house or condition as there is someone always willing to pay way more than the house is worth. Just why?

Every second person you see at the viewings is a cash buyer. A proven fact (I think it went down slightly this year to 45%). Every forth or fifth is only partially financing the purchase, having a large deposit of approx. 50% of the asking price. We bought a new built 2 years ago. and before that we viewed 72 houses in a course of a year and we bid on around 20 with no much luck.

LirW

All the people waiting for a crash here, are you cash buyers? If not, in case of a crash, the bank is going to do F all to lend you. Love the people moaning about not buying a few years ago at market's bottom. There was no money back then, banks didn't borrow.

MysticMonk

LirW wrote:

All the people waiting for a crash here, are you cash buyers? If not, in case of a crash, the bank is going to do F all to lend you. Love the people moaning about not buying a few years ago at market's bottom. There was no money back then, banks didn't borrow.

I'm 46 and I never met anybody who 'bought at just the right time'..including my parents.

I've heard of people selling at just the right time though and that's the hard part to predict.

sbs2010

The value of a property is more correctly taken to be the underbidder's highest offer rather than the sale price. The difference between the two is the premium that the buyer pays to secure the deal. Small potatoes I guess. But also value is a fickle thing - supply, demand, fashion, affordability etc can change the value very quickly.

The OP's complaint is basically due to one of two things: some buyers have more money than them or some buyers see more potential in the property. That's their business, not the OP's. Where asking prices are either deliberately low or just badly set I do have sympathy. But EAs, although they might be hated by buyers, are simply doing a job to get the highest price.

I do know that one reputable country-wide agency genuinely attempts to price at what they think it will sell at. Doesn't make sense to me personally but that's their way of doing it.

twiddletwaddle

Abu94 wrote: »

House for sale for 160 000, literally someone bid to 210 000 in 2 days and I can guarantee that it is still increasing. Absolutely pathetic that someone is willing to bid such amounts for a ****ty 2 bedroom house that needs a complete renovation. I don't even see the point in trying anymore, literally some smooth operator will come and offer insane amounts over the asking price almost immediately. Are any houses even sold anymore at the asking price? When looking for a house I can immediately add an absolute minimum of 25% over the asking price. If nobody made such stupid offers then the prices would go down.

There needs to be some collective responsibility taken by all who participate in a rising market. Every increased bid counts including any bids which the op made. Every single person who participates in the bidding process contributes to the eventual selling price of a property.

Unfortunately anyone who does not own their own home and is involved in the bidding process is in the exact same position as the op and if there is a limited supply of housing in a particular area the selling price will reflect this fact.

There is a right time to buy and a right time to sell. Now is the right time to sell, a few years ago was the right time to buy. The question the op needs to ask themselves is why they were not in a position to buy a few years ago, when prices were low and everyone was sitting on their hands and not placing bids.

A lot of first time buyers have been holding off buying for years and have managed to save much larger deposits than typical deposits of the previous boom. So the banks lending to them are far less exposed than previously. It was the 100% mortgages that really overheated the market in the previous boom.

I wouldn't give up op, there is a house there for you somewhere. I'm presuming from your posts that you are looking to buy a house in a built up urban area. You don't seem to be put off by a project property. Might be more scope for a successful purchase if you widen your search area and are willing to consider commuting further or living outside of an urban area, where there may be less demand.

Good luck with your search.

CruelCoin

Abu94 wrote: »

If nobody made such stupid offers then the prices would go down.

Abu94 wrote: »

there is someone always willing to pay way more than the house is worth. Just why?

The house is worth exactly what the winning bid is.

Maybe the seller put the starting price at 160k as a lowball to encourage a load of bidders to play off each other? Action house tactics 101.

CruelCoin

Abu94 wrote: »

If I was a billionaire and bid 500k for every house in the area without question then that means that these houses are worth that? Outbidding everyone else. Yeah no ****ing **** I can't afford it being single.

Then you need to share rent with other working professionals.

It's the norm everywhere on the continent and its fast becoming the norm here.

CruelCoin

Peregrinus wrote: »

That in itself is an indication that the market is not functioning well. Logically, it should cost more[/i[ to buy an enduring asset outright than to rent it for a temporary period. If it costs less, some market distortion is ramping up one price, or supressing the other (or both).

A landlord paying a mortgage on a property is going to want, at the very least, to cover that mortgage with the rental income.

After tax/prsi/usc he's paying out 51% of that rental income.

Rental prices need to be higher to enable mortgaged landlords not to turn a loss.

If the rental were happening from some sort of communal pool, then yes i'd agree with you that it's arseways, but unfortunately, the property is owned by someone with bills to pay!

CruelCoin

MysticMonk wrote: »

I'm 46 and I never met anybody who 'bought at just the right time'..including my parents.

I've heard of people selling at just the right time though and that's the hard part to predict.

I did. 4-bed, 3-bath for 105k. Asking prices now around 160k 3 years later.
I observed the prices dipping 130->115->100....stayed there for a month or two, at that moment i put in my bid.

Brother bought in the same town during the boom a 3-bed, 2-bath for 265k.
We bought at polar opposites of the boom/bust.

I pleaded with him not to buy at the time. I was in a position to buy at the time but i did my research and waited.

It really is part of the typical Irish begrudger mentality that it has to be chalked up to luck by some.

Peregrinus

CruelCoin wrote: »

A landlord paying a mortgage on a property is going to want, at the very least, to cover that mortgage with the rental income.

After tax/prsi/usc he's paying out 51% of that rental income.

Rental prices need to be higher to enable mortgaged landlords not to turn a loss.

If the rental were happening from some sort of communal pool, then yes i'd agree with you that it's arseways, but unfortunately, the property is owned by someone with bills to pay!

The landlord is going to want to cover the mortgage but, in the long run, there's no reason why he would expect to. At the end of the mortgage period he's going to end up owning a nice house free of obligations, and there is no reason why the tenant should contribute to that. In principle, he should be willing to pay out more than he receives from the tenant, because he's getting something that the tenant is not. The extra is what he is paying to acquire an asset.

CruelCoin

Peregrinus wrote: »

The landlord is going to want to cover the mortgage but, in the long run, there's no reason why he would expect to. At the end of the mortgage period he's going to end up owning a nice house free of obligations, and there is no reason why the tenant should contribute to that. In principle, he should be willing to pay out more than he receives from the tenant, because he's getting something that the tenant is not. The extra is what he is paying to acquire an asset.

You're proposing that the tenant should cover a portion of the costs only?

You're not placing any value on the risk taken by the landlord.
What if prices crash and the bank forecloses? Then the landlord is out by tens/hundreds of thousands of lost costs with no asset to show for it.
Likewise, same happens if the landlord loses their job or income.

In the same way that cheques are not actually money untill they cash, that house is not a house, but a liability untill such time as the deeds are returned.

The landlord shoulders all the risk with the tenant getting all the use for 25/30/35 years and shouldn't contribute anything?

Pffft dude....

gaius c

Peregrinus wrote: »

The fact that the house sold for 50,000 more than the asking price tells me that there were (at least) two people willing to pay substantially over the asking price. Which means (a) this is a freak occurrence, or (b) the asking price was based on a serious underestimate of market demand and, therefore, of market value.

Or it was priced low in order to attract interest and spark a bidding war.

Peregrinus

CruelCoin wrote: »

You're proposing that the tenant should cover a portion of the costs only?

You're not placing any value on the risk taken by the landlord.
What if prices crash and the bank forecloses? Then the landlord is out by tens/hundreds of thousands of lost costs with no asset to show for it.
Likewise, same happens if the landlord loses their job or income.

In the same way that cheques are not actually money untill they cash, that house is not a house, but a liability untill such time as the deeds are returned.

The landlord shoulders all the risk with the tenant getting all the use for 25/30/35 years and shouldn't contribute anything?

Pffft dude....

Why should the tenant pay the landlord to take this risk? The tenant derives no benefit from it. The landlord takes the risk because he hopes to benefit from the upside; he has more reason to carry the downside risk than anyone else does.

I repeat; common sense suggests that it should cost less to rent an asset for a temporary period than to buy it outright. I don't see any reason why houses should be an exception to this rule. Where is is not the case, it's because there is some factor at work distorting the market and either inflating one price or depressing the other. Anyone who buys a house with the intention of letting it out should not assume that that distortion will continue indefinitely.

Varik

Interest on a mortgage is a cost, the premium isn't.

A LL would be smart to cover payment of both from the rent after tax, but it's zero sum game and it's about as much of a loss otherwise as Conor MacGregor walking away from a "loss" with 70m.

Same for the tax, Interest should be fully deductible but those saying the full monthly payments should be haven't a clue.

CruelCoin

Peregrinus wrote: »

I repeat; common sense suggests that it should cost less to rent an asset for a temporary period than to buy it outright. I don't see any reason why houses should be an exception to this rule.

Can rentals charge more for the car over its usable rental lifetime than the car is worth.
Why shouldn't the rental cost be less than owning it?

The common sense argument does not allow for wear and tear, bad eggs, etc. It assumes everything runs perfectly all the time, which it does not.

It takes one bad tenant who makes **** of the place to undo the income made from years of rental.
It takes one non-payer and the accompanying 5 years of non-payment as it drudges through the courts to wreak more damage still.

In the same way Rentals cars are shagged well before privately cars with similar mileage are and therefore demand a premium, so it is with home and needing a premium to handle the above.

Peregrinus

Cars are a depreciating assets, so the economics of rental work differently. If you buy a car to rent it out for a couple of years, at the end of that period you expect the car to have a nil value. Therefore, you won't enter into the transaction unless you expect the rental income over the couple of years to exceed the entire cost of acquiring, insuring, servicing, etc the car, and provide you with a margin of profit.

But with a house, when the mortgage has been cleared you expect to have unencumbered title to an asset worth hundreds of thousands of euros. It would be irrational of you not to expect to pay for that. It would be equally irrational to expect others, who won't end up owning the house, to pay for it. If you're not prepared to wear that cost for it when you'll end up owning the house at the end of the day, why in God's name would you expect them to wear it? In what world would it be rational for them rather than you to wear the cost of you acquiring the unencumbered title to a valuable asset?

Obviously the rent they pay you doesn't just represent what you get for allowing them to occupy the house. You also have to insure the house, you have to furnish it, you have to decorate it, you have to maintain it, you have to pay any taxes, rates, etc levied on it. So the total payment which they give you may well be more than the amount you lay out simply to acquire title to the house. But, when you strip out the cost of all those other things, the net rental - the amount you trouser in return for allowing them to occupy the house - would normally be less than the cost of buying the house. If this isn't so, there is some factor at work distorting the market. You shouldn't assume that this will continue indefinitely.

That's not to say that buying a house to let it out can't be profitable. It can. But you should expect a significant part of the profit to be found in the capital value of the house that accrues to you when the mortgage is paid off and the tenant leaves. There's absolutely no reason to expect the transaction still to be profitable if you disregard the capital value of the house; common sense suggests that, if that's how you measure profit, it won't be profitable.

martineatworld

CruelCoin wrote: »

Can rentals charge more for the car over its usable rental lifetime than the car is worth.
Why shouldn't the rental cost be less than owning it?

The common sense argument does not allow for wear and tear, bad eggs, etc. It assumes everything runs perfectly all the time, which it does not.

It takes one bad tenant who makes **** of the place to undo the income made from years of rental.
It takes one non-payer and the accompanying 5 years of non-payment as it drudges through the courts to wreak more damage still.

In the same way Rentals cars are shagged well before privately cars with similar mileage are and therefore demand a premium, so it is with home and needing a premium to handle the above.

You can't compare it to renting a car. A car is a depreciating asset while is a house is usually not.
The rental yield on a house should include a risk premium for the risk of non payment etc. It is a large risk given the variability and extent of possible cost but it's a risk the landlord takes to gain a return on their money.

CeilingFly

B.A._Baracus wrote: »

I am no expert in the matters of what causes recession. But didn't the banks giving out loans and people over-paying for houses attribute to it?

Yet here we are again...

Central Bank has very strict rules about lending these days and bank must and do adhere to them.

The problem is there is a lot of cash in the market - anything from technology & banking share options to proceeds from deceased person's estates and that puts a lot of cash into a heated market.

Years ago the estate of deceased person was divided amongst 6-10 family members, but with family size much smaller since the seventies, there is now a much smaller number of people "in the pot".

One case I know of - house in ballinteer, two sons, house sold for over 500k, add in some savings and they got 300k each. Both bought houses and have very small mortages.

Facebook - over 1000 staff. All with share options. Shares at record high. Even after tax, that's a very nice earner.

And above samples are fairly ordinarly people - not the high flying banking staff in the iFSC.

sbsquarepants

MysticMonk wrote: »

I'm 46 and I never met anybody who 'bought at just the right time'..including my parents.

I've heard of people selling at just the right time though and that's the hard part to predict.

There is far too much emphasis put on houses as some form of investment or wealth generator if you ask me - your house is somewhere to live first and foremost. If house prices soar and your house is suddenly worth 2x, 3x, 10x - it only matters if you've a spare one, if you only have 1, then you are no better off in real terms - sell that 1 for 10x and it will likely cost you 10x to buy another. You're back to square one.
The right time to buy is some mysterious combination of when and why you need the damn house and what you can afford at that time.

Say you're renting a room in a house with a few others and your missus comes and tells you she's pregnant with triplets - it doesn't particularly matter whether house prices are historically high or low, you are going to need one in the very near future regardless, you may have a few months or a years grace, but you can't sit on your hands for a decade plotting and scheming so as to time your entry into the market to perfection- even if you could predict the way it will go! (which you absolutely can't by the way, anyone who could actually predict it, would be a gazillionaire property investor, not an internet shíte talk maestro (like myself:D!)

super_furry

If you want a house and can afford it, you're going to pay what you can afford. My wife and I ended up paying just over 10% above the asking price for our house, but it's in a location where we both want to be, which should always be good for our jobs and which will be great for any kids to grow up in. People may consider that we overpaid and going into the process of buying a house a couple of years ago, I didn't think we'd end up paying this much but it's well within our means and it's a house that we're buying for the long term - 20 years at least.

And the kicker - the mortgage on this house will be cheaper than it would cost to rent a similar property in the same location by up to 20%.

CruelCoin

Peregrinus wrote: »

There's absolutely no reason to expect the transaction still to be profitable if you disregard the capital value of the house; common sense suggests that, if that's how you measure profit, it won't be profitable.

If you pay 100% (plus interest) and receive 100% then you're merely getting what you paid for it. That's not profit in any understanding of the word.

We are at the bootom end of the scale in terms of Rental income compared to home value, but nonetheless, the majority of Europe operates as rental paying off a home before the average mortgage term of 25/30 years.

http://www.boards.ie/vbulletin/showthread.php?p=104512484#post104512484

Pofiteering on Rental is de rigeur it would seem, and not a dysfunctional Irish market thing.

Peregrinus

CruelCoin wrote: »

If you pay 100% (plus interest) and receive 100% then you're merely getting what you paid for it. That's not profit in any understanding of the word.

If you buy a house with cash and live in it, you're merely getting what you paid for. Why should you expect to get more than you pay for? And why would that expectation change depending on the purpose for which you buy the house?

I repeat; there's no reason why tenants should be willing to bear the full cost of buying houses, given that they're not buying houses and are (ideally) in the rental market because they have no wish to buy houses. What they want is a much more limited interest in a house. Their rent will of course contribute to the cost of buying the house but, in an efficient market, it shouldn't cover the full cost.

Graham

Peregrinus wrote: »

Their rent will of course contribute to the cost of buying the house but, in an efficient market, it shouldn't cover the full cost.

Why, who says?

I can't think of many other assets that would be acquired in the course of a business that wouldn't be expected to generate a profit over and above the cost of acquiring the asset.

jamesthepeach

Don't forget too that the market isn't static.
There will be bad times and good times throughout the time of the investment.
So a landlord could be making a loss in the bad times and shoukd be able to make up for that loss during the good times by charging enough to negate the period in which he made a loss.

CruelCoin

Peregrinus wrote: »

I repeat; there's no reason why tenants should be willing to bear the full cost of buying houses, given that they're not buying houses and are (ideally) in the rental market because they have no wish to buy houses. What they want is a much more limited interest in a house. Their rent will of course contribute to the cost of buying the house but, in an efficient market, it shouldn't cover the full cost.

1 - because they are willing. Begrudgingly, but willing all the same
2 - because its the going market rate
3 - because in many "pressure zones" the going rate is actually below market value.
4 - and this is the simplest reason - they're paying for a privately provided service. It's up to the seller of the service to set the rate, and if there is a willing purchaser then so be it.

From the link i shared with you, unless the majority of the EU is in a dysfuntional market scenario, the current practice of rental being more than purchase cost IS efficient .

sbsquarepants

Peregrinus wrote: »

I repeat; there's no reason why tenants should be willing to bear the full cost of buying houses, given that they're not buying houses and are (ideally) in the rental market because they have no wish to buy houses. What they want is a much more limited interest in a house. Their rent will of course contribute to the cost of buying the house but, in an efficient market, it shouldn't cover the full cost.

There's only 1 "reason" why anyone should be willing to pay x amount for anything. That reason is they want to, because it beats the alternative - be that paying more for somewhere else, staying with relatives, or sleeping in a bush somewhere.
It's none of the tenants business or concern if they are paying half the cost of purchase or double the cost - their only concern should be "am I willing and able to pay this amount for what I'm getting, ie the temporary rental of this property"

martingriff

For both sales and renting it's the simple concept of supply and demand. There is a house with a number who want to buy the price will go up. Same with rents.

Peregrinus

Graham wrote: »

Why, who says?

I can't think of many other assets that would be acquired in the course of a business that wouldn't be expected to generate a profit over and above the cost of acquiring the asset.

Yes, but the return accruing to the owner includes the residual value of the asset, which in the case of a house is very substantial. Cruelcoin is arguing that the rental over the mortgage period should exceed the entire purchase price plus the cost of borrowing, yielding a profit, and the the residual value of the house is an additional return over and above that. Effectively, in his scheme, you end up acquiring a house, free of mortgage, at a net cost of nil or less than nil.

gaius c

Varik wrote: »

Interest on a mortgage is a cost, the premium isn't.

A LL would be smart to cover payment of both from the rent after tax, but it's zero sum game and it's about as much of a loss otherwise as Conor MacGregor walking away from a "loss" with 70m.

Same for the tax, Interest should be fully deductible but those saying the full monthly payments should be haven't a clue.

Not a good idea. Investors will be even further advantaged against other buyers when it comes to buying properties.

Besides they can get interest as a fully deductible expense any time they want. Just set up a company instead of running it through their own books.

CruelCoin

Peregrinus wrote: »

Effectively, in his scheme, you end up acquiring a house, free of mortgage, at a net cost of nil or less than nil.

Which is fair for assuming 25/30 years worth of risk/maintenance/paperwork etc.