Have we learnt nothing from the last property collapse?

Jim2007 said:
And the annualised return of an equity portfolio is around 8%-9% over the same period.
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I get the impression, based on my reading, that 6%-7% is a more common assumption for the returns on an equity portfolio.
 
As far as i can remember from reading "the cult of the equity" on askaboutmoney a cuple of years ago the annualised return of an equity portfolio in real terms is around 3 to 4 % over a good number of years say 40 years or more.[Just an observation]
 
Paul F said:
I get the impression, based on my reading, that 6%-7% is a more common assumption for the returns on an equity portfolio.
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Even if that is what you feel comfortable with it 50% more than the original return of about 3%.
 
DK123 said:
As far as i can remember from reading "the cult of the equity" on askaboutmoney a cuple of years ago the annualised return of an equity portfolio in real terms is around 3 to 4 % over a good number of years say 40 years or more.[Just an observation]
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If you start out with an under estimate I guess 3%/4% on a single property is OK then. But if we returned 3% - 4% we'd loose the client.
 
Jim2007 said:
And the annualised return of an equity portfolio is around 8%-9% over the same period.
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Paul F said:
I get the impression, based on my reading, that 6%-7% is a more common assumption for the returns on an equity portfolio.
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Does the 8%-9% annualised return account for inflation?

(I need to ask myself the same question about my 6%-7% estimate.)
 
Its complicated & it assumes that the next 25 years will look a lot like most of the past 50.
If people are willing to be realistic about what kinds of returns they can make, and stick to original plans, its still a good investment for a patient investor. However, I've seen so many rental units on the market that were remortgaged 2 and 3 times in 20 years I can only assume that its too easy to get caught up in hubristic ideas about the sector & assume that what went well 10 years ago still applies. (The "landlords have to flee the market now" is in many ways a reversal of the "what can possibly go wrong" of the height of the Tiger era).

That said, I would put the following learnings down:
- Central Banks more aware of accountability for regulation
- Minimum deposits far higher to avoid high risk
- greater record sharing among lenders to avoid poor credit decisions
- tax evasion has been largely eliminated from the sector
- idea that the regulations in the sector didn't need any enforcement now gone
- more balanced media (I know some will disagree) - I don't remember any time when IPOA were represented as anything but monstrous vultures in the media
- issues relating to minimum standards - when I started renting in the 90s there was a general acceptance that renters had to just "make do" with inferior conditions
- in general, the idea that tenants are somehow deserving of their situation is long gone
- but at the same time, the idea that you are morally entitled to lie to banks in order to get a mortgage at any cost is also long since gone

I think tax enforcement is one of the more underdiscussed factors in the sector and has a lot to do with many changes. (It was far easier to charge low rents and keep a low profile in the days when tax compliance was still poor).
 
Just looking at your first point that the Central Bank is more accountable for regulation? My own observation is that there are a large number of ‘trophy cars’ on the road and parked outside very modest homes. Is this personal borrowing or remortgaged money?
 
It's probably inflated pensions due to QE and the money the owner didn't eat during the Covid lockdowns.
 
There is no cost of living crisis.
Irish people are still piling into property like its 2006.
A new estate just launched in Enniskerry, Wicklow. All 27 luxury houses sold on day one.
 
I'm not sure of the relevance of this. U dont know if the house is rented, or the car leased or owned. Or if the person is into cars and not houses. Or the car is a demo and they work for the dealership. You see far more trophy cars in front of trophy houses, whatever that tells us.
 
fistophobia said:
There is no cost of living crisis.
Irish people are still piling into property like its 2006.
A new estate just launched in Enniskerry, Wicklow. All 27 luxury houses sold on day one.
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What do you mean no cost of living crisis, my electricity bill for a large family home for the last 2 months was €59. It cannot go on like this.
 
fistophobia said:
There is no cost of living crisis.
Irish people are still piling into property like its 2006.
A new estate just launched in Enniskerry, Wicklow. All 27 luxury houses sold on day one.
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The people buying luxury homes in Enniskerry have the disposable income to absorb the everyday price increases without their lifestyle taking a hit. People who were already just about scraping by do not.

Have you not noticed a big increase in the price of a tank of fuel or your weekly shop? I certainly have. Just because I can afford it doesn't mean it's not a huge problem.

Since this thread is about property: a few of my peers (~30 year old FTB tech workers) are re-evaluating their plans to purchase this year since we're all suddenly feeling a lot less secure in our jobs.
 
interested21 said:
The people buying luxury homes in Enniskerry have the disposable income to absorb the everyday price increases without their lifestyle taking a hit. People who were already just about scraping by do not.
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Or they have the capital from the increase in value of their existing home or they inherited money or they have shares or they have a cash lump sun from a pension or a combination of the above.
interested21 said:
Have you not noticed a big increase in the price of a tank of fuel or your weekly shop? I certainly have. Just because I can afford it doesn't mean it's not a huge problem.
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It's aa problem but not a crisis.
interested21 said:
Since this thread is about property: a few of my peers (~30 year old FTB tech workers) are re-evaluating their plans to purchase this year since we're all suddenly feeling a lot less secure in our jobs.
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Yep, sentiment (or panic, as it's also known).
 
The point that I am making is the cost of these cars would go a long way towards a good deposit on a home. Regardless of whether the car is leased or bought through a personal loan is irrelevant. An expensive car in front of an expensive home is not unusual.
 
Exactly but also - the key figure here is "27 homes" - tiny in the greater scheme of things. If developers can make the same profit building 27 luxury piles in fancy places that has a limited market, then its a lower risk than building 800 homes in North County Dublin and hoping there are 800 buyers out there to find them. Also the level of financing required to build 27 homes is probably a lot smaller than the grand schemes of 1000+ units of the 90s.

As for the FTB tech workers, thanks to our greatly diverged arrears changes, they would probably have greater security of tenure if they bought a home they subsequently couldn't afford to pay for than renting. Non payment of rent is one of the two exceptions for the eviction ban, but we read every week in the papers of thousands of home owners who are in medium to long term arrears. To put that in context: in the mid 00s, banks could start repossession procedures 6 months after the last payment was made.
 
And that brings me to a point I missed: there was very poor governance of arrears prior to 2008 with regard to repossessions. I had family who were facing repossession with 6 months of arrears and less than 10k of a mortgage left to pay in 2006. Such a case simply wouldn't happen now - it would be brushed away by managed procedures that made such a small figure in arrears terms easily manageable for the borrower in a way they wouldn't possibly countenance in 2006.

Yes its unfair that some people are able to spend years in arrears without appearing to make meaningful efforts to repay, but those who don't engage do end up before the courts and generally end up losing both the cases and their homes. I think thats learning something.

But we certainly do need a serious way to manage persistent refusals to engage (perhaps by better FLAC services that keep people away from grifters who prey on such people).
 
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