P.I.G.S.

In general economics how is the rise/fall of house prices linked to the renting prices?
 
Land prices up = landlords pay more to buy, want more rent.
Land prices up = less owner-buyers = more renters = higher rents.

Why do land prices go up? You might say 'demand', but in volume terms that's a secondary not the primary.

Land prices go up because the location will yield more rent. That's because of value-giving activities in or affecting the area.

Keeping it broadly non-specific. Else you get picking.
 
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House prices can historically be valued in many different ways. One of them is by rental income.

Rental yield = (Monthly Rent * 12) / House Price

So if your monthly rent on a house is €1000, and its price is €200,000:

Rental yield = 6%. The next question is what is a good rental yield. This will depend on the yield of other assets, the prevailing cost of borrowing, etc. As well as how much money you are having to put down on a house.

But 6% is almost always too low.

Many people will tell you that this calculation shouldn't be used, as houses are a utility. But in general, if rental yields are lower than 8%, it is more likely that the price of property is too high. If rental yields are higher than 10%, house prices may be cheap.
 
Devils Advocate:

What would you do if you were living in Ireland:

Single, renting with a job paying 20k+
Married with no kids but a 200k mortgage in negative equity.
Single with a 200k mortgage in negative equity.
Married with two children with a 200k mortgage in negative equity.
 
All expenditure is taxed. Spend on a house, spend on a car, spend on a book - no difference in principle, just in how hard it falls.

What is tax? The legalised taking of part of the price of a trade by a third party.
It's been called legalised theft. You'd have to make your own mind up about that.

A good place to start is not with throwing hands in the air and asking where else the state's needful revenues will come from if not from taxation.

Just don't ask the politicians! Nor the economists. Better not ask anyone who has an 'interest'!

:)
 
With the advantage of hindsight to me, it seems that it should have been blindingly obvious to anyone with a professional interest that the whole shebang was going to collapse. Warning signs were there from long before 2008 and were pointed out by some clever people who at the time were considered less clever, and by some not so clever people. Maybe the Lehman Bros and consequentials speeded up the process unexpectedly, but the number of intelligent people and international corporations caught with their trousers down for not following the most basic economic equations seems beyond belief. If the likes of Sean Quinn with his huge financial resources can't see whats coming, or, worse again, actively bet against it coming, it seems hard to blame bob the builder for trying to turn a quick buck by developing a couple of acres outside Longford.

I forget the point I was trying to make. Anyone working in the regulators office at the time deserves a good kicking.
 
Gearoid said:
Devils Advocate:

What would you do if you were living in Ireland:

Single, renting with a job paying 20k+ No problem here.
Married with no kids but a 200k mortgage in negative equity. Emigrate
Single with a 200k mortgage in negative equity. Emigrate
Married with two children with a 200k mortgage in negative equity. Depending on how deep the roots are - Emigrate.

The Irish mentality of "you have to own your own house" runs deep in a huge part of the population. Where a bank would never throw you out of you home generations of tenants have suffered at the hands of landlords from here and abroad.

You were truly upper middle class if you owned your own home in the 70's and 80's.

This has now changed massively. Banks are evicting more "home owners" now than any rogue landlords of the past ever did. In the long run this will lead to a more pragmatic view of a home with little or no regard to where the deeds lie. It will take another generation probably though.
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Bar the Bull said:
I would argue that buying a house in 2005 say = people seeing easy money.
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For some obviously, yes, business decision, gone pear shaped and like you said, tough shit.

For the many who bought during the bubble to have a stable environment in which to live and raise a family, had money thrown at them by people who where supposed to know 'money matters' (Banks) and assured by Government and media etc that everything was great, and that they should get on the property ladder, they are victims of criminal negligence.
 
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Melendez said:
With the advantage of hindsight to me, it seems that it should have been blindingly obvious to anyone with a professional interest that the whole shebang was going to collapse. Warning signs were there from long before 2008 and were pointed out by some clever people who at the time were considered less clever, and by some not so clever people. Maybe the Lehman Bros and consequentials speeded up the process unexpectedly, but the number of intelligent people and international corporations caught with their trousers down for not following the most basic economic equations seems beyond belief. If the likes of Sean Quinn with his huge financial resources can't see whats coming, or, worse again, actively bet against it coming, it seems hard to blame bob the builder for trying to turn a quick buck by developing a couple of acres outside Longford.

I forget the point I was trying to make. Anyone working in the regulators office at the time deserves a good kicking.
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I was brought into the regulator's office after it went pear shaped. I was working in a far worse place before it kicked off.
 
It's probably safer to give everyone ever associated with the regulators office a good kicking lest some of the guilty escape enharmed. Take one for the nation, as it were. You've probably done something somewhere for which you deserved a good kicking anyway.
 
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Melendez said:
It's probably safer to give everyone ever associated with the regulators office a good kicking lest some of the guilty escape enharmed. Take one for the nation, as it were. You've probably done something somewhere for which you deserved a good kicking anyway.
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Shoot them all and let God sort them out....
 
At least in the States there's been some christain mercy in the form of common bloody sense to cut back the kick-out, grab & boarding-up that was happening to new owners.
So, the banks don't get it all, but if a family can pay somewhat like the rent, they can be given the chance to do so.
I hated that foreclosing going on. Idiocy. You have to look at the effects in the society aka community.
 
I would have thought Christian mercy had very little to do with it - if the rates of foreclosures / repossessions continue to rise, surely this serves to further devalue housing prices meaning the repossessed assets are worth less?
 
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