Is this an anti property investment forum

[bearishbull]

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]

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]

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]

£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]

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]

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]

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]

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]

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]

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]

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??

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

 

[Culchie]

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]

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]

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]

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]

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]

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

 

[Howitzer]

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]

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]

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.