Are landlords selling up?/asking prices not met.

NotInventedHere

I am currently looking to trade up. I live in Clondalkin. and hope to stay there. Anyhoo I am viewing quite a number of properties and one thing I have noticed is the number of rental properties for sale. Also a number of properties in this area have been on sale for quite a while and are not achieving their asking price. This is not an isolated phenomonon(?). My friend who is looking for an apartment in the city centre recently had the highest bid on a number of properties, but they were withdrawn, again for not reaching the asking price. Has anybody else seen this? Is it becomining a trend?

hmmm

If this is really happening, then it would be an interesting parallel to areas of the UK over the past year. Sellers were unwilling to sell their properties because they "expected" the properties to eventually sell at what they considered to be an appropriate price, even while there were no buyers. Looking at the statistics, house prices were not falling, althought the reality was somewhat different. Eventually prices drop and the sellers adjust to the new reality.

Supercell

I'm wondering the same also, the lastest house price growth released today ( Pace of house price growth almost halved ) is very much slowed down on what has gone before, am wondering if the 100% mortgages are going to be the straw that brakes the camels back.

Two things are for sure...

1) Many people who rent will now be looking for properties
2) Interest rates will not stay at 2% indefinitely

I'm really wondering if I shouldn't hold of for anouther few years now as my income is rising faster than the current house price inflation and imho there is a sizeable chance that within the next 3-5 years interest rates will rise and the rental market could be in freefall.

Captain Trips

I have seen 2 beds in IFSC for 430 being pulled down to 410 and still no offers. Same goes with temple bar apts with several (e.g., Crow Lane) still on the market and not selling at the guide (350k).

It is worrying to underbid a property just for the hell of it and 2 weeks later noone has bid higher. The seller of course, won't sell and the estate agents want their cut obviously.

All in all, it's definitely slowed and the massive growth of the past years has stabilised a lot. No more 50k/year gains in value!

Probably a good thing and also with the 100% offers it will encourage more individuals to buy and less having to rent from landlords with 10+ apts. Overall it will help a more stable society and not a two-tier system like 10 years ago of owners vs. renters and no possibility to move up.

More craziness is the south quay/hanover quay area. It's basically Pearse Street and they want 365k without parking for a 1 bed ) +40k for parking. No market can sustain that and judging by the DAFT rental asking prices you can see landlords are getting desperate: advertising a 2 bed in hanover quay for €1800/month!!

the_syco

I live in Leixlip, Co. Kildare. The houses here are still being bought. And being built. Anther 500 left to build at least. They go pretty quickly. Basicly, you can get more for less out here. for 350,000 you can get a decent house, & a decent garden.

Me thinks people are in the phase of buying outside of Dublin. The last phase was buy near to Dublin, high rise flats, etc. Now, the people who lived in high density area's, flats, etc, are moving to lower density area's, IMO.

MorningStar

Longfield wrote:

I'm wondering the same also, the lastest house price growth released today ( Pace of house price growth almost halved ) is very much slowed down on what has gone before, am wondering if the 100% mortgages are going to be the straw that brakes the camels back.

Just don't trust news reports on reports. As I pointed out yesterday two different media reports on the same report gave opposing views. You really need to read the report yourself.
Your views on what will happen maybe right but what are you basing them on? If you are going to try and wait out the market you should get yourself really informed rather than trust the views of a reporter who read a whole report in an hour and then shoots out an article. The reporter may be an expert but he is not looking at how it will effect you.
I think everybody agrees that house prices will shoot up over the next 2 years due to the SSIAs . If I was buying soon I'd buy this year but that's me and I am not really close to your situation.
If what is being said about ex-rental is true I'd be surprised because I have not seen anysigns. Some property always is on the market at the wrong price and sometimes people project hopes. When you are looking at the market at a particular price range you tend to see many houses that are in the same situation so it can be misleading.
In saying that appartments in general don't increase in value as much as other property and they also tend to be the first thing to reduce in price when the market slows.
There are a good few new landlords Last 10 years) that don't know how to budget correctly who could be panicing but their aren't as many as people think from what I see. How many new landlords do you know? Generally people talk about the idea but don't follow through from my experience but I might be in the wrong circles

positron

the_syco wrote:

Me thinks people are in the phase of buying outside of Dublin.

That's exactly what I did last month, but here's some statistics:

http://www.rte.ie/business/2005/0803/houses.html

House prices in Dublin rose by 0.9% in June, compared with 0.3% outside the capital, bringing growth for the first six months t0 3.5% and 2.3% respectively. But prices in the commuter counties (Louth, Meath, Kildare and Wicklow) fell by 0.1% in the month, though they are still running 3% ahead in the first six months.

Well, to me its about more space, and a better commute (an hour in train compared to more than 90 mins driving), and the blissfully calm weekends!

MorningStar

positron wrote:

Well, to me its about more space, and a better commute (an hour in train compared to more than 90 mins driving), and the blissfully calm weekends!

You should look at a thread before posting up a link as that one was already posted.

I see why people move out but while you can get the train many can't and your house price represented that. Bear in mind though as some friends of mine discovered as the areas further out get busyy along the track you may not be able to get on the train. In fact you may be the reason somebody else can't further down the line. Your current bliss may not be sustainable and there are many people commuting for 4 hours a day and raising their children in cars

Bluehair

Are landlords selling up? Smart ones are.

It's all about yield and increasingly there's better money to be had elsewhere. A lot of amateur (read 1 or 2 property) landlords are also finding that it's far from being the easy money they had thought it was and are selling up to.

MorningStar

Bluehair wrote:

Are landlords selling up? Smart ones are.
.

Is their any actual evidence? To suggest that the smart one are is a little strange to me. It's very like saying smart shop owners sell up when retail sales go down. Being a landlord is a business, very few buisnesses sell up the minute there is a change in the market. Novice landlords are possibly that nieve but I don't think they are all like that and the landlords that own the majority of the rental property are certainly not novices. It's very hard to get actuall figures on landlords in ireland due to the terrible registration system and lack of enforcement but why everybody assumes all landlords just do it for property value increases is beyond me. THese type of people are really speculators and there really aren't that many of them as far as I can tell. What are people basing the view on? I have heard it so many times here yet not one person has ever provided any kind of facts. It sounds like wild speculation to me based on nothing more than articles in the media.

Bluehair

MorningStar wrote:

Is their any actual evidence? To suggest that the smart one are is a little strange to me. It's very like saying smart shop owners sell up when retail sales go down.

Hardly an acurate comparison but to entertain you it would be like shop owners selling up when their cost base can't sustain much lower prices in a market where there is serious concern at a potential drop in prices.

'Articles in the media' will always report well after the event and I don't hold much stead in reports from the likes of Perm TSB recently who have vested interests in the market.

Being a landlord is indeed a business and it's all about making a profit. For a long time now that profit has been derived from capital growth. Even the most eager commentators are talking up a 'soft landing' now and admiting that the years of double digit increases are well behind us.

Speculators are the market from what I can see. I'll admit this is purely anecdotal evidence but I never cease to be amazed at the number of amateur landlords I know many of whom are slowly beginning to realise that it's not really as simple as 'rent-mortgage=profit every month'.

There's an awful lot of things that have to go just right for property to continue any kind of upwards growth in this country looking forward and a whole lot of things any one of which could put a serious damper on the market.

I'm conservative I'll admit but while you can leverage debt to maxamise profit with property most people don't seem to realise that you are therefore exposed to potentially dreadful loses too.

I've just recently sold up (for a very healthy profit) and will be renting for the next few years while I make up my mind whether or not to emmigrate.

MorningStar

Bluehair wrote:

Being a landlord is indeed a business and it's all about making a profit. For a long time now that profit has been derived from capital growth. Even the most eager commentators are talking up a 'soft landing' now and admiting that the years of double digit increases are well behind us.

Speculators are the market from what I can see.

The landlords in this country are mostly pension companies renting office space. After that it's a bit hard to tell but you can determine it by thinking about what is rental property now and what was. Basically most old rental stays rental property as the expensive of converting/redecorating can devalue what tends to have an investment price. Most of the older landlords just add to their portfolio. THe increase in the rental market was primarily driven by these landlords who borrowed on their existing investements rather than people borrowing on their home. For every home borrowing landlord I would say there were 3 to 4 borrowing on existing rental property. It just makes sense that people used to the market reacted more quickly with more capital. It's hard to tell but logically and from my experience the small time investors are only about 10% at most of the rental market. THey just don't have the buying power or experience to take on the more seasoned investors who are on the slow burn profit. Some did sell one property and buy 2 or 3 in the next good rental area. Very few use capital gain as profit because you need to sell pay capital gains etc... A good investement is €350k with a monthly return of €1400. Not bad for a pension and the property over time will be a better return than most over a 10-20 year period.

It's all kind of anecdotal but how many old time landlords do you know? You might know 5 people who rent out property but that's small fry. I know many people who own 10 and more. They have a lot more effect on the market than the amount of small fry. How many people do you know who built appartment blocks or own them? It's all anecdotal but people seem to be talking about amatur legue and thinking it effects the premiership

Beruthiel

I don't see any slow down
I bought a house in feb for €245
there is a house for sale in my street right now, for the same type of house, asking price is €265.

positron

MorningStar wrote:

You should look at a thread before posting up a link as that one was already posted.

I read that link, and I wanted to quote that specific bit from it, notice the usage of quote, bold etc. I believe that is copywrited article, and hence the link right next to it.

I see why people move out but while you can get the train many can't and your house price represented that. Bear in mind though as some friends of mine discovered as the areas further out get busyy along the track you may not be able to get on the train. In fact you may be the reason somebody else can't further down the line. Your current bliss may not be sustainable and there are many people commuting for 4 hours a day and raising their children in cars

Err, (ignoring the tone in your post), the comfortable train commute may not be sustainable, but its still is and will be far better than the hour and half spend driving to City centre (on a good day, from Blanch, just 12 miles!!) - which will only get worse going forward. I can't speak for others, but at least in my case, this works well, and I don't see how its going to get any harder than the Blanch-City Centre commute in coming years (unless there is some huge investment in suburban train/luas facilities, like dart/luas to Blanch etc!

Cheers!

garred

Personally I want to sell up soon and invest in the foreign property. There are a lot more people buying property to let and with the 100% mortgage, people can afford to buy, naturally not everyone but certainly a lot of the rental market.
Went to a few new developments at the weekend and the amount of to let signs is staggering.
Its my personal opinion. People might go on about backing up with facts but facts at the end of the day seem to be opinions based on figures.

MorningStar

positron wrote:

the comfortable train commute may not be sustainable, but its still is and will be far better than the hour and half spend driving to City centre (on a good day, from Blanch, just 12 miles!!) - which will only get worse going forward.

Cheers!

No tone meant. Nothing happens in isolation would be my view. Friends of mine said as you are now that it's still better. They have been proven wrong and moved back towards the city as a result. If you can't get on the train you have to drive is what my friends discovered. If a car commute keeps getting worse so does everything else. You could be right over time but I rather my 15 minute cycle to work and if I worked directly in the city it would be no more than 30. There are benifits to living in either areas but the further you live from where you work time will just increase on your commute as time goes by unless something very dramatic happens. The property also does not increase at the same rate.

I see why people buy far out but some are doing so with a lack of insight rather than a lack of choice. No reflection on you but some people move out then start complaining about the services and the roads. It's hard not to see it as being a cause of their own choices rather than just bad planning. Effectively the worse things are in the far commuter belt will keep prices up closer to the city

Tazz T

According to the Indo today the 100% mortgage isn't going to have much of an impact on the market. Between 5 and 6% will be affected. This is due to the minimum salary requirements - 68k for a single buyer and over 70K for a couple.

When landlords start selling, that's a warning sign - as happened in the 80s in London. All of a sudden there's a surfeit of properties in the market, prices fall and other landlords panic sell. I don't think SSIAs will make a huge difference to the market either. 20 grand isn't going to make a lot of difference when you're buying a house these days. I'm using mine to pay off debt and hopefully fund a much cheaper purchase overseas.

BTW I'm not a homeowner at the moment, although I was in the UK.

Sponge Bob

Am I surprised the market peak has been reached , NO!
Am I surprised it took this long , YES!

MorningStar

Tazz T wrote:

According to the Indo today the 100% mortgage isn't going to have much of an impact on the market. Between 5 and 6% will be affected. This is due to the minimum salary requirements - 68k for a single buyer and over 70K for a couple.
20 grand isn't going to make a lot of difference when you're buying a house these days.

BTW I'm not a homeowner at the moment, although I was in the UK.

€70k for a couple is not much above the average wage.
€20k isn't the big problem it's the €40k+ from a couple and some paretns have saved the money for the kids too. Many couple will have €60k+ as FTB and existing owners will have €40k to imporve their house or upgrade some have more as the invested under their children's names which can mean as much as €80k. It's all opinion but many views are some what limited and unaccustomed to certain thinking. People who are used to money often put things in their childrens' name for example. The majority of the SSIAs are going to middle class and up people they will probably invest it in their homes or as many are doing buying houses renting them out and then plan to give them to their children. SSIAs are going to effect the market is one of the few things practicly every expert agrees on.

soma

I also live in clondalkin, I've also noticed the plethora of to-let signs in apartment blocks. Have you seen the block down near bewleys/statoil..? it's like a mini forest of signs, mind you - it's one of the ugliest looking new apt blocks I've seen in dublin and that is saying something.

Do you know what, I can almost see the market diverging in the next 2 years: houses continue to rise, apartments fall in value. A indicator could be that the 100% morts are not available to those wishing to purchase 1 bed apts, i.e. those institutions have little faith in those type of properties holding their value.

soma

quick follow up, I just did a search on daft there, no parameters other than "2 bed apt to rent, furnished, anywhere in dublin" and got 1082 results.

Is it just me or is that a hell of alot of apartments..?

A couple of years ago it was tough to rent a good apt - I remember couples turning up for a viewing and there'd literally be 7 or 8 other couples there too.

MorningStar

soma wrote:

Do you know what, I can almost see the market diverging in the next 2 years: houses continue to rise, apartments fall in value. A indicator could be that the 100% morts are not available to those wishing to purchase 1 bed apts, i.e. those institutions have little faith in those type of properties holding their value.

I think you have a point there. There seems to be an ever increasing problem with new building techniques not blocking sound. It's going to be a bigger problem in appartments than houses too. People are begining to dislike appartments for more than just the lack of garden and the traditional complaints. I think at some point certain types of houses will also loose value due to construction techniques too. It was noticable in the late 80s but when house price started to rise people stopped noticing the problems.
I think the logic on 1 bed appartments is that if things go bad people won't have the back up of renting a room out more so than the potential property value.

soma

Two other immediate & future problems I see with apts:

1) Management fees are becoming a real issue. I know several people paying between 1600-2000/yr, which really is alot of money (equivalent to several months of rent), and blows away any benefits to the purchase like mort interest relief.

2) False advertising of the above fees, people are paying 1k in year one, and 2k thereafter! :mad:

3) Management companies (mainly those who are just puppets for the original builders) doing a terrible job. (I know of one who was 40k in debt after year 1).

NotInventedHere

The apartments on the boot road seemed to have problems since the start. Another problem for apartment owners is that the Local Authorities are purchasing some of these one bedroom apartments for there housing stock. This is not anecdotal. I heard this from a director of Housing in a LA. The purchase them through solicitors.

Tazz T

soma wrote:

quick follow up, I just did a search on daft there, no parameters other than "2 bed apt to rent, furnished, anywhere in dublin" and got 1082 results.

Is it just me or is that a hell of alot of apartments..?

A couple of years ago it was tough to rent a good apt - I remember couples turning up for a viewing and there'd literally be 7 or 8 other couples there too.

I remember that. When I moved back from London I was amazed how difficult it was to get an apartment. I remember being at a viewing queued behind about 10 other people for a dive. The guy in front of me said he'd been looking for 3 months.

MorningStar

soma wrote:

Two other immediate & future problems I see with apts:

1) Management fees are becoming a real issue. I know several people paying between 1600-2000/yr, which really is alot of money (equivalent to several months of rent), and blows away any benefits to the purchase like mort interest relief.

I agree it will become a problem but just on your first point. You do get insurance and bin charges in that fee at least. If they actually did all the jobs they are meant it might be a fair price

Zaph0d

MorningStar wrote:

...THe increase in the rental market was primarily driven by these landlords who borrowed on their existing investements rather than people borrowing on their home. For every home borrowing landlord I would say there were 3 to 4 borrowing on existing rental property. It just makes sense that people used to the market reacted more quickly with more capital. It's hard to tell but logically and from my experience the small time investors are only about 10% at most of the rental market. THey just don't have the buying power or experience to take on the more seasoned investors who are on the slow burn profit. Some did sell one property and buy 2 or 3 in the next good rental area...

It's all kind of anecdotal but how many old time landlords do you know? You might know 5 people who rent out property but that's small fry. I know many people who own 10 and more. They have a lot more effect on the market than the amount of small fry. How many people do you know who built appartment blocks or own them? It's all anecdotal but people seem to be talking about amatur legue and thinking it effects the premiership

This government survey of landlords, taken 5 years ago, seems to contradict your view that few landlords are single property small fry.
http://www.housingunit.ie/publications/newsletter_3.pdf

The most significant findings are as follows: 70 per cent of respondents first became landlords in the 1990s with 57 percent of this group first investing between 1995 and 1999.These landlords have led the expansion of the PRS in the 1990s but the small nature of landlord investment is demonstrated by the finding that firstly 96 per cent of landlords describe themselves as ‘individuals’ and 61 percent of this group hold only one property for letting.Typically this group of landlords purchased the second property as an investment vehicle, with the actual letting ofthe property and therefore the provision of accommodation being of somewhat secondary importance

When I first read this a few years ago I thought the findings were fairly obvious. Most people I knew had decided to buy a second property or not sell their old house when moving. All of them must have had one eye on what estate agents call 'strong capital appreciation'.

ionapaul

Check out www.askaboutmoney.com for all the threads going 'My partner and I are planning to trade up, should we keep our existing residence as a rental property?' - even if there are not a huge amount of these 'amateur' landlords on the ground, many MANY Irish people now have swallowed the get-rich-quick as a landlord idea and are becoming heavily involved (and endebted) in a business / investment they mightn't have much fundamental knowledge of. I also know a few friends in their late 20s who have bought a PPR here, and recently have bought abroad in Eastern Europe, markets they know absolutely nothing about! Crazy. There seems a mania for property in this country, despite most agreeing that equities deliver a better ROI in the long term. The building trade will only be happy when each and every Irish person owns their own home and has a property or two to invest out!

I agree that apartments are where the real bite will be felt when or if prices start to decline. Those €350,000 two bedrooms in the Liberties look like awful investments...

MorningStar

Zaph0d wrote:

This government survey of landlords, taken 5 years ago, seems to contradict your view that few landlords are single property small fry.
http://www.housingunit.ie/publications/newsletter_3.pdf

When I first read this a few years ago I thought the findings were fairly obvious. Most people I knew had decided to buy a second property or not sell their old house when moving. All of them must have had one eye on what estate agents call 'strong capital appreciation'.

I will gladdly stand corrected but can you tell me which page and what the report is based on. I will say my friends are now registered businesses so are probably avided in such surveys. If it avoids office property it is then it kind of misses another huge section of the landlord market.

It could be we are just in different circles. I do think a lot of people hold onto their last property but that is really only certain areas where it is viable. A family home is often very baddly suited to renting. If this is what people are doing then they aren't really relying on market increases for profit in the manner you described.

soma

ionapaul wrote:

I agree that apartments are where the real bite will be felt when or if prices start to decline. Those €350,000 two bedrooms in the Liberties look like awful investments...

Well, at least those apartments (altho I dont now the specifics here..) are close to the city centre. It's the apartments in the not-so-great dublin suburbs and commuter counties that I'd be most wary of. I mean a quarter million to live in a box in clondakin, tallaght or finglas..? huh..?

PS Im not against apts per se, if they built them like the ones on the continent which are more like actual homes that'd be alot better.

MorningStar

soma wrote:

PS Im not against apts per se, if they built them like the ones on the continent which are more like actual homes that'd be alot better.

I agree appartments now seem to be like student accomadation rather than homes. I own an appartment off Mount Street built in the 80s. It has three bed rooms, a huge living room and seperate kitchen. Generally they were all pretty decent sizes before the boom where they became clever use of space and then to now, cram them in. I don't know why anybody would buy an appartment in places like Ashbourne is a real mystery to me. The town houses in a country location seems equally crazy. You can increase density without being so simply minded.

ionapaul

Someone recently pointed out to me that unlike most of the pre-90s apartments, modern apartments often are lacking utility rooms, hot presses and other fairly important features that most of us would expect. If supply ever exceeds demand in this country, why would any choose to live in these properties?

Culchie

ionapaul wrote:

Check out www.askaboutmoney.com for all the threads going 'My partner and I are planning to trade up, should we keep our existing residence as a rental property?' - even if there are not a huge amount of these 'amateur' landlords on the ground, many MANY Irish people now have swallowed the get-rich-quick as a landlord idea and are becoming heavily involved (and endebted) in a business / investment they mightn't have much fundamental knowledge of. I also know a few friends in their late 20s who have bought a PPR here, and recently have bought abroad in Eastern Europe, markets they know absolutely nothing about! Crazy. There seems a mania for property in this country, despite most agreeing that equities deliver a better ROI in the long term. The building trade will only be happy when each and every Irish person owns their own home and has a property or two to invest out!

Hmmmm.

There has to be a balance, I agree with some of what you say Paul, but not with other parts of your post.

It is estimated that 95,000 people from the new EU states have come into Ireland (43,000 poles !) since November of last year.
These people require accommodation as well, so the rental sector has a role t play for quite a while yet, if well located.

Properties will go up in Eastern Europe, the same way as they did in Western Europe, however you have got to do your homework, and the hardest thing is establishing a trustworthy contact and developer, which gives you the same protection as you would get here in the Irish Market.

I purchased a property in Croatia right on the sea, June 2004 prices €1800 per sq m - price August 2005 €3000 per sq m. = 66% increase. (A real increase, not sales talk increase)
This was financed by equity from another investment property from a house here in Ireland, I felt this money had reached it's peak in terms of return on investment, so time to put it somewhere else and re-invest it. It wasn't an overnight decision and I spent 6 months studying the options.
One looks at these things from a business point of view, and when it is the right time, and the right property, you re-invest.

I have my own home which is kept seperately to the property business, and would not at any time risk that on any business venture.

Whilst equities have been proven to be a better return on property on average, this comparison is based against a national property indexation figure, not what actually happens with property at a local level, nor does it take into account, property surges that can come about through key drivers such as tax designated areas, or EU Entry for a country etc....
In fact the only money I ever lost on investments was with shares, when the bloody stockbroker went bust !!! Morroghs in Cork.


Property is about location and saleability. As the saying goes .. "the day you buy, is the day you sell".

ionapaul

I have my own home which is kept seperately to the property business, and would not at any time risk that on any business venture.

That level of business acumen is laudable, but I think it is lacking in MANY of our amateur landlords. Again, just review www.askaboutmoney.com for all of the 'I bought my house for €200,000, the value has increased to €300,000, how do I release this equity to buy another [investment] property?' What are these people thinking? I have a fair amount invested in the American and British stockmarkets, but haven't leveraged one investment to borrow money for another! I really feel that if and when the worldwide property boom goes a bit flat, many people indebted way past their comfort level are going to get very very badly burned.

Thomond Pk

Culchie wrote:

Hmmmm.


I purchased a property in Croatia right on the sea, June 2004 prices €1800 per sq ft - price August 2005 €3000 per sq ft. = 66% increase.

Don't you mean per square metre?

I agree with a lot of what you are both saying, the market fundamentals are good for rental property in areas that are well served by essential services. The level of leverage does remain fundamental to all business decisions as interest rates can rise and when they do they move very quickly in 0.25-0.50% rises approximately every quarter for 3 to 6 quarters. The interest rate regime we are in was termed 'Monetary Life-support' during 2002 and haven't moved since.

With proper stress testing on the loans and an allowance for a months void per year I wouldn't worry one bit on the income side. What is of concern is that as stockmarkets start to perform again (FTSE at 3 1/2 year high) that other investment mediums will become more attractive, if this happens capital growth will slow in the short to medium term. For this reason it is I feel a risk to rely on capital appreciation if you want to be sure of holding the investment long-term.

On another matter it would be good to see Shell go to Sea, Rossport isn't much of a letting location.

Culchie

Thomond Pk wrote:

Don't you mean per square metre?

I agree with a lot of what you are both saying, the market fundamentals are good for rental property in areas that are well served by essential services. The level of leverage does remain fundamental to all business decisions as interest rates can rise and when they do they move very quickly in 0.25-0.50% rises approximately every quarter for 3 to 6 quarters. The interest rate regime we are in was termed 'Monetary Life-support' during 2002 and haven't moved since.

With proper stress testing on the loans and an allowance for a months void per year I wouldn't worry one bit on the income side. What is of concern is that as stockmarkets start to perform again (FTSE at 3 1/2 year high) that other investment mediums will become more attractive, if this happens capital growth will slow in the short to medium term. For this reason it is I feel a risk to rely on capital appreciation if you want to be sure of holding the investment long-term.

On another matter it would be good to see Shell go to Sea, Rossport isn't much of a letting location.

Sorry yes Square Meter.... agree with your other points.

garred

ionapaul wrote:

That level of business acumen is laudable, but I think it is lacking in MANY of our amateur landlords. Again, just review www.askaboutmoney.com for all of the 'I bought my house for €200,000, the value has increased to €300,000, how do I release this equity to buy another [investment] property?' What are these people thinking? I have a fair amount invested in the American and British stockmarkets, but haven't leveraged one investment to borrow money for another! I really feel that if and when the worldwide property boom goes a bit flat, many people indebted way past their comfort level are going to get very very badly burned.

Don't know, I'd actually feel the oppostie. If you have equity in a property get it working for you. Would it not be better to release and invest it rather than leave it tied up in your house doing nothing for you.

Bluehair

garred wrote:

Don't know, I'd actually feel the oppostie. If you have equity in a property get it working for you. Would it not be better to release and invest it rather than leave it tied up in your house doing nothing for you.

I'm not sure I understand the sanity behind this (no offence) but hidden behind all the "equity in your property" and "getting it working for you" you do appreciate that what you are talking about is getting a loan and then attempting to invest that loan to beat the interest you're repaying on it?

"Leaving it tied up in your house doing nothing for you" sounds like a fine idea to me seeing as YOU LIVE THERE! . It's hardly doing nothing for you.

garred

Fair point Bluehair (no offence taken ) I know what you mean by the whole loan aspect. But if I had 100k in equity in a house I'd rather use that as payment towards/of an investment property, which is what I mean by working for you (hope that does'nt sound patronising).
Not necessarily here but certainly abroad where you can get in on a growing market and have repayments covered and with a profit by tennants. Your initial loan is being paid and also the fact that the property is going up in value. I know that the "bubble" could burst, which I'm not going into as its been done to the death, but it has'nt.
I know technically its a loan your getting but its cash that you can access and use and of course the repayments are lower (short term) than a bank loan.
Maybe its just me.

Bluehair

garred wrote:

abroad where you can get in on a growing market and have repayments covered and with a profit by tennants.

Are you sure? Regardless of where does your own independent research show this to be the case or are you just going on the agents info?

garred wrote:

Your initial loan is being paid and also the fact that the property is going up in value. I know that the "bubble" could burst, which I'm not going into as its been done to the death, but it has'nt.

Can you be sure of that capital appreciation? Without a crystal ball no-one can and as is often said time and again in financial markets "previous results are not a prediction of future results". The bubble arguement has indeed been done to death but having researched it at length I'm firmly in the "get the hell out of property asap" camp. I've just sold my own property.

Btw Sunday Indo has an interesting piece today about 10 reasons to postpone buying a property in Ireland.

garred wrote:

I know technically its a loan your getting but its cash that you can access and use and of course the repayments are lower (short term) than a bank loan.

Sorry to be pedantic but it's not 'technically' a loan it IS a loan plain and simple. Repayments are lower primarely because of the term (30 years?) and historically low interest rates. The real question is can you afford to keep that up if your investment doesn't work out perfectly?

garred wrote:

Maybe its just me.

Thats the scarey thing Garred. It's not just you. It seems to me that most of my own generation in particular (I'm 30) have some very bizarre notions about finances that have been supported by years of interest rate cuts and soaring house prices all supporting people living for today and not thinking about tomorrow.

After all nothing can go wrong right?

cuckoo

One thing not mentioned so far in this thread is the recent changes to the law regarding security of tenancy in the Tenancies Act of 2004. A lot of landlords who might have been thinking of selling up a property may have been galvanised by this. Yeah, landlords can terminate a tenancy if they they're selling the place, but if a tenant wants to play awkward about leaving things get complicated and the PRTB is still a bit of an unknown quantity.

MorningStar

cuckoo wrote:

Yeah, landlords can terminate a tenancy if they they're selling the place, but if a tenant wants to play awkward about leaving things get complicated and the PRTB is still a bit of an unknown quantity.

They always could have been awkward. The change in laws makes little or no difference IMHO. I mean a tenants could always stop paying the rent and legally it is very difficult to get them out. Starting with the fact the court doesn't sit all year around.
Many new landlords have no idea of the reality of the law. The film "Pacific Heights" isn't far off what a tenant could do if they wanted to. I have had tenants change the locks on the house because they lost theirs and then refuse to give me a copy because there is "no need for me to have them" :eek: Not sure what happened but apparently somebody broke into their flat and luckily I was close by and able to call the cops but we missed the robbers and nothing was taken. Lucky them! I go the locks replaced with in an hour for them because I am nice guy.

soma

Bluehair wrote:

Btw Sunday Indo has an interesting piece today about 10 reasons to postpone buying a property in Ireland.

It could have been an interesting piece, but it was a jokey/half-arsed piece of crap that it is fairly typical of the sunday independent's brand of 'journalism' - I mean what self respecting paper would often run pics of it's "journalists" bikini-clad & half naked. (serious comments only :rolleyes: )

garred

Bluehair wrote:

Are you sure? Regardless of where does your own independent research show this to be the case or are you just going on the agents info??

Nope its fact. Any survey will tell you that over the last couple of years. Prices are even rising in Iraq. Its all been done on another thread, but here's some links from the numerous out there:

http://www.finfacts.com/irelandbusinessnews/publish/article_10002284.shtml

http://archives.tcm.ie/businesspost/2005/03/13/story3047.asp

Bluehair wrote:

Can you be sure of that capital appreciation? Without a crystal ball no-one can and as is often said time and again in financial markets "previous results are not a prediction of future results". The bubble arguement has indeed been done to death but having researched it at length I'm firmly in the "get the hell out of property asap" camp. I've just sold my own property.

Nope no one can predict the future. As with all investments its a gamble to whether it pays off. Based on current figures it would be a good investment but again it's always down to the investor to do their homework.

Bluehair wrote:

Sorry to be pedantic but it's not 'technically' a loan it IS a loan plain and simple. Repayments are lower primarely because of the term (30 years?) and historically low interest rates. The real question is can you afford to keep that up if your investment doesn't work out perfectly?

Yeah fair enough, but it is also a source of cash that may not of been available to them. If they did'nt have the equity in their house and were on low incomes, they more than likely would not get the cash. It comes down to the old saying "it takes money to make money", which I'm a believer of.

Bluehair wrote:

Thats the scarey thing Garred. It's not just you. It seems to me that most of my own generation in particular (I'm 30) have some very bizarre notions about finances that have been supported by years of interest rate cuts and soaring house prices all supporting people living for today and not thinking about tomorrow.

After all nothing can go wrong right?

Yeah its not me and it has paid of for numerous people.

Anyway my point is I'm a believer of using the equity in property to invest. My example is reinvesting in foreign property but obviously there are other ways of investing this money and making it "work" for you. Whether its over the long term or short term, equity is a form of cash that you can invest wisely.

Zaph0d

garred wrote:

Anyway my point is I'm a believer of using the equity in property to invest. My example is reinvesting in foreign property but obviously there are other ways of investing this money and making it "work" for you. Whether its over the long term or short term, equity is a form of cash that you can invest wisely.

Do you believe in borrowing against all your assets to invest? For example, if you owned a painting worth 20K, would you then take out a 20K loan, using the painting as security, and invest the proceeds hoping to make a return higher than the interest rate on your loan?

just curious.

MorningStar

Zaph0d wrote:

Do you believe in borrowing against all your assets to invest? For example, if you owned a painting worth 20K, would you then take out a 20K loan, using the painting as security, and invest the proceeds hoping to make a return higher than the interest rate on your loan?

just curious.

You know what they say the poor have no money and the rich are in debit! It is a standrad business practice to borrow on assets. It's the basics of the stock market. It's a gamble but the whole economy is based on it, communism has proved to successful so what are you suggesting

Zaph0d

MorningStar wrote:

It is a standrad business practice to borrow on assets.

It's standard to borrow on assets to finance the ongoing enterprises of a business but less common to borrow on assets to make non-strategic investments outside of the business such as purchasing foreign property or other shares of unrelated companies.

It's the basics of the stock market.

Is it? I thought the stock market was based on the sale of tradable shares in companies. Are you talking about margin trading?

It's a gamble but the whole economy is based on it, communism has proved to successful so what are you suggesting

I'm not sure what you're saying here. Do you mean that the alternative to 100% gearing is communism?

MorningStar

Zaph0d wrote:

It's standard to borrow on assets to finance the ongoing enterprises of a business but less common to borrow on assets to make non-strategic investments outside of the business such as purchasing foreign property or other shares of unrelated companies. Is it?

Yes it is what just happened to Superquinns? Diversification anyone? Costello Doors went into foriegn property.

Zaph0d wrote:

I thought the stock market was based on the sale of tradable shares in companies. Are you talking about margin trading?

Where do the shares come from? :rolleyes:

Zaph0d wrote:

I'm not sure what you're saying here. Do you mean that the alternative to 100% gearing is communism?

I was asking what do you think is the way to go I am not the one complaining about the practice but I don't see what your suggestion is.

Zaph0d

MorningStar wrote:

Costello Doors went into foriegn property.

Yup I just said it was less common.

Where do the shares come from? :rolleyes:

The shares are just that, portions of the company that are sold off rather than borrowed against. There is a difference between selling off a portion of an asset you own and taking out a loan using that asset as security. In the latter case you have to make interest payments. Dividends are optional.

I was asking what do you think is the way to go I am not the one complaining about the practice but I don't see what your suggestion is.

I am not making a suggestion or complaint. I am asking whether people believe they should fully leverage their assets for reinvestment puposes. I am curious because I would not trust my ability to get more than 3.5% return on an investment, so I would not borrow money at 3.5% secured on my assets to make this investment. I would only borrow money to as a means of getting a house or to reinvest in my own business or education. Everything else looks to risky to me. What do the rest of you think- is 3.5% dead easy to get?

To put it another way, if returns over 3.5% are a sure thing on eastern european property why does AIB bother lending money at 3.5% when it could just buy up that property directly?

MorningStar

Zaph0d wrote:

Yup I just said it was less common.

I don't think is that uncommon at all. It's a common business model was what I said.

Zaph0d wrote:

The shares are just that, portions of the company that are sold off rather than borrowed against. There is a difference between selling off a portion of an asset you own and taking out a loan using that asset as security. In the latter case you have to make interest payments. Dividends are optional.

Many share sales are to get investment into the company. AFAIK it is the most common. Companies sell a portion off to get the investment. Venture captialists! Again it is a common business model it doesn't need to be the most popular.

Zaph0d wrote:

To put it another way, if returns over 3.5% are a sure thing on eastern european property why does AIB bother lending money at 3.5% when it could just buy up that property directly?

AIB make a profit with 3.5% with less risk so they are happy with theat. Bear in mind it has been suggested another bank is coming in with a 2.5% rate to the irish market.

garred

Zaph0d wrote:

Do you believe in borrowing against all your assets to invest? For example, if you owned a painting worth 20K, would you then take out a 20K loan, using the painting as security, and invest the proceeds hoping to make a return higher than the interest rate on your loan?

just curious.

Yep, of course. Using the example earlier (foreign property) you could not only cover you repayments but also:
1. Your repayments are covered for 10 years (guaranteed rental income of 10% of property value).
2. You will also make a profit on the rental income.
3. Your initial 100k topup is being reduced.
4. The property might go up in value as it is and has for the last 5 years.

Sounds a bit like I work for a foreign property company but I don't, honest.

Some people may call it being too hungry for money, but I've been bitten by the bug and no doctor can cure me.