You Tube Posting

Folks, I am working on a 4-5minute You Tube video on the Irish Property Bubble, I am lining up concrete facts with clear story line etc etc as

All constructive advice / thoughts very much welcomed.

Nero

Good luck Nero looking forward to the results.
Some pictures and prices from the most over priced thread on the pin could be good, show the height of the lunacy. A good soundtrack, I dunno, Crazy - Britney Spears maybe :smiley:

When I try to get across to people just how overvalued property is, I point to a house an tell them what it rents for. I think ask them what gross rental yield a landlord should expect. The answer is typically 6-7% (afterall you can get 5% in the bank).

I then work backwards and calculate the price an investor should pay (which includes stamp duty and other expenses). i.e Price=Annual Rental Return/0.07. In many cases the answer is around 50% lower than the current asking price.

That’s when I see the penny drop. I often get the “Yeah but, rents are going up” response. But rents have to double to justify many of the property prices out there. Is that likely?

I know I am preaching to the converted but rents have likely peaked with lower rents to be driven by:

Increased supply
Lower employment
Economic slowdown

You can base the value of a house on PV of rental yield if its buy to let and you have an income stream to work with. If you are buying a house to live in and you are dead set on that house then the rental yield approach probably only serves to calculate the absolute minimum value of the house. If the house you are looking at is in an estate where all the other houses are owner occupied how do you assess the rental income stream to begin with? If you live in a house, the opportunity cost of not owning the house is the rent you would pay otherwise, but if you love your gaff or you ain’t selling or you have a low mortgage you might be prepared to pay the opportunity cost.

You might also consider how much it would cost to build the same house on the same site at todays land/labour prices.

You might also consider how much houses in that estate sold for recently, the amenities etc around the area and your own desire to own that house. If you saw the gaff as your dream home then you might be willing to pay somewhat over the value of the place based on rental yield.

You are correct insofar as from an investors point of view the reason they were all in the boat was capital appreciation not rental yield. With that figleaf gone, they are now basically gambling on how far down the buy to let market has to go before they go into neg equity. Depends when they bought really. The longer the downturn goes on, the more BTL investors will be caught in the trap. From an owner occupier point of view this sideshow makes damn all difference unless they are in the market to sell in the near future.

Hmmm… I’d suggest, “Enter Sandman” by Metallica but they’d probably take a whopping great court case against you! :smiley:

I agree this is the case with the least commoditised top end of the market or areas where very few houses are for sale (although For Sale signs are almost everywhere now). But in most large estates there are many houses owner occupied and rented, so it is fairly easy to make a comparison.

True. But how much more? 20%, 30% or 50%? Remember also that as the value of the property falls, the advantage to renting increases. Any equity the owner had is eroded, but a renter with a similar amount of equity can use the return on this to offset their rent paid. The resulting saving could be huge.

I understand the “dream home” sentiment, but the nightmare of losing a fortune should outweigh this for many.

Agreed. But to a potential new buyer or someone trading up it is massively important, which is why transactions have almost totally dried up. A market with no buyers is a falling market.

I’d like to recommend “I’m Forever Blowing Bubbles”

Surely there’s only one song for a job like this.

lyricsdomain.com/1/alan_pars … es_up.html

-Rd

We have a winner…

Some US news feed of Cleveland now in contrast to Irish Christmas shoppers in NY. USA and Irish housing stock comparison. Don’t forget some DMcW vox pop from 2005 of the mother queuing: “Oh popped along for the son and picked one up for meself”. Waves from Prince, O’Neal, Lynn …

Something on “no sub-prime in Ireland” myth - compare what makes a US buyer sub-prime with what goes on in Ireland.

Master of Puppets by Metallica! :laughing:
lyricsdomain.com/13/metallic … ppets.html

Anything from Slayer, Soundtrack to the Apocalypse :smiling_imp:

As far as the VIs are concerned, the market is definitely heading South of Heaven. :wink:

Are you suggesting there will be some “Seasons in the Abyss”? :smiling_imp:

Angel of Debt?

:laughing:

I’ll get my coat…

Clint Mansell, Requiem For A Dream, full orchestral version 8)

:laughing:

…Live Undebt?

(Gets anorak)

Here Ya Go
youtube.com/watch?v=H27FHXAnRtI
:wink: