Show me the money and I’ll give you the keys

If I were to detail all of my gripes with the amount of power that rests in the hands of landlords and letting agencies (e.g. arbitary retention of deposits, little or no maintenance during tenancy, etc.) I would be here all day. One particular thought that I had today: Is it really fair that when you sign a tenancy agreement, you’re generally obliged to provide a deposit and first month’s rent either as cash or a bankers draft before being handed the keys? At the end of the tenancy period, you generally have to vacate the property, hand over the keys and then wait for some arbitrary period until your deposit is returned.

It would be much “fairer” if tenants were able to demand their deposit back before vacating the property.

“Give me the money (my money, in fact) and I’ll give you the keys.”

Negative equity – will I shed a tear?

Like many people, I’m kind-of fascinated/obsessed by property prices in Ireland at the moment. Many commentators are suggesting that they’re over-valued, with some even predicting an imminent property crash.

I’m one of the non home-owners (and there are lots of us!). Why? Well, we’re completely completely priced out of the Dublin market at the moment. This is partly of our own doing (we’re late arrivals to the party, are in our mid-thirties and have two small children, so we can’t really buy a typical first-time-buyer’s property – a one or two bedroom new-build apartment) but also because – if the doom-merchant commentators are correct – we would be paying X+20% for a house when it would only be worth X.

Why is the market (allegedly) over-valued? I’m no economist, but it appears to be the result of historically miniscule interest rates, and the decade-long economic boom here (aka the “Celtic Tiger”). But individuals have to take some of the blame for it. No-one seems to think “what’s a sensible amount for me to borrow?” and then go and find a house for that much. They seem to think “wha’s the absolute maximum I could possibly borrow?” and then go and buy a house for more than that!

Anyway…the point of this post is that if there is a crash, and property prices fall by (lets say) 20%, will I be sad for home-owners who find themselves in a negative equity situation?

Well…I’ll be sad for the people whose income drops for some other reason (e.g. redundancy) and who then can’t make the mortgage payments and end up having their house repossessed. Of course I’ll feel sad for them.

But…what about the people who complain to me that they’re stuck with a house that’s worth 20% less than they bought it for? Who complain that it’ll be years before their house is worth more than they owe the bank for it? Who complain that their mortgage payments are essentially going into a big pit?

Sadly, I won’t be feeling sorry for them. This isn’t schadenfreude. I won’t be gleeful at their predicament but…I’m really in a negative-equity situation myself at the moment. For the last 10 years I’ve been paying rent, awaiting house-prices to fall into line with earnings. I’ve had 10 years of negative equity. Ok, granted, I’ve always had the option of moving house. I’ve never been “trapped” by negative equity. However, financially, I’m in the same situation. I’m throwing (rent) money into a pit, awaiting for houses to be worth the prices folk are paying for them!

During this boom, not one of our home-owning friends has said “Here, share some of the spoils of the 60% profit we’ve made on our house!” so – I’m afraid – I won’t feel that sorry when they inform us they’ve now made a 20% loss on it and “can we buy them dinner?”.

(Secretly, of course, I’m hoping that prices will drop below what they’re really worth so we’ll be able to snap up a real bargain. However, Ireland is a fairly small country so any such bargains will probably be snapped up fairly quickly [maybe by overseas buyers], which would probably stabilize prices fairly quickly).