Do you personally know anyone who.

Monty Burnz

swampgas wrote: »

So you might be paying more per month renting instead of paying a mortgage, but you are also taking on a lot less exposure to risk.

What risk, sure? If things go wrong, just claim that nobody could have predicted the existence of economic cycles, and that if you have to live in rented accommodation your children will grow up deformed or as murderous druggies. The government will be along to bail you out in no time with money that's supposed to be paying for hospitals and schools.

swampgas

Monty Burnz wrote: »

What risk, sure? If things go wrong, just claim that nobody could have predicted the existence of economic cycles, and that if you have to live in rented accommodation your children will grow up deformed or as murderous druggies. The government will be along to bail you out in no time with money that's supposed to be paying for hospitals and schools.

Ah yes - I forgot about the alternative reality called "Sindo Ireland" where banks should just give people money instead of lending it, after all they have loads of it, don't they?

DublinWriter

Monty Burnz wrote: »

The people who can now pick up a house or (especially) an apartment for peanuts? Yes, it must be galling...

...especially when the banks aren't lending.

Monty Burnz

DublinWriter wrote: »

...especially when the banks aren't lending.

You are clutching at straws now tbh.

jackiebaron

andyjo wrote: »

I know a tacher who bought a holiday home abroad and an investment property here. She is now in difficulties. Also have a cousin in the Gardai who bought a couple of investment properties during the boom, ...he said at the time it was to suppliment his income when he retires at 50, and all his friends were at it too. Crazy stuff.

He can kiss goodbye his dream of retiring at 50.
Well he'll retire from the Gardai but he'll go straight from there to Tesco, stacking shelves by day and Abrakebabra, chopping onions by night :pac:

fricatus

Monty Burnz wrote: »

For the umpteenth time, I'll explain the nonsense of 'rent is dead money'; you either rent a property, or you rent money to 'buy' property. The rent you pay for the property is commonly called 'rent'. The rent you pay for the money to buy property is called 'interest'. Mortgage interest is dead money, no?

Yes it is, but all you've proved to me is that mortgage interest is dead money, not that rent isn't...

Accepting your logic that mortgage interest is "dead money", I think we can consider it a form of "rent" paid to the bank for the money paid for the house that you live in. You're "saving" a tiny (but increasing) amount every month, which is your equity in the property.

You could argue that I could rent a house and save the money. Sure I could, and I could save the rest, and in 25 years' time I could have enough to buy a house outright to live in.

However the point that you're missing is that if I take out a mortgage, the interest portion (dead money) declines every month, to the point where in 20 years' time most of my monthly payment is now equity (savings) which buy the actual house.

At the end of 25 years, the guy renting and I have both had a roof over our heads, but I now own a house; he owns nothing.

And sure, I've paid a load of mortgage interest and it's dead money, but now I have a home to live in, rent free for the rest of my days, while he's still paying rent to a landlord. Now every month that I'm not paying rent or a mortgage, I am in a sense making back my dead money, while he's still paying his out.

I don't see what part of this you don't understand. Yes, there are separate and perfectly valid arguments about flexibility, but when you reach the stage of your life when you're not going to be moving to London or Toronto, those arguments hold no weight.

Monty Burnz wrote: »

And of course if rent is lower than the mortgage on the same property, things get very interesting.

Well yes, but most of us are not foolish enough to buy in those circumstances! My mortgage (for a house) is only twice the rent I had been paying (for a room).

Monty Burnz wrote: »

The funniest thing though is that we are still hearing the same idiotic rationalisations for buying at all costs that has trapped so many into bubble-priced shoe boxes. Some people will never learn.

Would you agree though, that buying a house for a reasonable price (say about the rental level or slightly higher) is a sensible move for someone who is not planning on moving location?

swampgas

fricatus wrote: »

Would you agree though, that buying a house for a reasonable price (say about the rental level or slightly higher) is a sensible move for someone who is not planning on moving location?

Although not aimed at me, I agree to an extent.

The point is that Irish people don't seem to make a rational comparison between renting and buying. It's buy at all costs.

Personally I think that people should rent until they are absolutely sure that they are settled - kids at school, very secure jobs (public sector maybe) where they can be reasonably sure that they will neither lose their income nor be forced to re-locate. And obviously they should borrow well within their means so they can be confident of making the repayments, even if there are a few lean years down the line.

This means that people with unpredictable careers or incomes should be looking to rent rather than buy, no matter how settled they are.

You could argue that I could rent a house and save the money. Sure I could, and I could save the rest, and in 25 years' time I could have enough to buy a house outright to live in.

And this is what people in Europe often do.

jackiebaron

DublinWriter wrote: »

Dude.

In all seriousness, are you arguing that Western Europe will experience continual negative economic growth year on year for the next twenty-five years?!?

I mean, come on. Even David McWilliams would call you a pessimist.

You seriously think that a house bought for 700K in 2006/2007 will be worth less in 2036??!

Look Pal,

You're the very bloke who, back in 2006, knew everything. Anyone who mentioned a bubble or a crash or anything of that nature was a fool in your eyes. And now you're still waffling out your gems of economic wisdom.

Monty Burnz

fricatus wrote: »

You could argue that I could rent a house and save the money. Sure I could, and I could save the rest, and in 25 years' time I could have enough to buy a house outright to live in.

However the point that you're missing is that if I take out a mortgage, the interest portion (dead money) declines every month, to the point where in 20 years' time most of my monthly payment is now equity (savings) which buy the actual house.

At the end of 25 years, the guy renting and I have both had a roof over our heads, but I now own a house; he owns nothing.

In a 'normal' housing market (which we haven't seen for many years), renting is cheaper than buying. Throughout the bubble, renting was far cheaper than buying. The money you save by renting you invest. Much as the interest element of your mortgage declines, the interest element of your savings increases. After 25 years, you have a large lump sum - perhaps exceeding the cost of a house (a worked example I did on Boards previously had me saving the cost of 2 of the houses I was renting, with change for some supercars, although this example was distorted by top of the bubble prices), perhaps less.

fricatus wrote: »

And sure, I've paid a load of mortgage interest and it's dead money, but now I have a home to live in, rent free for the rest of my days, while he's still paying rent to a landlord. Now every month that I'm not paying rent or a mortgage, I am in a sense making back my dead money, while he's still paying his out.

This depends on what the housing market, interest rates, rent, inflation and investment returns have done in the meantime - assuming of course that the renter doesn't blow their monthly savings on coke and hookers.

fricatus wrote: »

I don't see what part of this you don't understand. Yes, there are separate and perfectly valid arguments about flexibility, but when you reach the stage of your life when you're not going to be moving to London or Toronto, those arguments hold no weight.

I understand this stuff very well - it's not an accident I haven't bought yet. I'm trying to combat one of the simplistic memes that had people buying ridiculously overpriced apartments during the bubble rather than renting same for a half or a third of the cost.

The flexibility argument is very much a side issue as far as I'm concerned.

fricatus wrote: »

Well yes, but most of us are not foolish enough to buy in those circumstances! My mortgage (for a house) is only twice the rent I had been paying (for a room).

Anybody who bought during the bubble was foolish enough to do that. I can't remember a single example of a property where the rent exceeded the mortgage. In my case, the mortgage would have been 3 times what I was paying in rent, yet the house 2 doors up sold (for 750k or so) to somebody. Perhaps you mean to say that nobody will be foolish enough to do that now that they realise that property prices fall as well as rise.

fricatus wrote: »

Would you agree though, that buying a house for a reasonable price (say about the rental level or slightly higher) is a sensible move for someone who is not planning on moving location?

Yes, certainly. I intend to do so myself in a few years. But this is the point: throughout the bubble people were buying apartments and houses where the mortgage exceeded the rent by a country mile. Take the Alison O'Riordan example - she bought a place for 500k or so and pays (assuming it's a repayment mortgage, with a long 30 year term, and a low 5% interest rate) 2,700 per month. Those apartments could be rented for 1300 or 1400 at the time (and you can now rent them for under 1200).

But she probably figured that rent is dead money - not realising that she's paying 2100 per month on interest alone!

earlyevening

There can be times when renting makes more sense from a financial point of view, and times when borrowing to buy makes sense.

In the bubble years, with 40 year terms and long interest only periods, it made no sense to buy.

If you end up paying over a million euro for a 200,000 house, there's no real way to justify it (financially).

DublinWriter

jackiebaron wrote: »

Look Pal,

You're the very bloke who, back in 2006, knew everything. Anyone who mentioned a bubble or a crash or anything of that nature was a fool in your eyes. And now you're still waffling out your gems of economic wisdom.

Look 'chum', don't take it all so personally, play the ball not the man.

I never claimed to know it all, but what I've always stated was that property *IN THE LONG TERM* is a good investment, i.e. after the life of a 25 year mortgage.

Got that? IN THE LONG TERM.

What we're seeing here is a repeat of what happened in the UK in the early 90's. People bought residential property for what was silly-money in the late 80's, there followed a currency crises causing interest rates to sky-rocket resulting in many people having to default on their mortgages. Prices did eventually return and exceed the 'boom' late 1980's prices by the turn of the millennium.

jackiebaron

DublinWriter wrote: »

Now factor in DIRT.


Huh? Paid €230 for the house in 2003. House is currently valued at €210.


Told you - I don't pay *any* interest on my mortgage because I was lucky enough to get an offset mortgage before they pulled the plug on them in this country.


Yeah...I'm beginning to understand just how much of an emotive subject this is for those who rent or still live with their parents.

Oh, here we go again. Everyone's a sucker for not buying. Well, listen to me, Stiglitz. I own three properties. 2 outright and one mortgage in Amsterdam....and they're a pain in the bollocks. I can't just bog off over the horizon on "walkabout".

Zubeneschamali

DublinWriter wrote: »

What we're seeing here is a repeat of what happened in the UK in the early 90's.

We don't know that.

Property is still losing value. We don't know when it will bottom out. When it does, we don't know if it will stay low, or start climbing, and if it climbs, how fast.

earlyevening

DublinWriter wrote: »

Look 'chum', don't take it all so personally, play the ball not the man.

I never claimed to know it all, but what I've always stated was that property *IN THE LONG TERM* is a good investment, i.e. after the life of a 25 year mortgage.

Got that? IN THE LONG TERM.

What we're seeing here is a repeat of what happened in the UK in the early 90's. People bought residential property for what was silly-money in the late 80's, there followed a currency crises causing interest rates to sky-rocket resulting in many people having to default on their mortgages. Prices did eventually return and exceed the 'boom' late 1980's prices by the turn of the millennium.

Others have cited examples where prices havent returned to pre bubble levels - like Japan.

Are we closer to Newcastle or Nagasaki???

jank

DublinWriter wrote: »

...especially when the banks aren't lending.

Most buyers now are either local council or cash buyers. My folks have enough cash in the bank to buy two fairly decent apartments. There is still a lot of "old" money in the country.

jank

DublinWriter wrote: »

Look 'chum', don't take it all so personally, play the ball not the man.

I never claimed to know it all, but what I've always stated was that property *IN THE LONG TERM* is a good investment, i.e. after the life of a 25 year mortgage.

Tell that to the Japanese. You are still convinced that property will be back to 2007/2008 levels in a matter of years. We could be waiting 30-40 years before that happens, where pretty much any other investment will kick its ass. Bonds, cash, equities and most commodities. The best long term investment in the world over the last 80 years is stocks. NOTHING will beat that not even property.

Got that? IN THE LONG TERM.

DublinWriter wrote: »

What we're seeing here is a repeat of what happened in the UK in the early 90's. People bought residential property for what was silly-money in the late 80's, there followed a currency crises causing interest rates to sky-rocket resulting in many people having to default on their mortgages. Prices did eventually return and exceed the 'boom' late 1980's prices by the turn of the millennium.

And the current situation is similar how? Did the UK have the IMF knocking on the door? Apples and Oranges. Again have a look at what happened in Japan. It is a far more comparable situation. I think you only want to see and hear what you want.

jank

DublinWriter wrote: »

Now factor in DIRT.

Factor in CGT on a sale of a property and of course the interest you pay to a bank for a mortgage on an asset that is losing value every day...

DublinWriter wrote: »

Huh? Paid €230 for the house in 2003. House is currently valued at €210.

So 8 years in you have lost at least 20k in value of the asset and lost countless thousands in interest payments. Do the math, if you rented and saved the difference in a cash account that pays a fairly decent rate, you would be way way up rather than 20k down. Also dont forget CGT?
If you put that 230k in any other class of investment you would be up, well up on the initial investment.

By the way you mentioned 280k on a sale of a property.

DublinWriter wrote: »

Told you - I don't pay *any* interest on my mortgage because I was lucky enough to get an offset mortgage before they pulled the plug on them in this country.

But you are still losing money on the capital and the asset. You "think" you are saving money one way but you are being ****ed in the ass twice for reasons already explained.

DublinWriter wrote: »

Yeah...I'm beginning to understand just how much of an emotive subject this is for those who rent or still live with their parents.

Ah yes we are all losers who live with mam and dad (even though I live in Sydney). You in the other hand are laughing all the way to the bank with your depreciating asset and thousands upon thousands of lost interest on your capital. Well if the opposite to you is a loser I love being one!!

swordofislam

jank wrote: »

If you put that 230k in any other class of investment you would be up, well up on the initial investment.

Well not really.
Irish bank shares for example.
Or I could buy gold now.

jank wrote: »

You in the other hand are laughing all the way to the bank with your depreciating asset and thousands upon thousands of lost interest on your capital.

I'm not sure if it is accurate to describe property as depreciating even when the value falls.
I agree with as the owner of 2 negative equity properties there is no guarantee that property will recover its value (though in very long term (post my death) a boom is inevitable if we remain capitalist).

If you look at the price of property adjusted for inflation in Ireland a home bought in 1976 did not appreciate in value until 1995.

Monty Burnz

DublinWriter wrote: »

Look 'chum', don't take it all so personally, play the ball not the man.

I never claimed to know it all, but what I've always stated was that property *IN THE LONG TERM* is a good investment, i.e. after the life of a 25 year mortgage.

Got that? IN THE LONG TERM.

What we're seeing here is a repeat of what happened in the UK in the early 90's. People bought residential property for what was silly-money in the late 80's, there followed a currency crises causing interest rates to sky-rocket resulting in many people having to default on their mortgages. Prices did eventually return and exceed the 'boom' late 1980's prices by the turn of the millennium.

Again, wrong. The crash in the UK from peak to trough saw prices crash by...12.5%, over 6 years or so from 1989 to 1995. We are losing that every year here - have done for 3 years or so, and will continue to do so for a while yet. So their 'crash' was more like a blip compared to ours.

And if you look at Japan, prices there are still less than half what they were 20 years ago.

murphaph

DublinWriter wrote: »

Told you - I don't pay *any* interest on my mortgage because I was lucky enough to get an offset mortgage before they pulled the plug on them in this country.

Oh.My.God.

You still think your mortgage is interest free?

Do you understand that the money you have on deposit (earning sh!t interest, if any) could be invested elsewhere (ie, the stock market) and could (would over time) make a far higher return? Do you get this? Do you understand this basic fact?

earlyevening

murphaph wrote: »

Oh.My.God.

You still think your mortgage is interest free?

Do you understand that the money you have on deposit (earning sh!t interest, if any) could be invested elsewhere (ie, the stock market) and could (would over time) make a far higher return? Do you get this? Do you understand this basic fact?

I fairness to him, I agree with him about keeping the equivalent of the mortgage amount in an offset account.

By not paying lets say 5.5% variable interest on his loan and not having to pay DIRT, he's effectively earning almost 8% on his lump sum, risk free.

That would be reasonably hard to beat in the stock market and certainly wouldn't be risk free.

Everyone is quick to point out property has fallen 50-60% and may take an awful long time to recover. However, those of you who point out that the stock market only goes up in the long term sound like the people who said the exact same thing about property 5 years ago. It is worth noting that the ISEQ was at 10800 a few years ago and is now around 2500. It will take years to recover, if ever.

So, anyway, he is correct to say his mortgage is effectively interest free if he has an equivalent lump sum in the offset account, and this will result in the loan being paid off 7 or 8 years early.

ChRoMe

jank wrote: »

Tell that to the Japanese. You are still convinced that property will be back to 2007/2008 levels in a matter of years. We could be waiting 30-40 years before that happens, where pretty much any other investment will kick its ass. Bonds, cash, equities and most commodities. The best long term investment in the world over the last 80 years is stocks. NOTHING will beat that not even property.

Got that? IN THE LONG TERM.



And the current situation is similar how? Did the UK have the IMF knocking on the door? Apples and Oranges. Again have a look at what happened in Japan. It is a far more comparable situation. I think you only want to see and hear what you want.

While I agree on your views regarding property, where you are getting stocks as the best long term investment, I really dont know.

earlyevening

Past performance is no guarantee of future return.

murphaph

earlyevening wrote: »

I fairness to him, I agree with him about keeping the equivalent of the mortgage amount in an offset account.

By not paying lets say 5.5% variable interest on his loan and not having to pay DIRT, he's effectively earning almost 8% on his lump sum, risk free.

That would be reasonably hard to beat in the stock market and certainly wouldn't be risk free.

The DIRT thing is a red herring tbh as he would not just stick it in a savings account if he wanted to maximise his return. He'd invest it (over a medium to long period) in a diverse portfolio of shares. There'd be no DIRT to pay on that, so he's saving at móst the interest on his mortgage and 5.5% seems very high to me as someone with a tracker. He would have been much better advised to take out a tracker and invest the cash in shares (diversity being key!). He'd then be paying a much more attractive rate on his mortgage that would be guaranteed to remain within a set range of the ECB rate.

He gets a measure of security in his property that he wouldn't get on the markets. He does NOT get a better financial return as he has been claiming, at least historically, since 1929, shares have outperformed every other form of investment, including bricks and mortar.

murphaph

ChRoMe wrote: »

While I agree on your views regarding property, where you are getting stocks as the best long term investment, I really dont know.

This is just something that can be checked. Historically the Dow Jones (and most other markets) has outperformed all other forms of investment since the '29 crash.

I suppose the reason is so: with stocks and shares you are effectively investing in the hard work of other human beings. You are buying bits of companies with people working in them striving to be productive. With a house, you are investing in an inanimate object, that is affected (value wise) completely passively. The investment itself is not productive in the way the employees of a strong, profitable company are.

I have no beef with property ownership at all. I see it as one way, but not the only way-Irish people need to finally start understanding that. I own a flat in Berlin and have a relatively small outstanding mortgage on a house in Dublin and I inherited some commercial property from may father. Being a landlord is a pain in the b0llocks most of the time-another huge advantage the stock market has over direct investment in property: no tenants deciding not to pay rent but to stay on anyway and/or damaging your property etc. Risk free it is not (not related directly to DublinWriter-I know he's just an owner occupier).

Many continentals view property ownership as a pure millstone. They want to spend their wages on holidays and enjoying life while they are in their prime. The mere thought of taking a loan for hundreds of thousands of Euro makes many of them weak at the knees!

earlyevening

murphaph wrote: »

The DIRT thing is a red herring tbh as he would not just stick it in a savings account if he wanted to maximise his return. He'd invest it (over a medium to long period) in a diverse portfolio of shares. There'd be no DIRT to pay on that, so he's saving at móst the interest on his mortgage and 5.5% seems very high to me as someone with a tracker. He would have been much better advised to take out a tracker and invest the cash in shares (diversity being key!). He'd then be paying a much more attractive rate on his mortgage that would be guaranteed to remain within a set range of the ECB rate.

He gets a measure of security in his property that he wouldn't get on the markets. He does NOT get a better financial return as he has been claiming, at least historically, since 1929, shares have outperformed every other form of investment, including bricks and mortar.

..just re read my post and google off set mortgages. They were only offered by NIB and first active in this country.

DublinWriter

murphaph wrote: »

The DIRT thing is a red herring tbh as he would not just stick it in a savings account if he wanted to maximise his return. He'd invest it (over a medium to long period) in a diverse portfolio of shares. There'd be no DIRT to pay on that...

Breaking news...you pay tax on monies made from shares.

murphaph

DublinWriter wrote: »

Breaking news...you pay tax on monies made from shares.

Not necessarily DW. You pay tax on capital gains over a certain threshold in any given year. You don't generally flog all your shares in one go, you gradually shift from the markets to less risky investments, at least this is generally how a well managed pension fund would do it. You just liquidate enough shares ech year so as not to trigger a CGT liability. Then rinse and repeat in the following years.

For anyone not being an owner occupier of course, an inescapable CGT liability would be triggered on the sale of any investment property (assuming a capital gain was made!). You can't sell "a bit" of a house each year to keep the CG below the threshold.

So, less of the sarcasm and the "breaking (incorrect) news" please

AlekSmart

murphaph wrote: »

I have no beef with property ownership at all. I see it as one way, but not the only way-Irish people need to finally start understanding that. I own a flat in Berlin and have a relatively small outstanding mortgage on a house in Dublin and I inherited some commercial property from may father. Being a landlord is a pain in the b0llocks most of the time-another huge advantage the stock market has over direct investment in property: no tenants deciding not to pay rent but to stay on anyway and/or damaging your property etc. Risk free it is not (not related directly to DublinWriter-I know he's just an owner occupier).

Many continentals view property ownership as a pure millstone. They want to spend their wages on holidays and enjoying life while they are in their prime. The mere thought of taking a loan for hundreds of thousands of Euro makes many of them weak at the knees!

This is,more than anything else,the aspect of this Property Ownership thing that keeps me awake all day.....Why,at this point in our history,do such a vast percentage of our population continue to crave the Mortgage,almost to the exclusion of any possible alternative ?

I would immediately concede that successive Governments have conspired to make Renting a very high-risk area,with minimal protections or recourse available for either Landlord or Tenant in the event of tenants moonlight flits or dastardly landlords.

Surely,with one of the best educated broadminded young populations in Europe,we should have been questioning the accepted Get-Into-Debt logic which has now effectively emasculated several generations of Irish...?

DublinWriter

murphaph wrote: »

So, less of the sarcasm and the "breaking (incorrect) news" please

Apologies murphaph...this is the wrong forum to take part in when one is giving up smoking!

There is an inherent risk with shares, obviously. There's no risk with deposit - it's the old chestnut of the risk/reward ratio.

I took out my own private pension with Eagle Star (got suckered by the radio ads in 1998 when I went out on my own). The first 15 years of the pension the contributions were put into equities, with contributions going into less risky vehicles as the pension matures.

By 2008 my pension was worth less than the actual contributions - and we're talking about a fund managed by professional fund managers here. To put it bluntly, I would have been better off stuffing my money under the mattress.

To be fair, things have swung around a little, but my own fund is only worth around 115% of the total contributions.

I think bonds are a better long term bet than shares and I do self-manage a small fund with Rabodirect with a lot more success than the Eagle Star fund managers (total beginner's luck on my part).

If anything, I think the obsession in this country is with property. While I still think it's a good 25-year investment (especially in the light of a recent baby boom and ERSI projections for the Dublin area), I think our obsession with property has been at the expense of maintaining a balanced portfolio, i.e. putting all our eggs in the one basket.

I also find it amusing the way people drag up the old chestnut of Japan when trying to make the graph support the argument. Japan is an Eastern Asiatic economic superpower with no natural resources of its own and with business and social cultures completely alien to western Europe.

I always prefer to use our nearest neighbour as an indicator of what will happen here in ten years' time. It's uncanny how our own economic history mirrors what has happened in the UK by a ten year lag.