Why Do Investors Not Sell Underwater Buy-to-Let Property? Irish Evidence

13 Pages Posted: 9 Oct 2013

See all articles by Karl Deeter

Karl Deeter

Irish Mortgage Brokers

Marie Hunt

Fellowship of the Society of Chartered Surveyors (FSCSI); Society of Property Researchers (SPR)

Brian M. Lucey

Trinity Business School, Trinity College Dublin; University of Sydney Business School; University of Economics Ho Chi Minh City

Date Written: October 8, 2013

Abstract

Using a sample of Irish Buy-to-let residential property investors, we provide a breakdown of their characteristics. We confirm some issues suspected in popular discourse and find new evidence. We provide evidence on the determinants of the decision to sell or not amongst a sample of Irish residential property investors. The data suggest that the typical investor is small scale, and has suffered a perceived loss from peak investment of between 50-60%. Analysis suggests that the decision not to sell property that is ‘underwater’, i.e. where the present market value is less than the outstanding mortgage, is driven mainly by affordability constraints not by biases. Thus a rational set of actions from borrower and lender should be possible.

Keywords: investment mortgages, underwater properties, overconfidence, anchoring, buy-to-let, prospect theory, Ireland

JEL Classification: D03, G02, G18, R30

Suggested Citation

Deeter, Karl and Hunt, Marie and Lucey, Brian M., Why Do Investors Not Sell Underwater Buy-to-Let Property? Irish Evidence (October 8, 2013). Available at SSRN: https://ssrn.com/abstract=2337406 or http://dx.doi.org/10.2139/ssrn.2337406

Karl Deeter

Irish Mortgage Brokers ( email )

33 Pearse Street
Dublin, 2
Ireland

Marie Hunt

Fellowship of the Society of Chartered Surveyors (FSCSI) ( email )

Ireland

Society of Property Researchers (SPR) ( email )

Brian M. Lucey (Contact Author)

Trinity Business School, Trinity College Dublin ( email )

The Sutherland Centre, Level 6, Arts Building
Dublin 2
Ireland
+353 1 608 1552 (Phone)
+353 1 679 9503 (Fax)

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

University of Economics Ho Chi Minh City ( email )

59C Nguyen Dình Chieu
6th Ward, District 3
Ho Chi Minh City, Ho Chi Minh 70000
Vietnam

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