If I pay someone €3,000 to fix my roof and they do a good job, that is not dead money.
I agree that's the thinking. In the same breath though they tend to forget / be unaware that to come up with a mortgage figure equivalent to the rent they're paying, they'd have to put down a 10-20% deposit on the property, and then cover all the other outlays such as stamp duty, solicitor's fees, furniture / decoration, LPT, home insurance etc etc, and that's assuming there's nothing wrong with the place that needs to be put right.The general context I've heard people using the phrase dead money is paying rent equivalent or in excess of what mortgage payments would be and considering that after x years they would have had the same outflow of cash, but no equity to show for it. Maybe using 'dead money' for this is a bad term, but I understand the idea they are trying to convey.
If u pay someone €3,000 to fix your roof while there is an option to pay only €2,500. €500 is dead money.
I agree that's the thinking. In the same breath though they tend to forget / be unaware that to come up with a mortgage figure equivalent to the rent they're paying, they'd have to put down a 10-20% deposit on the property, and then cover all the other outlays such as stamp duty, solicitor's fees, furniture / decoration, LPT, home insurance etc etc, and that's assuming there's nothing wrong with the place that needs to be put right.
that's assuming there's nothing wrong with the place that needs to be put right.
And assuming that house prices don't fall 50% after you buy the place and you find yourself in negative equity for years afterwards.
But if you look at the housing that was built in the 70s and 80s when we were building lots of houses, they were much more basic and were easier to build . They had a stove , a fridge , one basic bathroom and a few sticks of furniture that was it. Also the safety standards for workers were non existent, there were no portaloos, builders used basic tools, a few ladders and a cement mixer, if a builder got injured there was no compo culture. Its no wonder we were able to build cheaply back then. Now with covid and social distancing , safety officers, there are alot more people employed on building sites that are not actually building. All of this adds alot to the cost.As a nation we have to accept that a big driver of housing cost has been the much-needed and absolutely justifiable regulatory issues around safety, energy and sustainability. This happened in the car industry too, but that sector managed to continually produce better cars for increasingly less cost by ‘value engineering’ and by using increasingly sophisticated production techniques.
It is true to say that renting is far more uncertain and probably more costly in the medium to long term than home ownership but rent is not dead money. The problem with bad analogies and metaphors is that they lead to us asking the wrong questions, have the wrong discussions and fix the wrong problems.The comparison is not valid because your are comparing rent cost with another rental cost. The 'dead money' term is typically a comparison between mortgage costs and rent.
All things remaining equal, a €3000 rent per month for the term of 25yrs is €900,000.
What is the value of the property and how much would a 25yr 100% mortgage cost?
Are you seriously suggesting that in the last 50 years construction methods haven't improved sufficiently to reduce the labour input way beyond the cost/labour input of monitoring health and safety etc?But if you look at the housing that was built in the 70s and 80s when we were building lots of houses, they were much more basic and were easier to build . They had a stove , a fridge , one basic bathroom and a few sticks of furniture that was it. Also the safety standards for workers were non existent, there were no portaloos, builders used basic tools, a few ladders and a cement mixer, if a builder got injured there was no compo culture. Its no wonder we were able to build cheaply back then. Now with covid and social distancing , safety officers, there are alot more people employed on building sites that are not actually building. All of this adds alot to the cost.
Yes the heavy labour element has been taken out of it by machines, but there are still a lot of bodies on construction sites or connected to it that were not there in the 70s and 80s. Think of covid compliance officers etc etc, also those Labour saving machines are expensive, it all adds to a lot more cost, then you have the new curve ball of shortage and rising cost of construction materials.Are you seriously suggesting that in the last 50 years construction methods haven't improved sufficiently to reduce the labour input way beyond the cost/labour input of monitoring health and safety etc?
If shipping in Ireland was done like construction we'd still be using sailing ships.
Germany and the USA are the most productive manufacturing economies in the world with the most productive workers because they don't have lots of cheap labour making things. Their businesses, especially their SME's, are far more capital intensive than ours. The efficient use of capital, more than the efficient use of labour, reduces costs.You need cheap labour to build houses cheaply
Why are we behind the times on this? And is it the same in the UK?Germany and the USA are the most productive manufacturing economies in the world with the most productive workers because they don't have lots of cheap labour making things. Their businesses, especially their SME's, are far more capital intensive than ours. The efficient use of capital, more than the efficient use of labour, reduces costs.
The last thing an efficient construction sector needs is lots of cheap labour. Anyone using a hand saw or hammer on a building site should be sacked. There should be no need for block or brick laying above the groundworks level. There should be no first fix on site. There should be no door hanging on site. There should be no roof tiling on site. The way we build houses is Dickensian. The entire sector is not fit for purpose and, speaking as an Irish Tradesperson, Irish Tradespeople are not at the races when compared to the European competition. Eastern European tradespeople are generally smarter, much better trained and have a vastly superior work ethic.
Hopefully we'll eventually get to the stage where 80% of the construction of houses is done in factories, here or elsewhere, and 50% of the labour disappears.
But you will still own a PPR?will likely rent somewhere abroad instead of buying
The "rent is dead money" is the one I most agree with Conor Skehan on.
It is the most stupid phrase in the whole housing debate.
I am a great believer in home ownership.
But if someone chooses to rent a property instead of renting money, that is a perfectly valid choice.
There is nothing to stop someone renting their home and instead of repaying the capital on their mortgage, they invest it in equities.
It is hard to explain this to people. Maybe renting a car vs. buying one would be a better analogy?
A lot of people who bought at the top of market felt that their full mortgage payment , interest and capital, was dead money.
Brendan
Exactly good question, are we that much different to UK, they are probably a lot better given that they are one of the most densely populated island on the planet ?Why are we behind the times on this? And is it the same in the UK?
How about grants for business owners to turn their empty upstairs rooms into flats and apartments and a guarantee that their rates will not be increased if they do the conversion?
How about real taxes on empty housing?
How about real taxes on vacant sites and a use it or lose it planning system?
How about the planning process being brought into the 21st century so that it doesn't take 6-8 years to develop a site? Failing that bring it into the 20th century.
How about a semi state company to which all non-building land which has been re-zoned for building must be sold? It could then sell the land to developers at a much lower cost, with the proviso that the prices of the housing units built will reflect that lower land cost?
How about the department of the environment getting its act together so that new regulations can be put in place quickly for new construction methods?
We are in a closed market, not open to international competition. The UK is a larger closed market. On the mainland you can buy a house in one country and have it assembled in another. That means local construction prices have to be more competitive and of a good quality. Of course construction costs are only part of the overall price of delivering housing.Why are we behind the times on this? And is it the same in the UK?
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