"average Dublin house prices should fall to ‘the €300,000 mark" according to Many Lou McD.

DataDude

https://www.boards.ie/discussion/comment/121606163#Comment_121606163

The best way to unlock a clogged up market is new supply. The best way to get more supply is higher prices. Transaction have been rapidly increasing since the crash (COVID aside). As we have seen before, falling prices causes transactions to drop significantly as you simaltaneosuly lose new supply and have existing owners keen to ‘wait it out’.

It’s a tricky problem and will take time to solve. I think it is important for people to acknowledge all indicators are going the right way for the last 12-24 months.

• more houses are being built every year

• more first time buyers are getting homes than any year since 2007 and it’s increasing fast

• house prices are falling relative to wages in the first time since I don’t know when.

I fear people will lack the patience required to solve a very deep rooted and complicated problem and instead turn to extreme reactionary policies that are almost certain to break things in some other way.

Blut2

https://www.boards.ie/discussion/comment/121603413#Comment_121603413

I said capital appreciation in the housing market is almost guaranteed over the long term for a landlord, ie very obviously yes not in a cherry picked 3 year recessionary period. No landlord should be buying property to rent out for 3 years and then sell.

Since the foundation of the Irish state Irish house prices have increased, on average, consistently, for over a century now. They're currently at the highest ever. I, and most other landlords and analysts, would be quite comfortable predicting that house prices in the year 2050 will be higher than now. Because for the opposite to occur would require reversing 100 years of performance of the asset, and going against all economic theory. It is not, in fact "very likely", that prices will fall over the long term - its very, very statistically unlikely.

Your maths are horrendous from the very first point. If you have a property on a 30 year mortgage from today, that rents for €1400pm in 2024, its going to rent for much, much more than that over time. Rents aren't going to stay static for 30 years. This alone completely ruins your entire argument...

And even with your awful maths you've still made a profit of €216,500 - literally hundreds of thousands of euros, for doing very little actual day-to-day work compared to someone working a full time job to earn that.

Your comparison to a savings account is also very bad maths - to put in 1400 per month that would assume the comparison is you're renting your property out at 0 euros per month.

If you're a landlord, and your grasp of maths is this bad, then thats very clearly why you're not making money. Its not from a lack of capital appreciation (which has been consistent and reliable in Ireland for a century), or from low rents (which are at their highest in the history of the Irish state currently, and still growing every year).

MegamanBoo

https://www.boards.ie/discussion/comment/121606225#Comment_121606225

Any indications I've seen are that we've pretty much peaked in terms of construction output.

And as for house prices decreasing... I'm not so sure in practical terms.

With higher interest rates, prices staying still is the same as prices increasing in terms of affordability.

DataDude

https://www.boards.ie/discussion/comment/121606321#Comment_121606321

It is concerning that we appear to be approach maximum construction output and think all ideas to increase that are welcome. I know for sure reducing prices dramatically will not help construction output.

On affordability, for the vast majority it’s about price to income limits as it’s almost always cheaper than renting. We weren’t celebrating ‘affordability improving’ when mortgage rates dropped down to 1.95%. Everyone was referencing the increasing prices. Can’t have it both ways when rates start to go back up again.

HerrKuehn

Another way to get prices down would be to reduce demand. They could bring in new central bank LTI rates of say a max of 1x earnings or something like that. Guess not a lot would get built and people would be complaining they can't borrow enough.

hometruths

https://www.boards.ie/discussion/comment/121606225#Comment_121606225

The best way to unlock a clogged up market is new supply. 

Assuming you're talking about new build supply, I'd disagree with this.

Transaction numbers might have been increasing, but that's largely driven by increased numbers of new builds. Turnover of existing stock remains extremely low by historic standards.

Most new builds are bought by FTBers, Investors, Housing bodies, govt etc. none of which does anything to free up an existing unit to get musical chairs going. People looking to trade up/down/sideways are stuck.

Of course new build supply is important, but in order to unclog the current market, greater numbers of existing stock need to be on the market. It's a catch-22 - the barrier to 2nd hand homes coming on the market is the lack of 2nd hand homes on the market.

I'm not suggesting we abandon the strategy of increasing new build numbers, but there are a number of inevitable delays to those properties becoming available.

In the meantime there is plenty that could be done now that would have an effect on 2nd hand supply in the short term, but nobody is even talking about the low turnover rate let alone discussing measures that could be used to increase it.

MegamanBoo

https://www.boards.ie/discussion/comment/121606364#Comment_121606364

Surely that depends where the increased supply is coming from?

And wouldn't is also depend on the state of the market?

But do tell us why you know for sure...

GSBellew

https://www.boards.ie/discussion/comment/121606281#Comment_121606281

Hmm, ok, the theoretical profit I showed is taking your rent payment into account, you may want to re read that part.

Sale Proceeds after 30 Years € 700,000.00

Less CGT on disposal € 115,500.00

€ 584,500.00

Mortgage repayments 30 Years € 504,000.00

€ 80,500.00

Plus your rental payments after tax € 216,000.00

€ 296,500.00

Less my initial deposit € 80,000.00

Net Profit after 30 years € 216,500.00

I'm not sure you understand that the cost of financing the property via the mortgage is higher than the purchase price do you?

It is not a simple thing of it being 350k today, 700k then, profit = €350k, the interest on the €270k mortgage works out at € 234,000.00 in the 30 years, again I used a mortgage calculator from one of the main irish banks to arrive at the figure.

If you suggest I only save the net amount less your net rental amount I would have to deduct the rental income from the profit, taking it down to €500.00

Eg if there was no rent and the house was idle:

Cost of house € 350,000

Sale Proceeds € 700,000

"Profit" € 350,000

CGT € 115,500

€ 234,500

Less Interest € 234,000

€ 500

€ 216,500 over 30 years is € 138.46 per week, it is nothing in the grand scheme of things, you say it is a lot compared to someone in a full time job? if you are not earning €138.46 or close to it in a day you need to look at getting another job, a minimum wage job has someone at €99.06 per day.

Yes I understand that rental payments would increase, interest payments are likely to also & I have not allowed for inflation, maintenance costs, insurance, property taxes.

Can you show my how much you believe a landlord would make in this hypothetical scenario and explain why you would choose to rent and not buy if it is so profitable.

GreeBo

https://www.boards.ie/discussion/comment/121606006#Comment_121606006

Its almost like you are saying that a bunch of people will need to release equity in their homes to pay for those upgrades...that'll work well with 30%+ drop in value.

GreeBo

https://www.boards.ie/discussion/comment/121606033#Comment_121606033

But if the price drops to 300K it doesnt matter if I want to sell now or in 5 years right...unless SF are only dropping the prices for less than 5 years?

MegamanBoo

https://www.boards.ie/discussion/comment/121607341#Comment_121607341

The drop in house price can only come with construction costs decreases.

If costs don't decrease these would be the expenses somebody in my situation, a mid sized detached 80's or 90's built house, could expect to be looking at in the next 15 years or so, based on today's going rates.

Rewire - 15k

Reroof - 30k

Retrofit - replace doors and windows, new heating system, increase insulation and bring house to heat-pump air-tightness standards. - 100k (This will vary depending on the design and age of your house). https://www.euractiv.com/section/energy-environment/news/eu-agrees-2040-fossil-boiler-ban-in-revamped-green-buildings-law/

That's about 10k per year, without any normal maintenance costs.

Yet FFG have done nothing to tackle labor shortages in construction but have signed us up to remove fossil fuel home heating . Wouldn't like to be selling that come the next election.

Blut2

https://www.boards.ie/discussion/comment/121607239#Comment_121607239

Using your own assumptions of a 350k property with an 80k deposit, and 270k mortgage of 30 years, with a starting point of 1400pm rent, and the landlord already being in the top income bracket. The attached is what we get using the current standard mortgage assumptions if you approach a bank for a buy to let mortgage.

This is for the first 5 years of the mortgage, and the last 5 years, for brevity.

Thats including mortgage interest obviously. And annual costs for things like repairs, which you haven't accounted for. And only a 90% occupancy rate.

This means for an initial 80k investment, and 28k negative cash flow over the decades, you're left with an €825k asset after 30 years. Circa €715k of appreciation on your investment, or €24k per year. Thats more than a lot of workers in full time, 40hour a week, jobs earn.

CGT applies to any gains on stocks, PAYE taxes on dividend income, and DIRT on savings, so what exact tax free alternative are you suggesting that gives better returns, for a similar or less effort? Turning €110k into €825k over 30 years, from something that requires an hour two a week of effort at most, is very very good business.

This is all also despite some of your assumptions being rather questionable - what property would you buy in Dublin for 350k and only rent out for 1400e pm today? 350k woud get an apartment with closer to 2k a month rent these days. And 25% of landlords in Ireland currently pay no income tax whatsoever, with plenty more in the lower tax bracket. Only some are in the top bracket. Adjusting for both of those makes things wildly more profitable for the landlord.

I really hope you aren't a landlord, because your maths are utterly incorrect in every way.

GreeBo

https://www.boards.ie/discussion/comment/121607440#Comment_121607440

I find it interesting that you completely ignored my point about how reduction in house value and/or negative equity would impact ones ability to finance any retrofit via a remortgage.

MegamanBoo

https://www.boards.ie/discussion/comment/121608252#Comment_121608252

I just thought it a ridiculous point.

Why would anyone want construction costs to stay high, to keep their house value inflated, so they can borrow more to pay for high construction costs???

GreeBo

https://www.boards.ie/discussion/comment/121608379#Comment_121608379

I dont believe anyone said that?

What I did say was that its going to be hard for people to raise money from their biggest asset if the value of it drops by 30+%.

This was on the back of you detailing how much money people are going to need to spend retrofitting their houses.

GSBellew

https://www.boards.ie/discussion/comment/121608033#Comment_121608033

So in your example the rent goes up but the repayments remain static? Considering you have the rental income is positive in growth, repayments are static and your predicted end value is €124k more the figures are going to be skewed in your favour. You have also decided to rent at the mortgage cost, not sub cost as previously suggested by yourself.

Throw up your totals, as per my post, purchase price, total cost of finance etc, show me the NRV of the asset after 30 years

I used €350k (look at the title, 300k....) if I used €750k with whatever rent you wanted its all the same really seeing as we are talking a relative increase over a period, it could be a house anywhere for the sake of it.

Not a landlord, presume you are not a homeowner, which is bewildering seeing as its the only way going buy your logic.

For the savings, https://personalbanking.bankofireland.com/investments-regular-saver-calculator/ knock yourself out

FYI note the exit tax of 41%

Assumptions

• Minimum investment term of 5 years
• Maximum investment term of 50 years
• Monthly premiums are flat and do not increase over time
• Investment Growth of 3.25% pa for medium-high risk is assumed
• Fund Management Charge of 1.5% is assumed
• Exit tax of 41% is assumed.
• Fund Levy of 1% is assumed.

Blut2

https://www.boards.ie/discussion/comment/121609006#Comment_121609006

Do... do you know how mortgages work? Do you think mortgage repayments increase with inflation? At this stage I genuinely don't think you know how mortgages work.

I am literally a landlord, who has done the maths on this before making the investment. As I said already in this very thread. Thats why I know how the figures work.

I honestly don't know whether to laugh or explain this to you. Can you read your screenshot? Someone investing in your savings account has put in €584k over 30 years, and now has an asset value of €692k. Vs the investment of €110k over 30 years in the house, with an asset value of €825k after those 30 years (and thats allowing for mortgage interest, tax on rental income etc, as shown in my screenshot). Can you understand the difference between those numbers?

This is because in *your very own constructed scenario, with your own dubiously low rental income figures* the landlord has only invested €30k net total over the 30 years, after the initial 80k. The net cash flow per month for this is not negative €1400, it averages out to negative €83 a month. Whereas with the savings account the negative monthly cash flow is €1400 per month, every month, for 30 years.

Thats at a time of the highest interest rates of the last 30 years (which benefit the bank account and penalise the mortgage holder), too. Just to make things even worse. And with the stated rental income about 40% lower than it would be in the real world on a property of that value, and income tax on the landlord anywhere from 40-15% higher. And even with those very skewed figures your investment comes nowhere close...

Thats just how wildly profitable it is to be a landlord in Ireland. Theres a reason everyone who has money invests in multiple properties here.

Blut2

For additional reference, to put things in even more context, the current average rental yield in Dublin on a 2bed apartment, with an average value of €355k, in 2024 is 8.6%. Which gives a yearly income of €30.5k, or over €2,540 a month. Rather more than the figures used in the above of €1,400 a month. And thats not not even inclunding the substantial capital appreciation that will also be occurring.

Again, thats how insanely profitable it is right now to be a landlord in Ireland. Even one charging just over half the market rate like in the €1400pm example, who owns just one completely average not high end apartment, with a full mortgage, will make more money per year in net income over the duration of the investment than large numbers of people working full time, 40hour a week jobs. For about an hour a week of time/effort.

GSBellew

https://www.boards.ie/discussion/comment/121609133#Comment_121609133

They increase with interest rates....

GSBellew

https://www.boards.ie/discussion/comment/121609197#Comment_121609197

You said that a landlord should rent below mortgage cost.

"I'm not suggesting anything, I'm pointing out the financial realities of being a landlord in Ireland in the year 2024. Which is that its not required to have your rental income cover your mortgage to make a large, long term, financial profit. Anyone telling you otherwise is either lying, or very bad at maths."

GSBellew

https://www.boards.ie/discussion/comment/121609197#Comment_121609197

Perhaps I read your post incorrectly in that you appeared to be saying that landlords should rent at a loss based on future value.

Of course there is money in renting something at €1k a month over the mortgage cost, I have absolutely no doubt that landlords are making money and so they should, they are the ones putting the money up in the first place.

PS not everything is in Dublin, I have zero reference as to market rates in Dublin, I can only use local references which tie into the threads €300k value / cost.

Bass Reeves

https://www.boards.ie/discussion/comment/121609197#Comment_121609197

Taking your scenario above and there us probably a lot of 2 beds making sub2K/ month.

Of the 30K apartment management fees will be the bones of 2k/ year maybe a tad with as well as the risk of a cash call by the OMC.

Property tax approx 400 not tax deductible so it take double the money if you are at the high rate.

If you use an agent to manage you tenancy the fee is usually about a months rent. Then there is risk on average over a five or ten year span you will only average 11 rental months per year. So yout 30k is now below 23k before you even start into maintenance costs

You will probably replace statutory appliances every five year, washing machine ( dryer as well if an apartment) microwave, fridge freeze, hob and oven as well as electric shower probably 500+/ year,

A repaint will cost 2-3k every five years, electrical certificate every three years 5-600 euro.

To clean and remove rubbish between tenancies, 1-1.5K every 2-3 years.

The real killer us a tenant over holding and not paying rent or seriously damaging the property anything from 5-20k in losses. Once is enough to really sicken you.

HAP tenant goes in arrears with the LA you get nothing and they pay you in arrears and you know nothing about it until 7-10 days before they stop it. Have a friend that has to deal with this 3+ times every year.

Then you are quoting upper end Dublin rates. A two bed apartment in Limerick city rents for 800-1500/ month at the top end. Costs will be 2/3 of Dublin costs.

Edit

My son was renting a two bed apartment in Dublin with another lad two years ago. Cost was 880/month each or 1760/ year. Landlord sold up after 12 months and he moved to a house share @800 month for him for the master ensuite.

The apartment was in Ballsbridge it sold for above 450++k I think. If the LL had risen it by statutory amounts it would be 915 each or 21960/ year at present. A yield of 5%. I say he was an accidental LL

Clo-Clo

https://www.boards.ie/discussion/comment/121609197#Comment_121609197

Divide than number by 2, a little thing called tax. So the landlord comes out with €15k give or take, before overheads🤬

Didn't you claim to be a LL? 🤔

The answer to how much tax do people pay on rental income:

It depends on your tax rate and if you have to pay PRSI and the USC levy. You will pay income tax on your rental profit at either 20% or 40% whichever rate applies to you. You will pay PRSI at 4% if it applies. You will pay the USC at whatever rate applies to you, most likely the 8% rate.

Blut2

https://www.boards.ie/discussion/comment/121609748#Comment_121609748

25% of landlords in Ireland pay no tax on their income whatsoever. A significant amount more are in the lower tax bracket.

The only realistic investment alternative, stocks, have the same tax rate for dividend income.

What exact investment are you suggesting is better?

Blut2

https://www.boards.ie/discussion/comment/121609300#Comment_121609300

Do you... think interest rates increase consistently over 30 years every year, the way rent does with inflation? You realise thats insane right?

Bass Reeves

https://www.boards.ie/discussion/comment/121609916#Comment_121609916

Can you give me a link to prove that. I seldom ask anyone to link anything but that is pure BS.

Blut2

https://www.boards.ie/discussion/comment/121609302#Comment_121609302

No, I said a landlord can still make huge financial gains from their investment long term while renting at below mortgage cost. As I then showed with my figures. And as that quote literally says.

https://www.boards.ie/discussion/comment/121609356#Comment_121609356

This thread is literally about housing in Dublin. "Dublin" is in the thread title. Why would you be posting about housing anywhere else?

Blut2

https://www.boards.ie/discussion/comment/121609444#Comment_121609444

All of those figures are averaged for and accounted for in long term buy to let calculations like the above.

Again, this thread is literally titled "Dublin house prices". Why would I quote figures for anywhere else?

And for reference I didn't quote remotely upper end. €355k is the average price for a 2bed apartment in Dublin in late 2023. High end would be something closer to double that.

Either your figures are made up, or your son was being insanely under charged, or the apartment was a kip. 1760e pm in 2022 for an average 2bed apartment in Ballsbridge was wildly below the normal market rate.

If the apartment sold for "above 450++k" and the yearly rental was 21k per your figures thats closer to 4% yield. When the average for similar in Dublin is 8.6%. So less than half the going market rate. Thats not remotely normal/common.

https://www.boards.ie/discussion/comment/121609923#Comment_121609923

"OFFICIALS WITHIN THE Department of Finance warned against the tax break for landlords that was introduced in Budget 2024. Department officials also estimated that more than one in four landlords will pay no income tax on the rents they charge as a result of the tax break."

https://www.thejournal.ie/department-warned-finance-minister-against-tax-break-for-landlords-6267280-Jan2024/

Clo-Clo

https://www.boards.ie/discussion/comment/121609916#Comment_121609916

So 75% pay tax and you made a business case based on not paying tax 🤦‍♂️😂

Maybe post the right numbers instead of spreading nonsense might be a start

Blut2

https://www.boards.ie/discussion/comment/121610293#Comment_121610293

I didn't make any business case based on not paying tax, I included an assumption of the landlord being fully in the top tax bracket for all rental income in the figures I posted.

Despite the fact that in real life large numbers of landlords do not pay tax at this rate.

And, again I'll ask since you'e ignored it: what specific investment are you suggesting offers better returns over the long term than property in Ireland in 2024, if being a landlord is so awful according to you?