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House Prices V Rental Value

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I’m interested to know whether rents in your area are falling, rising or staying flat. Moreover, I’m interested in how rising prices can be justified when rental yields have already hit all-time lows.

In my area (Dublin) rents have been under pressure for around three to four years now, although in the last year they appear to be broadly flat. This is despite an unprecedented amount of immigrants to Ireland. This tells me that supply (of shelter) is keeping up with demand.

Yet despite this, house prices continue to rise at double digit percentage levels.

If we apply this to the stock market, it is like following the shares of a company whose earnings are falling year on year. If the share price is still rising, then the market must be banking on a dramatic turnaround in earnings or maybe a takeover approach. If either fails to materialise, the share price should fall sharply.

The earnings on property (its rental value) do not appear to be turning upwards any time soon. The rise in prices is therefore completely unjustified – especially as rental yields now sit at just 2%. How do the VI’s explain this?

I was reading an article yesterday mocking the absurdity of Google’s $450+ share price. Overvalued it may be, but at least its earnings are rising.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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