[EF]

Those who were desperate enough to take out a 100% mortgage have what they wanted, a vastly over-valued asset which will need to be re-paid over 35 - 40 years at crippling rates. And I dont envy them for a second. But the pendulum has swung and I really hope the Irish public hold off buying into any short term scheme which is introduced in the coming weeks, and let the market sort itself out. If there is anyone out there about to acquire the deeds to a first time property dont do it!

[The_Conductor]

Originally Posted by EF

Those who were desperate enough to take out a 100% mortgage have what they wanted, a vastly over-valued asset which will need to be re-paid over 35 - 40 years at crippling rates. And I dont envy them for a second. But the pendulum has swung and I really hope the Irish public hold off buying into any short term scheme which is introduced in the coming weeks, and let the market sort itself out. If there is anyone out there about to acquire the deeds to a first time property dont do it!

You are arguing that they were fully aware of what they were doing though- I am arguing that they were not. They bought into the media whipped up hype about "having to get on the property ladder", "sure as houses", "buy-to-let mortgages", "house-in-the-sun", "property millionaire" etc- how many more headlines can you remember? People were bombarded with this crap, day in, day out- quite literally for years. Regardless of how intelligent someone is- if you throw enough mud at them for long enough- some of it will stick.

So- in the midst of this media hyped frenzy- people felt compelled to purchase- if they did not, they "would be left behind". Totally aside from the peer pressure involved- these people were not in a position to make a decision that has 30-40 year implications. It would be very interesting to see if someone tried to have contracts annulled on the basis of temporary insanity- if they had a good barrister- it is most probably an arguable situation.

These people were pressurised into parting with silly amounts of cash to buy substandard accommodation, and are now being thrown to the wolves- abondoned by the government who allegedly are there to act on their behalf.

It is these scores of thousands of people I am talking about.

Certainly- there are thousands who were well aware of what they were doing- but its an equal assumption that there were at very least as many who simply bought into the hype.

An interesting poll here might be- how many people have read the lease associated with their apartment / terms and conditions associated with their mortgage / conditions attached to their mortgage approval in principle (etc)- you get the picture- people are making far ranging decisions without equipping themselves with all the facts. There is an assumption that other people are acting on our behalves, I argue that this is not a valid assumption.

[20goto10]

Originally Posted by smccarrick

By what measure would one decide that a property was reasonably or unreasonably priced? Multiple of one's earnings? Portion of net take home pay? If a person on 30k can draw down a mortgage of 300k, costing them almost 65% of their net take home pay- surely something is wrong? Thats where we are at......

Is it because houses are too expensive or because wages are too low? I take it you are saying 30K is the average salary and 300K is the price of an average house. Therefore a person on 30K should be able to comfortably afford a 300K mortgage. If that is true then why is it that houses are too expensive and not that wages are too low? Or that there are too many people in the country without decent qualifications and therefore do not have a decent profession?

btw, a person with a 30K salary according to yourself should not be lulled into a 100% mortgage. So they will actually be looking at a 240K mortgage with a 20% deposit or a 270K mortgage with a 10% deposit. Does that still sound overpriced to you?

What state will our country be in if people do not have to work hard to buy a nice house?

[The_Conductor]

Originally Posted by 20goto10

What state will our country be in if people do not have to work hard to buy a nice house?

There is a difference between working hard, and selling your soul to the local bank manager. Keep in mind- traditional mortgages were for 15-20 years- now there are 45 year mortgages on the market.......Working hard should not equate with penury in old age.

[CallieO]

Excellent debate which made interesting reading this morning.

When you are talking in a broad sweep about property prices, are we talking all the new builds in urban areas? Or does this include second hand properties in the countryside.

I get the distinct impression that it is such a vast band of parameters that a 46% drop could be effected by one house in Dub cutting a totally unrealistic asking price to a realistic price?

I am also interested by the number of investment properties that have found their way onto the auction boards over the last weeks. And are being snapped up lol

Not by the Irish in the main either.....

Personally its land or gold ( both???)

Callie

[Shambo]

From being involved in selling houses for quite sometime

Right so- a totally unbiased opinion there then!

. As house prices are extremely low at the present and they may dip a little

House prices low? That's a laugh- if house prices were low then people would feel more comofortable about buying them- prices in this country are still a disgrace and hopefully will continue to fall dramatically so that the average Joe Soap can actually afford one without taking on a 35 year mortgage.

Reasons for people not buying hopiuses in Ireland?

Too expensive- most people have copped on to that at last

Banks not lending (Though I believe our wonderful govt is going to do something about that today)

Unemployment is up and forecast to go through the roof next year- again people are not as thick as Fianna Fail think- who would want to take on a 35 year mortgage when you think you could be out of a job in 6 months?

Oh, hello by the way - great forum- long time lurker and I finally got my arse in gear to register
.

[20goto10]

Originally Posted by smccarrick

There is a difference between working hard, and selling your soul to the local bank manager. Keep in mind- traditional mortgages were for 15-20 years- now there are 45 year mortgages on the market.......Working hard should not equate with penury in old age.

15-20 years? When was that? My parents last mortgage was 25 years in 1982.

You also talk as if a person on 30K is stuck on that for the rest of their lives. I consider that to be a starter salary for a lot of professions. Meaning wage increases and inflation lessen the burden of the loan over time.

Lets look at the facts based on AIB mortgage calculator and this tax calculator.

This is pre-budget

Person earning 30K has a monthly take home pay of 2,177 p.m
They can get a mortgage of 276K for a 300K home.
But this person is sensible and is putting in a 10% deposit, so mortgage on a 300K home is 270K.

270K for 30 yrs = 1,572 p.m
less 167 TRS = 1405 p.m

Cash left over after mortgage is 772 p.m

Its a stretch but it shows that a person on a 30K salary can afford a 300K house with a 10% deposit and a reasonable 30 year loan. And that is just 1 person.

I know the arguments are that its too much of a stretch. Yes maybe. So your options are:
Buy a cheaper house
Save a bigger deposit
Get a better paid job
Give up going out every weekend
Meet a girl and buy together
Get a longer term (unwise but an option non the less).

You have many options. Why should your only option be sit on your ass and expect everyone to drop their prices so you can get what you want without working for it or making sacrifices?

Don't get me wrong. If you think prices will fall further then by all means sit it out and get a cheaper home if thats what you want. but don't fool yourself into thinking its the way things should be. The way things should be is the way things have always been throughout the generations. People work hard and make sacrifices.

[shenanigans1982]

Originally Posted by 20goto10

The way things should be is the way things have always been throughout the generations. People work hard and make sacrifices.

That is the way it is for the majority of people, but when greed kicked in and all the developers, banks and estate agents could see were dollar signs people became forced to work too hard, too long and make too many sacrifices all for a property they didn't really want.

[gurramok]

Here we go again about 20gto10's definition of affordability.

A buyer should fork out 65% of their net pay according to your calculations, 9 times their wage, this is absurd and laughable and hopefully the banks would not tolerate this sub-prime type mortgage.

mrgaa1 - what is an 'extremely low price'?

[Shambo]

Originally Posted by gurramok

Here we go again about 20gto10's definition of affordability.

A buyer should fork out 65% of their net pay according to your calculations, 9 times their wage, this is absurd and laughable and hopefully the banks would not tolerate this sub-prime type mortgage.

mrgaa1 - what is an 'extremely low price'?

Good points Gurramok- the banks won't- this shambles of a govt will with this Local Govt loan thing they are proposing

[trellheim]

what was wrong with the old way of figuring it ?

10% deposit

2.5 times higher earners salary + 1x lower earners salary is the mortage ceiling

40% of after-tax income should be the absolute max ceiling for the monthly repayment

This, however, would introduce an unwanted level of fiscal prudence.

[20goto10]

Originally Posted by gurramok

Here we go again about 20gto10's definition of affordability.

A buyer should fork out 65% of their net pay according to your calculations, 9 times their wage, this is absurd and laughable and hopefully the banks would not tolerate this sub-prime type mortgage.

mrgaa1 - what is an 'extremely low price'?

There are 2 sides to every equation. 65% is based on wages and price. You choose to focus on one side of the equation and ignore the other. This is the definition of a biased argument.

[gurramok]

Originally Posted by 20goto10

There are 2 sides to every equation. 65% is based on wages and price. You choose to focus on one side of the equation and ignore the other. This is the definition of a biased argument.

Bias is not, common sense it is

Can you explain 'You choose to focus on one side of the equation and ignore the other.'?

What is the 'other side'? Do you mean that a person should fork out 65% of their net wages on a housing unit as it's 'affordable' in your view?

[SimpleSam06]

Originally Posted by mrgaa1

There is absolutely no way house prices will drop 46% as being forecasted.

And your reasoning for this is:

Originally Posted by mrgaa1

but I'm looking at people - the irish people - and the way we are and what we're about. We are survivors and we will move on from this and tell children about the time this all happened.

Moving on from this does not mean a growth in property prices. The survival of the economy and the country as a whole does not equal your survival and the survival of your personal business model.

Originally Posted by smccarrick

By what measure would one decide that a property was reasonably or unreasonably priced?

Well lets look at the fundamentals, supply and demand, and the costs involved in building houses, labour and materials, which are themselves affected by supply and demand.

Rental returns are a fairly accurate reflection of supply and demand, since rent is higher in areas which are in high demand, or larger houses, so it makes sense to figure out the proper value of housing in terms of rental rates.

The question really becomes then what would be the average rental returns in a healthy property market, with a decent supply of houses and a stable population. 8%? 7%? If that is the case, and I would well believe it is, accurate property prices must be around the 12x to 14x annual rental return region. This figure is a reflection of market fundamentals, not skewing factors like cheap credit and poor rental legislation.

Originally Posted by 20goto10

Is it because houses are too expensive or because wages are too low?

We have people moving here from first world, highly industrialised nations like France because of our high wages. We're extremely uncompetitive as things stand on an international scale, regardless of tax incentives, and this keeps away a lot of FDI. If you honestly need to ask that question, you really need to learn a bit more about how a healthy economy functions.

The little tin gods of the property market are gone.

[whizzbang]

65% of take home wage.... at current interest rates... who says interest rates will stay in this range for the next 35 years?