Questions on Dublin Rental Yields + Capital Appreciation Over Time


#1

Hi Guys,

As someone looking to buy property with a view to renting it out long term (20 years plus) and then potentially selling it or continuing to rent it, I’m trying to work out what areas of Dublin are likely to generate the best returns over time.

From doing a bit of research into it it seems the best rental yields tend to be in areas such as Dublin 3, 10, 11, 22, 24 and these tend to be quite a bit higher than places with more expensive housing like Dublin 2, 4, 6 etc

So on paper at least it seems as though you’d get a better return on your money buying a property in Dublin 11 than you would in Dublin 4.

What I’m wondering is that likely to be the case in terms of appreciation of the value of the property over time also? Ie, is your house in Dublin 11 going to appreciated more than your Dublin 2 apartment.

I was planning to go pack through the various DAFT rental/sales reports of the past 15 years or so to get hard figures on these but was hoping someone might have an answer without me needing to do a lot of data entry and graph creating! Or potentially point me to DAFT figures on the same long term time period (I’m sure they must exist but have yet to find them)

I’m assuming if property in Dublin 11 offers a better yield + better appreciation then it would seem a no brainer. However I’d wonder if there was not also another factor of long term desirability/demand to live there? Ie people are happy living in Dublin 11 and paying quite a bit to do so as there is a chronic housing shortage at the moment. But when the next crash happens are the areas that generate the highest returns also likely to be the worse affected? Ie if there’s suddenly a huge oversupply of rental properties are areas like Dublin 11 likely to take a much bigger relative whack to their value than Dublin 2, 4 etc, which you would assume will always remain the most desirable places to live?

I suspect there is some standard logic to all of this but it’s not an area I know a lot about so was hoping for some suggestions.

Any advice would be much appreciated!

Thanks


#2

May God have mercy on your soul.


#3

This is a hard one to answer. But if your time horizon is twenty years my guess is that the property with the higher rental yield will win out. I’ve no idea what the actual numbers are, but I reckon from past threads over the years that you should be easily able to achieve 5% net return per annum on the right rental. Let’s suppose your more expensive D4 place is only 2%. Again, I’ve no idea of the real numbers but pick your own and whip out your spreadsheet.

Over twenty years you will net 165% return on the cheaper property, but only 49% on the more expensive one. Is the increase in capital value really going to make up for that? Over the long run, property prices tend to increase by about the rate of inflation. Probably there has been a once-off secular change in the last 40 years due to an increase in the number of double income families. But that is history, probably not to be repeated.

Your bigger worry should be that you are buying a monolithic, immoveable, and illiquid asset. That carries all sorts of risks. Equities perform better than property in the long run, allow you to spread your risk and may be more favourably treated for tax (though you can never predict when the government will raid your coffers). So why on earth would you buy property?


#4

I agree with PS on looking at property with a higher rental yield. On that note, you can rent out a property right now in Kildare with almost a 7% rental yield.
Are you buying with cash or a mortgage? I can’t tell this from your post. If you are flush with cash and want to park it in a high rental yield property, I think that this is a good idea but many probably don’t.

PS, do you really think it’s a good time to buy equities? The Dow Jones took 25 years to get back to the peak after the 29’ crash and the Nasdaq took 15 years to get back to the peak after the 2000 crash. We’re looking a bit peaky and at the tail end of a 10 year bull run right now.


#5

Thanks for the replies guys. I’m buying with cash and it’s only part of a portfolio, ie I’m not putting all my money into property, just a %

Bulk of money will go into equities, but I’m a bit nervous about that also at end of 10 year bull market!

Aiming to go for reasonable yields but also areas that I think (rightly or wrongly) might have more long term appeal. Ie Dublin 8 close to Luas has good yields and hopefully would remain a reasonably appealing place to live long term.


#6

Yeah, I didn’t mean to imply that right now is a good time to buy equities. Not sure it’s a good time to buy property either. That’s why I’m mostly in cash myself. Though I don’t think I’d ever buy an individual property myself as an investment. Too much work to look after it and heard too many stories (here and AAM) about places being trashed or overheld by non-paying tenants etc. Might suit other people, I wouldn’t have the gumption.