Investors 'vital to housing market'

Thanks GB, interesting facts in the report isn’t there;

rte.ie/business/2007/1114/economy.html

The report also reveals that Ireland’s private sector is one of the most heavily indebted in the world. It says private sector indebtedness could reach 248% of GNP by the end of this year. It also says that the stock of lending by financial institutions to domestic households is now equal to 78% of GDP. This puts Ireland in a group of four countries who are the most heavily indebted in the euro area.

**- so will it all be paid back?
**

It also said that 26.1% of outstanding mortgages can be attributed to investors, up from 16.7% in 2006. By the middle of this year, investors faced a** 36% shortfall between their annual rental income and their annual mortgage repayments on new houses**. This is a significant deterioration since 2005 when it was just a 16% shortfall.

It added that the rental shortfall for those investing in second hand houses is more pronounced at 43%.

  • so will rents rise by 36% and 43% respectively?

There’s not a problem sure we can work it off in 2 1/2 years :unamused:

Of course they will. Rents are rising - did you not know that? The daftwatch rental supply graph is a little misleading - just turn it upside down for an alternative view.

Somebody correct me if I’m wrong but what a landlord owes on his/her mortgage is irrelevant with regard to what he/she can charge in rent. What is important is how many properties are available to rent. Some show on the BBC highlighted this point a few weeks ago when interviewing bankrupt buy to let investors.

Or maybe it’s different in Ireland.

Investors are welcome of course. It is the proportion of specuvestors, flippers and horders that is the problem. The sight of the majority of them leaving the market is a positive; a point the CB don’t seem to push.

From the original article

Surely this is the definition of a housing bubble.

So big transaction costs are positive. I propose an increase in stamp duty to stabilise the market.

They dare not speak its name; speculative bubble. And so we will have to endure this slow reveal of the truth, drawn out over years.

You are right, the landlord can only raise rent to the market rate. The issue is that most landlords/renters don’t know this, so you have seen a lot of rents raised on daft making it look like the market rate has gone up.

“Rent may not be greater than the open market rate and may be
reviewed (upward or downward) once a year only unless there has
been a substantial change in the nature of the accommodation that
warrants a review. Tenants are to be given 28 days notice of new
rents.”
from prtb.ie/DownloadDocs/Residen … 0Guide.pdf

2nd graph down says it all
daftwatch.atspace.com/

Those who had been riding the upward wave decide now is the time to get out. Those who thought the increase would be forever find their illusion destroyed abruptly, and they, also, respond to the newly revealed reality by selling or trying to sell. Thus the collapse. And thus the rule, supported by the experience of centuries: the speculative episode always ends not with a whimper but with a bang. There will be occasion to see the operation of this rule frequently repeated.

**A Short History of Financial Euphoria **
John Kenneth Galbraith

The lesson of history is that we don’t learn the lessons of history.

Because it’s different this time… d’oh :unamused: :wink:

But they do!
It’s very hard to prove market rate and what sort of situation does that leave you in if you are a family. Even if you take them to the tribunal and win do you really want to continue living there once the relationship between you and the landlord has got to the point where you have to involve lawers. You can move out but that involves having a rental overlap and the cost of moving so in reality it is not much protection.

Our LL hit us with a 25% hike out the blue when there had been an identical property rented for 100 E less the month before and the other houses in the same the estate with the same estate agent as the letting agent had not budged for 2 years. We complained, made a case and they offered us a 20% hike. We told them it wasn’t aceptable and moved out.

Next week the EA had an advert in then local paper looking for landlords bragging that their rental reviews only ever went up. ( and they are a well know respectable EA in the town!) The place went up for rent at less than they were going to charge us, and sat there for at least a couple of months. I have no idea if they got their money or not.

I think the EA was probably at the heart of it as they told me a differnet storry every time I called and always claimed it was someone else in the agency who was dealing with it or had advised the client. We found out later the EA charge a months rent to find a new tennant so they probably came out ahead. :imp: