Comments
Trackbacks for this post
Leave a Comment
Awesome! You've decided to leave a comment. Please keep in mind that comments are moderated.
Irish Mortgage Brokers - Mortgages, Financial Planning, Savings, Pensions & Retirement.
Call Us: 01 679 0990
Karl
interesting read. Quick question – did you factor in any asset price appreciation in the study, even just the rate of inflation? Nominal interest rates on a deposit are essentially just supposed to account for inflation for the most part (assuming a risk free deposit system – don’t laugh!), where as in the long run, ceterus paribus and all that, property should increase by a minimum of inflation, on top of getting the rental yield. It would be interesting to see how the figs look if you assume a 2% annual increase in asset prices, and therefore how much they are “over-valued”.
Hi Owen C,
We put in a 1% inflation from year 5 (of 10 years) on the DCF, the investor method is really a yield exercise and my home-brew calculator on deposits is a cashflow v cashflow proposition that doesn’t look at capital position at all.
I totally agree though, that the market may change and typically it does, we probably won’t go downhill forever! In that respect I suppose we were of the view that if you have faith in capital appreciation that all of our work on yields or after tax returns on a proxy don’t matter?
And yes, I did laugh at the idea of a ‘risk free’ Irish bank! Thanks for dropping by, come back again soon!
karl