Repossessions

Monty Burnz

Milk & Honey wrote: »

There are more going out than in. There are some bottom feeders. There are published statistics regarding buyer profiles. The percentage of investors is way down.

Milk & Honey wrote: »

No, I didn't make them up.

http://www.thepropertypin.com/viewtopic.php?f=10&p=605487

How do these stats back up your claim that more landlords are getting out of the market than are getting in?

The_Conductor

There actually aren't any definitive figures- other than those of a single estate agent, and even then- they aren't providing any comparative data- simple facts for one quarter in particular, nothing else.

Scortho

Milk & Honey wrote: »

If all of these buy to let investors are as active as you claim, why is the number of properties for rent 12% lower than last year?

A possible reason for this is due to the increase of people who are renting.
After all our would-be first time buyers have to live somewhere.

As an example my parents have a few rental properties as their pension. Normally they would only ever have had 1 year leases and then the people would move out. But in the last 6 months all tenants have renewed for another year.

Milk & Honey

Ok. Heres another one.

http://sherryfitzgerald.files.wordpress.com/2012/05/irish-residential-market-review-spring-2011.pdf

Monty Burnz

Milk & Honey wrote: »

Ok. Heres another one.

http://sherryfitzgerald.files.wordpress.com/2012/05/irish-residential-market-review-spring-2011.pdf

Before I waste more time trawling for facts (you made up) to support your argument below, is there any particular part of this report I should be looking at?

Milk & Honey wrote: »

There are more going out than in. There are some bottom feeders. There are published statistics regarding buyer profiles. The percentage of investors is way down.

Scortho

Milk and honey heres a link which may explain as to why the supply of properties for rent has fallen 12%
http://www.independent.ie/business/personal-finance/property-mortgages/fewer-irish-people-own-their-own-homes-and-renters-jump-by-47pc-in-latest-cso-figures-3215254.html

Milk & Honey

Scortho wrote: »

Milk and honey heres a link which may explain as to why the supply of properties for rent has fallen 12%
http://www.independent.ie/business/personal-finance/property-mortgages/fewer-irish-people-own-their-own-homes-and-renters-jump-by-47pc-in-latest-cso-figures-3215254.html

It is simply a snapshot of the state of the market and does not explain anything. My point is that forcing buy to let investors out of the market will further diminish the supply of rentals. Your parents tenants are staying put because having surveyed the market, they cannot improve their deal. As supply tightens, prices will be bid up. Next year your parents will be in a position to review rents upwards if this continues.

Scortho

Milk & Honey wrote: »

It is simply a snapshot of the state of the market and does not explain anything. My point is that forcing buy to let investors out of the market will further diminish the supply of rentals. Your parents tenants are staying put because having surveyed the market, they cannot improve their deal. As supply tightens, prices will be bid up. Next year your parents will be in a position to review rents upwards if this continues.

Supply is diminishing for 2 reasons.
1 new housing developments aren't being built.
2 there has been a jump of 47% in the number of households who are renting.

buy to lets are being forced out of the market because they previously based property investment on the potential capital appreciation. It was never the rental yield. The function of the rent was to cover the mortgage payment.

Very few of them bought on the basis of the rental yield. 5 years ago one would have gotten a better return on a deposit account or government bonds. They never bought these properties so that renters could have cheaper rent. This was seen across the board in most categories of property investors. One only has to look at Mcnamaras purchase of Castle street in Dublin 2. http://www.irishtimes.com/newspaper/finance/2012/0229/1224312517361.html

There is still the large scale investor-landlord buying into the market at the moment. These people are buying large blocks of high quality appartments such as Clancy Court and the Gasworks.

The_Conductor

Thats a good summation.
You can get a risk free (relatively- depending on your view of Irish government bonds) return of 6% without having to lift a finger- so why put your soul into a business that has a much lower return on investment? The negative capital appreciation, punative taxation of investors (and property owners in general), and continued downward pressure on rent via reductions in the state sponsored schemes- mean only one thing- why would you bother?

Milk & Honey

Scortho wrote: »

There is still the large scale investor-landlord buying into the market at the moment. These people are buying large blocks of high quality appartments such as Clancy Court and the Gasworks.

I never heard of any investor buying so that tenants could have cheaper rent. It is simply a natural consequence of buying to let that there will be downward pressure on rents.
Buy to lets are leaving the market. The large scale operators are entering in very limited circumstances. It is not sufficient to replace the number of investors exiting. forcing more buy to lets out of the market will reduce supply and force up rents.

Zamboni

Milk & Honey wrote: »

I never heard of any investor buying so that tenants could have cheaper rent. It is simply a natural consequence of buying to let that there will be downward pressure on rents.
Buy to lets are leaving the market. The large scale operators are entering in very limited circumstances. It is not sufficient to replace the number of investors exiting. forcing more buy to lets out of the market will reduce supply and force up rents.

If they are forced out of the market, what do you think happens those properties? The investor will want to realise any equity in the asset.
They get placed on sale and increase the supply of properties for sale, thus lowering property prices.
As property prices lower, tenants will begin buying rather than renting.
This reduction of renters will ease pressure on rental prices.

arbitrage

smccarrick wrote: »

Thats a good summation.
You can get a risk free (relatively- depending on your view of Irish government bonds) return of 6% without having to lift a finger- so why put your soul into a business that has a much lower return on investment? The negative capital appreciation, punative taxation of investors (and property owners in general), and continued downward pressure on rent via reductions in the state sponsored schemes- mean only one thing- why would you bother?

i would imagine there are very few people buying to let these days.

Irish bonds are 6% for a reason.

Your advice is too late for tens of thousands of people and the last central bank report had approx 128,000 people in mortgage arrears with all indications to say things will get worse.

murphaph

Zamboni wrote: »

If they are forced out of the market, what do you think happens those properties? The investor will want to realise any equity in the asset.
They get placed on sale and increase the supply of properties for sale, thus lowering property prices.
As property prices lower, tenants will begin buying rather than renting.
This reduction of renters will ease pressure on rental prices.

Very few renters will be in a position to buy their home without requiring credit, something that is much more difficult (should always have been the case) than a few years ago. No credit means even if a house costs 50k, that most renters will be unable to buy it.

I know that my tenants would like to be home owners, but have no chance of getting the required credit, or so they tell me.

Banks may never return to that business model as it was fundamentally flawed. They may remain conservative and chase smaller profits derived from banking services (you pay more for day to day banking) and small loans than the bigger profits (and risks) associated with mortgages. If banking remains conservative, renting (at least for the first 20 years) will be the norm, not the exception.

Zamboni

murphaph wrote: »

Very few renters will be in a position to buy their home without requiring credit, something that is much more difficult (should always have been the case) than a few years ago. No credit means even if a house costs 50k, that most renters will be unable to buy it.

I know that my tenants would like to be home owners, but have no chance of getting the required credit, or so they tell me.

Banks may never return to that business model as it was fundamentally flawed. They may remain conservative and chase smaller profits derived from banking services (you pay more for day to day banking) and small loans than the bigger profits (and risks) associated with mortgages. If banking remains conservative, renting (at least for the first 20 years) will be the norm, not the exception.

There is a difficult to quantify cohort of potential FTBers who have been renting and accumulating capital (for possibly 6 or 7 years at this stage) - eventually the decreasing property price costs + reduced financing requirement, will tip the rent v buy balance.

The rent versus buy argument is different than Milk & Honey's unsupported claim that reduced BTL numbers leads to inevitable rent increases.

PS: I put on the poor mouth with my landlord too. :-)

murphaph

Zamboni wrote: »

There is a difficult to quantify cohort of potential FTBers who have been renting and accumulating capital (for possibly 6 or 7 years at this stage) - eventually the decreasing property price costs + reduced financing requirement, will tip the rent v buy balance.

The rent versus buy argument is different than Milk & Honey's unsupported claim that reduced BTL numbers leads to inevitable rent increases.

PS: I put on the poor mouth with my landlord too. :-)

I think the mindset hasn't yet shifted enough for the above to be the case. I doubt many people renting in 2005/6 saw the way things would pan out and immediately set about saving every penny for the day when prices would be so low that they could buy with little or no credit. The rent itself of course means it's more difficult to save up such sums in the first place.

Nobody can really say for certain what is/will happen in this area. I can only offer anecdotal evidence that my tenants haven't made a peep about rent reduction since last year (they were previously quite vocal about "the market rate") so I can only assume they do not feel they'd get anything cheaper in the area.

I think (as I've said before) that we need to be clear about different types and locations of property. IMO rents will continue to fall in many parts while in the cities they will hold steady and begin to increase again. Time will tell.

grover_green

smccarrick wrote: »

Thats a good summation.
You can get a risk free (relatively- depending on your view of Irish government bonds) return of 6% without having to lift a finger- so why put your soul into a business that has a much lower return on investment? The negative capital appreciation, punative taxation of investors (and property owners in general), and continued downward pressure on rent via reductions in the state sponsored schemes- mean only one thing- why would you bother?

while i agree that certain stocks , goverment - corporate bonds offer a yearly income which is equal to if not better than property , not only can you not borrow to buy either stocks or bonds , you cannot use stocks or bonds as collateral either when trying to borrow for something else

i hope to borrow some money to buy a particular property in a years time ( not a house ) and while i have around two hundred k in cash which i could stick in vodafone or irish goverment bonds , i hope to instead buy a house around dublin 7 which will return about 6% yield but which can also be used as security against future borrowings , i realise such a scenario wont apply to most people but my point is that their is more to value in property than the anual yield , were this not true , farm land would not be the price it is witth a yield of half of what houses presently return

Scortho

Milk & Honey wrote: »

I never heard of any investor buying so that tenants could have cheaper rent. It is simply a natural consequence of buying to let that there will be downward pressure on rents.
Buy to lets are leaving the market. The large scale operators are entering in very limited circumstances. It is not sufficient to replace the number of investors exiting. forcing more buy to lets out of the market will reduce supply and force up rents.

If you look at the rent rates from 2005-2007 there were significant rent rises. This was at a time when the buy to lets were at there most strongest.

Also no investor is going to invest if he knows that a consequence of investing is a reduction on the return.

Scortho

grover_green wrote: »

while i agree that certain stocks , goverment - corporate bonds offer a yearly income which is equal to if not better than property , not only can you not borrow to buy either stocks or bonds , you cannot use stocks or bonds as collateral either when trying to borrow for something else

i hope to borrow some money to buy a particular property in a years time ( not a house ) and while i have around two hundred k in cash which i could stick in vodafone or irish goverment bonds , i hope to instead buy a house around dublin 7 which will return about 6% yield but which can also be used as security against future borrowings , i realise such a scenario wont apply to most people but my point is that their is more to value in property than the anual yield , were this not true , farm land would not be the price it is witth a yield of half of what houses presently return

I understand where you're coming from here. One of the great things about property is that it sits on land. And at least with property if the value falls you still have the bricks and mortar there anyway. It mightn't be worth the amount you paid, but it could be worth twice that amount in 20 years time. Buy at the right time though and it will make you stinking rich.

Buy shares and their value could collapse overnight. You end up donating them towards a piece of artwork on the celtic tiger. But then the best investors never have their eggs in the one basket.

Milk & Honey

Scortho wrote: »

If you look at the rent rates from 2005-2007 there were significant rent rises. This was at a time when the buy to lets were at there most strongest.

.

Where can I look at these rent rates? I recall rents were higher in 2001-2002 than they were in 2005 to 2007. What sort of rises were there. Rents dropped significantly
from 2007 because of the massive increase in supply.

Scortho

Milk & Honey wrote: »

Where can I look at these rent rates? I recall rents were higher in 2001-2002 than they were in 2005 to 2007. What sort of rises were there. Rents dropped significantly
from 2007 because of the massive increase in supply.

http://www.daft.ie/news/2007/daft-rental-report-august-2007.daft

Rents rose 9% in the year to August 2007.

There is a thread from then on here http://www.boards.ie/vbulletin/showthread.php?t=2055060845

After that it discusses rents falling in the report. This was due to the increase in supply as a result of developers unable to sell properties rather than in buy-to-lets buying up apartments. Houses had begun to stop selling at this point and developers decided that it'd be better to rent out the properties and hope that sales would pick up in 2008.

Marcusm

grover_green wrote: »

while i agree that certain stocks , goverment - corporate bonds offer a yearly income which is equal to if not better than property , not only can you not borrow to buy either stocks or bonds , you cannot use stocks or bonds as collateral either when trying to borrow for something else

I'm not sure why you think it's impossible to borrow to buy equities or bonds but you are wrong, as they are readily marketable and capable of being valued to a realisable price, they are used as collateral everyday - if you're doing it through your broker it's called buying on margin. Likewise they are regularly accepted by banks as collateral for other loans. You may have misinformation from your local bank official.

grover_green

Marcusm wrote: »

I'm not sure why you think it's impossible to borrow to buy equities or bonds but you are wrong, as they are readily marketable and capable of being valued to a realisable price, they are used as collateral everyday - if you're doing it through your broker it's called buying on margin. Likewise they are regularly accepted by banks as collateral for other loans. You may have misinformation from your local bank official.

was told in no uncertain terms that a stock portfolio offers no security to a bank

Marcusm

grover_green wrote: »

was told in no uncertain terms that a stock portfolio offers no security to a bank

Whoever told you that is uninformed; as it can be readily liquidated it offers much better security than a house. I speak from experience, not from some theoretical viewpoint.

grover_green

Marcusm wrote: »

Whoever told you that is uninformed; as it can be readily liquidated it offers much better security than a house. I speak from experience, not from some theoretical viewpoint.

so if i own 100 k in vodafone shares which generate a dividend yield of 6% per anum , a bank manager should rate this as highly as a one bed appartment ( which i might pay 100 k for ) with a rental yield of 7.5 % or thereabouts , less when you take off the managment charge

if that is what you say with confidence , its a no brainer for me , vodafone has far more potential to increase value than any one bed appartment in dublin

will speak to another bank but i can see them refering to 2008 where the market saw a 40 % price drop within the space of six months

Marcusm

grover_green wrote: »

so if i own 100 k in vodafone shares which generate a dividend yield of 6% per anum , a bank manager should rate this as highly as a one bed appartment ( which i might pay 100 k for ) with a rental yield of 7.5 % or thereabouts , less when you take off the managment charge

if that is what you say with confidence , its a no brainer for me , vodafone has far more potential to increase value than any one bed appartment in dublin

will speak to another bank but i can see them refering to 2008 where the market saw a 40 % price drop within the space of six months

It's not that simplistic and the yield is the least thing they are interested in from a security perspective; the principal issues are liquidity (the ability to sell quickly) and volatility (a historic analysis of the movement in the share prices). These are considered in setting the %age they will lend you against the portfolio. You are entering into a transaction not that dissimilar to Quinn's CFD transactions with the differences that liquidity is not an issue (as you own an irrelevantly small part of a huge company). Volatility, I no longer have the tools to assess. From that point, it's a mechanical exercise to determine how much would be lent. Yield would be close to irrelevant.

grover_green

Marcusm wrote: »

It's not that simplistic and the yield is the least thing they are interested in from a security perspective; the principal issues are liquidity (the ability to sell quickly) and volatility (a historic analysis of the movement in the share prices). These are considered in setting the %age they will lend you against the portfolio. You are entering into a transaction not that dissimilar to Quinn's CFD transactions with the differences that liquidity is not an issue (as you own an irrelevantly small part of a huge company). Volatility, I no longer have the tools to assess. From that point, it's a mechanical exercise to determine how much would be lent. Yield would be close to irrelevant.

if yield is not relevant , im struggling to see how a stock portfolio offers as much security as a property portfolio , sure a stock can be sold at the click of a mouse but what if i own 100 k of bank of ireland shares instead of a solid company like vodafone , how does the bank know i wont make foolish descisions with my portfolio , i.e , sell apple and buy facebook ( 50 % drop since going public ) , my point is that a house - appartment is more tangible and static

Scortho

grover_green wrote: »

was told in no uncertain terms that a stock portfolio offers no security to a bank

There are 2 reasons. Security of the asset and the risk of the borrower.

While you mightn't be able to borrow of your bank, who will most likely laugh you out the door, you can borrow in a way to build up shares.

An example of this is spread betting or Contracts for difference which provide an investor with leverage. Other ways are through CDOs and CDSs. However these are more aimed at your large funds and seasoned investors who have a good track record.

A Bank however would have no problem giving Warren Buffet or John Paulson billions in money to invest in shares.

They would have a problem with giving you money as they'd see you as being a very high risk.

When you start of investing you invest only what you can afford to lose.

A possible reason for them not giving you a loan to buy shares, but would give you one to buy a house is because the bank would understand the risks associated with mortgage. They mightn't neccessarily understand the risks around shares.

Shares prices can collapse overnight. This is especially seen during October 1987. On black monday the dow jones collapsed by over 20% in one day alone.

While we might like to think it, Irish house prices never fell by 20% in one day.

Marcusm

grover_green wrote: »

if yield is not relevant , im struggling to see how a stock portfolio offers as much security as a property portfolio , sure a stock can be sold at the click of a mouse but what if i own 100 k of bank of ireland shares instead of a solid company like vodafone , how does the bank know i wont make foolish descisions with my portfolio , i.e , sell apple and buy facebook ( 50 % drop since going public ) , my point is that a house - appartment is more tangible and static

It wouldn't work like that - the lender wud control the shares and the volatility inherent in new stock purchases (which considers the risk of significant price changes over a short period) would be reappraised when the portfolio changed. Taking Vodafone and Bank of Ireland as you have suggested, the VOD volatility is around 19% on a 3 month basis while that for Bank of Ireland Is over 540% capturing the wild swings in the latter's share price. That higher volatility would feed through into a decision not to lend (depending on other aspects of your custom) or only to lend against a very high margin.

What is not clear to me is whether you have a share portfolio you want o borrow against or whether you're simply looking at leveraged investments (ie investments partly funded by borrowings). If the latter, leveraged equity exposure would be better obtained by using CFDs rather than margin ending as it increases the range of institutions you could deal with.

grover_green

Marcusm wrote: »

It wouldn't work like that - the lender wud control the shares and the volatility inherent in new stock purchases (which considers the risk of significant price changes over a short period) would be reappraised when the portfolio changed. Taking Vodafone and Bank of Ireland as you have suggested, the VOD volatility is around 19% on a 3 month basis while that for Bank of Ireland Is over 540% capturing the wild swings in the latter's share price. That higher volatility would feed through into a decision not to lend (depending on other aspects of your custom) or only to lend against a very high margin.

What is not clear to me is whether you have a share portfolio you want o borrow against or whether you're simply looking at leveraged investments (ie investments partly funded by borrowings). If the latter, leveraged equity exposure would be better obtained by using CFDs rather than margin ending as it increases the range of institutions you could deal with.

if i spend 100 k on an apt , it will be with my own cash , i already own 100 k ( plus ) in stocks

im sceptical about your suggesting that a lender would ( or could ) control a borrowers share portfolio

Marcusm

grover_green wrote: »

if i spend 100 k on an apt , it will be with my own cash , i already own 100 k ( plus ) in stocks

im sceptical about your suggesting that a lender would ( or could ) control a borrowers share portfolio

I note your scepticism but it's regular private banking/stockbroking/weath management business even in Dublin.

How do you hold your equities, paper certificates or a brokerage account. If the latter, simply ask about margin trading facilities.