Buy to Let Investors are Suffering Triple Whammy! Article www.independent.ie

ubiquitous

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Re: Buy to Let Investors are Suffering Triple Whammy! Atticle www.independent.ie

Are some people just upset that they didn't jump on board the bandwagon at the time and make some easy money or do they really believe that those that invested in property were 'amateurs' pretty much fools for some reason.
I think the entire point of the thread is that the notion of "make some easy money" is now being revealed as a mirage.
 

MrMan

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Re: Buy to Let Investors are Suffering Triple Whammy! Atticle www.independent.ie

I think the entire point of the thread is that the notion of "make some easy money" is now being revealed as a mirage.
i do accept that there has been a misunderstanding that all it took for people to make money was to but into the property investment bonanza, but it did make a lot of people alot of money over a good ten year period, and alot of that was as much down to luck as anything else. The market has changed now so that to make your money you really have to look into every aspect and accept the risks, but previously i do think that while the risks were there, the same thought was not required to the same extent.
 

barryl

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Re: Buy to Let Investors are Suffering Triple Whammy! Atticle www.independent.ie

Excellant work. So for the 20 year period 1971 - 1991 house prices marginally beat inflation (holds hand up). It's only in the 14 years afterwards where the truism that house prices always beat inflation can be seen. The figures only run to 2005 so the inflation beating credentials of a falling housing market since then are, as yet, unproven.
so you are satisfied that in Ireland at least ,from 1971 to 2005 that house prices beat inflation,as nobody can tell for sure what will happen in the future
 

ajapale

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Re: Buy to Let Investors are Suffering Triple Whammy! Atticle www.independent.ie

MrMan,

Could you use the quote (or multiquote) facility
.

Its very hard to follow your posts when you don't know who you are quoting.

Thanks,
aj

Can we keep the discussion focused on the "Buy to Let" triple whammy raised by the OP?
 

Afuera

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Re: Buy to Let Investors are Suffering Triple Whammy! Atticle www.independent.ie

so you are satisfied that in Ireland at least ,from 1971 to 2005 that house prices beat inflation,as nobody can tell for sure what will happen in the future
I think all we've managed to establish is that one particular house managed to beat the officially reported level inflation over a certain 24 year period. It's quite a bit removed from your original claim that house prices would beat inflation over any 5-10 period. I'm also wondering, like Jethro Tull, why we have to ignore any precedents seen in other markets? What makes the Irish market unique so that it can avoid a 20 year downturn?
 

ajapale

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Re: Buy to Let Investors are Suffering Triple Whammy! Atticle www.independent.ie

To summarise:

1) Plummeting property prices;
2) Falling rents;
3) Rising interest rates

Link to Article by Louise McBride Indo:
Indo Article Dowling said:
"Buy-to-let is a very different investment today to five years ago. You can't get into the market now and expect a quick return in two years."

Rising mortgage interest rates have forced landlords to increase -- or even subsidise -- rents. Although the ECB rate has not changed over the past year, the credit crunch ........ has also forced lenders to increase the interest charged on mortgages.

Many investors ... are suffering because the value of their apartments has plummeted.

Investors have bought in areas where tenants are hard to find.

In the last few years, there was an explosion of amateur investors who got into buy-to-let for the wrong reasons.

People who bought because their neighbours had investment properties.

Others bought because of tax incentives, such as the Section 23 scheme, "People [who took advantage of Section 23] have been left with properties that are idle -- they're getting tax relief, but no rent.

Even when investors have bought in good locations, it can be hard to secure rent. "Not every tenant pays their rent and not every tenant pays on time."
 

bo se

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Re: Buy to Let Investors are Suffering Triple Whammy! Atticle www.independent.ie

I'm sure the Japanese would love to hear that little mantra of yours. :rolleyes:
Afuera/ Jethro Tull,
One difference between Ireland and Japan rarely mentioned when people cite the Japanese example, is that the population in Ireland is growing strongly (even now with positive net migration though less strong than in past few years and a growing indigenous population). Japan's population in contrast has been falling for many years which is not very supportive of demand.
 
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Jethro Tull

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Re: Buy to Let Investors are Suffering Triple Whammy! Atticle www.independent.ie

in fairness to Barryl, his statement was as elaborate as yours, why don't you outline your points to him if you want to debate.
My point was to sarcastically throw out the oft used expression (usually by FF trolls and VIs) that Ireland is different. A bit like 'da fundamentals are sound', they are bandied around an acquiescent media with no follow up or outline of why Ireland is different

I later stated that I was still awaiting reason(s) why Ireland was different, barryl has posted several times since but hasn't answered this.

So I will ask a straight question, WHY IS IRELAND DIFFERENT?

also why will a bubble inflated by cheap credit and a 'you can't lose on property' mentality not deflate (or even burst) despite the fact:

- unemployment is rising
- interest rates are rising on an almost weekly basis
- there are (depending on your source) between 200,000 & 300,000 empty properties
- buy to let investors are being squeezed by rising cost of interest payments and falling rents
- slowing economy
- all signs point to a recession

I could go on but I'm going to the pub for a quiet pint
 

Howitzer

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Re: Buy to Let Investors are Suffering Triple Whammy! Atticle www.independent.ie

so you are satisfied that in Ireland at least ,from 1971 to 2005 that house prices beat inflation,as nobody can tell for sure what will happen in the future
Sure. Note from the graph that any period where the line turns south that inflation is beating property prices. There were plenty of 5 year periods from those figures where that was the case.
 

Steve D

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Re: Buy to Let Investors are Suffering Triple Whammy! Atticle www.independent.ie

- unemployment is rising
- interest rates are rising on an almost weekly basis
- there are (depending on your source) between 200,000 & 300,000 empty properties
- buy to let investors are being squeezed by rising cost of interest payments and falling rents
- slowing economy
- all signs point to a recession
Another important point to add to this list is that many immigrants from E Europe who came for work are leaving because of poor job prospects (especially in construction). This will also have a big effect on the rental market, increasing supply, increasing the length of void periods and reducing rents.
 

Afuera

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Re: Buy to Let Investors are Suffering Triple Whammy! Atticle www.independent.ie

Afuera/ Jethro Tull,
One difference between Ireland and Japan rarely mentioned when people cite the Japanese example, is that the population in Ireland is growing strongly (even now with positive net migration though less strong than in past few years and a growing indigenous population). Japan's population in contrast has been falling for many years which is not very supportive of demand.
Point taken that Ireland and Japan are not directly comparable. I only brought it up to show the absurdity of barryl's "hasn't happened yet, can't happen" attitude. I must say there appears to be some very shaky beliefs out there that I am surprised to still see being passed off as advice.

Regarding the article posted by the OP, I think that this quote from Frank Conway of the Irish Mortgage Corporation is very telling:
"Buy-to-let is a very different investment today to five years ago. You can't get into the market now and expect a quick return in two years."

What happened to "in it for the long term", "sound fundamentals" etc.? People expecting a quick return after two years is simply speculation and will always end in tears. Since 40% of new builds were being bought by investors, it will be interesting to see how many of them were really in it for the long term after all.
 

newirishman

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Re: Buy to Let Investors are Suffering Triple Whammy! Atticle www.independent.ie

I personally think the term "buy-to-let" investment is very much misleading for the last ten years in Ireland. Nobody bought to let. They where all buying to make big money due to the inflation of property prices. The term "buy-to-find-someone-else-to-dump-this-shoebox-on-for-at-least-40%-more-than-I-have-forked-out-12-months-ago" would be more accurate.

It was the same with the dotcom bubble at the end of the nineties, and is the same with whatever bubble you choose.

A normal investor usually tries to get some return on his investment, not only caused by price inflation (because property prices don't always go up) but - when speaking about property - by getting some rental yields for example.

Unfortunately, this rental yield calculation didn't quite work out. I mean, you fork out 450K for a 2 bed shoebox in Dundrum, and you can rent it out for say 18K a year if you are lucky: you can get more interest on your current account.

And then giving out on the government for providing social housing? Ridiculous.
 

barryl

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Re: Buy to Let Investors are Suffering Triple Whammy! Atticle www.independent.ie

rents are up 22% over the last three years according to a bank of Ireland report last week
 

barryl

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Re: Buy to Let Investors are Suffering Triple Whammy! Atticle www.independent.ie

Sure. Note from the graph that any period where the line turns south that inflation is beating property prices. There were plenty of 5 year periods from those figures where that was the case.
property investing is for the long term,dont expect returns after 5 years
 

shanegl

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Re: Buy to Let Investors are Suffering Triple Whammy! Atticle www.independent.ie

property investing is for the long term,dont expect returns after 5 years
But you said that's exactly what we could expect. :confused:
 

barryl

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Re: Buy to Let Investors are Suffering Triple Whammy! Atticle www.independent.ie

no,I said property beats inflation in any 5-10 year period.
 

Bronte

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Re: Buy to Let Investors are Suffering Triple Whammy! Atticle www.independent.ie

To summarise:

1) Plummeting property prices;
2) Falling rents;
3) Rising interest rates
Anyone who bought a buy to let expecting a return in two years is very naive. But sure some people made a killing on it and fair play to those who had the guts to get in buy, wait and sell at a hefty profit. It's a high risk strategy. But not everybody will succeed at this and many will get burned. Property ideally is a long term investment.

Going back to the OP's point: Plummeting property prices don't matter if you are not going to sell.
Falling rents won't affect you if the rent still covers the mortgage/costs
Ditto rising interest rates. Also I'm sure some people can afford to pay the mortgage even if they have no tenants. The people that are worst affected are those who bought in the last two years, paid over the odds, in a bad location and have no room for manoeuvre on interest rates/rent decreases and are now losing their jobs.

People will always need to rent but you have to have property in a good location, one should have factored in the possibility of a rent decrease and mortgage increase into your calculations before making the decision to purchase in the first place.
 

Howitzer

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Re: Buy to Let Investors are Suffering Triple Whammy! Atticle www.independent.ie

no,I said property beats inflation in any 5-10 year period.
Err, and the graph plainly shows shows that property doesn't beat inflation over any 5-10 year period.

rents are up 22% over the last three years according to a bank of Ireland report last week
Err, did you read the Daft report showing rents have started falling and are now 2% lower since january

http://www.daft.ie/news/2008/daft-rental-report-q1-2008.daft

Picking and choosing what you read and choose to believe is one thing but passing that off as fact is another. There may well be 2 sides to every argument but more often than not the facts and figures speak for themselves.

http://daftwatch.atspace.com/
 

Duplex

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Afuera

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Re: Buy to Let Investors are Suffering Triple Whammy! Atticle www.independent.ie

Depends on when and where you buy. If you bought a house in the US in 1890 it would have taken fifty years for it to return to its 1890 value in real terms.

Good article on inflation and long term house price growth.


http://economistsview.typepad.com/economistsview/2006/03/shiller_longter.html
We're talking about the Irish/UK market here though so we can ignore everything that happened in those other countries ;)

Interesting article though.
 
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