Future price of Irish properties
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Duplex said:
This is correct. Many investors remember how much there parents bought their houses for 30 years ago. 8K, 12k or thereabouts. Professional investors don't limit themselves to property, but are attracted by the highest returns. Current BTL "investors", are "clever" enough to know that property will ALWAYS rise, and in 30 years time will be mega rich.
Presently, servicing these assets are just about manageable, but when rates rise, or their circumstances change (baby, marrage etc) they won't be able to afford them. All these BTL investors would be better off by putting money into a pension fund. (Idiots)
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Neffa
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I think there is also a lifestyle choice in this. When we moved back here, I had a choice of a number of housing options, including:
1. Renting a decent sized period house in one of the nicest areas of town, walking distance to good schools and 20 mins drive from work. Easy access to nice restaurants, cafes etc. Put a decent chunk of my income (with employer subsidy) into pension. Plan to buy in the event of a downturn or in the absence of a downturn (which I doubt won't happen, but I'll include it for the sake of completeness) keep renting and eventually buy (with pension lump sum) when I retire somewhere further out when I don't need to commute any more. We have a house in London which we can eventually sell to help with this.
or, for the same monthly commitment
2. Buy a new-build box with a small garden in an estate 60 mins drive from work with schools bursting at the seams to cope with the influx of new pupils somewhere on the Dublin commuter belt. Be car-bound for everything - shopping, eating out etc.
or, for roughly twice the monthly commitment
3. Buy period house as per (1) above, forget about pension and hope for no interest rate rises. Hope for capital appreciation to make it come good in the end.
So I chose option (1).
The most amazing thing for me in all of this is when I explain my logic to people who are buying now and settling for the 2+ hours/day in traffic they still think I am mad, btw. "What about the long term, you need to own" they say.....
. At what cost, I say.
1. Renting a decent sized period house in one of the nicest areas of town, walking distance to good schools and 20 mins drive from work. Easy access to nice restaurants, cafes etc. Put a decent chunk of my income (with employer subsidy) into pension. Plan to buy in the event of a downturn or in the absence of a downturn (which I doubt won't happen, but I'll include it for the sake of completeness) keep renting and eventually buy (with pension lump sum) when I retire somewhere further out when I don't need to commute any more. We have a house in London which we can eventually sell to help with this.
or, for the same monthly commitment
2. Buy a new-build box with a small garden in an estate 60 mins drive from work with schools bursting at the seams to cope with the influx of new pupils somewhere on the Dublin commuter belt. Be car-bound for everything - shopping, eating out etc.
or, for roughly twice the monthly commitment
3. Buy period house as per (1) above, forget about pension and hope for no interest rate rises. Hope for capital appreciation to make it come good in the end.
So I chose option (1).
The most amazing thing for me in all of this is when I explain my logic to people who are buying now and settling for the 2+ hours/day in traffic they still think I am mad, btw. "What about the long term, you need to own" they say.....
. At what cost, I say.I think you're bang on the money there, and it has all the hallmarks of a pyramid scheme for a lot of these investors. There are three types of people I see buying propertyDuplex said:
1. The professionals who won't get burned (maybe)
2. The naive (buy now or you'll never get in, rent is dead money, prices always go up etc etc)
3. Those who believe they will grab a quick buck and get out before a fall
My landlord is a #3 I know - it's the same as a pyramid scheme, people think they're smarter than the rest and will be able to get out at the right time. I really think that when prices fall (after the odd dead cat bounce or two) that the bottom will fall out of the market as many investors scramble to sell.
soma said:
No it wasn't. My point was that bearishbull might today be able to rent a property for a fraction of what it would cost to pay a mortgage on it, but that's due to two things....
1) house prices being hugely inflated
and
2) landlords subsidising the renter in the belief that capital appreciation will make up for it.
You've kinda sidetracked the discussion with your economics 101 comments, but my original point was that long-term renting could not be cheaper than buying over a long-term due to the fact that, except in a bubble of "irrational exhuberance", landlords have to turn a profit.
Either the rents go up in a big way (unlikely) or the prices come down, one way or the other, the current criteria for making renting more profitable than buying i.e. rent costs less than IO mortgage, can't be sustained for the lifetime of a mortgage.
Put another way for bearishbull - overall, would renting for the past 9-10 years have been cheaper than buying?
Theo said:
An exaggeration of the truth perhaps, but the argument is at which point does it become economically senseless to buy when renting is the more attractive alternative.
Theo said:
Events, dear boy. Events.
I'm not saying the world will end, but unexpected events (and even foreseeable events that are largely ignored) always have the capacity cause serious repercussions.
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thewatcher
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hmmm said:
If prices begin to fall and you have just taken out a 12month lease,he will be stuck with you though.
T
thewatcher
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conor_mc said:
I think we're all in agreement more or less as to the current state of the irish property market though,the longterm renting versus buying is a different issue really.
soma said:And wages don't increase by inflation, thus negating any rises..?
Great if they do. That means full employment, which is good for higher house prices.
soma said:
Rational = commercial
my point is that its likely that the majority of the 35% (if that figure is accurate, i am in no position to dispute it as I do not have the figures) you speak of will sell up and rent, this includes homeowners. This happens each time , most recently in London. Therefore, no. of renters goes up, property prices go down, rent goes up, yields go up. This is an established pattern in property cycles.
The person who was renting waiting for the market to turn will likely not buy at this point because prices are falling and everyone is panicking.
soma said:
There has been no significant inflation between 2001-2005. Ask walk2dewater, he/she'll tell you what real inflation feels like.
As surely as interest rates are rising, so too are rents. To answer your question, it will be driven by demand and the economic choices made by (rational) landlords. Demand from those getting out of property and renting, demand by the new baby boomers, demand by immigrants, and demand from people like your good self.
bearishbull
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obviously not.but we are talking about now and the future.for last few years the numbers havent stacked up.ten years ago i was doin my junior cert so i cant remember what rent was like compared to mortgagesconor_mc said:
as for my points on renting versus buying obviously things will change and this anomaly wont last in medium/long term which raises the question how will it change? theres only 2 ways it can happen, rents rise substantially or prices fall ,i cant see rents rising much with the massive building happening-80k a year for ten more years=another 800k houses! "raise the rents!!"
i am talking about at this moment and untill the change happens it does not make financial sense to buy,even if your house rises ten percent in year after buying this only covers stamp duty and the extra mortgage repayments above rent payments.then inflation is at 3% so take 3% away from any increase in value and the difference between renting and mortgage is around 2-3% of value of home so every year as it stands your houses has to rise by more than 6% in order to "make a profit".
bearishbull
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so if the bulls are right and property keeps on rising for a few more years and then stabilises and remains flatish and rents dont rise substantially it makes sense to keep renting with the rent/mortgage differential and invest the money in tax efficient investment fund.
if the bears are right then it makes sense to rent untill houses are more reasonably priced and again invest the savings.
the only way it would make sense to buy now is if property was certain to increase by 6+%(to account for inflation and differential between buying and renting) for life of mortgage and during this time not fall at all as a fall would trigger panic selling and self perpetuating downward cycle. with wages not rising much more than 5% and interest rates rising can anyone really see prices rising by 6%+ in nominal terms for next 30 years?
of course this ignores the intangiable benefits of "owning me own property" which to me is close to nil but to others(mainly the female ) is substanial
if the bears are right then it makes sense to rent untill houses are more reasonably priced and again invest the savings.
the only way it would make sense to buy now is if property was certain to increase by 6+%(to account for inflation and differential between buying and renting) for life of mortgage and during this time not fall at all as a fall would trigger panic selling and self perpetuating downward cycle. with wages not rising much more than 5% and interest rates rising can anyone really see prices rising by 6%+ in nominal terms for next 30 years?
of course this ignores the intangiable benefits of "owning me own property" which to me is close to nil but to others(mainly the female
) is substanial
W
walk2dewater
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conor_mc said:
Well my point is: Renting is not always worse than buying. My example was hypothetical (and ridiculous) but proves the point elegantly. When it costs so much to 'own' one is better off renting. Think about that, because I am convinced many many people simply don't believe that. Many people believe that you should buy REGARDLESS of the price once the monthly payment can be met, and that renting is ALWAYS dead money. This is faulty logic.
IMHO a certainty of a severe fall in prices, makes renting in Dublin supremely better than 'owning'. In my view, there's simply no contest.
But what about the intangible benefits of 'owning your own home'. Sorry, not worth it, I'll accept the shame of the renter
I presume someone is going to call me a "begrudger" etc. Well lets head that off. I own property, in two countries (not ireland), love having my own property, and I could afford to buy a modest place outright in Dublin. But I don't. I rent. Because prices here make no sense to me.
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thewatcher
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http://www.rte.ie/news/2006/0329/housing.html
It should be remembered these are the people pushing house prices further and further up,taking first time buyers to the pin of their collar because of their Interest only mortgages.
They should have been taken out of the market long ago,whose that other socalist in the the Dail again i mean apart from joe higgins.
It should be remembered these are the people pushing house prices further and further up,taking first time buyers to the pin of their collar because of their Interest only mortgages.
They should have been taken out of the market long ago,whose that other socalist in the the Dail again i mean apart from joe higgins.
[FONT=Verdana, Arial]The party is slowly coming to an end. The US Federal Reserve raised rates (again) bringing them to 4.75pc and they may not have yet reached their peak. There now seems to be an expectation that the ECB will raise rates quicker than was thought at the beginning of the year with the next increase coming in May. [/FONT][FONT=Verdana, Arial]We could end the year with an ECB rate of 3.25pc, up from 2pc at the beginning of December 2005.[/FONT] This would bring mortgage rates to over 4pc and add around €200 to the monthly cost of a €300,000 mortgage.
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[FONT=Verdana, Arial]I think the big slowdown is coming over the hill. It's probably only 15 months away which means that anybody buying now should be aware that they are buying at the top of the market and so they really, really need to love the property!
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[FONT=Verdana, Arial]I think the big slowdown is coming over the hill. It's probably only 15 months away which means that anybody buying now should be aware that they are buying at the top of the market and so they really, really need to love the property!
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walk2dewater
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askalot said:
Indeed. If you've got the money, have lots more money, don't care about resale and simply have to have it. Then by all means Mr. O'Reilly! I suspect that was the case in Ailesbury road where someone paid that record price for a semi-d. Words "Money" "no" "object" come to mind. I have a very modest property in Honduras. It's mine, I love it. If the market would only offer me €1 for it, so be it, I wouldnt lose much sleep, it aint for sale.
The heavily geared are going to get creamed by a pincher movement, first the slow boil as 'the truth about rates' emerges, second the inability to sell without a sweetener when buyers dry up. Then we start the long, bumpy descent down the slope of hope; more and more vendors, fewer and fewer buyers.
I highly doubt our Celtic Tiger will survive the trauma of it all.
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