Future price of Irish properties

[gearoidmm]

I agree with you Loki. The example figures supplied do not make financial sense. Why would you invest in somthing that would be out performed by cash in the bank. It really is a STUPID example, deserving of The Sun or the like.

But isn't that the point people have been trying to make here for the last few months. Rental yields are negative in Ireland at the moment so that the only reason for investing in a BTL property is if you plan to sell it on for more later (or if you are in it for the long haul and think rents are going to increase significantly in the next few years and cover the mortgage). This is exactly the rational that people have been presenting for why property prices might fall.

 

[redo]

I know someone currently purchasing a place for 1.3m, planning to rent it for one year (obviously at a negative yield) and fully intends to flip it for 1.9m after that year.

I'd call that extreme.

 

[gearoidmm]

FTIs normally can do this as their mortgages are so much cheaper than other people on the same road and/or wages.
I think if you have to make such riddiculious examples to make a point I think it is close to lying.

The point is that it wasn't a property sceptic who made up this example but in fact it was the property supplement of the Irish Times and they were trying to sell it as a good idea!

 

[Howitzer]

FTIs normally can do this as their mortgages are so much cheaper than other people on the same road and/or wages.
I think if you have to make such riddiculious examples to make a point I think it is close to lying.

Yeah it's pretty hard to justify.

At the end of the day (getting back to original thread) the likelihood of prices increasing is determined by the ability, and the desire, of the market to keep buying property. It doesn't matter one iota whether the business case is justified using whatever metric you care to rely on.

 

[Calina]

FTIs normally can do this as their mortgages are so much cheaper than other people on the same road and/or wages.

Can you provide back up for this statement? Why is it so much cheaper for FTIs than for other people?

 

[beattie]

- I know someone currently purchasing a place for 1.3m, planning to rent it for one year (obviously at a negative yield) and fully intends to flip it for 1.9m after that year. This type of activity is covered by her comment "or if the investor flogs the property to an even bigger mug down the line."

In the current market, I think there's every chance this guy will find that mug in 12 months time.

I would not like to be caught in this particular pyramid scheme

 

[Howitzer]

Can you provide back up for this statement? Why is it so much cheaper for FTIs than for other people?

Well IF they're using their PPR as leverage and there's a fair amount of equity in it, which there should be, then the LTV ratio on the investment should be pretty low = cheaper interest rate.

 

[ivuernis]

Personally I don't see the example as extreme - I know someone currently purchasing a place for 1.3m, planning to rent it for one year (obviously at a negative yield) and fully intends to flip it for 1.9m after that year.

So, even after paying stamp duty, negative yield, etc. they still expect to make a 400k plus profit? I'd call that optimistic in the extreme.

Out of curiosity, are they borrowing most of the €1.3m or is it cash in the bank?

 

[Neffa]

The exclusive property in each country has the highest prices becasue of the social status. Go to the monopoly board in each capital city and find a house for sale on each of the top property roads. Compare them and you might be closer.

I don't think it is only true for exclusive property - it looks to me (from examples I've already posted) that it applies to the family home market too - the €1m market is hardly exclusive in Ireland anymore but it buys you more in most areas of London. It is just another pointer to me that it is unlikely that the market has a lot of growth left in it, particularly when interest rates are rising.

 

[soma]

I'd call that extreme.

redo - I must have a habit of hanging out with 'extreme' people then! *lol* (I sound like the X-Games..) cos I know of two other situations like this (one also in dublin, one in the southwest).

Anyways I see this kind of madness left, right & centre and these examples only differ in the amount of money involved, not necessarily the relative hit someone is taking. I think I posted here a while back about a couple on 'show me the money' taking a hit of €700 a month on their 'investment' property - ouch!

 

[Neffa]

Anyone see Rabobank.ie's view on property investment - a welcome view in the sea of "it only ever goes up"

[broken link removed]

 

[soma]

So, even after paying stamp duty, negative yield, etc. they still expect to make a 400k plus profit? I'd call that optimistic in the extreme.

Out of curiosity, are they borrowing most of the €1.3m or is it cash in the bank?

The problem ivuernis is that I cant even begin to talk logically about things like this to the parties involved - they just roll their eyes - they've heard all the 'doom and gloom' (as they would say) for years.

Most of the 1.3m will be an interest only loan secured against existing investment properties. Talk about a house of cards..

 

[ivuernis]

Anyone see Rabobank.ie's view on property investment - a welcome view in the sea of "it only ever goes up"

[broken link removed]

The tide seems to be turning w.r.t. to commentry on the property market. A lot are becoming hawkish (or more hawkish) by the week. David McWilliams in the SBP and Indo, Damien Kiebard and Jill Kirby in the Sunday Times, Ben Dunne on the radio during the week to name just a few.

 

[Eurofan]

The tide seems to be turning w.r.t. to commentry on the property market.

I agree. While there's been an undeniable irrational exuberance for some years now i think even the most bullish commentator is waking up to the fact that the numbers just don't make sense anymore.

 

[bearishbull]

yes everyone knows theres little if any value in dublin but whats gonna tip it over?
people are obviously still able to afford the properties as banks are still giving them loans and they are stressed to 2% increase in rates.
obviously they cant go up much more as wages arent going up by anywhere near enough,if immigration slows there will be less demand and if rates rise there will be less demand.

the banks stress individuals to 2% but i wonder do they also factor in the effects on the economy as a whole,rates rise then consumers spend less which slows economy which slows economic growth job creation etc which impacts on house prices which then further feeds into consumer spending(if your house goes down in value you feel less wealthy and spend less).

 

[dam099]

Anyone see Rabobank.ie's view on property investment - a welcome view in the sea of "it only ever goes up"

[broken link removed]

While I would tend to agree to a large extent with the sentiment in that article Rabobank have their own agenda too in that AFAIK they are not in the mortgage lending business in Ireland but they do market a series of stock based funds and deposit accounts that are competing with property for the publics investment euros.

 

[Marie]

Saturday's Guardian (financial section) carried a report on Gartmore's Irish Growth Fund (in a piece titled "Your Life in Their Hands")

It reports Ireland built 1.15m new houses last year, consumer spending soared at its fastest rate ever; more than two million more temporary workers from Poland and Latvia came.


Britain built around 150,000 new homes last year in a country with a population of 60million.

Ireland built 77,000 in a country of 4million

The Irish building project is equivalent to a building programme of 1.15million new homes in the UK!

Britain has taken 345,000 workers from the new EU accession countries since May 2004 (easily absorbed in the existing 60 million population).

Ireland has taken in 150,000 in that time - equivalent to 8% of the entire workforce.

Last year the Irish economy grew by 4.5%. This year it's forecast to grow at 5%, compared with 2.25% in the UK.

However the share price on Gartmore's Irish Growth Fund is a modest 20.6% making 298.3% over three years. "Once you strip out Elan, you find that Irish equities performed broadly the same as other European exchanges".

SSIA's coming onstream will be equivalent to 20% of all Irish consumer spending.
More fuel to boil the pot!

 

[bankrupt]

Came across this:

http://www.netcastdaily.com/broadcast/fsn2006-0318-2.asx

(Recorded interview with this book's author: "The second great depression 2007-2020")

Yikes! This guy is full of doom and gloom, he's calling a complete slump in 2007 with current high house prices and debt levels as a key precursor. He's talking about the US but it sounds pretty familiar.

Anyway, would be interested to know if people here think he's a crank or not.

Discussed on Housepricecrash.co.uk:
[broken link removed]

 

[Glenbhoy]

I'm actually a bit shocked by you all, I just don't understand how ye can't see the factors which will keep the Irish property market bouyant for eternity (and yet ye all think ye are financially savvy).
In fact to quote Mark Fitzgerald chairman of Shery Fitz when speaking at a Dublin Chamber of Commerce breakfast last week:
"The flow of international property profits back to Ireland and inherited wealth will be significant factors in the long-term property market.
Irish Investors have done very well abroad and ultimately these profits will find their way back to Ireland"
He went on to speak about the net immigration of 50,000 .........

 

[Duplex]

Came across this:

http://www.netcastdaily.com/broadcast/fsn2006-0318-2.asx

(Recorded interview with this book's author: "The second great depression 2007-2020")

Yikes! This guy is full of doom and gloom, he's calling a complete slump in 2007 with current high house prices and debt levels as a key precursor. He's talking about the US but it sounds pretty familiar.

Anyway, would be interested to know if people here think he's a crank or not.

Discussed on Housepricecrash.co.uk:
[broken link removed]

All I’d say is that his hypothesis is plausible, however I would argue that the recession (well he says depression) he suggested could be deflationary as much as inflationary. The two most recent recessions in modern post industrial economies (Germany and Japan) have been deflationary. Many commentators argue that if the Housing bubble was stripped from US GDP figures the country would have witnessed a recession starting a couple of years ago. One thing is for sure, we are approaching a fork in the road for the global economy.