Warning that house prices may fall by 80%


#172

On another note how about a grand slam face off between Alan Ahearne and Morgan Kelly…

One’s pitching 50%, the other 80%…

Who’s right?!? 8)


#173

Might be worth working on a calculation to assess return! Where to start…assuming the following…

House price…€400K
Rent…€14K per year
Deposit…€60K…(5% in NR minus DIRT ~ €2300 per year interest)
Upkeep…€1.5K per year (insurance, cover for vacancy, appliance replacement etc)

Mortgage ~ €1700 per month=€20400 per year no interest relief + costs (loss of interest-€2300 + Upkeep - €1500) total cost = €24200

Rent €14000 before tax (how much is tax? 41% if you are a high earner?)

Unless Im missing something big property investment is dead? if you expect a return?


#174

You’re missing the fact it’s been dead for quite a while…

Crappy yields were the signature of the bubble… Only outright owners could claim to have been eking something respectable from their capital, everybody else… Well a river in Egypt had alot in common with them…

2Gaffs!?? Wanna get in on this… What is an acceptable yield for an Irish Landlord…


#175

Cheers UWG if i can give that acronym, I suppose the point I was gettin at is that the possibility of investors reentering the market is as remote as the use of the words banker and introspection in the same sentence. nothing short of a rise in prices could reignite the next episode of stardust economics. So really an 80% drop in investor terms will have to subtract falls in rent. Investors tend tobe agressive during an upswing and underpin prices in very weak markets but that model died with credit crunch. A 400K gaff could easily fall in value to 100K if the rent collapses from 1200 monthly to 500 monthly. Mortgage on a 100K is around 450 per month, Relatively speaking in terms rental return the fall would be 20-30% ie 75% drop in price -50% drop in rent. Simple calculation but property investors are not scientists and have a sentimental view of property prices which will be as fickle on the way down as it was ascending


#176

I would have thought that the above is not contreversal on this site.


#177


#178

Is that guy drowning in debt ?


#179

lol WGU

Snap Printing + Kildare Street!


#180

Rally Monkey is regulated by the Financial Regulator


#181

:laughing: :laughing: :laughing: :laughing: :laughing: :laughing: :laughing: :laughing:

The loose-lips-sink-ships remix poster is also brilliant. I’ve posted it off my blog.


#182

its class…


#183

“Rally Monkey IS The Financial Regulator
Terms and Conditions Apply”

…in very small print at the bottom :slight_smile:


#184

It’s not really a relevant question anymore until rents stop falling… In terms of working out what the price floor is. But answer might range from 4-5% in a rising market to 15-20% in a falling market. I reckon because of this that when the VI contingent eventually give up on trying to put a floor on prices through FTBers (they might yet succeed though), they may fall back on trying to put a floor in through rent control or something similar.


#185

interest rates were 20% in the 80s on a property worth 100K => you paid EUR 20K a year(ok Irish punt)
interest rates at 5% currently on a property worth 400K, you pay EUR 20K a year!

Just think this is worth saying in case people forget, while interest rates are a quarter of what they were in the 80s/early 90s, house prices are four times what they were also!

a 1% rise in interest rates now has larger disproportionate effect than in the 80s.
6% on 400K => EUR 24,000pa.
21% on 100K => EUR 21,000p.a.

That is some volatility people are buying into!


#186

That’s a scary prospect you’re raising their roc. What if the government decided to step in and implement “rent controls”, ostensibly to prevent us poor renters from being screwed by callous landlords, but in reality attempting to set a market floor for rents.

This would leave a lot of unrented property of course but would serve the Fianna Fail objective of preventing BTLers and accidental landlords from undercutting the developer-lets in apartment complexes, something I am seeing more and more of as interest rates start to fall.


#187

I think we’re delving into paranoia. No govt is gonna directly attempt to dictate the floor price of rents through price controls, that would be political suicide. They may try other controls to discourage accidental landlords from entering the rental market (think overregulation and a lot of the pros wouldn’t want to see this either) but this would just force the ALs into selling which could only hasten the sale price drop. A lot of PS and unionised employees still rent, as do 3rd level students, can you imagine govt sponsored pay cuts, increases in college fees/tuition AND a ban on rent reduction in an otherwise deflationary environment? Political carnage.

EDIT: clarity


#188

It would certainly be a desperate act. But it would be one of the very few things left to do if prices eventually fell by say twice as much as PWC (who I believe are among the most corrupt and cronyistic of all the crooks in this entire saga) have estimated the price drops will be. And on which all banking sector plans have been built. Probably an appeal would be made to patriotism, and that it was needed in the best interests of the country.


#189

I don’t see how you can impose rent controls which would prescribe minimum rents. (At least directly - you can do this indirectly by imposing high minimum floor areas, level of appliances, etc.) But rent controls which say to landlords - “You may not rent city centre two beds for less than €1400”? How are they going to work?


#190

They won’t which is kinda my point. Using minimum standards to artificially exclude properties won’t work either most of the new shoeboxes would fail on floor area and BER.


#191

How did rent control usually work? It used be very common in places. Just the same thing, but the other way around. I’m only raising the possibility. I wouldn’t fall off my chair though.