Irish Mortgage Brokers Blog

The ‘Rent or Buy?’ report was featured on RTE1 ‘Drive Time with Mary Wilson‘ yesterday, it was prepared by Dr. Peter Stafford (Independent economist recently taken on by the Society of Chartered Surveyors), Karl Deeter (of Irish Mortgage Brokers) and Frank Quinn (of Senior College Dun Laoghaire). In the report we ran six different future scenarios with a view to determining whether it made better sense to rent or buy a property.

The findings are in the report, you can download it by clicking on the image to the left.

Our findings were fairly consistent, showing that in almost every future scenario that renting makes better sense from a cost perspective than buying does. The times that buying is better is in an upward only market and a flat market.

That may help to put numbers on behaviour, because during the boom people thought prices would go upwards only and it is therefore reasonable to see why so many jumped into the market. It doesn’t get into the deeper causation but it helps to demonstrate this albeit ex ante evidence.

I want to give a very big thanks to the other authors, Peter and Frank, without them this report never would have happened, Peter keeps a great blog/site and his monthly macro reports are well worth signing up to check out his site. Frank teaches valuations in Senior College Dun Laoghaire and although he doesn’t keep a site himself, we have been chatting about him contributing on this blog from time to time, the prospects of which we are very excited about!

‘Research on Real Life’ is (in my opinion) the best kind there is, we hope that this report helps readers to make a decision that they may otherwise find difficult to answer, of course, not everybody buys a house based on minimum cost to themselves, if that were the case we’d all cram into bad neighbourhoods and rent there [albeit that paradoxically that would drive up rent prices in those areas!], having said that, this report should help to debunk some of the property spin you may hear from time to time.

If you want to get a calculation done you can contact us and we’ll send you the report all you have to do for any scenario is the following

1. Send the price of the property you are considering
2. The rental price of a similar property, or the one you are renting now
3. The rental price scenario you envisage over the next ten years in terms of % change per year.
4. The purchase price scenario for the same period, giving the % change per year +/-

From there we can let you know the cost of buying now, waiting five years, or renting only for the next ten years. There are some flaws in our calculations as there are in any calculation that makes assumptions but we can tell you about them so you are aware of them.

Happy reading!

Today we were delighted to do the first of what will hopefully be a regular slot on the Business section of the Breakfast Show on Newstalk 106 with Conor Brophy. The topic today was that of Site Value Taxation (we had an article in the Sunday Times about it this week), property prices and then a mention of our Investment Property Profile which was done in association with PropertyWeek.ie and ODKM Architects in Terenure.

We looked at some properties in the Dublin market that might obtain a 7% yield, they require some work (sweat equity!) and although they all didn’t come out at 7% some were above 6%. This is helping to reinforce the believe that the market in general has not rationalised but that in particular you can find good value if you look for it.

Aidan McLoughlin of of the Independent Trustee Company was also there with some fascinating insight into non-bank lending that is occurring whereby pension funds are lending to businesses who cannot obtain credit via the banks, this is some compelling evidence that credit is not forthcoming to SME’s in the way that we are being told that it is.

[To see the Investment Property Profiler report click on the image]

We are pleased to release our new Irish Property Investor Report for the Spring of 2010 (click on the picture to view it). The people that put it together this time were Frank Quinn (IPAV), Lecturer in Valuations at Senior College Dun Laoghaire and Irish Mortgage Brokers.

The property figures were provided by PropertyWeek.ie (who also run a non-practitioner site at MyHat.ie) and a critique of the report and methodology (which we deemed  necessary in the spirit of balance) was carried out by Iain Nash.

The news is not positive, we have determined, using our valuation methods; that property as an investment is still unattractive in the spring of 2010, in order for it to make sense prices would need to fall significantly in our major cities in the range of about 39% on average.

Having said that, this report looks at averages and it can’t factor in the individual properties on the market, for that reason it is highly likely that there are great deals out there - they just don’t come through when looking at market averages. Iain Nash also has some good reasoning on why the type of analysis we have done falls short of being ideal in several ways, but in a strange twist, he agrees with our figures, just not to the manner in which we arrived at them!

We hope you enjoy our report and would welcome any further critique any our readers may have upon our findings.

We are pleased to bring you the winter edition of our Residential Property Investor report for 2009.

(Click on the picture to the left to download it)

This time we teamed up with our friends at propertyweek.ie and MyHat.ie as well as with Frank Quinn who is a lecturer in Property Valuations in Senior College Dun Laoghaire to bring you what we feel is a very comprehensive overview of the Irish investment property market.

We used four different methodologies to look at valuations, discounted cash-flows, the investor method of property valuations, and then two unique versions that look at the performance of a property versus bank deposits factoring taxation in both leveraged and un-leveraged examples.

We have published the analysis element of what we have done and welcome any critique readers may have, we accept that every variance and eventuality can never be fully covered, having said that, we have attempted to give a very genuine snapshot of what the market environment would need to look like in order for property to become a meaningful performing investment again.

It is our belief that in order for investors to return to the market that property has to stack up again in terms of risk/reward and yields which outperform risk free benchmarks.

I thought this was a fascinating clip, Israel is a country surrounded on all sides by people who want to remove them and despite the odds being stacked against the nation they have found ways to attract venture capital, to capitalise business ideas and grow businesses in this environment, even in during the worlds largest financial catastrophe in living memory, it is a testament to the fact that innovation can be nourished under any circumstances, and perhaps that desperation is the father of invention.

We are pleased to bring you, in association with Propertyweek.ie, the investment property report for Q1 2009. To download the report just click here, or on the picture to the left.

The headline findings and information contained in this are based upon prices which are collated by Propertyweek, one of the most widely used valuer systems in the country, and financial calculations which were done by Irish Mortgage Brokers. Between the two companies we have combined our experience and knowledge in order to give an interpretation of the property market for investors.

The basis of comparison is as follows: anything with risk should carry a ‘risk premium’ versus the returns available on ‘low-to-no risk’ options (such as deposit interest). If deposits are outperforming investment property then there is no reason to assume the additional risk, equally, if this isn’t the case then there is an argument in favour of investing in property.

We hope you enjoy the report and if you have any questions feel free to contact either Paul O’Connor from Propertyweek.ie or Karl Deeter (that’s me!) of Irish Mortgage Brokers, our contact details are at the end of the report.

Sincerely,

Karl Deeter, Operations Manager at Irish Mortgage Brokers
&
Paul O’Connor, MD at Propertyweek.ie