Future price of Irish properties

[ivuernis]

They are building in Dubai like there is no tomorrow...
http://forum.skyscraperpage.com/showthread.php?t=101057

The rapid scale of construction is unbelievable, probably only matched in a few of the largest Chinese cities.

 

[onekeano]

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..

Soma - they are shoe shine boys these friends are they?

Roy

 

[Eurofan]

Soma - they are shoe shine boys these friends are they?

Roy

As long as they're not looking for stock market tips then we're grand

 

[gearoidmm]

They are building in Dubai like there is no tomorrow...
http://forum.skyscraperpage.com/showthread.php?t=101057

The rapid scale of construction is unbelievable, probably only matched in a few of the largest Chinese cities.

Those pictures are amazing. What's really interesting is what happened last week:

[broken link removed]

The Dubai stock market lost 30% of its value in the space of a week and it would have been more only that locals stepped in to buy stocks to prop up prices. There is a suggestion that this may undermine house prices in Dubai (although there is an equally valid point that it may cause prices to rise further as people withdraw money from the equity market and put it into property). The reason for this crash, it has been suggested, is because of the Bank of Japan's decision last week to stop flooding the economy with cheap money. Investors had been borrowing from Japan at ridiculous interest rates and investing in emerging market stock markets all over the world and now that the money supply is being cut off, they are withdrawing their money from these markets.

The point is that some here have suggested that Ireland is a special case and Irish factors will sustain the boom no matter what and that commenting on what is happening in other countries is meaningless in an Irish context. What happened last week in Dubai proves that wrong and I wonder if this is the first sign that asset bubbles are going to start deflating globally.

 

[Loki]

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!

Who Started listening to real estate agents and believed them? A property supplement is effectively property porn written by the advertisers. Show me any property ad and I can pick on most points and rip it to shreds.

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

Many FTI bough their home a while ago. This means they have equity they can borrow on if they buy another and rent it out with a differential and pay the difference their mortgage can easily be less than somebody who bought a year or 2 later. It appears that people do it for this reason in part, basically it is possible.
Many people are only considering financial aspect of property on its own. People buy for their children in the future, a downsize property for the future. The profit on the property is making more consider it but what some people fail to see is your kids can't live in shares. Maybe the shares will be worth as much as a house but if they are not you have no where to live. If your rent yield changes to positive in the 30 year term you probably will get dividents from your property. There are risks but most people can understand property but shares and the gambling involved there are hard for most.

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.

1 mil houses are owned by what percentage of the population? DO you think it is 50% or 5%? It is exclusive in my eyes. Supply and demand. A small portion of the property in Ireland is top end and fewer again in Dublin and fewwer again that are in certain areas with good reputations. Some areas don't really have rental property in them so how do you judge the value of the property? THe same way you do it anywhere else see what people will pay. London isn't a pointer here becasue it isn't here. How do you live in a large exclusive London property when you work in Ireland? Top game and scale are all local. Dublin has a small amount of exclusive property historically and that reduced over time. Location,location, location is what property is about not rental yields.

 

[Duplex]

Location, location, location is not, repeat not, what property (investment) is about. Property investment is about maximising the return on capital employed, i.e. it’s about yield. Location is a function of value but the main determinant is return (yield).

Would you place your money in one bank in preference to another, because of its location?, or would you base your choice of bank on the interest that they’ll pay on your capital?

 

[redo]

A bit simplistic there Duplex.

 

[Duplex]

A bit simplistic there Duplex.

Explain.

I’ll challenge Loki.

You find an ‘investment’ property anywhere in Ireland and I’ll provide a comparable property that offers a better yield, i.e. earns more money, and comfortably pays for its self.

 

[redo]

Explain.

I can only think that equating the location of an bank, to the location of property was an off the cuff comparison. Of course, one would not decide to invest money in a bank based solely on its location, or even purely on the interest rate they offer. There are many factors involved. Minimum term, mimimum amount required etc. However a lot of people are keen to invest money in the Isle of Mann and Jersey. These are location based investments.

I believe the property game is all about location. If you want to disagree, fine.

 

[walk2dewater]

I can only think that equating the location of an bank, to the location of property was an off the cuff comparison. Of course, one would not decide to invest money in a bank based solely on its location, or even purely on the interest rate they offer. There are many factors involved. Minimum term, mimimum amount required etc. However a lot of people are keen to invest money in the Isle of Mann and Jersey. These are location based investments.

I believe the property game is all about location. If you want to disagree, fine.

Yield is net income divided by current market value, usually expressed on an annual basis. E.g. a bond with a market value of €1000 that pays the owner €100 in annual dividends has a 10% yield.

Location begets the market value and rental income potential, hence begets the yield. If you believe that location matters more than yield, then it implies you expect asset appreciation to matter more than rent. And of course, it seems just about every property investor in Dublin believes the primacy of location (appreciation) over yield (rent). They believe the ability to sell the asset on for a higher price in the future is the prime reason for owning it, hence the often remarked "yield doesnt matter" and all that matters is "location, location, location".

Fools and their borrowed money...

 

[Loki]

Location, location, location is not, repeat not, what property (investment) is about. Property investment is about maximising the return on capital employed, i.e. it’s about yield. Location is a function of value but the main determinant is return (yield).

Would you place your money in one bank in preference to another, because of its location?, or would you base your choice of bank on the interest that they’ll pay on your capital?

As I said it isn't all about money, why do you find this so hard to understand. If you live in Dublin and want to down size in your area, owning a house in another country isn't going to help you get the house if they aren't matched in price.If you want to give your child a house close to you in the future and not have to leave the country how is your investment elsewhere going to help if Irish prices out perform again in a 10 year period?
What you fail to see is it is not about money only. How easy is it to manage a property in a country other than the one you live in? Your peace of mind is worth money. There are other returns on property than money and location is a big factor.
I'm not sure if you just don't bother reading what I say or you just like to dismiss any other view than yours. I'll bullet point for you.
Reasons why people may buy an investmnet property
1) Rent as an income (now or later)
2) A place to down size to (or up size to)
3) A future home for their children
4) A speculaion on price rises

Now you seem to only accept that 4 is the reason people buy now with people hoping 1 will happen along the way. I am giving you other possible reasons, location being a factor in both of them. If you want to dismiss those other reason do so but don't just ignore them and keep saying the same things over and over agian.

You find an ‘investment’ property anywhere in Ireland and I’ll provide a comparable property that offers a better yield, i.e. earns more money, and comfortably pays for its self.

Find me a house that I can buy so that when my mother is older I can move her closer to me so she can be independent. I would like to get about 10% yield but I'll pay €100 to catch up on any rent shortfall.

My brother mean while wants a place close DCU for his son in the future. The idea is he can rent it out until the son will most likely need to go to Dublin then.

Investment is not just money. You keep going on about how investors are stupid becasue of yields yet the returns I am talking about seem to just pass you by. Try to think about the subject instead of trying to force people to believe your view is the only right one. At what point did you decide house prices were too much? Do experts agree with you? How many websites are you going around preaching your set view?

 

[redo]

Yield is net income divided by current market value, usually expressed on an annual basis. E.g. a bond with a market value of €1000 that pays the owner €100 in annual dividends has a 10% yield.

I nevered entered the debate that locatation is better that yield. Investment is all about yield. I agree

And of course, it seems just about every property investor in Dublin believes the primacy of location (appreciation) over yield (rent). They believe the ability to sell the asset on for a higher price in the future is the prime reason for owning it, hence the often remarked "yield doesnt matter" and all that matters is "location, location, location".

Fools and their borrowed money...

This is exactly one of my points. These "investors" are buying property in ANY location they can afford, purely thinking that ALL properties will increase. While this may presently be true in the current market, it won't always be the case and may lead to localised property downturns.

 

[Loki]

Yield is net income divided by current market value, usually expressed on an annual basis. E.g. a bond with a market value of €1000 that pays the owner €100 in annual dividends has a 10% yield.

That is a funny way to work out rent yield. Current market value doesn't effect my rent yield! If that is what you think rent yield should be worked out on investros you would have me losing money when I am not.That is Vodoo economics

 

[Duplex]

More voodoo economics coming at ya Loki.

You suggest that many investors are happy to forego yield in return for intangible benefits, relating to specific locations ( I could argue that there is no such thing as intangible value).

You are arguing the case of ‘physic value’ in relation to specific locations, which I would agree is a factor in the owner occupier market. However the physic value element of the price of an investment does not yield a return other than a purely speculative one based on historic market preferences. ( i.e. not a fixed income contractural return; rent).

A professional property investor will seek a sound building with a secure legal title, occupied by a tenant who offers a good covenant, where the passing rent is close to open market rent or where the possibility of a review is in the offing and where prospects of further rental growth are good. You may argue that the Irish investment market does not work in the conventional mode, and you are possibly right, but that does not mean that hundreds of years of collective landed investment theory and practice should be confined to the bin. (Very far from it)

As far as yield is concerned.
Yield is calculated by employing the current passing rent and the current open market value, how else could you make an analysis of the performance of the original investment and any subsequent capital growth.


Redo my explanation was possibly simplistic but you understand what I’m trying to get at, I’m sure.

 

[Howitzer]

As far as yield is concerned.
Yield is calculated by employing the current passing rent and the current open market value, how else could you make an analysis of the performance of the original investment and any subsequent capital growth.

Yield is the current rent divided by the price you BOUGHT at. For someone, like Loki I'm sure, who bought ages ago their yeild's will still be very high. For new investors it'll be sh1t.

 

[walk2dewater]

Current market value doesn't effect my rent yield!

Yield is the ratio between what what an assets pays out and what an asset is worth.

 

[walk2dewater]

As far as yield is concerned.
Yield is calculated by employing the current passing rent and the current open market value, how else could you make an analysis of the performance of the original investment and any subsequent capital growth.

Yield is the current rent divided by the price you BOUGHT at. For someone, like Loki I'm sure, who bought ages ago their yeild's will still be very high.

Valid point. To be specific, I'm talking CURRENT yield then; current rent/current market value. This is the standard definition.

But none of this hair splitting matters, Dublin property barrons live in their own economic universes.

 

[Duplex]

Yield is the relationship between current rental value and current market value described as a percentage.

Like Walktothewater says; in Ireland it seems local custom prevails.

 

[Loki]

More voodoo economics coming at ya Loki.

You suggest that many investors are happy to forego yield in return for intangible benefits, relating to specific locations ( I could argue that there is no such thing as intangible value).

I never said they were intangable you did. These are tangable values the same way location from the city centre is.

A professional property investor will seek a sound building with a secure legal title, occupied by a tenant who offers a good covenant, where the passing rent is close to open market rent or where the possibility of a review is in the offing and where prospects of further rental growth are good.

Who said these people were proffessional property investors, in fact how many professional property investors are there? Most do it as a side subject.

As far as yield is concerned.
Yield is calculated by employing the current passing rent and the current open market value, how else could you make an analysis of the performance of the original investment and any subsequent capital growth.

You see the problem there is you can use it to make analysis of the over all market but forget that property is not purely an asset it has a use in itself. You also ignore the reality of financial situations live in. You can't give your kids some shares and say live in that.

I'm talking CURRENT yield then; current rent/current market value. This is the standard definition.

No that is current MARKET rent yields. My rent yield is by what I am paying and what I am recieving. Not great on definitions. If you are using rent yields in your way as I said you would be saying many investors are not getting a return from their property which is simply not true. I think you guys are mixing up economic theory and book keeping and getting a very warped view of the world.

You two guys don't know what yield means.

[broken link removed]

 

[Calina]

I never said they were intangable you did. These are tangable values the same way location from the city centre is.

Loki,

again, I'm having some difficulty following you. Are you saying location in the city centre is a tangible value?