Is it time to be content with renting and not have notions of buying ?

gaius c

riclad wrote: »

I know 2 landlords ,in negative equity , in 10 years they have made zero euro profit.
The rent does not cover the mortgage, insurance etc
There must be 1000 ,s of landlords like that in ireland.
And they still have to pay tax on the property.

Not our fault they overpaid for the asset and I don't see why we should be bailing out their poor judgement with tax breaks not available to any other class of investor.

Monife

gaius c wrote: »

Not our fault they overpaid for the asset and I don't see why we should be bailing out their poor judgement with tax breaks not available to any other class of investor.

This exactly! Same goes for people in arrears (by choice or not) getting debt writedowns from the bank, eh where's my free money? Responsible people being penalised again and again!

Bob24

gaius c wrote: »

Not our fault they overpaid for the asset and I don't see why we should be bailing out their poor judgement with tax breaks not available to any other class of investor.

Plus saying "they have made zero euro profit" is misleading. They are paying a mortgage to acquire an asset and part of the repayment is covered by the rent. If they expected they would get the apartment for free (rent full covering mortgage), get some extra income in the process, and not incur any risk ... difficult to feel sorry for them.

Barely Hedged

gaius c wrote: »

Not our fault they overpaid for the asset and I don't see why we should be bailing out their poor judgement with tax breaks not available to any other class of investor.

"The report is not specific about this, but Dr Larry O'Connell, one of its authors, told the Irish Independent that this would be about "bringing conditions closer to those of commercial property landlords".
This suggests providing residential landlords with full mortgage interest relief. At present they can claim 75pc as opposed to 100pc for a commercial property landlord."

Same class of investor, very different tax classification/break

Joolzie

Brendan O Connor sold his house in Ringsend a few years ago, and is now happy renting in Dublin 4. That's really a sign of the times..

Nate--IRL--

Joolzie wrote: »

Brendan O Connor sold his house in Ringsend a few years ago, and is now happy renting in Dublin 4. That's really a sign of the times..

Ballsy...

Nate

Thargor

I thought they had a house in Cork aswell though?

The Spider

Joolzie wrote: »

Brendan O Connor sold his house in Ringsend a few years ago, and is now happy renting in Dublin 4. That's really a sign of the times..

And as it turns out a few years ago was the time to buy....

House prices really are crazy since the late 90s -

If you google "Average House Price versus Average Industrial Wage the property pin" you will find a thread illustrating this.

While they were obviously ludicrously high from about 2003 onwards, they have been overpriced since about 1999 at least. I know it is supply and demand but different economic goods have different natures and in this country everyone wants to own their own house instead of renting, including me - but by god do people pay a price for this obsession!

That thread shows that in 1996 you could get a house in Dublin for about £76,500. I know wages were lower in numerical terms as well as real terms, and that it is a totally different time to now, but unless £1 in 1996 was equal to about €3.60 now, houses are overpriced (based on €276,000 average dublin house price). Compared to the crazy days of 06/07 it was as high as £1 = €5.50 compared to 1996!

All the money spent in mortgage interest is killer too. And it takes two people to service a mortgage now whereas in 1996 or before it could be done with one person working. If there wasn't such an ingrained culture in favour of owning over renting we wouldn't feel so psychologically uncomfortable with renting in the long run!

The Spider

Deleted User wrote: »

House prices really are crazy since the late 90s -

If you google "Average House Price versus Average Industrial Wage the property pin" you will find a thread illustrating this.

While they were obviously ludicrously high from about 2003 onwards, they have been overpriced since about 1999 at least. I know it is supply and demand but different economic goods have different natures and in this country everyone wants to own their own house instead of renting, including me - but by god do people pay a price for this obsession!

That thread shows that in 1996 you could get a house in Dublin for about £76,500. I know wages were lower in numerical terms as well as real terms, and that it is a totally different time to now, but unless £1 in 1996 was equal to about €3.60 now, houses are overpriced (based on €276,000 average dublin house price). Compared to the crazy days of 06/07 it was as high as £1 = €5.50 compared to 1996!

All the money spent in mortgage interest is killer too. And it takes two people to service a mortgage now whereas in 1996 or before it could be done with one person working. If there wasn't such an ingrained culture in favour of owning over renting we wouldn't feel so psychologically uncomfortable with renting in the long run!

Hang on, I was on the average wage of £12000 a year in 1996 and that works out at 6.3 times the price of a house at £76,500.

So average wage (in Dublin) roughly 40,000 today at 6.3 times gives you 252,000 which means these houses.

http://www.daft.ie/dublin-city/houses-for-sale/?s%5Barea_type%5D=on&s%5Bmxp%5D=250000&s%5Badvanced%5D=1&s%5Bpt_id%5D%5B0%5D=1&searchSource=sale

Not that any bank will give you 6 times your salary, but houses were still out of reach in Dublin to a person on an average salary in 1996, so I don't know what the point is here.

MarkAnthony

I really don't see how Dublin is over priced while the average house price remain under 3.5 x the industrial average wage x 2.

The fact that it's a capital city should be reflected in wages and house prices.

The Spider

The Spider wrote: »

Hang on, I was on the average wage of £12000 a year in 1996 and that works out at 6.3 times the price of a house at £76,500.

So average wage (in Dublin) roughly 40,000 today at 6.3 times gives you 252,000 which means these houses.

Not that any bank will give you 6 times your salary, but houses were still out of reach in Dublin to a person on an average salary in 1996, so I don't know what the point is here.

Hmm, that's fair enough. I suppose I'm underestimating how low wages were back then.

MarkAnthony

MarkAnthony wrote: »

I really don't see how Dublin is over priced while the average house price remain under 3.5 x the industrial average wage x 2.

The fact that it's a capital city should be reflected in wages and house prices.

For sure, but didn't it used to be 3.5 x salary, not 3.5 x 2 x salary?

MarkAnthony

Deleted User wrote: »

For sure, but didn't it used to be 3.5 x salary, not 3.5 x 2 x salary?

No idea when I bought it was 100x salary that you just made up and told the broker and he added a bit more on. :pac:

When my parents bought it was 3 x husband + wife's salary glad that's not the formula now given I'm a kept man! I think it then went to 3.5 + 1.5 lower salary. Frankly I think 3.5 times combined is pretty fair.

The Spider

Deleted User wrote: »

Hmm, that's fair enough. I suppose I'm underestimating how low wages were back then.

Yeah, it's easy to forget when you look back but I do have vivid memories of people trying to buy houses back then on what would have been considered decentish wages, I was earning 1000 a year more than my boss from a previous job.

Wages rose rapidly from what I remember with most people earning around 18-20k around 1998-1999, going from 12-14 in 1996.

handlemaster

gaius c wrote: »

Not our fault they overpaid for the asset and I don't see why we should be bailing out their poor judgement with tax breaks not available to any other class of investor.

on that basis people shouldnt complain about rents going up.

gaius c

I don't follow.

I swindled the NSA

Deleted User wrote: »

For sure, but didn't it used to be 3.5 x salary, not 3.5 x 2 x salary?

It used to be 2.5 x (Highest Earners salary) = 2 x (partners salary) IIRC

Fkall

gaius c wrote: »

Not our fault they overpaid for the asset and I don't see why we should be bailing out their poor judgement with tax breaks not available to any other class of investor.

Fair enough but why not treat them the same as every other class of investor.

Property tax - not deductible
Interest not fully deductible
NPPR - not tax deductible

handlemaster

gaius c wrote: »

I don't follow.

Landlords take a risk on a business and have the right to maximise rents. When people see Landlords making losses they always say its the Landlords problem so it works both ways

KomradeBishop

The rental market isn't there to allow landlords to leach off of the rest of society - sucking up all of peoples spare income - it's there to provide a place for people to live, without rents severely curtailing the rest of the renters lives, for the benefit of a class of people who can get a big pay-boost, with zero value added - just by jacking up the rents continually.

Excessive rents and lack of adequate numbers of properties for both renting and buying, are problems that can be solved in a large number of ways other than 'screw the renter/buyer - to benefit investors and landlords'; the entire market is dysfunctional right now, precisely in a way that screws renters/buyers.

NewDirection

KomradeBishop wrote: »

The rental market isn't there to allow landlords to leach off of the rest of society - sucking up all of peoples spare income - it's there to provide a place for people to live, without rents severely curtailing the rest of the renters lives, for the benefit of a class of people who can get a big pay-boost, with zero value added - just by jacking up the rents continually.

Excessive rents and lack of adequate numbers of properties for both renting and buying, are problems that can be solved in a large number of ways other than 'screw the renter/buyer - to benefit investors and landlords'; the entire market is dysfunctional right now, precisely in a way that screws renters/buyers.

I think you are thinking about this the wrong way. The rental market is only there to make money for the landlords. They are not renting out properties for some social obligation to provide houses for people in need of them. It's for one reason to make a return on their investment. The second point is that like every investment they will try to increase their ROI by reducing costs and increasing income, like any other investment / business.

You use phrases like 'leaching off society' and 'sucking up sapre income', which is entirely inaccurate. Its an open market, regulated by market forces (and every now and again interference from the government). If a landlord ups his rent too far, he wont get tenants. Its self regulating. The only thing really pushing up rent is lack of suitable supply.

My thinking might be over simplistic, but the only way rents can naturally stabilize (or even reduce) is not by government interference, but by increasing the supply where its needed, which looks to be Dublin.
The supply will naturally increase when you have three things
1) Available land to build on
2) Developer who can make a return on investment building the properties
3) Credit for the developer to fund the project.

I reckon (1) is available, and with current house prices in Dublin I'm guessing that the ROI would be there for developers. So why are there not developments popping up all over Dublin? Is it the funding?

gaius c

handlemaster wrote: »

Landlords take a risk on a business and have the right to maximise rents. When people see Landlords making losses they always say its the Landlords problem so it works both ways

I didn't follow because it has little to do with my point that the government should be giving foolish investors special tax breaks to help shield them from the full extent of their foolishness.

NewDirection

gaius c wrote: »

I didn't follow because it has little to do with my point that the government should be giving foolish investors special tax breaks to help shield them from the full extent of their foolishness.

It is not a special tax break. It's pretty much a standard tax break with all other forms of businesses.

The 75% relief never made any sense, and should have always been 100%.

riclad

I think landlords in dublin who rent out to rent allowance tenants should
get an extra 20 per cent tax allowance ,
As there is hardly any incentive for a landlords to take on a person on rent allowance vs a person who works full time on a good wage .
The landlords i know are in rural area,s where the rent is quiet low .
And house prices have gone down by 50-60 per cent since 2007.
The government could also help the market by giving tax relief to help
self build coops where you can rent or buy a house if your income is less than 30k.

Bob24

riclad wrote: »

I think landlords in dublin who rent out to rent allowance tenants should
get an extra 20 per cent tax allowance ,

It can be debated, but doing this is the same as increasing rent allowance by 20%. The money is given as a tax credit rather than a cash payment, but at the end of the day it is still the government giving more money to the landord to subsidise someone's rent.

The Spider

At the end of the day social housing is the governments responsibility, they can't fob it off onto private individuals, as has been said before it's a supply issue, and until that changes rents will continue to rise.

Supply won't be addressed until developers think that the potential profits are worth the huge investment risk, bearing in mind how badly they were burned the last time, in fact it's probably safe to say that they'd want significantly higher profits this time around as they're all painfully aware of the consequences of a crash and they'd look to put as much clear blue water between themselves and debt as possible.

if prices look like they're going to stabilise or fall, then they're wont be any significant development, if the profits look very tempting then builders will be back in the game.

fret_wimp2

The Spider wrote: »

At the end of the day social housing is the governments responsibility, they can't fob it off onto private individuals, as has been said before it's a supply issue, and until that changes rents will continue to rise.

Supply won't be addressed until developers think that the potential profits are worth the huge investment risk, bearing in mind how badly they were burned the last time, in fact it's probably safe to say that they'd want significantly higher profits this time around as they're all painfully aware of the consequences of a crash and they'd look to put as much clear blue water between themselves and debt as possible.

if prices look like they're going to stabilise or fall, then they're wont be any significant development, if the profits look very tempting then builders will be back in the game.

so your saying:

prices not high enough to warrant risk of building more.
until more are built prices wont come down.
prices comming down will prevent further building.
prices going up to incentivise building will mean even less can afford to purchase so flood of expensive houses nobody can afford.

so we have a stalemate eitherway, developer wont build or if they do prices will rise even higher.

not saying i agree or disagree with you. interesting deadlock though.

MarkAnthony

There are various things that can be done to bring down the cost of building, these need to be addressed. We're not quite at the point though where prices have normalised. For me that's the industrial average wage x 3.5 (Central Bank mandated Loan to Value) x 2 - which would mean the average home should cost around 290K taking into account a 15% deposit.

There should of course be cheaper housing available in the c. 150K range 2/3 bed terraces, below that people really should have the option of social housing. as household income is below 40K. There should never be the option to purchase that house at knockdown rates as has happened in the past.

Builders seem to suggest that to make 1 beds profitable they would need to sell for 250K which is ridiculous.

fret_wimp2

MarkAnthony wrote: »

There are various things that can be done to bring down the cost of building, these need to be addressed. We're not quite at the point though where prices have normalised. For me that's the industrial average wage x 3.5 (Central Bank mandated Loan to Value) x 2 - which would mean the average home should cost around 290K taking into account a 15% deposit.

There should of course be cheaper housing available in the c. 150K range 2/3 bed terraces, below that people really should have the option of social housing. as household income is below 40K. There should never be the option to purchase that house at knockdown rates as has happened in the past.

Builders seem to suggest that to make 1 beds profitable they would need to sell for 250K which is ridiculous.

your numbers are a little skued. AFAIK, national average wage in ireland is already below 40k. social housing for all then!