# Is this an anti property investment forum



## ukdavros (8 Mar 2006)

Hi Guys
Reading through some of the posts on this Forum it seems all doom and gloom. Every on that asks about a particular country seems to get the general advice dont do it. 

We have moved from the UK to Ireland, because its much better over here.
We have 3 buy to lets in the UK.
I have just sold my UK Residence and looking to re invest in more properties, Maybe more in the UK and we are also thinking abroad. We were looking at the Orient Palace thing in Turkey, but it seems world war three is about to break out over there.

What suggestions can this Forum offer as where would be a good place to invest if any.

Thanks
Mark and Karen


----------



## RainyDay (8 Mar 2006)

The general question of attitudes on AAM in general & Brendan in particular to overseas property investment is already being discussed on this thread, so I'd ask any posters who want to discuss ukdavos's general comments on this issue to keep discussion to the other thread.

Any posters with answers to the 'good place to invest' question should continue to post on this thread.


----------



## JohnBoy (8 Mar 2006)

hi guys, it is less a case of a bias against property investment per se, rather than the motivations behind it. Reading through a lot of the posts you can see that a lot of (Irish) retail investors are buying properties overseas without carrying out any research as to the suitability of property as an investment for them.

It seems to be a case of I want to buy in Turkey/Bulgaria/Florida/UK etc...can any one provide some advice? Instead of analysing ALL the investment alternatives a lot of people appear to be making the property investment decision based on little more than a desire to own more than one property.

Don't get me wrong - property can be a suberb investment but it needs to be judged as you would any investment - risk; return; tax implications; time horizon liquidity etc...Though it would appear from some of the positing in this form little thought is given to these considerations. It is difficult not to come to the conclusion that a good number of the people buying overseas at present are fairly unsophisticated investors and this is not normally an encouraging sign for any market.

As for places to invest (assuming that you have come to the conclusion that you want/need to increase your exposure to property) i would advise that you look for yeild over capital appreciation - especially given how far the property markets in many countries have come in the past few years.


----------



## Ric (8 Mar 2006)

None of the moderators, who in reality drive AAM, appear to have invested outside of Ireland in property even during the good times and in my view are more useful to smaller investors in equity type plans. The on-line community appears to be biased towards younger people with less in assets and spending, hence the myopic focus on the cost of everything.


----------



## CCOVICH (8 Mar 2006)

The moderators spend a lot of time trying to ensure that we don't let trolls and troublemakers who register under different names drag down AAM.  

Hence we have no time to investigate the wonderful possibilities that overseas property investment may have to offer.


----------



## CCOVICH (8 Mar 2006)

ukdavros said:
			
		

> What suggestions can this Forum offer as where would be a good place to invest if any.


 
Have you browsed the Property Investment forum for ideas?  There are scores of recent threads on where is good/where is not so good.


----------



## ClubMan (8 Mar 2006)

As _RainyDay _said in another thread people should not confuse *skeptical *commentary with *cynical/critical/dismissive* commentary on any investment (on any other discussion topic for that matter). The former is a prudent/logical approach designed to get to a balanced view of all of the pro and cons, costs and benefits, advantages and pitfalls etc. The latter might represent the sort of "blanket condemnation" that certain people accuse others of engaging in but which I don't believe is prevalent on _AAM_.


----------



## ukdavros (8 Mar 2006)

Hi
I agree you have to be Skeptical. I am just looking for some good properties to invest in. Every one of them will have some kind of risk, if it didnt we would all be millionaire property Tycoons.
The Turkey one looked good with the lease back, although it may not last the 10% for 10 years as quoted. A lot of people seem to be buying there so is it that bad.
I would still like some ideas on good places to invest and I can take it from there. I will be doing research and this is part of it. 

Regards
Mark


----------



## ClubMan (8 Mar 2006)

ukdavros said:
			
		

> I agree you have to be Skeptical.


So does that mean that you have changed your views?


			
				ukdavros said:
			
		

> Reading through some of the posts on this Forum it seems all doom and gloom. Every on that asks about a particular country seems to get the general advice dont do it.


----------



## ninsaga (8 Mar 2006)

ukdavros said:
			
		

> Hi
> I agree you have to be Skeptical. I am just looking for some good properties to invest in. Every one of them will have some kind of risk, if it didnt we would all be millionaire property Tycoons.
> The Turkey one looked good with the lease back, although it may not last the 10% for 10 years as quoted. A lot of people seem to be buying there so is it that bad.
> I would still like some ideas on good places to invest and I can take it from there. I will be doing research and this is part of it.
> ...



Lookded at that Orient Turkey one at a recent property expo...to me it looked like that you pay your money & get it back in rental over a number of years & that you get to use the property for 6wks per year yourself...if thats the same one.....being developed by some Dutch bloke.... I avoided because of the obvious uncertanties in that region on the resale...

ninsaga


----------



## ukdavros (8 Mar 2006)

ClubMan said:
			
		

> So does that mean that you have changed your views?


 
Not totally
It is a lot easier to come up with reasons not to do things than to come up with positives. 
It is like saying dont buy anything anywhere because the earth is way over due getting hit by another Meteor.
Yes Turkey could end up with a cival war, but it was more difficult to predict what happend in Yugoslavia. There are a lot of problems in a lot of countries.
anywere I buy will have a risk attached to it and you have to decide how bad or good that risk is.
There are going to be people on here with a lot more experience than me and I was hoping to tap into some of that experience.
All I wanted was some ideas on some good places to buy as far as the opinion of people on this board. But that I guess is not likely to happen because people are likely to keep that information to themselves.

Regards
Mark


----------



## ClubMan (8 Mar 2006)

ukdavros said:
			
		

> It is a lot easier to come up with reasons not to do things than to come up with positives.


 Just because somebody says something like _"foreign jurisdiction tax issues must be considered" _doesn't mean that they are presenting this as a reason not to do anything but rather as something that needs to be factored in and analysed.


> It is like saying dont buy anything anywhere because the earth is way over due getting hit by another Meteor.


 What is? Perhaps you could give a specific example of where somebody said the equivalent of this in the context of foreign/domestic property investment?


> Yes Turkey could end up with a cival war, but it was more difficult to predict what happend in Yugoslavia. There are a lot of problems in a lot of countries.


 I would be more worried about earthquakes than, say, civil war or _Islamic _fundamentalism out in _Turkey _to be honest. I'd hate to invest in a property to have it destroyed by earthquake and perhaps not be able to insure for that event. I'd also hate to die before my time.


> anywere I buy will have a risk attached to it and you have to decide how bad or good that risk is.


 I totally agree. And people who post here looking for comments, feedback, advice should expect more than just a well done, go for it and a pat on the back. They will usually be presented with challenging comments which hopefully help them to look objectively and prudently at the situation rather than just storming ahead. If some people misread skepticism and challenging comments as criticisms, dismissals, "blanket condemnations" (a la _Ric_) etc. then that's their own problem.


> There are going to be people on here with a lot more experience than me and I was hoping to tap into some of that experience.


 Of course. That's what the forum is all about.


> All I wanted was some ideas on some good places to buy as far as the opinion of people on this board. But that I guess is not likely to happen because people are likely to keep that information to themselves.


 I'm not sure that this is the case. There are very open discussion about potential investment opportunities all across this forum. What is of no use is for people to say that such and such a location is a great place without any qualification or further teasing out of the pros/cons, costs/benefits, risks/rewards etc.


----------



## CCOVICH (8 Mar 2006)

ukdavros said:
			
		

> All I wanted was some ideas on some good places to buy as far as the opinion of people on this board. But that I guess is not likely to happen because people are likely to keep that information to themselves.


 
To repeat:



> Have you browsed the Property Investment forum for ideas? There are scores of recent threads on where is good/where is not so good.


----------



## G123 (8 Mar 2006)

From a personal point of view, i've bought both in Ireland and the UK in the past. 

There are two sides to every story so I would say, listen to as much as you can, then make your own mind up.

If a one-off comment can turn your head then maybe you aren't ready for the commitment.


----------



## ARCH (8 Mar 2006)

The answer to which country is a good place to buy is simple "every country" if you get the right property at the right price.  You focus should not be on the country but the actual property, unless you are buying a country of course.


----------



## markowitzman (8 Mar 2006)

In my book there is a lot of due dilligence required when contemplating buying a property especially abroad.
I think a lot of posters on AAM are rightfully cautious as many posts are direct will I buy or not questions related to specific adverts in daily/sunday papers touting overseas investments.
I shudder to think that people would buy at local hotels based on estate agent guff and babble.
Re tax laws........this is a key point.........for example in spain there is 25% tax on GROSS rent in a buy to let. So no expenses are deductible including mortgage interest.
How many of the estate agents tell you this or how many Sunday flashy ads tell you this in the small print under their "guarenteed yields"?!
Buyer beware!
Spend money on best tax and investment advice before taking the word of a salesman.
Walk the area yourself and talk to local letting agents etc.
Property is a fantastic investment but one needs to do serious research prior to investing.
With respect AAM cannot be all things to all people.
I for one think AAM are right to be cautious if potential investors are not prepared to get best advice prior to purchase.


----------



## z102 (8 Mar 2006)

Tourist booking numbers for Turkey are down by about 20% this year compared with the same month of the previous year -so far. Due to Avian Flue and fundamentalism.


----------



## ClubMan (8 Mar 2006)

heinbloed said:
			
		

> Due to Avian Flue


 No smoke without fire! I guess that means a few holiday plans up the spout.


----------



## Glenbhoy (8 Mar 2006)

> The Turkey one looked good with the lease back, although it may not last the 10% for 10 years as quoted


There are two general problems with this type of arrangement:
1. Resaleability, presumably many investors buy at the same time, thus numerous persons may be trying to sell on at the same time when the lease income dries up.
2. You have to look at who is guaranteeing the lease income - what is the likelihood of this company lasting for the 10yrs?  You have to assure yourself that this company are'nt a fly by night operation who fold after year 3.  The property should be able to maintain that rental income regardless of such deals, in otherwords, the local market should be willing to pay at least the same in rental income.


----------



## ninsaga (8 Mar 2006)

ClubMan said:
			
		

> No smoke without fire! I guess that means a few holiday plans up the spout.



....you should be shot at dawn for that...seriously


----------



## budapest (8 Mar 2006)

For what it's worth, there's a pdf on this site which shows some statistics of capital appreciation in European countries over the last two years:

http://www.rics.org/Property/Residentialproperty/Residentialpropertymarket/ehr_2006.html


----------



## ClubMan (8 Mar 2006)

ninsaga said:
			
		

> ....you should be shot at dawn for that...seriously


 If I'm going to be shot then I'd prefer the firing squad to bring some gravitas to the matter alright.


----------



## Aegean (12 Apr 2006)

heinbloed said:
			
		

> Tourist booking numbers for Turkey are down by about 20% this year compared with the same month of the previous year -so far. Due to Avian Flue and fundamentalism.



What exactly do you mean by fundamentalism? Examples please?


----------



## Culchie (13 Apr 2006)

I actually challenged this view before as well some months ago http://www.askaboutmoney.com/showthread.php?t=13341  but ended up being accused of being a 'troll'.


----------



## SLAPPY (13 Apr 2006)

Go ahead and believe what the property section preaches every weekend. Get into the property pyramid scheme NOW! while property is still cheap. Go ahead and risk your financial future on a "rental" property with a 40 year 100% ARM loan (oh, don't believe all that hype about interest rates going up, they're going to stay at historical lows forever!).
Why would we bother learning from past property bubble and disasters because Ireland is different, Right?? 

Here's a little article from the _(guys)_ at Royal Bank of Scotland. It focuses on American Property, but if you really use your imagination you may just be able to draw some parallels to Irelands situation.

[broken link removed]


----------



## Culchie (13 Apr 2006)

SLAPPY said:
			
		

> Go ahead and believe what the property section preaches every weekend. Get into the property pyramid scheme NOW! while property is still cheap. Go ahead and risk your financial future on a "rental" property with a 40 year 100% ARM loan (oh, don't believe all that hype about interest rates going up, they're going to stay at historical lows forever!).
> Why would we bother learning from past property bubble and disasters because Ireland is different, Right??
> 
> Here's a little article from the idiots at Royal Bank of Scotland. It focuses on American Property, but if you really use your imagination you may just be able to draw some parallels to Irelands situation.
> ...


 



Here is my original post

I keep reading on websites such as this, and boards.ie a typical question such as

"Should I invest in a second home, or should I invest in overseas property"?

The most frequent answer from the moderators, or 'veteran advisors' of the boards generally goes along the lines of

"Shares have consistently shown a better return over a period of 5 years or more" or something along those lines.....and generally advise against (and some cases ridicule) people for thinking about investing in the property market..... and lo betide anyone cheeky enough to suggest buying a property in Bulgaria or Croatia etc... 

OK, well I'm open to correction, but it would appear to me that property has outperformed shares over the last 5/7/10 years or so?

Can property prices in the Eastern Europe not rise as they did in the Western Europe?


----------



## bearishbull (13 Apr 2006)

Culchie said:
			
		

> Here is my original post
> 
> I keep reading on websites such as this, and boards.ie a typical question such as
> 
> ...


irish equities rose by more over last ten years than irish residential property.historically equities in all market have outperformed residential property but not by a huge amount,sometimes its better to buy property(ie; when its cheap and rent covers mortgage) and sometimes better to invest in shares.
can prices rise in eastern europe like in western europe?? if incomes rise to same levels and the people in those countries have same desire to actually own the property they live in. there are many parts of western europe where prices arent high like germany france and italy so even if incomes rise in eastern europe countries theres no guarantee they will ever get to similar levels as uk/ireland.in uk/ireland there seems an undersupply of housing relative to most of the rest of europe,this may change in future.incoems will rise in eastern europe but theres no guarantee prices will rise in excess of income growth.if you can get a good rental return(better than 6% gross yield) and capital appreciation of 5%+ every year then it may be a good investment but so much can change to make your investment go sour,the location you buy in may become an unpopular place to live,locals taxes/laws /regulations may change affecting value of invesment,local /national economy of country you invest in can change for the worse . think of europe like the united states,certain states that are poor have low real estate prices even though america is a rich country so similarly theres no certainty of prices in poorer parts of europe rising to similar levels in richer european states.


----------



## JohnBoy (13 Apr 2006)

Hi Culchie,

Here is my 2 cents.

There is an attractive logic in thinking that Eastern European property prices can outperform those of Westen Europe and indeed they may do so in the future but there are significant risks involved in investing in overseas property and it is part of the role of this forum to play the devil's advocate. 

What may indeed be a bias against a lot of overseas property investment (particularly in less developed countries) is prompted in part by the shocking naivety of some of the so-called property investors who post here.

As for Eastern Europe there is lots to be optimistic about but too many people are buying there based on a visit to a property expo in some Dublin hotel rather than on a visit to the country itself. Moreover, property prices in much of Eastern Europe are as expensive relative to average (local) incomes as they are in Ireland.

There are plenty of smart people investing in property at present but they are making informed decisions based on a firm understanding of the mechanics of the property market and with strict reference to their own financial circumstances. 

Your reference to the divergent performances of residential property and stock market is probably correct but they are two very different animals. Most people participate in the stock market via their pensions so they are buying gradually over a prolonged period of time, thus they are less exposed to sudden sharp reversals. Relative to property investment, their transaction costs are lower, they are substantially more diversified and, perhaps most importantly of all, they can take payment holidays should their financial circumstances change. Currently, property investors are buying an illiquid asset that has already seen several years of price outperformance and funding this purchase at rates that are as low as they are probably ever going to get. They are locked in for twenty years or more and, unlike standard pension payments, cannot take payment holidays. They are obliged to fund this investment no matter what their financial circumstances may be and are, in many cases, betting the equity of their home on this.

Would you not agree that property prices in many developed countries are closer to the top of their current cycle rather than the bottom?


----------



## Duplex (13 Apr 2006)

Culchie try obtaining verifiable information on investment yields in any Eastern European property Market.   Money flows from weak to strong hands, and I see the majority of the Irish investing in Bulgaria, etc  as the weakest of weak hands.


----------



## mollser (13 Apr 2006)

SLAPPY said:
			
		

> Go ahead and believe what the property section preaches every weekend. Get into the property pyramid scheme NOW! while property is still cheap. Go ahead and risk your financial future on a "rental" property with a 40 year 100% ARM loan (oh, don't believe all that hype about interest rates going up, they're going to stay at historical lows forever!).
> Why would we bother learning from past property bubble and disasters because Ireland is different, Right??
> 
> Here's a little article from the _(guys)_ at Royal Bank of Scotland. It focuses on American Property, but if you really use your imagination you may just be able to draw some parallels to Irelands situation.
> ...





> Checklist for a Bubble
> High expectations for continuing rapid price growth
> Overvaluation compared to historical averages
> Several years into an economic upswing
> ...



Oh dear, most if not all the boxes ticked


----------



## Culchie (13 Apr 2006)

Hi,

My point is not specifically meant to be an overseas investment question, I was highlighting that example as one where I often see people appear to be advised against such investment straight off the bat, regardless of how much homework and research has been done by the prospective investor.

What I'm trying to get at... I guess, is to challenge what appears to be entrenched views that "Shares are better than property over a significant period of time". It is rolled out as a standard answer.
I accept that probably up until 10 years ago this statement was true.... however I now think that this typical response needs reviewing in light of the last 15 years or so.

I mean, isn't 15 years a significant period of time?  It's my whole working life thus far, it's 1/2 to 2/3's of a typical mortgage term, it's 20% of my time on this planet (touch wood). 
Do these last 15 years no count for anything, or are they some sort of blip?

Ireland in the early 1980's was nearly bankrupt, look at the place now.... is it not possible that Eastern Europe (or Timbuctou) can follow a similar path for the next 20 years.... afterall our economy is very dependent on overseas investment, so what's to stop the multi-national investment moving to Eastern Europe and cheaper overheads.... and giving them 20 years of incredible growth the same as we had?


----------



## Duplex (13 Apr 2006)

Culchie

You are suggesting that low cost economies in E Europe will attract foreign investment, because these locations allow MCN’s to achieve higher profits than in higher cost locations.

That seems like a reasonable argument, but what about the demographic trends in these nations, planning regimes, taxation issues competing locations that are more cost effective? 

The former East Germany has been a member of the EU for a decade and a half and property prices have fallen there over this period.   Ireland joined the EEC in 1971 however the price of property remained stagnant in real terms over the next two decades.   

A challenge to any aspiring property investor in E Europe, find verifiable information on net investment yields for any market in Eastern Europe or Spain, Florida, Dubai, Cape Verde etc. If you can’t get this information you should steer well clear of property investment


----------



## bearishbull (13 Apr 2006)

Culchie said:
			
		

> Hi,
> 
> My point is not specifically meant to be an overseas investment question, I was highlighting that example as one where I often see people appear to be advised against such investment straight off the bat, regardless of how much homework and research has been done by the prospective investor.
> 
> ...


The irish stock exchange has outperformed property over last 15 years.Ireland is close to being a one off,we are a small country so its much easier to create wealth for 4 million people than for 40 million people,i doubt there will be any eastern european countries that will have our level our financial success for numerous reasons. Dont forget that a lot of  the increase in property over last 15years was general inflation which added up to 64% since 1991.


----------



## Culchie (13 Apr 2006)

bearishbull said:
			
		

> The irish stock exchange has outperformed property over last 15 years.


 
Well if it has, I'll gladly stand corrected, as it would amaze me.

Where can I get the index figure for 1991 and compare it against today's figure?


----------



## tiroileain (13 Apr 2006)

bearishbull said:
			
		

> The irish stock exchange has outperformed property over last 15 years..


Hi bearishbull, you've mentioned this a couple of times. I'm not convinced. Where do you get your statistics from?


----------



## bearishbull (13 Apr 2006)

this day 1991 iseq was 1443 now its around 8000 ,add in dividends that you would reinvest and you get a larger return than property with more diversification. check out www.finfacts.com for detailed stats


----------



## Culchie (13 Apr 2006)

so that's a 5 fold increase.


Property has increased far more than that. I'd say it's improved 5 fold in the last 7 years in fact (mine has anyway).


----------



## tiroileain (13 Apr 2006)

> this day 1991 iseq was 1443 now its around 8000


Which ISEQ index was this? There seems to be a few. There's a lot of info on finfacts.com and other websites to sift through. Does the index you refer to broadly represent what it did 15 years ago? Basically, if I had invested 1443 in 1991 would my investment be worth approx 8000 today?


----------



## Howitzer (13 Apr 2006)

Culchie said:
			
		

> so that's a 5 fold increase.
> 
> 
> Property has increased far more than that. I'd say it's improved 5 fold in the last 7 years in fact (mine has anyway).


 
I don't know of any property anywhere in the world that has increased by 500% in the last 7 years. I'm dying to see your purchase price / current price.


----------



## bearishbull (13 Apr 2006)

Culchie said:
			
		

> so that's a 5 fold increase.
> 
> 
> Property has increased far more than that. I'd say it's improved 5 fold in the last 7 years in fact (mine has anyway).


property has tripled since 1997 in market as a whole so i doubt your property have risen 5 fold since 1999.


----------



## bearishbull (13 Apr 2006)

tiroileain said:
			
		

> Which ISEQ index was this? There seems to be a few. There's a lot of info on finfacts.com and other websites to sift through. Does the index you refer to broadly represent what it did 15 years ago? Basically, if I had invested 1443 in 1991 would my investment be worth approx 8000 today?


 yes the iseq general index and if you reinvested the dividends (2.7% a year )you'd have even greater return.if you did it through your pension you'd make much nearly twice as much more due to tax relief.


----------



## Culchie (13 Apr 2006)

Why do you doubt me?

I purchased my house in October 1999 for £48150 ... currently valued at €245000 (house next door sold last week) 


Anyways.... getting back to the point, doesn't those 15 years figures clearly show that property has outperformed the stock markets?


----------



## Culchie (13 Apr 2006)

bearishbull said:
			
		

> yes the iseq general index and if you reinvested the dividends (2.7% a year )you'd have even greater return.if you did it through your pension you'd make much nearly twice as much more due to tax relief.


 
If the shares paid dividends... that's massaging the figures.


----------



## ubiquitous (13 Apr 2006)

> £48150 ... currently valued at €245000



you're treating IR£ as being equal to euro. The multiple indicated by your figures is 4.00 times.


----------



## Culchie (13 Apr 2006)

ubiquitous said:
			
		

> you're treating IR£ as being equal to euro. The multiple indicated by your figures is 4.00 times.


 
Point taken.

Now .... the 15 year advice, which I'd like this thread to be about.

Doesn't this clearly show that property has outperformed equities in the last 15 years?


----------



## bearishbull (13 Apr 2006)

Culchie said:
			
		

> If the shares paid dividends... that's massaging the figures.


the average dividends for the irish stock exchange as a whole are 2.7%,even without the dividends i dont think property market as a whole has risen by much more than 5.5fold like iseq has.


----------



## mollser (13 Apr 2006)

Wouldn't the effect of gearing mean the actual returns for most persons with property exposure be significantly greater over this time frame?

However, the gearing effect will dramatically increase the risks going forward, I would imagine.


----------



## Howitzer (13 Apr 2006)

Culchie said:
			
		

> Point taken.
> 
> Now .... the 15 year advice, which I'd like this thread to be about.
> 
> Doesn't this clearly show that property has outperformed equities in the last 15 years?


 
No, this shows your 1 property, over a 7 year period, outperformed the ISEQ. What was your property, or it's equivalent, worth 15 years ago?

I could have bought Baltimore shares in 1999, they grew 500% in 12 months whilst property only grew by 5%. Does this prove shares always beat property? Hell no. It just shows a particular share beat a broader based index over a very narrow time frame.


----------



## bearishbull (13 Apr 2006)

mollser said:
			
		

> Wouldn't the effect of gearing mean the actual returns for most persons with property exposure be significantly greater over this time frame?
> 
> However, the gearing effect will dramatically increase the risks going forward, I would imagine.


yes thats the good thing about property investing in a bull market,you can gear up easily enough with a bank but if you tried to do that with shares you couldnt! irish property was a great invesment up untill last few years and now i'd rather have my money out of the market for numerous fundamental reasons.


----------



## Culchie (13 Apr 2006)

Howitzer said:
			
		

> No, this shows your 1 property, over a 7 year period, outperformed the ISEQ. What was your property, or it's equivalent, worth 15 years ago?
> 
> I could have bought Baltimore shares in 1999, they grew 500% in 12 months whilst property only grew by 5%. Does this prove shares always beat property? Hell no. It just shows a particular share beat a broader based index over a very narrow time frame.


 
Howitzer, I know that, someone asked for the details, so they got them.

I'm not trying to be dogmatic here for the sake of it.... I'm challenging the standard 'shares are better than property' advice though .... or at least I think that this position should be at least reviewed, and that people should also be told that 
"Historically shares outperformed property, however in recent times, property has outperformed shares"

If we got the average price of a new house in Ireland in 1991, and compared it to todays price....... and then see how that increase compares versus the 5.5 Iseq index.... then surely that's a fair comparison??


----------



## bearishbull (13 Apr 2006)

Culchie said:
			
		

> Howitzer, I know that, someone asked for the details, so they got them.
> 
> I'm not trying to be dogmatic here for the sake of it.... I'm challenging the standard 'shares are better than property' advice though .... or at least I think that this position should be at least reviewed, and that people should also be told that
> "Historically shares outperformed property, however in recent times, property has outperformed shares"
> ...


average price 1991 approx 60k euro
average price 2006 approx 290k euro
so less than five fold increase in average irish house price.


----------



## Culchie (18 Apr 2006)

bearishbull said:
			
		

> average price 1991 approx 60k euro
> average price 2006 approx 290k euro
> so less than five fold increase in average irish house price.


 
60k was the average priced house in 1991 ?    

I would have thought it was far less.


----------



## Meccano (18 Apr 2006)

In 1996 I bought my house for 130K IEP, today its worth 800K.

Besides, as has been pointed out - I couldn't/wouldn't have borrowed 130K IEP to buy shares in 1996, and if I had - I couldn't LIVE in them.

Even an investment property that has dropped to ZERO value (highly unlikely) has some value - you could shelter in it, keep your dog in it, or burn it down to warm yourself for an hour or two. 

Shares which have dropped to zero value are utterly WORTHLESS.


----------



## Howitzer (18 Apr 2006)

Meccano said:
			
		

> Besides, as has been pointed out - I couldn't/wouldn't have borrowed 130K IEP to buy shares in 1996, and if I had - I couldn't LIVE in them.
> 
> Even an investment property that has dropped to ZERO value (highly unlikely) has some value - you could shelter in it, keep your dog in it, or burn it down to warm yourself for an hour or two.
> 
> Shares which have dropped to zero value are utterly WORTHLESS.


 
This is the classic argument for buying property as an investment, however it's bo**ox.

The fact that you can't borrow to buy shares, whilst you can for property, is the very reason why property is, and always always will be for the first 6 month / year, a high risk investment. In the REAL world if your shares drop to zero value then you've lost all your money, if your house drops by, say 10% on a 400K mortgage, then you've lost all your money AND 10% of the banks money (40K in this instance). 

Realising this loss only happens when you are forced to sell, up to then you can indeed burn the place for heat if you're that stretched for cash. I, for one, have a sufficiently long memory to be able to visualize how you can be forced into selling your family / investment home. I'm not a property millionaire sitting on an 800K pile, so I don't have the luxury of smoking my pipe and ruminating about what effect the fall of the Guatamalen Peso will have on my foreign investment portfolio. The risk of a fall in Irish property values at some point in the next 3 - 5 years is very real and how this affects a highly geared asset is quite obvious.

If you were to tell me the ISEQ will fall by 10% in the next 3 years I wouldn't bat an eyelid, if you told me the same thing about the house I just bought I think I'd go quite pale before running to the jacks.


----------



## Meccano (18 Apr 2006)

Howitzer said:
			
		

> This is the classic argument for buying property as an investment, however it's bo**ox.


Hehehe...nasty mouth there Howitzer, did I touch a nerve? Calm yourself.



> In the REAL world if your shares drop to zero value then you've lost all your money, if your house drops by, say 10% on a 400K mortgage, then you've lost all your money AND 10% of the banks money (40K in this instance).


Errr...no. In the REAL world we make REAL comparisons. If you borrowed the same 400K to buy shares and they dropped 10% - you'd be just as much, if not deeper in the doodoo. 


> The risk of a fall in Irish property values at some point in the next 3 - 5 years is very real and how this affects a highly geared asset is quite obvious.


True, and I ain't buying. But the problem is - the same global scale issues which will trigger a crash in property will likely also trigger a crash in the stock markets. You may be old enough to remember the last property crash, but you seem to have forgotten the stock market crashes - which have arguably been worse and simply prove my point. If you borrowed 400K to invest in a Dotcom in the late 90's, or even the mighty ENRON - you'd know that sinking feeling very well.


> If you were to tell me the ISEQ will fall by 10% in the next 3 years I wouldn't bat an eyelid, if you told me the same thing about the house I just bought I think I'd go quite pale before running to the jacks.


WHY? Thinking of moving?


----------



## CCOVICH (18 Apr 2006)

Howitzer said:
			
		

> This is the classic argument for buying property as an investment, however it's bo**ox.



Keep it civil or find somewhere else to post.

Thanks.


----------



## Howitzer (18 Apr 2006)

Apologies for the profanity, I always thought asterixing out was sufficient to avoid offence but keep the emphasise. Noted.


----------



## Howitzer (18 Apr 2006)

Meccano said:
			
		

> Errr...no. In the REAL world we make REAL comparisons. If you borrowed the same 400K to buy shares and they dropped 10% - you'd be just as much, if not deeper in the doodoo.
> 
> ...................
> 
> If you borrowed 400K to invest in a Dotcom in the late 90's, or even the mighty ENRON - you'd know that sinking feeling very well.


 
The fact is in the real world you physically can't borrow to invest in shares. You may be able to squeeze a few K out of a lax lender, but that's about it. 

You can't borrow the 400K to invest in shares that you can in property. The worst comes to the worst you'll lose all your money investing in shares. With property, potentially you can lose all your money and owe the bank multiples more of what you have already lost.

This is obviously looking at worst case scenarios. In best case scenarios property wins hands down, but this is purely down to the gearing involved on the loan.


----------



## bacchus (19 Apr 2006)

Howitzer said:
			
		

> The fact is in the real world you physically can't borrow to invest in shares.


 
Incorrect. On some markets, you can invest more than the liquidity you have available, so you effectively invest money you do not have, i.e. borrow.
The amount you can "borrow" is usually based on 1) your liquidity 2) portfolio 3) type of shares in your portfolio. The big advantage of this market is that you can sell before you buy, so you can win on falling market.... The  sums (sales - purchases)  are done at the end of the month, and you may have to come up with the money, or postpone payment to the following month subject to interest of course. Risky business...


----------



## JohnBoy (19 Apr 2006)

i think that the different characteristics of these investment options ought to be considered.

When you buy a residential property as an investment, you are not only exposed to the systematic risks that all property owners face (interest rates, economic growth etc), you are also totally exposed to the specific risks of that particular property. A road widening, the construction of a prison or the delay in a transport infrastructure project could all have a significant impact on the valuation. Whereas, a basket of shares or an ETF provides substantially more diversification. Within any given equity index a company can go bust without the overall index suffering too much. 

Furthermore, you need to take into account the enormous liquidity advantage that the equity investors enjoy. Most retail investors ought to be able to liquidate their portfolio in a relatively short space of time. Moreover, even within a pension plan you can usually switch between various funds fairly easily (ie switch out of equities into bonds); whereas with property investment you cannot access your cash quickly and if you do fall on hard times you can always reduce your stock market contributions, but you cannot do so with a mortgage.


----------



## Culchie (19 Apr 2006)

We're wandering a little bit from the crux of the argument....It certainly seems to me that property has out performed shares in the last 15 years....so shouldn't this be reflected in the advice given to prospective investors?


----------



## ubiquitous (19 Apr 2006)

Culchie said:
			
		

> It certainly seems to me that property has out performed shares in the last 15 years....so shouldn't this be reflected in the advice given to prospective investors?



Yes - you are free therefore to offer advice based on this insight (or indeed advice to the contrary if you so wish) to anyone who asks a related question on these pages.


----------



## Culchie (19 Apr 2006)

ubiquitous said:
			
		

> Yes - you are free therefore to offer advice based on this insight (or indeed advice to the contrary if you so wish) to anyone who asks a related question on these pages.


 
Your nickname is very appropriate


----------



## CCOVICH (19 Apr 2006)

This has gone on long enough.  

Why don't those who believe that property is a good investment say so whenever someone asks about Dubai, Cape Verde, Budapest etc. rather than wasting their energies on this thread.  Likewise with those who disagree with that notion.

Thread locked.


----------

