Why is the cost of property, esp renting, so high in Dublin?

kceire wrote: »

No not at all. I have great sympathy for tenants stuck in a rental rut. There should be some initiative allow them use rent paid as proof of affordability to the banks. How anyone can save and rent at the same time is beyond me.

But then again, what’s my opinion when I’m an amateur landlord.

I never mentioned that tenants should expect cheap housing. I don't think I mentioned that they should move out of Dublin (although I think they should if they can't afford the rent as it would decrease pressure on the system overall if people were more willing to do this). Of course that would necessitate infrastructural improvements etc. Maybe I did say it, but not in the context of the post you quoted.

beauf wrote: »

What you're describing is altruism.

Efficiency is squeezing out max profit for least cost.

What you're taking about about is sustainability.



What has happens is Govt intervention has unbalanced the market. At which point its time to leave. But you can't because of the above Govt intervention. Catch 22.

You might want to google the definition of altruism. It has nothing to do with anything I said.

Donald Trump wrote: »

What kind of people have access to that finance? Presumably any professional person with a proper business plan and a record of competence.

I might not get a business loan to build a warehouse but a local business owner who has been running his business for years might be trusted by the Bank to build the same warehouse.

Wow! I didn't realise you didn't understand the basics of finance. Nobody would invest in that due to the taxes and the limited return. ReITs have a huge tax advantage and aren't borrowing the money.

What you are suggesting is a large private landlord using restricted rents in place. They would have to have the cash themselves and wouldn't be able to set the rents that REITs can.

When you say you aren't a businessman why do you seem to think you can come up with a business plan for a sector. The suggestion is you know better but if it made so much sense then somebody would do it. Why aren't they? I told you why it wouldn't work and you only responded to one part ignoring the other all important factors.

I'm seeing two two person circular arguments here. Take it to PM before it gets any more heated

Donald Trump wrote: »

It doesn't have to be a REIT.

It could be a person with X properties that manages them full time. They might put some equity in and get interest only financing and run it like a business. They might not be concerned with having the property "paid for" by someone else like the amateur (although I am sure they would also like it if it turns out that way). They only need that the income from renting it out covers the administration and maintenance costs along with the cost of capital (which is the interest rate). The above expenses included losses for non payment etc.

Your logic makes no sense. A professional doesn’t expect the property to be paid for by tenants paying rent but an amateur does. Please explain how this makes sense.

Donald Trump wrote: »

You'll need to be a little clearer. Who are you talking about? The professional person? They aren't necessarily trying to get the capital paid for free. That is the point.

See my example above of getting a 10 year mortgage/secured loan at 3%. on 300k that's 750 a month in interest. Lets suppose they rent the property for 1500 a month.

750 goes on interest.
150 (or 10%) on routine maintenance/expenses.
225 (or 15% on the other non-routine expenses such as non-paying tenants etc)

That leaves 375. But maybe they are managing dozens of properties. And they can have proper contacts and procedures in place when something goes wrong. They can have a local tradesperson on call etc.

The financial genius fella a few posts back, sure one of the last threads he started on this forum was asking randomers on an internet board on who he had to get to fix a light socket for his tenant. That is the problem with amateurs.

This thread has gone so far of track. Why is or property so expensive, simple demand exceeds supply. Increase supply prices drop simple economic law. Want the private sector to supply it let the market decide price. Want the state to provide where does the funding come from.

Try to enforce controls on the market it will react accordingly.

You seem completely hung up on figures. I don't know how many different examples you have used.

Dav010 wrote: »

All tax free?

Which bank gives interest only loans for investment now?

Incidentally, if you listen to The Last Word podcast this evening, just after the 6pm news, you will hear discussion of a new report which confirms that REITs, because of the way they are leveraged and pay dividends, paid a whopping 1.37% tax on income from rentals here last year. It’s nice being a professional in Trumpworld.

A Bank might not give you or me an interest only loan. They might give such a loan to a professional business that has enough equity to put into the deal.

There are not only banks either btw. They could get money via equity, albeit at a higher rate of return (but unsecured). Or if big enough, they could issue their own debt to other investors - but you are talking about those REITs at that stage.


On your points regarding REITs, that is exactly the thing. If you are an individual with one house, how will you compete with that? It's not much different to the fella with the local corner shop thinking they can compete with the new Tesco across the road when the Tesco sells all the same products

Dav010 wrote: »

All tax free?

Which bank gives interest only loans for investment now?.

Just as an FYI: finance Ireland and dilusk ics

Dav010 wrote: »

Do you think any of the above go shopping for single units?

I see the merit of your argument when applied to whole developments in Dublin, but this accounts for a very small percentage of the rental market, fo you think “professional” landlords as described above would be interested in properties outside of whole developments? They will not, so the “amateur” landlords are the owners of the other 95%. You want them to leave the market, many are, you really are talking complete BS.

But anyways, in your financial wisdom, you seem to be excluding tax on the €1500 rental, do you want to have another pass at it?

Hi again

You can write off interest against tax. That reduces your 1500 income to 750.
With enough units, the average percentage expenses and losses are more or less accurate. We pulled a figure of 10% for expenses and maintenance. That takes off another 150. Now down to 600. We put in 15% for unexpected losses (in the sense that they are contingent on say a tenant overstaying or an unforeseeable, on an individual basis, expense). Again, with enough units the average number will be more or less accurate. This reduces your taxable amount by 225 so you are down to 375.

That 375 will still be a sort of company income. Same as for any other company. If you pay tax on the 1500, then you'd want to get a better accountant!

Dav010 wrote: »

All interest is written off against rental income, reducing your taxable income to €750?

80% for an individual.

I am assuming that for a company, it would be a fully allowable expense. But I'm not an accountant

Edit: This appears to agree with me:

revenue.ie wrote:

What expenses can be claimed?

The expenses that you can claim for are those that are directly related to the running of your business such as:
....
....
interest payments for money you borrowed to finance your business.

Even if not, 80% is a fair chunk

Assetbacked wrote: »

FG talking about 200,000 jobs being created over the next few years. This is toxic and completely unsustainable. We are at full employment and do not have the infrastructure to deal with those already here. Supply is far behind demand and the large numbers arriving here each week is making things worse.

It's a fantastic place to be as a worker.
Wage increases galore! Especially if you're in STEM.

Ray Palmer wrote: »

I don't quite agree with you as I believe the narrative of rent allowance schemes is not a huge draw on the private sector. There are plenty of people able to house themselves in private rentals and they are the majority.

Using HAP does have an effect but often overblown. Time will make the situation worse as private tenants retire and then may start looking for HAP. Right now a minor issue.

The financial restrictions are enough to say not everybody can be a landlord. It is a case of have and have nots. If you can never become a landlord in the normal course of events and the same applies to friends and family of course you will resent those that can. Hence you have idiotic statements like the landlord and asset classes. So people do see themselves as different along with the resentment.

They are why people complain about people making profit. That and the history in Ireland that gives us a post colonial chip on our shoulder. Don't here people complain about Tesco profits in the same way because they never encounter the board of directors. They will meet a landlord and already think they are scum

I think we may have to agree to disagree. HAP has put a floor on rents which has artifically increased rents.

I can personally attest to this, when I was renting a property two years ago a prospective tenant informed me that they were entitled to €1800 although the market rent was only €1650.

I did not rent to this person as I go with "my gut" and ended up renting at €1650. Had I gone with this person the €1800 would have increased 4% each year rather than the €1650 increasing by 4% each year.

There are a significant number of people who do have access to funds to purchase or at a min have a deposit for rental properties, those in their 40's and over who have savings earning very little in various financial institutions etc.

Landlords are not asset classes, they are simply business people. I do agree we have this historical bias to landlords because of our past.

Donald Trump wrote: »

………..
Renting out a house and having the tenant default is no different to running your own business and having a large client refuse to pay or defaulting and closing without paying you. It hopefully won't happen but it can happen. If it does happen, hopefully you will have taken measures and built up buffers to allow you to cope with it and not go to the wall yourself.

Its very different - that's the single biggest problem with the rental market today.

In a normal business, when you don't get paid, you stop providing goods/services to that customer. In residential property letting, when you don't get paid, you have to continue providing the service for up to 2 years.

Lets consider the "buffer" you need if you get a non-paying tenant. 2 years mortgage payments with no rental income, costs of legal representation at various RTB and court appearances, costs of repairing any damage/theft your non-paying tenant does to your property before they are finally evicted. All in, you are talking €50k or maybe more.

"Amateur Landlords" don't usually have €50k+ spare cash. No matter what the returns, or whether the rent covers the mortgage or not - they cant afford the commercial risk of being in the business. That's why they are leaving.

Consider what taking €50k out of your family budget over the next 2 years would look like and see if you fancy the game of Irish Landlord roulette.

Deleted User wrote: »

I don't think this underlined part is correct. You can't squirrel away 15% of your income for a rainy day and not pay tax on it. Sure, why not say "I'm putting 100% of it offside 'just in case'" and then pay zero tax?

You didn't understand my point. Perhaps I was confusing.

With a large sample size, the empirical observation will converge on the average. So your expense/write off will be close to the expected amount.

Don't get hung up on the number. We'll say it's 10% of tenants default. And each tenant is equally likely, from what you can tell, to default. And we assume that defaults are uncorrelated (the latter will not be accurate in the case of something like the meltdown a decade ago)

If you have one tenant, then you cannot have 10% of your tenants defaulting. You will either have 0 with 90% probability or 1 with 10%.

If you have 10 tenants, you can expect 1 (38% probability) of them to default. But it could be 0 (@35%), 2 (@19%), 3 (@6%), 4 (@1%),.. etc. So it is still reasonably uncertain. You expect not to get 10% of your income, but lets say that the range of uncertainty is (0-30%). You will be in that range roughly 99% of the time.

Now, if you have 1000 tenants, then you will expect there to be 100 defaults (@4.2% probability). The corresponding range for 99% probability is (87-123) which is (8.7 - 12.3%).


Putting that all together, the business is not squirreling away 15%. They are allowing a buffer of say 15% to cover what will be a likely business cost. This is manageable.

But if you only have one tenant, then 15% is irrelevant and not manageable. 15% will either not be required at all, or it won't be enough. Because you are will either have 0% or 100% of defaults and you will need either 0% or 100% as a buffer.


So if you don't care about the figures then consider these two scenarios.
Scenario A) 100 houses, each owned by single-property-landlords.
Scenario 100 houses owned by one property company with 100 equal shareholders.

10 tenants default.
Under scenario A, this might bankrupt 10 property owners.
Under scenario B, it's just a 10% loss which was somewhat expected for the shareholders.

Because scenario B is much less risky, shareholders will require less of a return. It's just an investment. A reasonable investor would not think that they can get a loan of say 300k to become a shareholder under scenario B, that the income from those shares will fully pay back their loan, and that in 30 years they will have an inflation protected asset worth 300k real. I am sure that they won't complain if that is the case, but they're still going to invest if the end asset is 100k real. Because that would be a great investment! Do you not agree? But tell that to the individual landlord - that they can put all the income towards the mortgage and at the end of it have to sell the house and only be left with 33% of the sale price after paying off the loan and they'll think it's not good. They are risking possibly being bankrupted for that. They realise this over time and they want to get out of the market. That is completely understandable (and advisable IMO if they do not have capacity to cope in the worst case scenario)

Where does this come into price of housing etc. Well the individual landlords bring in inefficiencies. The might find it more difficult to deal with overholding tenant. They might not have the funds to renovate a property after the last tenant made shite of the place. Maybe they get stung by one tenant and don't want to rent it out again for a while. Plus then builders and estate agents and legal have to deal with multiple purchasers. And the builder needs bridging finance etc etc to maybe build a new development. All of these things create frictions. End result for the consumer is higher prices.

kceire wrote: »

So the large REITs increase the rent of all their units to a higher figure to allow for the 10% of tenant defaults. Lovely.

Seriously? You can't understand basics?

I think my time here is done. Not much point sticking around.

I'll leave the amateur wannabe landlords here wanting someone to do the work to pay for their house to give it to them for free.

The country was destroyed for hundreds of years by English landlords thinking they were entitled to have Paddy do all the work and for the landlord to live off their back for no more value-add than having their name on a piece of paper. Seems like independence just brought on plenty of cases of "monkey see monkey do" 100 years later!

Deleted User wrote: »

I get your point re: having other properties as a backup so you aren't reliant on one gaff / don't feel the pinch when they do default on rent etc. (It's similar to diversification of stocks etc....essentially don't put all your eggs in one basket).

Your underlined point, though, was in relation to tax. Actually, while typing this out I think I get where you're coming from. Are you saying that you obviously won't have to pay tax on rent if you don't receive it? So if 15% of your tenants default, that's 15% of your projected income which you don't receive and, therefore, isn't taxable?

Yeah, it would be a writeoff regardless of whether you are individual or large company. It's just that for the individual, they might have to pay tax on the amount needed to build up their buffer if they want one (which might have to be 100% or 1 years rent say). So there is a cost to them to build that up. They might never have to use it, and if they do, then they won't pay tax on the income for that year because they won't have received income that year. But the buffer would be needed to keep paying the mortgage.

Now for the theoretical landlord with 1000 units, they can be fairly certain of realising something close to the expected loss. They don't need to have a one-year buffer built up. They just need to plan to be able to cope with say 15% default in that year.

So even if, over the life of the mortgage, the both experience the same rate of default in the sense that 10% of the big landlords tenants default per year, and that the individual landlord had 3 years out of 30 that were defaults, the big landlord can plan and manage that risk much better. The individual might go bankrupt. So it's a bigger risk. Bigger risk requires more return.

Donald Trump wrote: »

I don't know what you are reading into capitalism. I would be advocating the mobilization of capital in more efficient forms.

You see, the individual landlords require greater return because that system is more risky (and inefficient).

Back a few decades ago, every day goods were relatively much more expensive. There were small corner shops etc. Maybe the shop owner also had a pub and opened the shop only on a Saturday and that suited because people bought their things on a Saturday and that was the way it was always done. Nobody would say that those little shop owners were creaming it just because the end buyer was paying relatively more.
Then the supermarkets came. And they were more efficient. Ok, some people lost their small corner shops but overall things were better. Later on the foreign multiples came in (bringing in problems of the other extreme but that is a different topic).
It would hardly be perceived as anti-capitalist to say that they second system was better for the consumer than the first?
The above example is analogous to the rental sector in a simplistic way. The individual 1-property landlord is the corner shop. Then we have the professionals which are analogous to the local independent supermarket. It is their business, they are making a living out of it, but they are serving more people. Then the multiples like Tesco/Dunnes would maybe be analogous to the REITs etc.

So I don't know where you are getting anti-capitalist from. All I am saying is that if you are in the town, there are two local supermarkets, Aldi are looking at buying and developing a warehouse-style shop on the edge of town, then maybe it's not a good time to try to open up a corner shop selling a few groceries and newspapers etc.

Well then can you explain why the REITS are targeting the high end of the market and not undercutting existing landlords?

How is this good for the consumer in the rental market if I am to use your analogy above regarding the supermarket multiples v the corner shops ?