Records began fifty years ago and since then inflation adjusted property prices have increased by 250%. This is a real gross annual return of 3.5%. That's before depreciation of course but ignores rents.When will people learn to live within their means (as someone once said...) and get about the business of reducing their existing debt without getting into more hock and putting all their eggs into one Irish property basket??
Only two periods of losses so farYes, it was a rollercoaster but three periods of big gains and only two periods of losses.
Half a century is a lifetime investment horizon for most people.Only two periods of losses so far
I certainly would be of a similar mind to you. I did not invest in Ireland in the 00s boom but then again, I suppose I missed out.... who knows. At least now my mortgage is fully paid off and just one daughter with two more years in Uni. I would like to think I am off the hook at that stage.Thanks to the mods for moving this.
I'm not doubting for a second that holding onto a house for 25 years will not make a return on an investment. Far from it.
However my point is that someone with 29 years left on their mortgage and a debt of €275K and who has a lump sum available seems to instinctively think that another property and more debt is a better idea than running down the balance of what they currently owe. It also completely ignores life's normal risks of unemployment/ill health etc. I don't believe it is a wise or prudent course of action.
Actually on a re-read it is even worse. The lump sum is only €20K!! To use as a deposit to get into further debt of €250K to owe over half a million...
Perhaps I'm just old fashioned...
I'd guess most assets linked to the Irish economy have grown significantly in the last 50 years. We were a basket case back. I think the growth rate in the last 20 years is more informative.Records began fifty years ago and since then inflation adjusted property prices have increased by 250%.
Crashed happen not when risky assets become riskier but when safe assets become risky.Thanks to the mods for moving this.
I'm not doubting for a second that holding onto a house for 25 years will not make a return on an investment. Far from it.
However my point is that someone with 29 years left on their mortgage and a debt of €275K and who has a lump sum available seems to instinctively think that another property and more debt is a better idea than running down the balance of what they currently owe. It also completely ignores life's normal risks of unemployment/ill health etc. I don't believe it is a wise or prudent course of action.
Actually on a re-read it is even worse. The lump sum is only €20K!! To use as a deposit to get into further debt of €250K to owe over half a million...
Perhaps I'm just old fashioned...
Certain parts of France have performed very poorly over 2 decades. While there is always the risk of having paid over odds initially, certainly there are areas that have not provided any return when one factors in Net Present Value of Current Market Value (over a 20 year period, this can easily reduce current values by 60% in real terms, that is why I like an IRR measure so much as it "normalises" today's value of your EURO against the present day notional value of your original investment). Include property taxes at an assumed 0.6% per year that is another 12% erosion over a 20 year period.... the remaining 20% is a 1% increase over a 20 year period. Hardly stellar.Half a century is a lifetime investment horizon for most people.
I don't know of any housing market in a developed economy where anyone has made a capital loss on residential property over the span of two decades.
Ireland is more volatile than most places, but returns are there if you have the patience.
I'm not sure what is the 'next generation' for you TallPaul but for me the next generation, are unable to get on the property ladder at all. This includes my children & most of their friends. So no I don't think they need to be taught anything like that in school..... They see 1st hand how government housing policy has failed them!I'm going to rant/generalise.
It seems that the next generation coming along still seem to have the same fixation as previous ones that any surplus cash should be chucked into second and third houses on the blind assumption that they will appreciate in value/earn easy high rents even if the purchaser has high levels of exiting debt!! 'Sure how hard can it be? 2K a month for doing nothing, It'll pay for itself in a few years' It is original posts like this that makes my blood boil.
When will people learn to live within their means (as someone once said...) and get about the business of reducing their existing debt without getting into more hock and putting all their eggs into one Irish property basket?? Not forgetting the unremitting hell that being a landlord in Ireland seems to be at present. Has the OP even CONSIDERED the direction of interest rates/inflation over the next five years?
I'm convinced, now more than ever, that budgeting/debt management should be drummed into children in school
It's not a blind assumption, it is a lesson from history, a bitter lesson if you were on the wrong side of it.I'm going to rant/generalise.
It seems that the next generation coming along still seem to have the same fixation as previous ones that any surplus cash should be chucked into second and third houses on the blind assumption that they will appreciate in value/earn easy high rents
I've been thinking about historic trends a lot lately, and how the older I get the smaller those sample sizes feel like, especially given the rate at which the world is changing and how long cyclical behaviour can be. I'm not saying you're wrong, but I would question whether 50 or even 100 years of data is enough to be predictive of the future.Records began fifty years ago and since then inflation adjusted property prices have increased by 250%. This is a real gross annual return of 3.5%. That's before depreciation of course but ignores rents.
Perhaps, but my benchmark was "no capital loss over two decades" and for France you'll see that was never remotely the case.Certain parts of France have performed very poorly over 2 decades.
Maybe you are old fashioned.Thanks to the mods for moving this.
I'm not doubting for a second that holding onto a house for 25 years will not make a return on an investment. Far from it.
However my point is that someone with 29 years left on their mortgage and a debt of €275K and who has a lump sum available seems to instinctively think that another property and more debt is a better idea than running down the balance of what they currently owe. It also completely ignores life's normal risks of unemployment/ill health etc. I don't believe it is a wise or prudent course of action.
Actually on a re-read it is even worse. The lump sum is only €20K!! To use as a deposit to get into further debt of €250K to owe over half a million...
Perhaps I'm just old fashioned...
That would be a strong financial position by most reckonings – although even then an emergency fund will only see you through a period of hardship for a few months.What if someone has 29 years left on their fixed rate mortgage, has already maxed out their AVCs and their fixed rate overpayment, and already has an emergency fund?
And the annualised return of an equity portfolio is around 8%-9% over the same period. So you are investing in a high risk asset class, failing to diversify and probably borrowing to invest and for all of that you are getting a return of about a 3rd of what is on offer. There is a reason why Irish households lost more than the average European household in the last recession and it is right in front of you.Records began fifty years ago and since then inflation adjusted property prices have increased by 250%. This is a real gross annual return of 3.5%. That's before depreciation of course but ignores rents.
Yes, it was a rollercoaster but three periods of big gains and only two periods of losses.
Irish property is not riskless but if you have the stomach to stay in it for at least two decades you will get a return.
In order to learn from mistakes, people would have to admit that they made them, it's much more comfortable to blame the banks, the government, the bond holders and just about anyone else they can think of.I'm going to rant/generalise.
It seems that the next generation coming along still seem to have the same fixation as previous ones that any surplus cash should be chucked into second and third houses on the blind assumption that they will appreciate in value/earn easy high rents even if the purchaser has high levels of exiting debt!! 'Sure how hard can it be? 2K a month for doing nothing, It'll pay for itself in a few years' It is original posts like this that makes my blood boil.
When will people learn to live within their means (as someone once said...) and get about the business of reducing their existing debt without getting into more hock and putting all their eggs into one Irish property basket?? Not forgetting the unremitting hell that being a landlord in Ireland seems to be at present. Has the OP even CONSIDERED the direction of interest rates/inflation over the next five years?
I'm convinced, now more than ever, that budgeting/debt management should be drummed into children in school
And the annualised return of an equity portfolio is around 8%-9% over the same period.
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