Won't ever own a house !!

whizzbang

FillSpectre wrote:

Link not working

try this one...
Linky

seriously. this is all that is up there for 200k!

ambro25

Keyser Soze 5 wrote:

Rent is a waste of money if you can afford to buy. You're paying someone else's mortgage when you could be paying your own.

Not when your rent is about half of the mortgage repayment equivalent.

My alternative to the 'rent is bad / buy is good' is, in view of the above ratio, to rent 'big' (e.g. 3-bed) whilst "needed" (family) & invest besides, then buy later in life when investments mature and 3-bed 'big size' not needed (if buying at all... could just as well rent smaller = rent decrease, after adjustment).

Afuera

FillSpectre wrote:

OCEB have been continuely wrong on the subject so becasue they say it doesn't make it happen. It is speculation that they do get wrong.

They have identified the risk of a property crash in Ireland as 50/50. If interest rates move up by 1% according to their formulas for calculating the probability of a crash it becomes almost a certainty (as it currently stands in Denmark).

They are not saying it's going to happen either way, they are just identifying the risk and probability of something like that happening. Measures could be taken to prevent it or some unforeseen event could happen to swing it one way or another.

Currently though it appears that betting against a property crash has the same odd as flicking a coin. Not surprisingly that might sound a bit risky to a lot of people nowadays who are being expected to bet the next 40 years of their life against something like this happening.

Kinetic^

ambro25 wrote:

Not when your rent is about half of the mortgage repayment equivalent.

My alternative to the 'rent is bad / buy is good' is, in view of the above ratio, to rent 'big' (e.g. 3-bed) whilst "needed" (family) & invest besides, then buy later in life when investments mature and 3-bed 'big size' not needed (if buying at all... could just as well rent smaller = rent decrease, after adjustment).

You know you're taking a gamble with your investment like we're taking a gamble with a house, the only difference between the 2 is that I'll have a house regardless and you could be left with nothing!!!

Sleepy

Keyser, read smccarrick's posts and keep reading them until you understand them. Look up some of the terms if you need to.

Maybe you're intentionally posting in overly simplistic terms and if that's the case I apologise but it's that largely that overly-simplistic viewpoint that buying is always better than renting that has created this bubble economy.

masterK

I find it amazing that people are saying because rents may be cheaper now than a new mortgage that they are somehow better off renting. Remember rents will rise, the amount of a mortgage will always stay the same.

For example, Mr A has a mortgage of 1500 on a 3 bed semi over 25 years, while his next door neighbour Mr B is renting an identical house but only paying 1000 in rent. Several poster have stated that Mr B would be better off because he is paying less per month.

If we were to work out how much Mr B would pay over 25 years assuming rents rise at 4% per annum, he would work out paying just under 500k in total while Mr A would have only payed out 450k, so Mr A would have payed out 50k less and he now owns his property and Mr B is left SFA for his 500k.

ambro25

Keyser Soze 5 wrote:

You know you're taking a gamble with your investment like we're taking a gamble with a house, the only difference between the 2 is that I'll have a house regardless and you could be left with nothing!!!

Well, let's not go into all this again. There are just too many variable on both sides of the fence to be so categorical: who's to say you will be able to repay your mortgage in 10 years' time? next year? And if -God forbid-you were to default bad enough for the place to be repo'd, you will lose your house and every and any repayments ever made. Now, who's left with nothing?

As for investments, it's all down to risk (and I fully admit that buying a main property is a form of investment, usually at the far end of the low scale) and the spreading of it: you'll not make a 50% net gain without taking some risks, but then you'll not make a big pile of cash with €100 per month at 4% or 5%, so you take risks with some portion of your cash and less risks with another portion of your cash - the proportion is down to you. But the 'safe' portion will always be there no matter what - it's not the bank's to begin with, but your house is until you've paid your mortgage in full

EDIT @ MasterK - you are forgetting that, in the specific context of Dublin market and FTBs, your maths don't stack up: rent is usually half of the equivalent mortgage for the rented property. And in 'traditional' mortgages, for the first half of the term (e.g. 15 years of a 30 years mortgage) all you're paying off is interests, not the capital. And I've not even mentionned interests-only mortgages, but draw conclusions for yourself...

Kinetic^

Sleepy wrote:

Maybe you're intentionally posting in overly simplistic terms and if that's the case I apologise but it's that largely that overly-simplistic viewpoint that buying is always better than renting that has created this bubble economy.

This is the route I'm taking, there's enough material in this thread already without adding the same crap again.

As I'm relatively new to the housing market after only purchasing my first home (jointly with my gf) about 9 months ago. Buying was always going to be our 1 and only option. We wanted to have something as ours and felt that it made financial sense to buy rather than rent.

Without a doubt the people renting similar apartments in my block (some are even paying less for a bigger apartment) are paying less then they would for a mortgage but while their money has been going on rent, ours has been going off the mortgage and we've earned about about 25% in appreciation in the time we have it. This could easily be eradicated tomorrow if there was a crash so we know we're taking a risk. I know that if a crash happens, out place could be worth a 100k and we'll be paying off a 240k mortgage. It can be seen as a no-brainer by alot of people but if I could predict the future I'd be alot richer.

But at this moment in time, and for the near future I'm going to buy rather then rent, in fact I'm going to be borrowing more in the next 12 months because I want to move back to Rathfarnham which is where I(and my gf) grew up and we see it as a lifestyle choice - nicer area = more money and we're willing to pay a higher mortgage to have our own home.

How long have people been talking about the house market collapsing? And it still hasn't happened, sure it's probably overdue but when you've got the mortgage companies coming out with more and more products to enable affordability the market will continue to rise but I know the longer we go without a crash the harder it will affect the economy when it does happen. I give about 12 months before the banks will have 100%+ i.e 105% mortgages coming out and this will have further impact upon the crash.

What do you suggest I do now though? Sell my property and move back home/rent and leave the 100k(est.) of profits made in a bank account?? Or re-invest in another source??

ambro25

Keyser Soze 5 wrote:

What do you suggest I do now though? Sell my property and move back home/rent and leave the 100k(est.) of profits made in a bank account?? Or re-invest in another source??

Not at all. You're buying to live in, so any other considerations are moot
I would be in the pro-rent side of the debate, but note that there is a fair amount of incidence for it - namely, I moved to Ireland in late 2004, when the market was (in my opinion) vastly overvalued already and I'm not -at this stage- entertaining long term plans here. So -at this stage- buying makes no sense when my investments'growth outpace the IE property market growth: I'd be doing exactly what you suggest (in the quote above), but in reverse

ionapaul

masterK wrote:

I find it amazing that people are saying because rents may be cheaper now than a new mortgage that they are somehow better off renting. Remember rents will rise, the amount of a mortgage will always stay the same.

For example, Mr A has a mortgage of 1500 on a 3 bed semi over 25 years, while his next door neighbour Mr B is renting an identical house but only paying 1000 in rent. Several poster have stated that Mr B would be better off because he is paying less per month.

If we were to work out how much Mr B would pay over 25 years assuming rents rise at 4% per annum, he would work out paying just under 500k in total while Mr A would have only payed out 450k, so Mr A would have payed out 50k less and he now owns his property and Mr B is left SFA for his 500k.

Incorrect analysis - please assume that Mr B invested the €500 he saved by renting each month in an efficient manner. Now work it out.

Sarn

masterK wrote:

For example, Mr A has a mortgage of 1500 on a 3 bed semi over 25 years, while his next door neighbour Mr B is renting an identical house but only paying 1000 in rent...
If we were to work out how much Mr B would pay over 25 years assuming rents rise at 4% per annum, he would work out paying just under 500k in total while Mr A would have only payed out 450k, so Mr A would have payed out 50k less and he now owns his property and Mr B is left SFA for his 500k.

You're neglecting the fact that interest rates can rise and fall altering how much the mortgage repayments are. There is also the risk of defaulting on mortgage repayments if interest rates go too high. Sorry for the doom and gloom. There are also the potential savings and increased quality of life that a renter has.

Rents at the moment have been reasonably static for the past 5 years, recent investors (say with interest only mortgages on their investment property) are trying to pass the interest rate hikes on to their tenants, long established investors are hit to a smaller degree, do not need to raise costs as much (smaller mortgage), potentially having lower rents. Tenants will up and move.

My personal circumstances (single and no one to buy with) mean that it is not cost effective or worthwhile for me to buy at the moment. It was very hard for me to get over the "rent is dead money" frame of mind. I will keep saving, pay rent, find a good woman (preferably with property ), then buy.

The_Conductor

ionapaul wrote:

Incorrect analysis - please assume that Mr B invested the €500 he saved by renting each month in an efficient manner. Now work it out.

500 a month at 8% return tax free (as is offered by Irish Life Forestry fund) compounded over a 25 year period would give you hmmm a little under 5.9 million- allowing for inflation averaging 2.5% over the term would work out at around 337,715k in todays terms. A lower inflation rate of 2% would result in 342k in todays terms.

Hmmmm I think my excel table is right......

That is a firm 340k against a house that while it may cost 450k today may be worth a lot less in 2 or 3 years time.

So- its not reasonable to state that Mr. B's rent is going nowhere.

Note: for the above exercise I discounted the 4% rise in annual rents. I also discounted everything into todays values for ease of comparative values.

hmmm

smccarrick wrote:

That is a firm 340k against a house that while it may cost 450k today may be worth a lot less in 2 or 3 years time.

Not to mention that if you have that invested in a pension, you are gaining an extra 40%.

Plus for those who say "my house is my pension" - how does that work exactly - you sell it when you are 65 and move where? What income do you live on?

I'd rather have a large income and pay rent than to own one large asset and have no income.

madonnar

Hi all
Come and buy my beautiful olde world cottage in R:D oscommon with over 1 acre of productive land and live the good life, catch fish in the nearby rivers and lakes (5minutes walk)
If you cannot find a job go on welfare..why not everybody else around is doing it!:D

FillSpectre

hmmm wrote:

Not to mention that if you have that invested in a pension, you are gaining an extra 40%.

Plus for those who say "my house is my pension" - how does that work exactly - you sell it when you are 65 and move where? What income do you live on?

I'd rather have a large income and pay rent than to own one large asset and have no income.

MY house is my pension does rely on selling the place or renting it out. Downsizing is part of the plan. Having a large income is pointless if you have to pay a large portion out for accommodation.

There is income.

ionapaul

I think having property as part of your retirement / pension portfolio is an excellent idea - but, like everything else, should not make up such a proportion of your portfolio or investments that your future is overly reliant on one asset class! The government offers such fantastic, tax effecient benefits for investing in standard, equity based pensions that people would need to be financially illiterate to ignore them (well, so long as you're paying income tax at the highest rate, in any case).

hmmm

FillSpectre wrote:

MY house is my pension does rely on selling the place or renting it out. Downsizing is part of the plan. Having a large income is pointless if you have to pay a large portion out for accommodation.

There is income.

OK so let's say you've turned 65, you've put all your money into buying a big property and you now own it. You're going to rent it out and live where - how are you going to pay the rent? If you sell it instead where are you going to live and are you not just paying rent again? I presume you own a large house elsewhere, so when you turn 65 you will sell, leave all your friends and family and the neighbourhood you have lived in and move to an apartment in City West, is that the plan?

garred

hmmm wrote:

Not to mention that if you have that invested in a pension, you are gaining an extra 40%.

Plus for those who say "my house is my pension" - how does that work exactly - you sell it when you are 65 and move where? What income do you live on?

I'd rather have a large income and pay rent than to own one large asset and have no income.

While I do agree with what you are saying it is a bit too generalistic. When people get to retirement age their circumstances change: they will have no kids so can downgrade and invest/live off the profit of the sale. They may have ideas of living down the country or abroad where even if buying they will still make a sizeable profit on their current residence.
I have an investment property that I consider my pension and there has been no investment/pension/policy, etc that has come anywhere near the gains I have currently made on it.

Even if someone has their primary/only residence as their pension. Look forward 25 years when say their mortgage is paid off and compare this to your situation when your pension matures. Who do you think would be the better off financially. Now if that same person at the moment is struggling to meet their current mortgage repayments I will agree that it is crazy. However if that same person is comfortably meeting their mortgage and has factored in % increases do you not agree that this is a better investment than a pension.

JimmySmith

I wouldnt worry about being able to afford a house. Every one of us who has ever bought a house has at some point wondered whether we will ever be able to afford a house. And look what happens. You get a bit older, you make more money, you buy a house.

Also, I think there are enough people waiting in the 'i'll wait for the correction' camp to actually make sure that property prices dont crash. It happened in 2001. The economy started to squeeze, house price growth slowed significantly. Everyone thought the crash was coming. Enough waiters decided to buy and boom, prices started rising again and the rest of the waiters jumped as fast as they could before they got left behind again.

I see house prices falling at some point but there will be enough waiters who decide to buy that the price drop stops and a tiny rise happens, next thing they all jump on again.

Make no mistake, it is a property ladder. You may not want on it, but some people do, and if you do and you cant start with a 3-bed, start with a 2 bed or 1 bed apartment.

whizzbang

JimmySmith wrote:

I see house prices falling at some point but there will be enough waiters who decide to buy that the price drop stops and a tiny rise happens, next thing they all jump on again.

thats assuming the banks are still giving monster loans

DublinWriter

hmmm wrote:

OK so let's say you've turned 65, you've put all your money into buying a big property and you now own it. You're going to rent it out and live where - how are you going to pay the rent? If you sell it instead where are you going to live and are you not just paying rent again?

Haven't you heard all those ads on the radio for Equity Release products (e.g. SHIP), or is it just me who's sad enough to listen to Radio 1 all day?

Anyways, equity release. You sell anything from 10% to 80% of the value of your house to one of those companies and you can stay living there until you die.

whizzbang

DublinWriter wrote:

Anyways, equity release. You sell anything from 10% to 80% of the value of your house to one of those companies and you can stay living there until you die.

How does that work, they give you money and get your house when you die? what if the house price goes down?

DublinWriter

hmmm wrote:

Plus for those who say "my house is my pension" - how does that work exactly - you sell it when you are 65 and move where? What income do you live on?

Equity release. See my above posting.

DublinWriter

whizzbang wrote:

How does that work, they give you money and get your house when you die? what if the house price goes down?

They basically value your house at the market prices at the time when you want the cash.

If house prices go down, then that's their though shit.

DublinWriter

smccarrick wrote:

500 a month at 8% return tax free (as is offered by Irish Life Forestry fund) compounded over a 25 year period would give you hmmm a little under 5.9 million- allowing for inflation averaging 2.5% over the term would work out at around 337,715k in todays terms. A lower inflation rate of 2% would result in 342k in todays terms.

Single Fund investments are just as volitile as real estate investments, even more so.

Even if there is a crash, the effects will be short term.

What market has *never* bounced back from a crash?

whizzbang

DublinWriter wrote:

They basically value your house at the market prices at the time when you want the cash.

If house prices go down, then that's their though shit.

sounds too good to be true! can anyone do it when they think the market is at the top? "Hi I'm 31 and I'd like you to give me the value of my house and you can have it when I die" nice...

DublinWriter

whizzbang wrote:

sounds too good to be true! can anyone do it when they think the market is at the top? "Hi I'm 31 and I'd like you to give me the value of my house and you can have it when I die" nice...

You'd only be elligable for such products if you're over 65.

Think about it. Banks are not idiots.

whizzbang

DublinWriter wrote:

You'd only be elligable for such products if you're over 65.

Think about it. Banks are not idiots.

damn it...

ambro25

DublinWriter wrote:

Haven't you heard all those ads on the radio for Equity Release products (e.g. SHIP), or is it just me who's sad enough to listen to Radio 1 all day?

Anyways, equity release. You sell anything from 10% to 80% of the value of your house to one of those companies and you can stay living there until you die.

Here's hoping you told your descendance they're not getting any inheritance

"You have the choice as to what percentage of your property you wish to sell at the outset;

You retain the right to occupy your property for life and your legal rights are ring-fenced in a contract that your solicitor will advise you on;

Your family or other nominees will have the first option to purchase the percentage that S.H.I.P. owns once the house is vacated."

A simpler option (cheaper to your descendance and just as lucrative for you) would be for your family to pay you until you peg. SHIP is a suckers' product or a last-chance saloon for those who (at term) will have put everything in the mortage and nothing in the pension (so, still a suckers' product ).

Still, I suppose it saves you worrying about a pension (and allows you to pay a mortgage off by retirement age - probably).

DublinWriter

ambro25 wrote:

Here's hoping you told your descendance they're not getting any inheritance

The way it's going with long-term health care for the elderly in this country, most of us will have to sell off equity in our own homes to pay for our care, etc.

So much for the Celtic Tiger - survival of the fittest.