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Property Market 2019

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    #2792
    The Student
    Registered Users Posts: 1,262 ✭✭✭The Student


    Interested Observer wrote: »
    Why is this normal?

    If a person can purchase something for less than the rental/hire price then common sense would suggest they purchase the item.

    So if a rent is higher than a mortgage people would purchase rather than rent as it would cost less to purchase rather than rent.

    If rent is below a mortgage payment then people would rent as its cheaper and the landlord is getting his mortgage or a large part of it paid and eventually the landlord will own the property.

    For example (a very simple one figs are not correct, just using this to explain my rationale. I am ignoring tax etc) if the mortgage is €1000 a month and the rent is €800 then the landlord has to put €200 to the rent to pay the mortgage. So rather than paying €12000 a year mortgage the landlord is paying €2400.

    At the end of the day the rent is cheaper than the mortgage so its cheaper for the tenant than buying. The tenant should then invest the "savings" they are making into either a pension or some other investment.

    So purchasing a property does not need to be the only way to ensure your accommodation needs in retirement.


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    #2793
    Cuddlesworth
    Registered Users Posts: 13,992 ✭✭✭✭Cuddlesworth


    Mickiemcfist wrote: »
    https://www.independent.ie/business/personal-finance/rents-are-driven-up-as-shift-from-home-ownership-risks-pension-timebomb-38341150.html

    I don't know how many times I've said it, but the rent for life thing really doesn't make sense unless you die at 66.

    Assistant Professor Orla Hegarty, a housing expert from UCD's School of Architecture, Planning and Environmental Policy, said the State's whole pension system relies on 70pc of people not having to pay housing costs when they retire.

    Hate to break it to you Orla, our state pension system has a lot more problems then a couple of additional RA people.


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    #2794
    terrydel
    Closed Accounts Posts: 3,881 ✭✭✭terrydel


    beauf wrote: »
    I think if you can save 2/3 the other 1/3 isn't going to be a problem. As it was this couple had joint income of at least 200k. In very secure jobs.

    The point being they were well with the rules (these were the banks rules) and had difficulty getting a loan. The banks simply weren't lending.

    The rules were immaterial to what loan you could get at that time. The media was full of stories of business's who couldn't get loans either.

    It's not that long ago. Do people not remember?

    The important point here is how much did that 1/3 equate to?
    If its 1mil quid then even their high combined income makes it a huge risk to pay back.


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    #2795
    Mickiemcfist
    Registered Users Posts: 1,585 ✭✭✭Mickiemcfist


    The Student wrote: »
    I think you may be looking at this too simplistic. Assume rents are less than a mortgage (in a normal market this would be the case as was in the period after the crash).

    The difference between the mortgage payments and the rent could be invested in a pension which could be used to pay rent in retirement.

    People do not factor in the savings from renting (in a normal market) and what they could or should be doing with those savings. It would appear people would spend rather than invest/save.

    Yes renting in retirement is impossible if you are relying solely on the State Pension but with proper planning and a bit of foresight paying rent (in a normal market) is possible in retirement.

    Other European countries seem to be able to do it.

    So rather than risk property price speculation they have to hope that they're lucky enough to retire at a point when markets are strong, I dunno man. Bird in the hand & all that. I'd rather own & know I won't be poor when I retire than rent & hope I won't be.


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    #2796
    Interested Observer
    Registered Users Posts: 13,105 ✭✭✭✭Interested Observer


    The Student wrote: »
    If a person can purchase something for less than the rental/hire price then common sense would suggest they purchase the item.

    So if a rent is higher than a mortgage people would purchase rather than rent as it would cost less to purchase rather than rent.

    If rent is below a mortgage payment then people would rent as its cheaper and the landlord is getting his mortgage or a large part of it paid and eventually the landlord will own the property.

    For example (a very simple one figs are not correct, just using this to explain my rationale. I am ignoring tax etc) if the mortgage is €1000 a month and the rent is €800 then the landlord has to put €200 to the rent to pay the mortgage. So rather than paying €12000 a year mortgage the landlord is paying €2400.

    At the end of the day the rent is cheaper than the mortgage so its cheaper for the tenant than buying. The tenant should then invest the "savings" they are making into either a pension or some other investment.

    So purchasing a property does not need to be the only way to ensure your accommodation needs in retirement.

    Ok, any evidence to back all this up?

    There are significant barriers in place when it comes to buying a house that don't exist when renting, i.e. the deposit for one. Renting can be far more convenient and much less of a commitment.

    The figures you give for the LL above, in terms of cash in the short term it is costing them money to rent out the house purely on the mortgage. You also don't factor in all the maintenance costs associated with being an LL renting out a property. This doesn't make any sense, why would anyone do it?


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    #2797
    aloooof
    Moderators, Sports Moderators Posts: 10,597 Mod ✭✭✭✭aloooof


    Interested Observer wrote: »
    The figures you give for the LL above, in terms of cash in the short term it is costing them money to rent out the house purely on the mortgage. You also don't factor in all the maintenance costs associated with being an LL renting out a property. This doesn't make any sense, why would anyone do it?

    Because they are gaining equity in the property.


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    #2798
    The Student
    Registered Users Posts: 1,262 ✭✭✭The Student


    Interested Observer wrote: »
    Ok, any evidence to back all this up?

    There are significant barriers in place when it comes to buying a house that don't exist when renting, i.e. the deposit for one. Renting can be far more convenient and much less of a commitment.

    The figures you give for the LL above, in terms of cash in the short term it is costing them money to rent out the house purely on the mortgage. You also don't factor in all the maintenance costs associated with being an LL renting out a property. This doesn't make any sense, why would anyone do it?

    That's the very point I am making that renting in a normal market would be less than a mortgage.

    The above figs were for illustrative purposes only. A landlord will own the property at the end of the mortgage having only paid €2400 each year although the mortgage was €12k. (Again I am ignoring tax, maintenance costs etc).

    If a landlord got a mortgage for one year and purchased a property for €12k and rented it out and for €800 a month then at the end of the year he has paid €2400 out of his own pocket but has an asset work €12k (again ignore tax, and other costs) Multiply this by 25 yrs and this is how a normal property market should work.


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    #2799
    Interested Observer
    Registered Users Posts: 13,105 ✭✭✭✭Interested Observer


    aloooof wrote: »
    Because they are gaining equity in the property.

    I know, but slowly and it doesn't help you pay the mortgage and the maintenance bills every month.


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    #2800
    aloooof
    Moderators, Sports Moderators Posts: 10,597 Mod ✭✭✭✭aloooof


    Interested Observer wrote: »
    I know, but slowly and it doesn't help you pay the mortgage and the maintenance bills every month.

    No, but anyone purchasing an investment property should have done their due diligence on this. i.e. that they could afford the difference and maintenance bills.

    An investment property costing €200 per month after mortgage / maintenance costs etc. would be a very attractive/lucrative proposition to a lot of people who could afford the cash flow hit. The (admittedly, illiquid) equity acquired would likely be an awful lot higher than that.


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    #2801
    beauf
    Closed Accounts Posts: 22,648 ✭✭✭✭beauf


    aloooof wrote: »
    No, but anyone purchasing an investment property should have done their due diligence on this. i.e. that they could afford the difference and maintenance bills.

    An investment property costing €200 per month after mortgage / maintenance costs etc. would be a very attractive/lucrative proposition to a lot of people who could afford the cash flow hit. The (admittedly, illiquid) equity acquired would likely be an awful lot higher than that.

    200 isn't much of a cushion at time of historically high rents.

    If rents were to fall 50% what then...


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    #2802
    beauf
    Closed Accounts Posts: 22,648 ✭✭✭✭beauf


    terrydel wrote: »
    The important point here is how much did that 1/3 equate to?
    If its 1mil quid then even their high combined income makes it a huge risk to pay back.

    Say its 300k


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    #2803
    aloooof
    Moderators, Sports Moderators Posts: 10,597 Mod ✭✭✭✭aloooof


    beauf wrote: »
    200 isn't much of a cushion at time of historically high rents.

    If rents were to fall 50% what then...

    Which is why I mentioned that someone buying an investment property should do their due diligence.

    I was just trying to demonstrate the point that, in theory, an investment property that is costing someone X amount every month could still be a very good investment.


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    #2804
    The Student
    Registered Users Posts: 1,262 ✭✭✭The Student


    beauf wrote: »
    200 isn't much of a cushion at time of historically high rents.

    If rents were to fall 50% what then...

    Once you are in positive equity less any contributions you have made then you have made money.


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    #2805
    beauf
    Closed Accounts Posts: 22,648 ✭✭✭✭beauf


    The Student wrote: »
    Once you are in positive equity less any contributions you have made then you have made money.

    My point is you can get into trouble if you are stretched at a time of high rents, if rents fall you are stuffed and you have unexpected repairs or extended over holding.

    Which is what happened last time. A lot of LL got out of the market after the crash probably because they were over extended.


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    #2806
    handlemaster
    Registered Users Posts: 6,003 ✭✭✭handlemaster


    aloooof wrote: »
    Interested Observer wrote: »
    The figures you give for the LL above, in terms of cash in the short term it is costing them money to rent out the house purely on the mortgage. You also don't factor in all the maintenance costs associated with being an LL renting out a property. This doesn't make any sense, why would anyone do it?

    Because they are gaining equity in the property.


    You cant eat equity !. You cant do anything with this until you sell.


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    #2807
    The Student
    Registered Users Posts: 1,262 ✭✭✭The Student


    beauf wrote: »
    My point is you can get into trouble if you are stretched at a time of high rents, if rents fall you are stuffed and you have unexpected repairs or extended over holding.

    Which is what happened last time. A lot of LL got out of the market after the crash probably because they were over extended.

    I agree with you but being a landlord is a business. So many think it is easy money. Like any business you have peaks and troughs. The successful landlord expects them and plans accordingly the unsuccessful one does not and can get lucky or badly burned.

    On a slightly separate note the govts treatment of the small landlord will come back to bite them.


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    #2808
    beauf
    Closed Accounts Posts: 22,648 ✭✭✭✭beauf


    I don't think the Govt care other than if it effects votes. So they will say lots of platitudes, without actually doing anything of consequence.


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    #2809
    aloooof
    Moderators, Sports Moderators Posts: 10,597 Mod ✭✭✭✭aloooof


    handlemaster wrote: »
    You cant eat equity !. You cant do anything with this until you sell.

    Which is why I mentioned due diligence. If you think fluctuating costs are going to impact something as fundamental as your groceries, then that long term investment is a bad idea. For others, who can afford it, it may still be a good idea.


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    #2810
    Zenify
    Registered Users Posts: 861 ✭✭✭Zenify


    I havent been going to any viewings the past few months. Anyone have any updates, busy etc.? Please mention price bracket and area.


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    #2811
    Bluefoam
    Registered Users Posts: 7,739 ✭✭✭Bluefoam


    Zenify wrote: »
    I havent been going to any viewings the past few months. Anyone have any updates, busy etc.? Please mention price bracket and area.

    Busy: yes, I have been
    Price Bracket: As little as possible
    Area: circa 100m/sq


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    #2812
    Bluefoam
    Registered Users Posts: 7,739 ✭✭✭Bluefoam


    Canada and New Zealand are the most vulnerable to a house price correction given both the price-income ratio and the price-rent ratio are well above their long-run averages, according to Bloomberg Economics. Policy makers may already be acting given Canada’s government has introduced a tax on foreign buyers, while overseas purchases have been banned in New Zealand. Still, the next challenge will be whether global house prices rise as central banks get ready to lower interest rates, with the Federal Reserve set to cut rates for the first time in more than a decade on Wednesday.

    Ireland looking reasonably safe according to the graphic...

    https://www-bloomberg-com.cdn.ampproject.org/v/s/www.bloomberg.com/amp/news/articles/2019-07-30/canada-nz-most-vulnerable-to-house-price-corrections-graphic?amp_js_v=0.1#referrer=https%3A%2F%2Fwww.google.com&amp_tf=From%20%251%24s&ampshare=https%3A%2F%2Fwww.bloomberg.com%2Fnews%2Farticles%2F2019-07-30%2Fcanada-nz-most-vulnerable-to-house-price-corrections-graphic

    486862.jpg


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    #2813
    cruizer101
    Registered Users Posts: 3,205 ✭✭✭cruizer101


    Bluefoam wrote: »
    Ireland looking reasonably safe according to the graphic...

    Thats a shockingly hard graphic to read, its like someone just saw the option and thought they were being clever picking it instead of a bar chart to be unique, there is a reason bar charts are common, they are easy to read. Don't pick a fancy chart unless it is adding value in some way, this isn't.


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    #2814
    Bluefoam
    Registered Users Posts: 7,739 ✭✭✭Bluefoam


    cruizer101 wrote: »
    Thats a shockingly hard graphic to read, its like someone just saw the option and thought they were being clever picking it instead of a bar chart to be unique, there is a reason bar charts are common, they are easy to read. Don't pick a fancy chart unless it is adding value in some way, this isn't.

    We'll thanks for that, next time I read the news I'll be sure to criteque the journalists who present it... & I'll wait till they have reconfigured it before I dare to share it...

    how is your cubicle today? has someone turned down the airconditioning? are you a little grumpy? did someone use the wrong colour in an excel spreadsheet today? maybe try to get out for some fresh air... are you allowed, or will it cause you additional distress? bless...


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    #2815
    Bob24
    Registered Users Posts: 10,905 ✭✭✭✭Bob24


    cruizer101 wrote: »
    Thats a shockingly hard graphic to read, its like someone just saw the option and thought they were being clever picking it instead of a bar chart to be unique, there is a reason bar charts are common, they are easy to read. Don't pick a fancy chart unless it is adding value in some way, this isn't.

    The data visualisation is horrible alright. But the data itself is relevant to the discussion.


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    #2816
    helimachoptor
    Moderators, Science, Health & Environment Moderators Posts: 21,655 Mod ✭✭✭✭helimachoptor


    Myhome just tweeted a load of price updates around south country dublin (blackrock/foxrock/monkstown etc)

    Probably more price rises than drops, and just looking at it, the increases are greater % wise than the drops

    odd: it looks like these are all now sold and they were just updating the price


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    #2817
    AlmightyCushion
    Moderators, Education Moderators, Technology & Internet Moderators Posts: 35,078 Mod ✭✭✭✭AlmightyCushion


    Bluefoam wrote: »
    Ireland looking reasonably safe according to the graphic...

    https://www-bloomberg-com.cdn.ampproject.org/v/s/www.bloomberg.com/amp/news/articles/2019-07-30/canada-nz-most-vulnerable-to-house-price-corrections-graphic?amp_js_v=0.1#referrer=https%3A%2F%2Fwww.google.com&amp_tf=From%20%251%24s&ampshare=https%3A%2F%2Fwww.bloomberg.com%2Fnews%2Farticles%2F2019-07-30%2Fcanada-nz-most-vulnerable-to-house-price-corrections-graphic

    486862.jpg

    I'd prefer to see the 2 metrics split out into separate graphs. Rent prices have sky rocketed here in the past 4 years so our price to rent ratio probably looks good but only because rents have gotten so high. Even if our price to income ratio got a lot worse, our relatively good price to rent ratio would mask that.


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    #2818
    aloooof
    Moderators, Sports Moderators Posts: 10,597 Mod ✭✭✭✭aloooof


    Bluefoam wrote: »
    We'll thanks for that, next time I read the news I'll be sure to criteque the journalists who present it... & I'll wait till they have reconfigured it before I dare to share it...

    how is your cubicle today? has someone turned down the airconditioning? are you a little grumpy? did someone use the wrong colour in an excel spreadsheet today? maybe try to get out for some fresh air... are you allowed, or will it cause you additional distress? bless...

    Cruizer was criticising the graph, not criticising your posting of it. Don't take it so personally.


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    #2819
    cruizer101
    Registered Users Posts: 3,205 ✭✭✭cruizer101


    Bluefoam wrote: »
    We'll thanks for that, next time I read the news I'll be sure to criteque the journalists who present it... & I'll wait till they have reconfigured it before I dare to share it...

    how is your cubicle today? has someone turned down the airconditioning? are you a little grumpy? did someone use the wrong colour in an excel spreadsheet today? maybe try to get out for some fresh air... are you allowed, or will it cause you additional distress? bless...

    I've no issue with your posting it, it is relevant and valuable to the discussion, but why do bloomberg complicate what is relatively simple data.

    I'm also not sure about combining house price to income and house price to rent, how are they combined?


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    #2820
    Zenify
    Registered Users Posts: 861 ✭✭✭Zenify


    Is that chart and article saying Ireland is 13th in the world to be at risk of a housing bubble? I cant figure it out.


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    #2821
    cruizer101
    Registered Users Posts: 3,205 ✭✭✭cruizer101


    Zenify wrote: »
    Is that chart and article saying Ireland is 13th in the world to be at risk of a housing bubble? I cant figure it out.

    It says compared to 2015 (2015 = 100) the combination (what combination I don't know) of our house price to income and house price to rent has increase about 20%.
    Where as New Zealand and Canada has increased by 80%.
    So because they have increased so much they are potentially at more risk of a house price collapse

    Edit:
    Decided to look a it further
    From CSO house price index Jan 2015 77.3, May 2019 107, thats a 38% increase.
    From Daft rental report rental index Jan 2015 120, Dec 2018 179 thats a 50% increase.
    (I know dates different but that most recent I could easily find)

    Average Income Jan 2015 700pw, Dec 2018 760pw thats a 8.5% increase. (Just got this from a line chart on Irishtimes)

    House-Price to income increase is about 25% increase.
    House-Price to rent increase is about 8% decrease (this is due to massive increase in rent )

    Combined they got 20% increase, maybe some weighted average based on how many live in each.
    I can't really see the value in combining them, to me they are very different measures, maybe I'm missing something.
    Rent to income seems more relevant, 36% increase.


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