Where are we? Insights from the price-rent ratio

Ronan Lyons, Economist

11th Nov 2013

Ronan Lyons, Daft's in-house economist, commenting on the latest Daft research on the Irish property market.

Where are we? Insights from the price-rent ratio

For pretty much everyone involved in the property market - including home-owners, would-be first-time buyers, investors and the Government - it is natural to wonder where house prices are now and how that compares to where they "should" be. I’ve put "should" in inverted commas, as there is of course, no definitive answer to this. Nonetheless, there are metrics we can use to assess the housing market and they can shed insight on the current level of prices.

A popular one is the ratio of household incomes to house prices. There is lots of barstool wisdom on this topic - indeed it was reported last week that some TDs wanted to tie mortgages to the historic relationship between house prices and income. While the price/income ratio is useful, it is at best a rule of thumb and can vary from generation to generation, so historic comparisons may not be relevant. For example, compared to incomes, house prices are going to be a lot lower when interest rates are high than when they are low and our current interest rate environment is very different to the one that applied in the late 1970s and early 1980s.

Survey evidence suggests that people are looking to borrow roughly 3.5 to 4 times household income when applying for a mortgage, so in general the price/income ratio seems roughly right but that is about as precise as one can be.

A second metric is the deposit required by the typical first-time buyer. This tells us less about where prices should be but is very informative about the amount of risk that the system (both borrowers and lenders) is taking on. A typical deposit of 20% means the system is well insulated against price downturns. A system with just a 2% or 5% deposit is not, as Ireland found out to its cost in the last decade. Again, hard figures are difficult to come by but Central Bank figures indicate that the deposit required of the typical first-time buyer recently was between 15% and 20%.

Gross yields in Ireland for five proeprty types, 2006-2013

But while those investing in our real estate or in our banks will look at something like the typical deposit as a measure of risk, they also want a measure of return. How does the price of a property compare to its fundamental value?

The graph shows the gross yield - that is, what fraction of the price is the annual rent - for five property types (from 1-bed to 5-bed, urban and rural) from 2006 to 2013, reflecting the latest figures contained in this Daft.ie Rental Report. How should this yield figure be read? In short, for homeowners, it should equal the mortgage interest rate plus a premium to reflect the risk of owning real estate (relative to the risk of renting).

Back in 2006 or 2007, someone like me might have stated that a 4-5% yield would be enough to both pay back the interest and reflect the risk taken. (In fact, I did think this.) These days, people think that realistically long-run interest rates for borrowing are likely to be at least 5% so the yield should probably be that plus whatever risk premium for buying rather than renting.

The significant correction in yields since 2007 - from 3% to 5% for 4-5 beds and from 4% to 8% for 1-3 beds - makes a lot of sense when viewed in this light. What we have seen in the Irish housing market over the last seven years can be understood as first prices correcting to reflect both risk and return being miscalculated and then - as rents fell reflecting unemployment and the decline of the real economy - prices have to fall by more to compensate.

What is interesting is the end of the upward trend in yields for, say, a three-bed home in West Dublin. In that segment, market participants seem to have decided that the balance between rents and prices is about right and the gross yield has fallen from about 7.5% earlier in the year to 7% now. This - together with reasonably healthy findings in relation to income multiples and the typical deposit - is encouraging for those affected by the housing market.

A concern remains, however, about the low yields on family homes, both in the cities and elsewhere. While the average yield for a 3-bed nationwide is now 6.5%, it is 5% for 4-beds and 4.2% for 5-beds. This may be a simple reflection of the fact that, unlike owner-occupiers, investors (who primarily own 1-3 beds) have to worry about tax on their rental income and so require a higher gross yield. Or it may be a sign that the correction is not fully over yet. The economic literature is remarkably silent on this point so unfortunately, only time will tell.

HIGHLIGHTS:

Rental Index
Rental Price Index

Stock and flow of properties
Stock and Flow of Rental Properties


SNAPSHOT:

Snapshot of Rental Prices Nationwide
Snapshot of Rental Prices Nationwide

Discuss This Article

  • Re: The Daft Rental Report Q3 2013

    Posted By: Steve Date: Monday November 11, 2013 @11:24AM

    In the daft.ie National Rental Index the reference 2007 average looks more like 130 than 100. It looks more like you chose 100 = 2010 average in that table?

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Ronan Deignan Date: Friday January 3, 2014 @11:53AM

    In my humble opinion the real metric is the competitiveness of Irish residential property market with our international competitors (e.g. Birmingham, Manchester). This is because the inflated values in the property market in Ireland was the actual catalyst for driving uncompetitiveness right across the economy in wages , professional fees and wider government spending. At present we are barely competitive with regard to property prices with comparable European cities. If Irish prices explode again due to a dysfunctional market where there is a constant shortage of supply over demand then we are back on a slippery slope. The Irish property market is dysfunctional (works slowing and inefficiently) and uncompetitive in my view from land prices, to development costs and building costs and unless these are reformed from top to bottom to ensure we have a system to supply quality housing to match demand and keep prices competitive then we will once again be building our economy on sand!

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  • Re: The Daft Rental Report Q3 2013

    Posted By: David Date: Monday November 11, 2013 @01:57PM

    As the ECB rate was cut to a record low of 0.25% surely this in response to the stalling of the european economy's recovery which is relevant as regards price/income ratio's as the system is basically on life support.

    When the european economy starts to perform we see rises in interest rates to traditional averages which will mean that price/income ratios will be the cornerstone of housing prices and very relevant, maybe not at this point in time but seeing as the average mortgage is 30-35 years is it not very short sighted to say it is basically a rule of thumb and can vary from generation to genertaion?

    What will happen to those who buy now with higher priced housing due to low interst rates? and have to deal with a much higher interest rate in a certain point in time of their mortgage?

    I for one dont expect the ECB's rate to be 0.25% in 5-10 years

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Selina Date: Tuesday November 12, 2013 @10:29AM

    What we know now is that supply side of housing has been destroyed by the government lack of policy post developer crash(2007) . No new stock will be coming from those developers that have been forced out of ireland to seek new oppertunites aboard.

    I know I have said this before , but it is work restating:

    Through gritty realism rental prices explores the hidden needs that drive often baffling human behavior. Many rental judgements are open ended but we draw fundamental truths from from the lack of supply , shining a searchlight into the dark corners our lack of understanding . The builder /developers are gone, housing need remains in Dublin for families who want homes. Noonan talks about 30,000 houses that need to be build each year , relistically that is not going to happen in the next 5 years. Rental prices going to rise by 30% - 35% in Dublin in the next 3 years .. I am talking year on year cummulative effect

    If you want to rent be prepared to be paying more year after year as we go forward in the haze of confusion that now is the Dublin housing throught lack of supply

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Anonymous Poster Date: Wednesday November 13, 2013 @12:18PM

    There are many landlords in the same position as both myself and Sean.



    Selena - The rents need to increase to sustain paying our own home mortgages plus substitute mortgage payments on the rental property PLUS yearly maintenance charges PLUS property taxes, PRTB charges & these do not include the internal maintenance, repairs and upkeep - ALL of these charges are paid by the landlord and not passed onto tenants.

    Agreed - properties should be presented as clean and safe with all the necessary conditions now the law for landlords.

    If the supply of rental properties are to be maintained and not further deplete & people who cannot get a mortgage will have nowhere to live then rents must increase - simple as that.


    Landlord of single property - an apartment in Dublin and living in Dublin.






    'making the rich, richer and keeping the hard working ordinary people in their place'

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  • Re: The Daft Rental Report Q3 2013

    Posted By: marcus Date: Tuesday November 12, 2013 @11:22AM

    Selina

    I have to say,I agree that rental prices in Dublin are crazy. Im looking for a new place as my landlord has sold the house I live in, I don't know how anyone can afford most of the rents out their and have any quality of life. You cannot save to buy, property for sale is hugely over priced and quite frankly some of the places I have seen for rent are appalling. I recently viewed an apartment that the furniture was falling apart, as in the couch you fell into, the beds and headboard was obviously very old, with holes in them and looked in great need of a clean, the carpet dirty with stains all over it, and the whole apartment could do with a good clean and paint. This apartment was being let by an estate agent contained two bedrooms and cost €1,300. per month. How they can justify this or even stand there trying to rent the property in the state is was for such a price I don't know. But I'm sure someone who had no choice, came along and took it. It's time something was done to relate the rental market, with guidelines and penalties for landlord who don't follow them. Just because you are renting does not mean that you are a second class citizen and that you should take it and be grateful! Our society is certainly making the rich, richer and keeping the hard working ordinary people in their place,I mean do we not deserve a clean place to live, where you can swing a cat and possibly can have more than three people over at the same time. And while we are on the subject maybe we could also get a new bed that doesn't smell or have holes in the headboard. I know we deserve that at least!

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Anonymous Poster Date: Tuesday November 19, 2013 @06:00PM

    Rents have to go up because landlords/homeowners cannot cary the huge outlay ) as follows

    PROPERTY TAX (NEW)
    WATER CHARGES (NEW)
    SERVICE CHARGES
    COMMUCICATION CHARGE (NEW)
    REFUSE CHARGE
    RENTAL INSURANCE
    PRTB FEES (NEW)
    ESTATE AGENTS LETTING FEES
    MAINTAINCE COSTS
    41 PER CENT TAX ON INCOME
    7 PERCENT USC ON INCOME (NEW)
    4 PERCENT PRI ON INCOME (NEW)
    BER CERT FEE (NEW)

    RENTS WILL HAVE TO INCREASE BY 33 PERCENT BY END OF 2014.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: jake Date: Wednesday November 20, 2013 @01:55PM

    At last we have the facts together with Second home tax and Private Residential
    Tenancies Board Fees.

    From a Tax of 41 % in20012 to today estimated 55% and in 2014 projected 62%?

    What about the Yield now? Is this why stocks are down by half?

    Best regards

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  • Re: The Daft Rental Report Q3 2013

    Posted By: David Date: Tuesday November 12, 2013 @11:51AM

    The current market is in a really sad state of affairs with manipulation of everything in the housing market, nothing is been done to aid demand instead prices are rising with unsustainable low interest rates that will add more pain in the future.
    Arrears are not being delt with and the explosion of high prices in the rental sector is an effect of all this.

    True housing and rental prices will not be seen in this country unless correct procedures are taken by the government for the people and not the banks to have a balanced robust stable fair market.

    Will that day ever come?

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Anonymous Poster Date: Tuesday November 12, 2013 @12:15PM

    The illogical bar stool logic that Ronan refers to is cretainly true in that traditional averages which will never mean that price/income ratios will be the cornerstone of housing prices.

    Its like we think that house prices can be fixed around a affordability model ? Input cost are more fundamental to house price cycles : Cost of Land + Cost of Constructio + profit for Risk = Price to Market. At the moment in Ireland the Price to Market is too low , therefore no developers are building until prices increase. As more and more people chase fewer and fewer properties prices of rent and purchase will only increase . THAT is the FACTS folks !

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  • Re: The Daft Rental Report Q3 2013

    Posted By: David Date: Tuesday November 12, 2013 @12:30PM

    It is the facts but doesnt make it right or sustainable and that is my point

    David

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Des Date: Monday November 18, 2013 @02:17PM

    I would take issue with your calculation of Price to market. While it should work like you described, it doesn't. Prices of everything are governed by the law of supply and demand. When demand is low the value of sites falls, and this is one of the bigger input costs. In a recession (again low demand) labour costs fall and materials become more competitively priced. The fundamental driver for these cost reductions is lower demand.
    The current rising prices in South Dublin are caused by an increased demand from cash buyers.But these are finite. I am waiting for this temporary bubble to burst and prices to return to their downward trend.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Bob Date: Tuesday November 12, 2013 @02:13PM

    If what you say is true Anoymous Poster, then are we not being rounded up into what will ultimately become another bubble burst?

    If rent and house prices continue to increase at the levels they currently are, it will only take one of a number of potential factors to recrash the whole system.

    Intervention is required now!

    If property prices and rent prices don't level to a sustainable level, we will find ourselves living in the stone age again. Wake up government, do something about it!!

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  • Re: The Daft Rental Report Q3 2013

    Posted By: alex Date: Tuesday November 12, 2013 @03:51PM

    will the house prices go up next year?

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  • Re: The Daft Rental Report Q3 2013

    Posted By: alex Date: Tuesday November 12, 2013 @04:44PM

    i want to buy a house but the bank give me only 130k and is hard to find something at this price.i want to know about prices,because if they go up i will try to buy at this price,if not i will wait until sprig and hope bank will give me more.thanks!

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Tony Date: Tuesday November 12, 2013 @05:51PM

    Alex,

    Prices in a normal market are determined by the amounts banks will and can lend. Currently regulation is in full swing and the amounts being lent are way below what they were in the boom era as regulation didnt exist then and people were given way more than they should have been increasing prices rapidly fueling the building boom and has left us with a legacy of arrears and negative equity.

    The current situation in Dublin see's unsustainable price rises due to the fact that alot of what was build in the boom era was made for profit with no forward thinking and now we have amassed alot of properties which are unsuitable for families and a shortgage of proper housing.

    This will fuel the rising rental market as demand is increasing and may lead to another property crash if this trend continues as credit is not available and people will overstretch themselves to buy a property before they are priced out the market as they cannot afford rising rents.

    Everything depends on what action is taken by the government intervention is needed and a serious rethink of property in Dublin

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Jim Date: Tuesday November 12, 2013 @05:11PM

    Bob,

    I understand your real concerns.

    But theres is plenty of affordable property in places like Naas and Newbridge , OK you have to do a commute to Dublin , but still can get a 3 bed semi for €150K to €200K which in any part of Euro land in not bad value . Dublin is a differant animal completely , there is no doubt that demand continues as more and more service jobs are being provided in the capital. Both rentals and purchase prices look certain to rise , many that are renters now see the value in buying are renting long term makes little sence.

    No sure if builders will get the support from banks for the development of new homes ..........seems unlikely in the next 5 years ........ the government could do a help to buy scheme as they are doing in the UK and that makes sence to me.

    Regards to all , Jim

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Alex Date: Tuesday November 12, 2013 @06:29PM

    Thanks for the answer.i m looking for a house in finglas area and i prefer a new one with 2+bed.thre are not many at this price.what you will advice me to do?thanks!!!

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Sean Date: Tuesday November 12, 2013 @09:42PM

    I have a 2-bed apartment that I bought in 2007 at the top of the market. Fortunately I have managed to continue renting it but have had to make a series of reductions to keep a tenant in situ. The situation now is that I am subsidising the mortgage and in addition paying PRTB, property tax, maintenance, service charge, tax, etc, etc. I am not in arrears on the mortgage but it is not sustainable for me to do this in the medium to long term. Any rise in rental income is to be welcomed from my standpoint. Not that I make any profit - it all goes straight to the bank.

    I am sure there are many other property investors in the same boat or in mortgage arrears or maybe they have cut their losses and exited the market. Could this explain why the rental stock has fallen? You don't have to have a degree in economics to see that a decrease in rental stock will lead to a rise in prices. It is the law of supply and demand.

    To the poster who complained that she was shown an apartment for rent in sub-standard condition I can only say that my apartment is kept in show-house condition both out of respect for my tenants but also because the market demands it.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Matt Date: Tuesday November 12, 2013 @09:45PM

    If only the market were left to its own devices, it would eventually achieve something close to equilibrium. The elephant in the room is.....NAMA, that clandestine, self-serving monstrosity; more secretive than the KGB of old.

    It (alone) holds the key to plugging the gap (read chasm) where the supply of new homes by a bankrupt, demoralised property development / construction sector used to be.

    Don't (anyone) hold your breath if you believe that anything meaningful will be forthcoming from the National Asset Management Agency any time soon.

    They are still gorging on the remains of the low hanging fruit (UK assets, and some commercial loan portfolios here and elsewhere.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Bob Date: Wednesday November 13, 2013 @08:45AM

    Matt,

    I agree that NAMA is not helping matters. By holding properties from resale, they are narrowing the supply, thereby increasing demand which is driving prices up.

    This however is not sustainable in the long term, even for NAMA. In my opinion as the lacuna on mortgage repossessions fixes itself (which is happening), banks will repossess and either sell or rent these repossessed properties. At this point, this will force NAMAs hand as they will need to stay in the game or face bigger losses for themselves.

    The reality is this: people want to buy, others want to rent, some want to sell and others want to rent their properties out.

    Buyers can only buy if the sale price matches what they can borrow and afford to pay back.

    Sellers will only sell when they can make some return on their sale, or even break even at this stage.

    Renters can only rent if the rent is sustainable on their income and landlords will only accept tenants if they see some return for renting out their property.

    A major problem is that for the majority of people who bought just before the property market bust and stuck. They can't sell because of negative equity.

    If they cant sell, then buyers don't have anything to buy. I fell victim to this myself. I was ready to buy, sale agreed, my contract ready to sign but the owner could not get the property released as his mortgage was too high on it and the writedown was too big for him to cover or the bank to allow to happen.

    The government bailout did not help the ordinary Joe, it crusified him.

    We are not at the end of this property crisis, not by a long way. No disrespect to anyone who thinks otherwise, but the facts are the facts, until Mr X can sell without leaving himself with residual debt and until Mr Y can buy at a sustainable price, we will all be walking on a tightrope if we want to play in the property game.

    Prove what I say is wrong

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Anonymous Poster Date: Wednesday November 13, 2013 @09:42AM

    I have a question about this report.

    I don't want to sound snotty, but what is the point of it?

    The methodology section seems to imply that the analysis is based on advertised asking prices on Daft.ie. Whilst this is obviously correlated with the true prices being paid, there is no reason to accept that they are the true prices.

    The PRTB Rental Index is essentially this report (you'd easily confuse the two if just scanned them) but is based on actual prices being paid rather than asking prices.

    Indeed an admittedly cursory comparison of the data from Daft to that from the PRTB seems to confirm that Daft asking prices over-estimate the willingness to pay.

    So, if there is a comparable alternative based off meaningful data, does that mean that this is just publicity stunt (and a very effective one given the blanket coverage it earns every quarter), or a vanity project maybe? If so, why should we pay attention to it?

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Kevin Date: Wednesday November 13, 2013 @03:15PM

    "Anonymous Poster"


    No data is absolute , it is only indicative of a trend. In the case of house prices , all government data and analysis in Ireland are saying the same thing : Prices are rising in Dublin and stable or falling in the rest of the country. Daft house prices are based on the asking price , generally the guidance from estate agents (in the current slow market) in to set the asking price below the market value to create a lot of buyer interest and thus properties generally now sell above the asking price.

    Will daft data has its faults , it does give guidance to early trends in the market. Yes the get great free media attention for this report … so what good for them. As a nation we need to grow up and stop pointing the figure.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Anonymous Poster Date: Wednesday November 13, 2013 @03:56PM

    My question was what is the point. What does the Daft report bring that the PRTB report doesn't.

    You've made one good point in that the Daft reports "give guidance to early trends". It seems fair to say that the Daft trends match the real underlying one, and it is correct to say that the actual [PRTB] data has a publishing delay of 3-6 months. Fair enough. Perhaps that's sufficient justification. Thanks.

    I would pick you up on the statement that "no data is absolute". The PRTB data is absolute unless we assume crooked landlords.

    And I would qualify your point that "prices are rising in Dublin". They are rising in some parts of Dublin (and Dublin taken as a whole), but in many areas they are stable or falling.

    As a renter it's a big problem that the headline is all that gets reported. Few landlords look into the data when they are bombarded with that headline for 24 hours. Sadly few tenants know how and where to look into the data when those landlords subsequently demand increases based on the media blitz that comes with this report.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Bob Ballox Date: Wednesday November 13, 2013 @08:21PM

    ''Daft house prices are based on the asking price , generally the guidance from estate agents (in the current slow market) in to set the asking price below the market value to create a lot of buyer interest and thus properties generally now sell above the asking price.''

    Yes of course they do...

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Brendan Date: Thursday November 14, 2013 @09:56AM

    Kevin is totally correct , the only role of an estate agent is to gain public interest in a property .... the seller is usually the one the has a specific opinion on the price. When a property has been on the market for 3 or 4 months and two or three interest parties emerge then people up bid each other and a final highest bid is reached , at that stage the agent if the seller is happy will be keen to get is fee which is a fixed percentage

    Bob and others seem to think that estate agency is like black magic , the TRUTH is that the buyers decide the price ... in Dublin its recently changed from 2011 when it was a buyers market , now sellers are getting the price they want or expect easily.

    Will prices go up or down .......demand is key .. banks will always want part of the action .. that is how the make profit ! Now days BOI open at 8am to meet new mortgage applicants in Dublin ...even in the boom that did not happen... the property storm has passed and a early spring is here.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Mike Date: Thursday November 14, 2013 @10:41AM

    It's good that rents are rising rather than falling. It means that investors may actually start buying apartments again which in turn will put more properties on the rental market making prices stabilise. What a lot of people don't realise is that wishing rents will fall and house prices will fall further will have a negative impact on the whole economy. No one wins with deflation.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Bob Ballox Date: Thursday November 14, 2013 @10:56AM

    ''..., the only role of an estate agent is to gain public interest in a property ...''


    In that case there is no longer need for them as the world wide web gains far more interest for a property than an EA ever could.

    EA are never able to answer the questions posed with a straight answer so there is not even credibility in saying that they help push a sale through by guiding the prospective buyer around the house.

    If anything they serve to reduce interest. As anyone who has ever tried to get the facts out of an EA will know. A buyer is far more likely to get a straighter answer if in contact directly with the seller. In a difficult market its hard enough as it is for the seller without an EA retaining information because he is not sure if the seller would have revealed it or not.

    As for understating the asking price, well that's one way of selling. Put up a price so low you gain interest. You also waste a lot of time that way with clients who aren't thinking of location etc and only thinking about price.


    ''Now days BOI open at 8am to meet new mortgage applicants in Dublin''

    This is not actually a good sign. the banks are technically bankrupt. They need the loan applications of wealthier people who wouldn't otherwise take the day off work to go in and see them, or the weekend either. ITs a bit like getting the begging bowl out.

    I have news for you about your ''early spring''. There is deflationary pressure throughout Europe. If deflation takes hold in Ireland price pressure is going to blow out this bubble very quickly. Talk is of negative interest rates for depositors which is going to produce the same affect as a bank haircut. If wages start to decline (and they are higher in Ireland than most european countries) I really don't see the average joe rushing to take out a mortgage in 2 years tiime .

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  • Re: The Daft Rental Report Q3 2013

    Posted By: hugh W Date: Thursday November 14, 2013 @02:56PM

    Bob
    The reality is that the gross yield on rental properties has to be over 10% given the marginal tax rate imposed on rental income, which will now be subject to PRSI in 2013, so in effect circa 55% of rent will be handed over to the taxman, in addition there is the €200 NPPR charge this year, plus anupcoming property tax and water charges next year. So say (for arguments sake) you get a gross yield of 10%, the net yield we could argue would be circa 4.5% (assuming deprecation tax benefit taxes out the different property taxes being imposed),- when this return is compared against the current marginal borrowing cost of investment mortgage / property of circa 5%, the investor in new property is still losing money, as the net income would not be sufficent to pay a principal and interest mortgage. So this leaves the current sales market open to cash rich buyers, who want a return in excess of (now rapidly) declining deposit rates on offer from banks here. Whether this is a wise choice for this cash is opn to debate, but given a 10 - 15 year timeline, it probably is. Notwithstanding all this, facts are that rents are rising, I've seen rental supply collapse in areas close to Dublin city centre, in fact it is now close to levels seen in 2007, when rents were circa 33% higher than now and I would expect rents to increase by this amount over the next 36-48 months on the back of an improving economy. Although the London market is an entirely diffent animal, rents there have risen over 40% in the last three years and this is midst a so called recession - the same could happen in Dublin, given limited supply coming on stream and a growing service sector

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Johnny Date: Thursday November 14, 2013 @04:14PM

    Why is NAMA not being forced to release the supply of housing that they have sitting there? Why is the government not doing anything to alleviate the pressure building in the Dublin property market?

    If people are spending most of their income on rents and mortgages will this not have an effect on the economy as no one will have disposable income to spend in the economy.

    The whole thing is one big joke, smoke screens and mirrors are being used to make Ireland look good to others, nothing is being done in all sectors for the average man in the street yet we pay for everything.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Gerry O'N Date: Friday November 15, 2013 @10:09AM

    House Prices Scyles are surprisingly consistent: Over the past 30+ years, the period between a recovery beginning and a bubble popping has run approximately 6 years, which is not really much time to go from a negative market outlook to "irrational exuberance." We are currently something less than half a year into the current recovery. Periods of market recession/doldrums following the popping of a bubble have typically lasted about 4 to 5 years. Generally speaking, within about 2 years of a new recovery commencing, previous peak values (i.e. those at the height of the previous bubble) are re-attained -- among other reasons, there is the recapture of inflation during the doldrums years. In this current recovery, those homes hit hardest by the bank crisis -- typically housing at the lowest end of the price scale in the less affluent neighborhoods, which experienced by far the biggest bubble and biggest crash -- may take significantly longer to re-attain peak values, but higher priced homes are already doing so.

    These timelines of recession, recovery, bubble and market adjustment (or crash) can be discerned in more detail. These recurring time periods does necessarily reflect some natural law in housing market cycles, or that they can be relied upon to predict the future but house prices tend to behave in cycles and over a long period tend to double over every 20 years.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Bob Ballox Date: Friday November 15, 2013 @10:19AM

    Which bubbles are you talking about? And how many bubbles has Ireland had in the past? Thanks

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Eamon Date: Friday November 15, 2013 @11:25AM

    As recently as the mid-1970s, the average house price in the Ireland was just over €10,000. A steady increase followed over the next decade, and by 1986 that figure was in the region of €40,000. However, the economic upturn of the late 1980s saw that figure rise to around €70,000 in 1989, dropping slightly in the early 1990s due to the recession.

    However, between 1998 and 2007, house prices in the Ireland rose dramatically, generating large increases in home equity for many homeowners but also making housing unaffordable for other people. Most developed countries experienced sharp increases in house prices in the early years of the new millennium. The Ireland situation was different in two regards. First, the house price boom started earlier and saw more sustained increases. Second, the regional pattern was fairly uniform between 2002 and 2007, house prices in the Ireland rose by 90%, faster than any Eurozone nation except Spain.

    The average (mix-adjusted) house price in the first quarter of 1998 was €81,722, but at the peak of the market in the third quarter of 2007 the average price was €219,256 – over two and a half times higher or a total increase of 168%. Between the first quarter of 2001 and the fourth quarter of 2006 prices increased 60%, again when adjusted for inflation. House prices at the end of 2006 were 35% higher than they would have been if the long-term trend rate of growth - 2.6% per annum in real terms since 1976 - had been maintained. In 2008, house prices started to fall but they have stabilised as of August 20012. This may reflect the housing market's normal seasonality or it may indicate a genuine recovery.

    The increase in the house prices has made the housing market increasingly difficult to enter. The ratio of lower-quartile house prices to lower-quartile earnings, a measure of affordability used in the from 4 in 2000 to 5.2 in 2003 and 7.1 in 2006. At a regional level, the problem now of unaffordable housing is confined to Dublin and the the ratio of house prices to first-time buyers' incomes remained higher than the historical average ,first time buyers now wait longer to enter the market with an average age of 34 when there incomes have increased. Perhaps lack of supply is driving more occupants per property making those properties more affordable in Dublin. The input cost of property construction continues to rise with land prices, materials and labour (wages) increasing at 135 % over the last 10 years, with now the cost of risk being priced in at 33% because of cost of finance

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Bob Date: Friday November 15, 2013 @12:12PM

    If property prices are allowed to increase at the levels they did before the recession, we will find ourselves in an even bigger problem than the first recession.

    Like with all societies, there are the rich and the poor. The rich can buy using cash and snap up good properties when prices are lower. Poorer secitons of society are not afforded this option. They rely on mortgages from banks to purchase property.

    While banks are giving out mortgages, they are "lower risk" mortgages than before. A married couple with two incomes and no secondary debts won't have a problem borrowering a modest mortgage, but are they going to be given half a mill like before? The answer is, not likely.

    It is better for banks to give out 10 mortgages of 100K a piece than 2 at 500K each. Firstly, from an advertising perspective, they have given out 5 times more mortgages this way. Secondly, from a risk perspective, the changes of default are lower and should a mortgage default, the chances of a loss on investment is lower as (A) the property mortgaged is more likely to be in positive equity and (B) if there was going to be a loss. it would be significantly lower on 100K than on 500K.

    A few posters have talked about the economy. Market correction helps the economy. You want greater volumes of property sales but at sustainable prices.

    If rent or mortgage repayments rise higher than about a third of a persons income, that borrower will have less money for other secondary expenditures. An economy won't thrive on buying bread and milk and paying the mortgage. An economy will thrive when people can go for a few pints, go for dinner, change the car, pay for a taxi, buy christmas presents etc.

    We can't go back to the way things were, never ending credit can't and won't come back, but the time has come to realise that enough is enough. Correcting the property market in a step (a pretty important one too) to fixing the economy.

    Allow property prices or rents to increase to unsustainable levels again and its time to start putting the cash under the mattress again because we will be stepping right back into 2008 without having learnt a thing!!

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Vincent Date: Friday November 15, 2013 @02:31PM

    Bob.

    Good post. Whilst I do not believe in price controls of any kind , Ireland needs to learn lessons on property prices and how a credit lead bubble occurs. My top lessons learnt would be :

    A. 20% deposites required and a record of saving for a period of two years
    B. A tax on holding development lands at 5% per annum of the original purchase price
    C. More strategic high density development of larger family apartments of 3 and 4 bed with at least 250 sq ft for every occupant over 2 people i.e, a two bed would be for one couple and one child and would be 750sq ft.
    D.higher fuel tax on cars to prevent commutes from places like navan and newbridge to Dublin , if you work in Dublin live in Dublin incentives.
    E. Make rental costs tax deductable - this will stop people chasing the purchase of new house and will increase the rental supply.
    F. Second homes need to be taxed at annual rate to stop vacant possession.
    G. Protected Period House owners should be given interest free loans to develope listed property in order that more of these fine house becomes fit for purpose.
    H. If a Bank fails , the goverment should not do a bail out , let commercial risk fall where it should by degree
    Landlords should be regulated for quality and services, capital gains should be stopped
    Tax on developments should be stopped for urban area's

    .
    Just some idea's .... ireland needs a housing policy not just a house price policy.
    There has to be a business case for building new homes.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Bob Ballox Date: Friday November 15, 2013 @08:56PM

    So this is the first bubble ? ok thanks

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Bob Ballox Date: Saturday November 16, 2013 @11:47AM

    Hard to know who to believe. I certainly wouldn't take at face value the opinions of those who thought or rather spoke in terms of 'soft landings' after the 'celtic tiger'. Between 1971 and 1995 average house prices in ireland rose by 10% per year on average. In 1997 the average prices went up 22% and in 1998 went up by 30% .There were people on here in 2007 saying that the property market wasn't going to crash !

    If you look at Ireland in the past especially the boom and bust in the 1970s (not a credit bubble) it takes between 5-8 years from the start of the downturn until house prices increase again.

    Still some way to go. Artificial constriction led recoveries in Dublinwill prolong the misery.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Jim Date: Monday November 18, 2013 @11:42AM

    Bob,

    Some buyers will clearly wait to see what happens and will pay increasing monthly rents to landlords in the interim, often for poor quality accommodation, since builders have responded to market changes by constructing no new homes.

    However, as the pent-up demand for housing increases, buyers will realise, in considerable numbers, that they are only delaying the inevitable and will look to purchase their own homes, especially when the difference between mortgage payments and rents narrows, as is now occurring.

    At that stage (late 2014), prices will jump as a result of the time taken for builders to respond to the market and buyers, fearing that prices will escalate as before, will again make higher offers for the limited housing available, thus further driving the market upwards.

    As current market conditions are purely temporary, those awaiting further price reductions will be disappointed and whilst the situation would be different if housing supply had remained constant or if immigration had reduced, neither occurred, on which basis, the supply and demand equation still endorses the likelihood of higher prices.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Selina Date: Friday November 22, 2013 @08:46AM

    As the early sunshine of the property recovery sparkles across Dublin city , many are dazed by the new reality and unable to see clearly. As with shock of the banking crises that rolled out into a property crash many are in denial but through gritty realism rental prices explores the hidden needs that drive often baffling human behaviour. Many rental judgements are open ended but we draw fundamental truths from the lack of supply , shining a searchlight into the dark corners our lack of understanding . The builder /developers are gone, housing need remains in Dublin for families who want homes. Noonan talks about 30,000 houses that need to be build each year , realistically that is not going to happen in the next 5 years. Rental prices going to rise by 30% - 35% in Dublin in the next 3 years .. I am talking year on year cumulative effect

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Frank Date: Monday November 18, 2013 @12:53PM

    This pains me, this article does. Whether the analysis is biased or not, it manages to hint at some of the underlying problems that I as a renter face: the impossibility of finding housing that is both affordable and liveable.
    The rat race is utterly ridiculous. It goes well beyond finance: I've stood in lines of 20 people to see one dark, musty little bedroom for 600 a month. Also, I find the indirectness of the people letting the rooms, ("sure, yeah, grand, we'll let you know by the end of the week" - what comes at the end of the week? NOTHING, not even when you ask them to confirm a 'no' answer) and the flip attitude about leases absolutely insane.
    Confession: I'm not Irish. I'm an American, a hard-working, clean, considerate, quiet person to live with. I also happen to be a graduate student. POST-GRADUATE. Adult. Not smelly, loud, or party-throwing (even though that in itself is an unfair stereotype). I do not understand the inability to make the distinction, and the discrimination (because that's exactly what it is - discrimination)against 'students' like myself is blatant and unbecoming to what is supposed to be a ciilized society. I need a place to live, too, and in fact I'm choosing to live a meager lifestyle right now in the hope that one day I might be able to contribute a bit more to society than the run-of-the-mill "young professional" landlords seem to prefer. And it is getting hard to work with loud constructuion outside my window all day and undergraduate roomates throwing crazy parties at night. But this the situation to which I am relegated. I am actively seeking a better living situation, but it is a much bigger pain than it should be.
    I lived in New York City for five years just before coming to Dublin this past fall, and even there it is easier to find half-decent, vaguely afffordable housing than it is here. This is DUBLIN, people. Not London, not Paris, not New York: DUBLIN. I don't get it.
    I came here with high hopes. I wanted so much to stay here initially, to build a life in what I thought was a better society than the one I left behind. It is telling, to me, that only one post was concerned with the quality-of-life that is sacrificed in this housing market. I'd hoped this place to be better than my own greedy country, and I am bitterly disappointed to learn that it is not; in fact in some ways, it is worse.
    To quote an artist friend of mine: "Rent kills culture." Watch that yours doesn't die under this pressure, Dublin - it is dangerously close

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Helen Larkin Date: Friday November 22, 2013 @06:35AM

    Hi,
    I feel your pain.I have recently bought my grandmother's house in Enniscorthy and I live in Wales. ihave the opposite problem to most of you people who are posting. I find that the cost to me to keep the property would be too great and renting appears a mind field.

    I find that instead of trying to keep the family home for the family I am forced to try and sell the property. If anyone would like a property in the most beautiful picturesque place that I have ever seen then please get in touch.

    It only takes just over an hour and a half to get into Dublin up the N11. Why not ???

    It is a mystery to me why the properties with land outside of Dublin are not advertised in Wales. The average price for one acre of field without planning permission in a rural location is 10,000.00 pounds. The Welsh farmers are desperate for land. People such as my father would like to come back and live in Ireland, but it is not widely known about the low prices rurally in Ireland and the excellent networks that exist now.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Jim Date: Wednesday November 20, 2013 @12:33PM

    As a landlord can assure you rents are rising - just let an apartment in Kilmainham and had 7 offers - and probably about 30 calls - tenants all complaing too many people going for not enough apartments. My rent is 11% higher than what I was charging 6 months ago.

    Rents in Dublin are still quite cheap comapred to UK cities and also the price of property in Dublin

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Dave Date: Wednesday November 20, 2013 @03:48PM

    Rents in Dublin will maintain upward pressure for the next 2 years at least.New stock

    will be slow to come on stream ,and when it does it will be more expensive than

    current housing stock.Sites are increasing in value ,this combined with the cost of

    raw materials etc will maintain high cost of housing.This only applies to Dublin,in

    areas with schools/transport and little or no space to build(SandymountBooterstown

    Blackrock)all beside the sea will command premium rates.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: MARK Date: Thursday November 21, 2013 @10:49PM

    We are all debt slaves, there is more debt owed than money in circulation in the entire world.

    The government of America does not print its own money it borrows the money from the federal reserve (which is privately owned) at interest., which leads to the paradox that no matter how hard you work or save you will always be in debt.

    We argue over prices going up and down but fail to see that all of this was designed. Flood the markets with cheap cash that can be created out of thin air and take the freedoms of people away as after boom you have bust, people and countries in perpetual debt yet banks and bondholders get bailed out to the sums of billions and the wealth of a few grows while indebted nations assets get sold off and stripped at knock down prices leading to the few having even more power and control over many

    Look at the big picture it does not matter how much rents/house prices are or are gonna be untill the system of capitalism is fixed we will always be in debt, always paying unfair taxes that dont benefit us, always be in danger of boom to bust cycles, always be living in an unfair system that is not there to serve the many but for the servitude of the few.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Gerry O'N Date: Monday November 25, 2013 @08:59AM

    have three residential houses which I rent out in Limerick for the past number of years. To be honest, I bought each of pre 2004 so did not pay inflated prices. The rents charged reflect this fact so the tenants benefit from a fair rent and I equally benefit from always having the properties tenanted.

    The key thing in my opinion is to view the residential letting business as a long term one i.e. 10+ years minimum. I can't see how anyone can make a return on their investment in the short term. Current the landlord is faced with a vast array of costs in order to simply maintain a house for rent in Ireland. There are PTRB costs, Income Tax, a crippling rate of stamp duty for investors that must be paid up front and for which there is no tax relief, the BES rating costs, annual servicing and certification costs for all gas applicances, the new €200 annual levy which may go to €600 per year, annual accountancy costs, advertising and management costs. Wear and tear and maintenance costs etc. etc.

    Each landlord has a responsibility to their tenants to provide a safe and clean environment. The tenant is paying for this, so it is their right. Simple as that.

    I have sympathy for those novice landlords who bought in at inflated prices and really didn't understand how much work is involved to run a property as a business. However, on the upside, the challenging economic environment will result in a higher standard of property for tenants and equally (and hopefully) a higher respect by tenants for such a property.

    One final point I would like to offer is there are lots of landlords who charge a fair rent (in relation to the costs resulting from the various taxes and levies etc), but quite often the tenant who may be renewing each year over a number of years without any increase in rent does need a wakeup call to understand and appreciate good value in relation to finding some other similar accomodation for similar rent

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Anonymous Poster Date: Tuesday November 26, 2013 @11:23AM

    Correct me if im wrong but the current situation for rents risings and house prices rising is solely down to the single fact that there is a shortgage of properties in the Dublin area?

    How can this be seen as the market stabilising?

    Therefore its not that it is stabilising it is not Functioning.

    If there was a supply of properties in the Dublin area to meet the demand how much would we be paying in rents and mortgages? and would these prices not be the REAL value of rents and properties?

    I think the word STABILISED can only be used when supply meets demand and prices find their true value, not on the fact that there is a shortgage. The true value of proerties and rents is still not known.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: terry Date: Thursday November 28, 2013 @09:49AM

    Irish Times today :


    An acute shortage of family homes for sale in prized areas of Dublin is one of the reasons why prices have leapt in the capital by 15pc over the last year.

    Queues of potential viewers are now attending open viewings -- a phenomenon not seen since the heady days of the property boom.

    Up to 40pc of all sales of houses in the Dublin area are now executor sales -- houses sold after the owner has died.

    One house at Home Farm Road in Glasnevin attracted 111 potential buyers this summer. And a four-bedroom house at Gracepark Road in Drumcondra, which had 72 separate viewings was sold for €540,000 -- well above the guide price of €525,000.

    Another property, a mid-terrace three-bedroom home at 12 Walsh Road, which 82 parties viewed, was sold for €390,000.

    Again that was substantially over the best pre-sale estimate of €359,000.

    Two "golden triangles" north and south of the Liffey are particularly hot, though other areas remain sluggish.

    On the northside, the area stretching from Glasnevin to Drumcondra and down to Marino and Clontarf is buoyant.

    South of the river, Dublin 4 including Sandymount, Ballsbridge, Donnybrook, Ringsend and Irishtown; and Dublin 6, including Milltown, Ranelagh, Rathmines and Rathgar; and stretching west to Harold's Cross, Templeogue, and Terenure, are in high demand.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Anonymous Poster Date: Thursday November 28, 2013 @10:31AM

    I think this is dangerous territory 15% is very high within a year and although Ronan states that it is not a boom as booms are created by a supply of cheap credit I think that if it was in the banks best interest to have a lowering of prices this would not be happening as minuplation and government intervention would be applied extensively to keep the depressing of prices (or prices finding their true value)

    It is in the banks interest to have rising prices as they will recoup their losses on the large amount of bad loads they have on unperforming mortgages.

    I dont think the market is stabilising and I dont think any of this will benefit anyone in the long run, but hey once the banks are happy what do we matter?!

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Kevin Date: Thursday November 28, 2013 @01:42PM

    It's inevitable that we are having a correction to the house prices that have incessantly decreased for the past 6 years - in the long term - we can afford these increased prices.
    If you look at the jobs pages- for the jobs that are well paid- it is difficult to reconcile the rates of pay available to the cost of houses and apartments. Houses now seem a lot more affordable.
    In the 6 years we've had sections of the economy that have been doing really well on the back of the recession - many who have performance-related bonuses – rental estate agents, financial services for insolvencies. and people have who signed into 30 year mortgage tracker contracts can move homes on the strength of these. Fact is, and always was, that this is exceptional growth that was always going to be long term and would correct any fall in house prices.
    Many others supplemented their income in buy-to-let, flipping properties, property development, releasing equity, etc. - revenue streams that are now also returning to Irish market.
    The government have also allowed expansion of the private sector over this period and we now have very large IT led current private investments and as these are jobs-for-life and have limited scope for cutting, decreases in taxes will be required to reward these firms We have been used to tax rises throughout the recession and again people have assumed this would go on forever. It won't, and again disposable income will be rise.
    There might well be excessive on-going demand in the Dublin for housing, but at the prices we have currently available it makes prefect logic to buy now.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Anonymous Poster Date: Friday November 29, 2013 @12:02PM

    Kevin,

    Reading your post it seems that you view the recession as presenting oportunities rather than anything else and that now we as an economy are in "exceptional growth" with jobs for life with no cut backs or job security issues.

    IF all of this was true housing and rent price hikes would be justified.
    Taxes are currently higher and will remain so untill we pay of our national debts which are colossal.

    Credit is not being supplied by the banks and that will remain the case, tracker mortgaegs will jump as the ECB rate will eventually go back to the norm when the larger economies in Europe start to perform(not Ireland).

    The only reason prices are rising is not because we have come out of this recession strong and are growing economically it is down to the fact that during the boom proper housing was not built, instead developers built masses of unsuitable properties across the country as their only interest was to maximise profit.

    Now we are facing a massive shortgage of adequate housing which is causing the Dublin market to heat up. People will pay more for housing with less credit from the banks and less take home pay due to high taxes which will not produce any leve of increased disposable income. To think it is becuse of anything else is simply wrong.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Jim Date: Monday December 9, 2013 @05:08PM

    Mr Noonan said the country was at the early stages of a restoration in the fortunes of the construction and building industry.

    ''The increase that there is in 2013 is quite small in proportion to the massive drop. There's no need for concern yet,'' he said.

    ''We need property prices to be restored. The trigger point is that they should at least reach on the second hand market the cost of building. It's an uneconomic situation if the cost of providing accommodation is higher than what you get on the market for second hand property" THIS POINT IS SO CORRECT.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Bob Date: Tuesday December 10, 2013 @04:52PM

    Valid point Jim,

    The cost of construction should not be higher than the value of property.

    However based on current asking prices (speaking in Dublin terms only) we are returning to market increases that far exceed buyer and particularly borrower capacity.

    Speaking from first hand experience, I am now looking at prices approx 50K higher now than I was 6 months ago for the same property. This is crazy! Pretty soon, if not already, I'll have gone from being in a strong purchasing position, to being in a position where I cannot affrod to buy.

    I am on a decent income so its not that I'm on 20K looking to purchase a mansion.

    Mortgages are based as a multiple of the borrowers income, properties need to reflect this or else we find ourselves in the same position we did prior to the bubble burst. The only difference this time is that the banks are wiser now, they wont be as fast to dish the cash out as they were before so the market will stalemate itself and we will be in a position where borrowers and sellers are singing from two different hymn sheets.

    Tell me I'm wrong

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Anonymous Poster Date: Tuesday December 10, 2013 @06:51PM

    I agree with your post Bob and I also take Jim's point

    Mortgages from banks were at their lowest since 1971 in 2013 with 50% of sales being cash buyers which fueled price increases.

    when we see the market totally reliant on banks credit i can only see prices contracting again.

    Certain international banks have already stopped planned investment in the Irish market due to the arrears debacle which is the elephant in the room as regards the Irish property market.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Angry potential buyer Date: Wednesday December 11, 2013 @09:03AM

    It is also worth noting that while new builds are absolutely necessary, finishing the currently half built properties dotted around the place will provide lots of accomodation.

    Lets not forget the property under NAMAs control, I'm no expert on NAMA, but I imagine they have a house or two, maybe the odd apartment here and there they could sell?

    My fear is that the supply of properties is being drip fed to the market slowly to rise the prices. Where demand outweighs supply, value increases.

    The underlying problem with this however is that the market correction that we have seen over the last few years is now being undone.

    Whether this is the work of the banks behind closed doors, the work of the government to give the appearance that things are recovering, or the work of some other unknown, the fact remains, with the amount of negative equity and mortgage arrears in Ireland, we still need a noticable market correct and possible debt write off before we see health return to the property market.

    If the average Joe cant buy an average house, there is something wrong. As that meerkat says....."Simples"

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Eamon Date: Wednesday December 11, 2013 @01:05PM

    The "average Joe" may have to do self build .

    I am a builder and you can not construct homes for the price that is being offered on 2nd hand market.

    As for lots of homes around the country , most are in mayo , limerick and waterford where there is no demand . Nama could spend what the like finishing these estates and no one wants does properties , the oversupply is in areas that planning premission was granted in the boom but there is no real demand.


    Price are , will and need to increase for Dublin , then builders will get back in the game of building for demand.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Brendan Date: Wednesday December 11, 2013 @09:27AM

    What is not appreciated by some people is that while the cost of 2nd hand houses is falling,and may coninue to fall, the cost of building new houses is rising.

    The cost of some building materials are higher now than they were in 2007.
    The price of oil ie energy has increased significantly. Land in Ireland is a scarce
    commodity and prices still high. New building regulations have added significanly to the cost of new housing. The cost of labour has fallen . The current cost of housing outside dublin is being sustained by the oversupply in the market

    As in dublin, in any area of high jobs density where the oversupply is used up you will see a significant increase in prices because it is not possible to build new houses for current prices

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Mark Date: Thursday December 12, 2013 @10:29AM

    Brendan,

    Everything you say is correct but the problem arises with credit availability.
    Prices cannot rise when credit is restricted the whole reason why we had a boom was due to the fact that credit was freely available.

    The market may sit stagnent for a long time as the rising recent prices where due to the fact that cash buyers flooded the market. There is not an endless supply of cash buyers and in future the marjority or all of buyers will be reliant on credit from banks.

    We may reach a point where houses will not be sold as the credit cannot be obtained which will have the effect of sellers dropping their prices even in a under supplied market which will remain, as no new building can be justified with the cost of housing.

    Something has to be done to get building costs cut to make it profitable for builders because banks will not return to the point of easy credit again fuelling rising prices.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Frank Date: Thursday December 12, 2013 @01:33PM

    Mark ,


    Surely banks only make profit from lending money and both AIB and BOI are moving back into mortgage market as its the only form of secured lending . BOI are perhaps the most aggressive bank in the UK offering mortages through the post office franchise which means they have funds to lead and as the perceived risk reduces in ireland there is no reason to see banks no reentering the mortgage market.

    BOI are so interested in offering new mortgages they now give 8am appointments in Dublin , even in the boom this was not happening. We also must remember that €5.6bn was repaid by existing mortgage holders last year to banks and this money will again be recycled as new mortages.

    your point about lack of credit seems incorrect. Frank.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Mark Date: Thursday December 12, 2013 @02:25PM

    Frank,

    It's not that the banks willl not lend for mortgages it that lending will be fully regulated based on income, basically 3 to 4 times annual salary which is in line with traditional averages.

    During the boom era lending was given at 90-100% mortgages with 10 times and over annual salaries which gave rise to the boom-crash.

    This wont happen again as it left banks bankrupt so my point is valid once you look at it properly.

    Mark

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Kevin Date: Thursday December 12, 2013 @04:15PM

    Mark ,

    If you are realistic , home owership will be outside what many " average Joe's " can afford going forward . Like a lot of europeans rental is the only option for the majority of young irish , there are now almost 500,000 renting in ireland this is a 60% increase on 2006. Many will not be able to buy going forward, that why we are seeing lots of cash investors buying and getting 9 - 12%yields on property which is pushing up prices . There is lots of non irish landlords emerging...many uk investors see the capital growth and yields being offered in ireland.

    Getting a mortgage will be for the few and not the many , rents will keep rising in Dublin.

    Regards

    Kevin

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Mark Date: Friday December 13, 2013 @08:50AM

    Kevin,

    We were discussing Irish bank lending, your comments were on AIB and BOI and how they make their profiits from mortgage lending which pertains to the future of credit in Ireland for Irish citizens.

    To suggest that the entire Irish market will be driven by international landlords whos only interest is buy to lets leaving the entire future Irish population renters is a daydream.

    International inverstors will always be in any property market and to suggest they will kepp prices afloat to where an educated employed Irish person cannot afford to buy a property in their own country is ridiculous.

    Unfortunately their is no easy answers for people in negative equity as the whole property game has changed with regulation now fully implemented. It is this factor which will determine house prices in Ireland and any other country for that matter.

    Mark

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Kevin Date: Friday December 13, 2013 @10:53AM

    Mark , you keep using the word regulation. What Regulation ? the is no regulation on 3 to 4 times income for mortgage lending criteria. The central bank is a soft touch organisation , mainly BOI dictate what is done in the market . Remember BOI is now mainly owned by a Canadian investor and the government has “wink wink “ given these investors the understanding that Ireland will be pro business and not a highly regulated market.

    If you think credit and house prices will not increase to average European comparable your in dream land , by the 2016 the average house price in Dublin will exceed 2007 levels by 10 to 20 % . Property always over the long term exceeds oil price increases by 2% pa , this has been happening since the 1950.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Greg Date: Friday December 13, 2013 @12:19PM

    20% over 2007 prices?? really?

    less and less people will be able to get approval for credit as prices increase – demand will therefore decrease and prices will stop rising
    Cash buyers driving the market now will be drying up soon so demand will drop
    Interest rates are going to rise, making credit even harder to get even at today’s prices – demand will drop
    Repossessions to happen – we have yet to see the full extent of this issue. Many people on tracker mortgages are able to afford there mortgages at the momnet. When the interest rate rises back to around 2.5% these mortgage repayments are going to increase considerably.

    Not one thing points to an increase in house prices. The only way you come to the conclusion is by only looking at one year of increases and forecasting on that alone and not taking anything else into consideration.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Martin Date: Monday December 16, 2013 @10:41AM

    Greg ,

    How does " demand will therefore decrease " work ? because people can't get mortgages ? surely demand remains the same , more people will fund fwer mortgages for the same number of houses, therefore there are more income holders for the same number of houses and more affordability .

    Simples ! You nor the government can disappear demand.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Greg Date: Monday December 16, 2013 @11:49AM

    Hi Martin,

    Demand does not remain the same. Consumers with the ability to purchase most definely decrease as prices increase. This is an economic fact.

    I am not saying that the number of people who want to buy houses will drease as prices increase - the number of able buyers will. There will still be demand for houses at a lower price point.

    The concept is very well illustrated on a Supply vs Demand curve - you may want to google it.

    I don't understand your concept there - are you implying poeple will buy houses in partnership?

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Mark Date: Monday December 16, 2013 @11:21AM

    Martin,

    I think what Greg was getting at was that in a rising market with restricted credit it will reach a point where demand will drop as people are priced out of the market. As Greg states cash buyers are not a limitless source which held up the market in 2013.

    The housing shortage may be less in 2014 with most banks being set to deal with buy to let arrears crisis with the possibility of more housing coming on the market from an additional source.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Joan Date: Monday December 16, 2013 @02:27PM

    If people can't buy , then surely more people will rent and push up the rental costs making it more and more aattractive for investors ?

    How does buy to let arrears solve a hosing shortgage ? are these properties not tenanted at the moment ........we need to think at a deep level..

    Regards

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Anonymous Poster Date: Monday December 16, 2013 @04:21PM

    Joan,

    There is a ceiling to what people can afford. This is the point you dont seem to appreciate. Rents and housing cannot continue to rise as the current economic situation is the polar opposite of what obtained high prices between 2000-2007.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Bob Date: Wednesday December 18, 2013 @08:59AM

    There are many interesting points made over the last few days of comments. Some have a foundation in reality, some would be laughed out of a children’s storybook.

    Dublin house and apartment prices are rising at a rate far faster than is safe for any sustainable property market. Over the last few years we have seen a considerable market correction in property prices which saw prices reduce to levels which are affordable for members of the public on the average wage.

    It was referred to earlier that banks in the boom lent based off property values at up to and over 100% of market value. While there is no specific regulation to dictate what levels banks will lend at now, 3 to 4 times income is not a bad bench mark to work off.

    Banks tend to use a stress test when reviewing applications for a mortgage so if you see an interest rate of 4%, they will probably base your max affordability on a mortgage at 5 to 6% to allow for market movement.

    Now bear with me because my figures are based from online calculators, but they are closer enough to show my point. Take the average wage, which would be somewhere around €700 per week or €36,400 per year. This would give a single borrower a net income of about €2,360 per month. All figures based on online calculators and information.

    A mortgage of 4 times income in this instance would be €145,600

    Take it from a former employee of a main bank; the debt repayment ratio often used is approx a third of net income. So allow one third of the net income of €2,360 as being €786 per month. This is assuming there are no other loans to be considered.

    Using a standard Irish online mortgage repayment calculator, a €145K mortgage over 35 years at a rate of 4.34% is approx €672 per month. Allowing for a bank stress test, an interest rate of 5.34% (1% higher) is €764 per month.

    Note how close €786 which is a third of net income, and €764, the mortgage repayment on 4 times income with a 1% stress adder is? They are within €20 of each other!!

    Taking Daft’s own sale price averages from Q3 2013, a 2 bed apartment in South County Dublin averaged at €180K. Assuming a mortgage of €145K, with a deposit of €35K, about 20% of the value of the property, an apartment was affordable for a first time buyer on the average wage.

    I would be interested to see what Q4 averages are, but from looking at average asking prices, asking prices for where I’m looking in South Dublin are rising in some circumstances by up to 50K. Granted not everywhere will have jumped so much, but I’d guess adding €20K would not be far off. So in 6 months, the potential buyer on the average wage has to find an extra €20K of a deposit or look for €20K of a higher mortgage.

    A €165K mortgage over 35 years now jumps to €765 per month at 4.34% and to €870 per month at 5.34%, the 1% stress test. €870 is roughly 37% of net income, higher than any bank will lend at.

    Now the average wage does not cover the mortgage needed to buy a modest property.

    People naturally want to sell for as high as they can get and with negative equity looming all over the place, banks will be happy to see property owners in arrears get more for their properties as it will reduce their losses. This does not however mean they will lend the next Joe soap more money to cover a higher mortgage to complete that sale. Poor old Joe will still only get the mortgage that the bank deems sustainable. You will note that if poor Joe lost his job and failed to pay his mortgage on today’s mortgage rates, repossession will cover the entire mortgage so the bank won’t lose on the new buyer!

    What is needed is for the borrower in arrears to be able to sell the property and have a portion of the remaining debt written off. I’m not saying all of the debt, I’m saying have a case by case assessment should take place. Where a borrower will clearly never be able to repay the debt, they should be allowed to sell, clear the debt and move on. This will free up more properties for sale which will level the market. Levelling the market keeps property prices at the correct levels allowing Joe soap to buy. This leads to the market fixing itself, banks will have a higher percentage of performing mortgages which will allow for more lending (at sustainable levels) and the market as a whole improves.

    Now before you say it, yes, this is a very simplified approach to viewing things and yes, it won’t be as easy as that, but one thing I can say without fear is that if property prices continue to increase at the levels we’ve seen over the last few months, it will all go pop again and then where will we be?

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Brendan Date: Wednesday December 18, 2013 @09:48AM

    Bob,

    Would a person on a average wage €36,400 not live in an average county like Longford and be able to afford a house there.

    Dublin to which you refer differs greatly on wages , but many employed and self employed exceed €100 K per annum and beyond. You analysis seems very poor.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Anonymous Poster Date: Wednesday December 18, 2013 @11:39AM

    Brendan,

    The Nevin Economic Research Institute states that income distribution in Ireland in 2013 is 77% of households earn less than 50K with 5% above 78K.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Kate Date: Thursday December 19, 2013 @04:26PM

    do you not need to strip out the unemployed and people retired ie over 65 and those that are out of the market , own there own home throught inheritance

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Mark Date: Wednesday December 18, 2013 @10:28AM

    Good post Bob,

    I fear that your last comment will be the most probabil path. we will hit a second crash as this country seems to have a very short memory an obsession with property and with everything in the media/government stating that what has happened in 2013 as regards inflated price increases is positive i think it will be left to its own devices overheat and we will be back to square one.

    Hopefully i wrong but it all seems so short sighted for now.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Kate Date: Wednesday December 18, 2013 @10:51AM

    Bob,

    Is not the shortage of housing in Dublin not pushing up demand/ prices.?

    In the West of Ireland and the South there is little demand and prices continue to fall. The economy seems to behaving as it should .

    This is a classic case of supply/demand/price curve, I am an economist ... so I might be wrong !!

    Regards

    Kate

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Bob Date: Wednesday December 18, 2013 @04:58PM

    Firstly to Brendan,

    I don't know your background in finance so do not want to blast you too hard, but a comment like that, to say many employed and self employed earn 100K plus is about as truthful as Harry Potter or Santa Claus. Yes there are a portion of society on this income, but believe me, they aren't looking to buy 2 bed apartments or 3 bed semis in the heart of Dublin, they are the ones in the fancy penthouse apartments and detached houses in Dublin 4 that we like to look at on Daft when we fantasise about winning the lotto!

    Secondly to Kate,

    You are very much correct that the supply or lack thereof of property in Dublin is a factor in the property price increases we are seeing. However the reason for this shortage is the more important factor to consider.

    People cannot sell if the sale price does not cover the mortgage taken out against that property. TO give an example, if you have a 2 bed apartment with a mortgage outstanding of 300K because you bought in 2007, you aren’t going to be able to sell that on today’s values as you will only get about 200K to 250K. The bank is not likely to write off €50K and unless you are loaded, you aren’t going to be able to make up the difference.

    So if you are that property owner, you are stuck. You can’t sell yet. Now as that property owner, you might still be employed and can pay that mortgage so in time, the mortgage will reduce, assuming you are paying at Capital and Interest and in a correct market, prices will increase with inflation and you might be able to sell.

    If you are the poor Joe who lost his job in the recession, now you are in arrears, you probably owe more to the bank and you are in a right mess. If you sell or have the property repossessed, you lose the property and still have any outstanding debts.

    For the economy to behave as it should, owners should be able to sell and purchase different properties as they wish to trade up or down, depending on what stage in life they are at. I.e. first timer buyers from 2005 to 2008 are probably raising small families by now and a 2 bed apartment isn’t big enough, they will want a small house.

    These transactions can’t happen effectively if the young couple can’t pay off the first mortgage and afford the bigger house.

    Market correction is still required before we see a healthy property market again.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: JR Date: Thursday December 19, 2013 @01:04PM

    is a fact that Ireland is experiencing the largest population growth in Europe. The supply of new housing in the country over the last 18 months has fallen notably and is expected to decline further. As a result, the supply of new houses is inadequate to cater for both natural population increase.

    The resulting accommodation shortfall will give rise to higher rents and/or higher purchase prices, às increasing numbers of people will have to queue for the small number of dwellings which builders will construct in the near future or which investors (if any) will put out to rent.

    If landlords hold onto their existing investment properties, the supply of houses for sale will be further limited, thus forcing purchase prices up. Equally, if owners decide to sell, the number of dwellings available for rent will be minimal, thus increasing monthly rates.

    The budget changes will have minimal impact overall as the measures introduced will not go far enough to prompt those convinced of continuing falling prices to buy. However, the clever househunters, who had already decided to purchase early in 2013, will take these changes as their cue to get a home and will beat the rest of the pack.

    Other people, awaiting further reductions in house prices will be disappointed as both monthly rents and purchase prices will increase

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Bob Date: Thursday December 19, 2013 @04:16PM

    It is true that a lack of supply will impact the sale and rent prices, particularly in Dublin.

    It is also true that those who bought in early 2013 struck “property gold” in that the supply of property was reasonable and the sale prices were favourable.

    However the recent shortage of property and resulting higher asking prices brings me back to my previous point. At the rate property prices in Dublin are increasing, potential buyers will be priced out of the market very soon, if not already.

    It may sound repetitive but Irish banks have taken a bashing over the lending practices used prior to the property crash. I’m referring to 100% mortgages, mortgages based primarily on property value rather than borrower repayment ability. Banks have wised up; lending practices have changed and won’t be changing back any time soon.

    Welcome to the lending practices of affordability, sustainability and lower risk to banks. For a start, mortgages will be lower. Even if you are on the highest income in the safest job, if you go looking for a large mortgage, you will be jumping through loops before a bank will release a big lump sum.

    For example, if you are looking for €1million of a mortgage on a property worth €1.1 or €1.2 million, best of luck to you. That million could go towards 10 €100K mortgages where the risk is spread much wider so the potential losses will be lower.

    As per my previous posts, mortgages will be a multiple of your income. This multiple will take all your other debts into account and will include stress tests to ensure you can handle interest rate increases.

    This brings me back to the issue of the rate of housing increases at the moment. At the rate of increase we’ve seen in the last 6 months, buyers who could just about afford to buy 6 months ago are no longer able to buy. Those who had some wiggle room are now looking at smaller properties and those who were waiting for further decreases are completely shot out of the water.

    The market can cope with some increases; in fact the increases will bring a certain amount of buyers and sellers out of the woodwork. The problem is that past a short term period, the increases are not sustainable.

    If the access to credit allowed for property prices to bring properties out of negative equity, I’d be writing a very different post. If that were the case, distressed borrowers could sell, borrowers would get access to credit and they could pay their mortgages because for all of this to happen, they’d be on great incomes.

    This however is a fairytale to most. The reality is that banks won’t lend as much meaning borrowers won’t borrower as much, meaning that if sellers continue to look for more, the market will come to a point where buyers can’t afford to buy at the prices being sought.

    Add the fact that there will be a large sector who “want” to sell, but can’t due to the negative equity on their properties. Until this elephant in the room is not addressed, the market is going nowhere positive.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: James Date: Friday December 20, 2013 @09:00AM

    Bob,

    Some issues with your post .

    Banks need/ want profit to survive , lending is the only way to make profit for a bank . Funding in a matter of weeks, maybe a month, from the time a mortgage is originated it can become part of a CMO, ABS or CDO deal. Few borrowers realize the extent to which their mortgage is sliced, diced and traded. The end user of a mortgage might be a hedge fund that makes directional interest rate bets or uses leveraged positions to exploit small relational pricing irregularities, or it might be the central bank of a foreign country that likes the credit rating of an agency MBS. On the other hand, it could be an insurance company based in Brussels, that likes the duration and convexity profile of a certain tranche in an ABS, CMO or CDO deal. The secondary mortgage market is huge, liquid and complex with several institutions that all take a slice of the mortgage pie. These markets now like the Irish risk profile more than in 2008 and the returns on the Irish market are nearly 3 times more that the UK mortgage market .


    Mortgage lending volumes and size will increase year on year , the business of banking knows that recovering house prices is good for the economy.


    The pivot point is reached when the cost of new homes exceeds the price of the second hand market and oversupply results as in 2006 , 2007 and 2008 . When this oversupply happens prices drop like a stone. At this moment this is no forecast of oversupply in the housing market in Dublin. Down the county in some areas this is an oversupply and prices continue to drop.


    On comparable incomes to the UK market , Irish house prices now look like 40% under-priced.


    If you intend to buy sooner the better if you want a bargain.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Selina Date: Friday December 20, 2013 @09:40AM

    Property is a cyclic matrix, is this a “V” sharped recovery , and “ U” shaped recovery or a “ W” shape ?

    My own view is that it’s a W shaped , by the end of 2014 prices will fall for a period of 6months or a year and the a full blown rise will see prices exceed 2008 values in 2016 by a lot. There is also a long curve that says prices double every 18 years . its only a question of where we are on this curve.

    We are now in the up curve , many heads are in the clouds but as the early sunshine of the property recovery sparkles across Dublin city , many are dazed by the new reality and unable to see clearly. As with shock of the banking crises that rolled out into a property crash many are in denial but through gritty realism rental prices explores the hidden needs that drive often baffling human behaviour. Many rental judgements are open ended but we draw fundamental truths from the lack of supply , shining a searchlight into the dark corners our lack of understanding . The builders /developers are gone, housing need remains in Dublin for families who want homes. Noonan talks about 30,000 houses that need to be build each year , realistically that is not going to happen in the next 5 years. Rental prices going to rise by 30% - 35% in Dublin in the next 3 years .. I am talking year on year cumulative effect

    Happy Xmas a peacefull new year to all posters , some great debate in 2013 , let it continue

    Would like to see daft have a pol for those that think marker will rise or market

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Bob Date: Friday December 20, 2013 @10:37AM

    Hi James,

    Valid points made in your post. Banks of course need to lend to generate profits and you are correct in saying that the secondary mortgage market is huge.

    This however does not address the fact that as much as banks may want to lend, they can't just throw money at people again in the same manner we saw prior to the recession. Banks will lend, but will adopt a stricter risk based approach to lending. Do you think a bank will lend at 90% or 100% of the value of a property to a borrower whose income does not cover the repayment comfortably? I can’t tell the future, but I wouldn’t bet on it.

    This will limit mortgage lending practices to what incomes can cope with.

    I disagree with your final comment that Irish house prices now look 40% under priced. Apply that to asking prices on properties on Daft today. A 2 bed Dundrum apartment between 275K and 295K should be between 385K and 413K? A Clondalkin 3 bed semi between 200K and 225K should be between 280K and 315K? A 3 bed Duplex in Finglas priced between €160 to €165K should be between 224K to 231K? I don’t believe the market could support that. I don’t believe banks will lend high percentage mortgages on those values and I belief at those prices and mortgage repayments we would continue to see high levels of failed mortgages.


    Selina,

    Not leaving you out, again, I’d agree that markets work on a cyclical matrix. I don’t have the data to hand to comment on properties doubling every 18 years, but I can say that the value of money changes, i.e. inflation so if your figures are true, can you expand on them taking 18 years worth of pay rises, inflation and cost of living into account? I doubt you will see in real terms that house prices double relative to income.

    Regarding rental rises of 30% to 35% in the next 3 years, should this happen, I hope incomes rise with this or not only will we see people unable to buy; they won’t be unable to rent either.

    I also extend Christmas wishes to everyone and hope that 2014 shows a more transparent market for property.

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Mike Date: Friday January 3, 2014 @11:17AM

    All,

    i bought a 4 bed house in castleknock in September this year. We went looking in May. Our preferred location was castleknock. Myself and my partner got a shock when we first started looking. 30 to 40 couples some with kids at the house in the time we were there. Queues to get up the stairs. We were outbid on 2 houses. One house had an asking price of 330. At 9 o clock in the morning I phoned the auctioneer to see if it had any offers. 1 offer he said 320. I then offered 325. I got a phone call back 15 minutes later saying my offer was beaten. At the time our budget was 365k max. So to secure the property after an offer came in at 335 i upped the offer to 350 hoping to shake off other bidders. Long story short it went past 365k my top at the time by the end of the day and finally sold for 395k. we did finally secure a home in september by gathering more money together and finding a house. Draw your own conclusions from this. We wanted a home in castleknock and we did not look elsewhere but that was our experience. Family homes are in huge demand

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  • Re: The Daft Rental Report Q3 2013

    Posted By: Bob Date: Friday January 3, 2014 @04:43PM

    Mike,

    Very interesting story and very representative of the Dublin market at the moment. Demand is high and supply is low, so this is the main cause of the increases.

    But we need to ask ourselves, is this a good example of a healthy property market?

    For what it’s worth, I think it’s an excellent example of an unhealthy property market.

    Mike’s example shows a 75K increase from asking price to sale price. He didn’t specify the exact timeframe but it’s over 20% of an increase. Even if the increase was over a 2 year period it’s still unsustainably high.

    It doesn’t take a genius to work out that when demand is higher than supply, prices go up. If supply is higher than demand, prices go down. That’s a fundamental rule to business. This is shown across all markets, not just property.

    I’m like a broken record but we need to stabilise the market so that the average person can afford to buy an average house. The market should also allow for the average person to sell that same house without leaving a noose around their neck, i.e. the shortfall on the mortgage, once the property is sold.

    The funny thing is that while the supply is currently low in Dublin, this isn’t just a result of the lack of new building going on. Yes it is absolutely a factor, and a pretty big one, but the other is the percentage of people who would like to sell and buy elsewhere but can’t.

    If you bought a property in Dublin in the mid 2000’s you are probably stuck where you are.

    You probably got yourself a high loan to value mortgage at the time over a long term because money was easy to access back then. Hopefully you still have the job and were not affected too badly by pay reductions. If this is the case, you can probably still pay your mortgage and if you are willing to stay where you are, you don’t have any immediate problem.

    However if you wanted to sell, you would need to consider the following:
    1. How much do I still owe (if it was a long term mortgage, the amount of capital paid off will not be very much)
    2. How much is my property worth now (look at the daft figures but it’s probably worth less)
    3. Before evening looking at where I want to move to, how will I cover the difference between what I still owe and what I’ll get for the sale? Do I have that much in savings? Will a bank be willing to give me that much more to move? Is it really worth it?

    I’m not even going to get into the legions of people who aren’t even in that good a position, i.e. the ones who did lose a job, did get a pay cut and all those in lovely mortgage arrears.

    For the market to perform well, buying and selling should for the most part cover itself. You put up more cash to trade up, you get a little nest egg if you trade down and if you trade across, the purchase of your new property should not be overshadowed by the sale of your old one.

    We are in 2014 now; wouldn’t it be great if we weren’t having the same conversations this time next year? Government people, it’s time to step up and do something to help your constituents out. Start repairing our property market and I don’t mean put a Band-Aid on it, actually do something to help!

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  • Re: The Daft Rental Report Q3 2013

    Posted By: John Date: Friday January 3, 2014 @03:43PM

    Mike

    That kind of on the ground analysis is better that a 1000 works in some report, I am trying to buy myself in D8 , Portobello for the last year and the numbers of people viewing is amazing. Demand is huge maybe greater than 2006.

    Regards

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