Current public sentiment towards the housing market?

[liteweight]

If you bought into the Irish property bubble early count yourself lucky. But spare some sympathy for the poor saps buying now.

Bought my first house in my early twenties in 1978 when rates skyrocketed to such an extent that salaries were only slightly higher than mortgages. Did not count myself lucky. Struggled on until salaries etc. increased and rates decreased meaning we could afford to pay extra off mortgage until it was paid off. Bought my current PPR, worst house in best area scenario and refurbished it over time. Meanwhile invested in commercial property (amongst other things) which we sold off a while back at a profit. Bought rental properties and allowed estate agents to look after them. With recent rise in rates and lower rental yields, took over the role of letting agent myself.

I do spare more than a thought for the FTB, but I trust that the majority will make an informed decision not only based on the market but on their personal circumstances. If that choice is to buy a home then so be it. I do not consider them 'saps' as long as they can afford it and have factored in rate increases.

Indeed why have "investors" continued to pile into property? I think it might have to something to do with "prices always go up in the long-term", "it's a pension", "Can't lose with property", "have someone else pay your mortgage" and other such pearls of apparent wisdom.

You seem to believe that all investors behave like lemmings. Nobody could force the cash out of my hand based on a few cliches. I have to assume that others do their research too. Yes I am sure there are some who will fall for it and, if the property market crashes, IMO, they are to be pitied.

As you stated in another post, perhaps education in schools, from parents and others in the know might help these people avoid the pitfalls. Unfortunately those 'in the know' are not always forthcoming with advice, even on these pages.

The reality is that the saps buying at current prices are supporting the value of your property(s). For now. That is, until we run out of saps.

Correct, although I wouldn't refer to them as 'saps'. Its always been this way. Back in 1978 I was also 'supporting' those above me. What would you like to see happen? Do you imagine that if houses dropped a 100k overnight due to interest hikes, that a FTB could afford this? How far would the drop in price have to go? Nothing changes in isolation. A bank or building society will lend less to a FTB if interest rates increase, is the drop in house price negated by this? Those who think they will be able to borrow the same amount, on the same salary, at a higher rate of interest are only dreaming. The financial institutions always look after themselves first!

 

[bugsbunny]

Let the EA's sweat for a change!

 

[Guest109]

any opinions as to where not to buy a house ie near a railway bridge or line airport or motorway

 

[z107]

Let the EA's sweat for a change!

The Estate Agents have already made their money. If there is a collapse, they'll just close up shop and move on.

any opinions as to where not to buy a house ie near a railway bridge or line airport or motorway

Ireland

 

[bugsbunny]

They are closing up shop and selling on to International estate agents!

 

[Duplex]

Just an observation on the investment options discussed in previous posts. No one has suggested setting up a business, possibly exporting its product or service (lessening exposure to any down turn in the Irish economy). The return on investment would be up to you.

 

[thewatcher]

[broken link removed]

Some very interesting reading in that,with alot of ire directed towards the BTL brigade in the uk.Their definitely a bit more financially savy over there than your average paddy.

 

[Duplex]

Anyone remember the broom cupboard in knightbridge? - well check this out;
http://news.sky.com/skynews/article/0,,30000-13536171,00.html

This was mentioned further up the thread umop, the Chinese and Australians are currently laughing up their selves.

 

[ivuernis]

If energy supply wasn't a problem then I would sell property and buy shares. But it is a problem and with the uncertainty of FIAT money, I'm not convinced that selling up is the best bet.

I agree that I haven't a clue about how to invest this windfall. So I would very much like to see arguments about why peak-oil won't reverse the trend of stock market growth. Perhaps someone with answers would like to start a new thread? Or even just some URLs to get me started.

I think peak-oil will most definitely reverse the trend of stock market growth and I can't see any reasons why it won't reverse the trend of property price growth either if it's not pricked already beforehand.

The oil-shocks of the 70's and 80's occured when just about 5% of the world's production was removed. Annual depletions rates post-peak will be around 2% (if we're lucky). You can see the potential for the turmoil it will cause.

 

[whizzbang]

[room305]

Note that I am only addressing one important subtopic: why don't 199X investors sell up when the profits are so high?

Greed, why sell now if prices "can only go up"?

 

[Firefly]

Room305, you mentioned leverage as a negative aspect about property investment...leverage, in my opinion, is the sweetest thing about property investment - shares may out perform housing % wise in the long run, but because of gearing, housing brings a larger wedge of cash back in. Take a 50k deposit money for a house and put it into shares..take the S%P's 8% return for the past 25 years, for the next 25 years...wow in 25 years your investment has reached 483k...this 50K could be used to buy a house for 500K and assuming that grows by a paltry 3% a year it will worth a million over the same period. OK housing has costs and hassle with tenants, but also carries tax benefits - as interest rates rise it also presents a higher Case V rental expense deduction.
If gearing was an option for shares, I'd agree with you and buy more of them, but try walking into a bank and looking to borrow 500k to buy shares...
Firefly

 

[whathome]

leverage, in my opinion, is the sweetest thing about property investment

Agreed - when prices are rising. Gearing is one of the most dangerous aspects of property investment when prices are falling. It amazes me how many people are terrified of the stock market after loosing a few hundred euro on Eircom shares but they will happily walk into a bank and take out a 100% mortgage on a €400,000 property. Gearing up for a financial nightmare. Risk is a good thing when people are aware of the dangers.

New show coming to RTE in the autumn:
"I'm a property investor - Get me out of here"

 

[askalot]

this 50K could be used to buy a house for 500K and assuming that grows by a paltry 3% a year it will worth a million over the same period. OK housing has costs and hassle with tenants, but also carries tax benefits

a million minus the 500k it cost (if interest only) and minus the 50k deposit. So that's 450k gain and don't forget your 20% CGT if this is an investment property so in fact it is a 360k gain but then you have to allow for the mortgage payments! So that 483K gain on shares looks pretty good especially if they are wrapped in a pension whereby the 50

 

[Duplex]

Leverage is good when prices go up and bad when prices go down. You can borrow money to buy shares btw.


[broken link removed]

 

[Guest126]

Hi Duplex

For my info - for an average person like me say, who is not mad about property, and would like to invest say €300k in equities, using say €50k of my own (and I am not Dermot Desmond so the security for loan would need to be the same shares) - what banks would consider this?

 

[walk2dewater]

Room305, you mentioned leverage as a negative aspect about property investment...leverage, in my opinion, is the sweetest thing about property investment - shares may out perform housing % wise in the long run, but because of gearing, housing brings a larger wedge of cash back in. Take a 50k deposit money for a house and put it into shares..take the S%P's 8% return for the past 25 years, for the next 25 years...wow in 25 years your investment has reached 483k...this 50K could be used to buy a house for 500K and assuming that grows by a paltry 3% a year it will worth a million over the same period. OK housing has costs and hassle with tenants, but also carries tax benefits - as interest rates rise it also presents a higher Case V rental expense deduction.
If gearing was an option for shares, I'd agree with you and buy more of them, but try walking into a bank and looking to borrow 500k to buy shares...
Firefly

oh dear me.

 

[Firefly]

Ok Ok...I'm gonna have a bash at defending housing cliches. Can I first point out that I am in no way an expert in property investment but am actively beginning to add a portfolio (even at today's prices) for the long term.

1. House prices rise in the long term - they for the past 200 years.

2. You have to live somewhere - You do....think of all the wonderful and practical things you could do with shares and gold on a desert island.

3. Safe as houses - houses are safe. See 1. Also, for all the talk about shares as a better investment, property assets make up a very sizeable portion of a plc's Balance Sheet...take this out and see what happens the share price!

4. Rent is dead money - it is - you're paying off someone else's mortgage
instead of your own. In the short term renting may be cheaper, but as mortgage payments are made up of Principal and Interest payments, the outstanding balance is falling all the while. For a realistic comparison of short term cashflow, the rent should be compared to only the interest element of the mortgage. Principal repayments, while hitting your bank a/c, are netted off by reducing the mortgage balance.

5. Renting is not viable long term - totally agree. Without proper rent control we can't compare our situation with the Germans. And without proper rent control I personally think that raising a family by moving from one rented house to another is both impractical (schools, childminding etc) and irresponsible as it promotes a transient attidute. Some things, like housing, just make sense.

I know I'm gonna get slated now because the vast majority of contributers to this thread are preaching doom & gloom, but for those who really believe long term renting is a better way to go...please spread the word to as many people you can - who knows you might be renting one of my places in a few years time, and sure then we'll all be happy!!

Firely

 

[Guest126]

Firefly - if rent is DEAD MONEY...then what do you call the money that a landlord pays on an INTEREST ONLY loan that exceeds the rental income on a house (you will be doing that if you buy investment property at current prices)?

 

[jani]

i happened on this thread a while back and have popped in on it from time to time. i am a FTB and being referred to as a sap really angers me, some of the generalised comments here..referring to people as sheep, plebs, saps lowers the tone and are indulgent, unbalanced and take away from the valid points being made.

 

[redo]

1. House prices rise in the long term - they for the past 200 years.
Prices of everything rise over time, art included

2. You have to live somewhere - You do....think of all the wonderful and practical things you could do with shares and gold on a desert island.
Yes, you do have to live somewhere, house ownership is different

3. Safe as houses - houses are safe. See 1. Also, for all the talk about shares as a better investment, property assets make up a very sizeable portion of a plc's Balance Sheet...take this out and see what happens the share price!
Local developments, like the new Gaol in North Dublin can effect prices

4. Rent is dead money - it is - you're paying off someone else's mortgage
instead of your own. In the short term renting may be cheaper, but as mortgage payments are made up of Principal and Interest payments, the outstanding balance is falling all the while. For a realistic comparison of short term cashflow, the rent should be compared to only the interest element of the mortgage. Principal repayments, while hitting your bank a/c, are netted off by reducing the mortgage balance.
Rent is the payment of a service, ie accomodation. If during the next couple of years, the housing market bursts, houses (in the short term) can become liabilities. In this instance, rent is the clever option.


Firely

However, I own a house and would not rent.

EDIT: The bank owns half of it.