Housing Bubble Bursting

ixoy

ixoy wrote:

I want property right now because I'm in a couple and we want our own space and somewhere to settle down.

I can understand that! Its why I bought when I did - renting has serious downsides in my opinion but I sold up to rent and in the current situation I am more than willing to rent!

I would urge you strongly not to buy even just to wait a few more months to see - I am sure the market is goign to reveal itself to all shortly.

Gurgle

ixoy wrote:

We're looking for a home, not just an investment fund, and that's why I found the whole thing currently frustrating as to whether it's going to continue to decline or if now is as good as time as any (with respect to stamp duty, we'd be buying below 317k so it's a moot point for now).

You get the same answer as everyone else in your situation.

If you plan to buy a 1-bed apartment, expecting to 'trade up' on the equity in a few years, forget it. You could get lucky or you could be stuck with it.

If you plan to buy a house to live in for at least 10 years, then now is a good time to pick one you like (and can afford to make the payments on) and offer a couple of grand below the asking price.

Take advantage of the uncertainty in the market before the estate agents realise whats going on.

ixoy wrote:

I looked at a propety on daft.ie with an asking price of €280k. 1.5 weeks later and it's €274.5k.

Why not offer €270k as they're obviously starting to panic.

Sponge Bob

I have come across a new development near Galway which dropped its asking from €680k to €550k during the past month. None are occupied yet and they seem to have been completed by last christmas.

Thats quite a lot in one go . The information the Sunday Times had last week must be accurate.

jmayo

The only reason to abolish Stamp Duty is to prevent more money been given to our government to p*** away.
The abolishmenyt of stamp duty will only benefit sellers and not the buyer, because the price will be inflated up to what it was previously.

As regards asking the opinions of twenty something FTBs or would be FTBs, as mentioned earlier in the thread, I think the opinions returned would be positive regarding increasing house prices.
Credit has been cheap, house prices have continuously increased.
While in college they may have received bank loans for cars, holidays etc.
They have not experienced the days when all their class mates were catching a plane or boat to try and find work.

The big worry is with increasing job losses (technology, call centers, manufacturing) and the inevitable cutback in construction, with a corresponding drop in tax revenue, who will pay the huge public sector wage bill in the future ?
Will any government cut the deadwood and bring public sector wage spending back to reality ?

Gurgle

jmayo wrote:

The abolishmenyt of stamp duty will only benefit sellers and not the buyer, because the price will be inflated up to what it was previously.

I disagree.

Excluding builders, sellers and buyers are the same people at different times.

Abolishing stamp duty would allow people to move house more easily if they so desired - if for example they wanted to change jobs but the new one would be a painful commute.

The rates are prohibitive at current house prices; even with a 100% mortgage, you have to produce tens of thousands of euro on top to pay yet another unjustified tax.

Its the single biggest lost expense in moving house.

The_Conductor

Well, historical information shows that when First Time Buyers were allowed to purchase second-hand homes, when previously if they wished to exercise their favourable stamp duty rates they had to buy new developments- the price of second hand homes increased almost across the board to the stamp duty threshold of the FTBs overnight.

What people are forgetting is Stamp Duty was a nominal charge associated with the registration of property titles and deeds- and only in exceptional cases did people hit the 6% or higher bands. This duty was not reformed to keep pace with the increases in property prices since the early 1990's. A true reform of stamp duty would return it to its previous quid-pro-quo, unfortunately the government have become intoxicated with the cash-flow it brings in.......

A true reform, when it happens, must be seen to be equitable, and equally benefit everyone across the board. Those FTBs who believe they deserve special attention are forgetting that they will be the apartment dwellers unable to upgrade to a house at some point in the future.....

Death and taxes.......

luckat

The problem with stamp duty is that when it hits a higher level, the tax is charged at that high level on the *whole* price, rather than it working like income tax, where each band is charged at a separate level.

Reforming that would make a big difference.

What won't help is taking it off cheap houses - that'll just cause the cheap houses to rise in price.

And it's not just first-time buyers who are hit by stamp duty: I work with someone who wanted to move house to be near a better school for his kids, but the stamp duty on the purchase proved a disincentive, so he's staying where he is. (Good thing, really, since our jobs are going!)

This site - http://www.irishpropertywatch.com/ - shows price drops on myhome.ie. 799 dropped prices are currently listed, the leading one dropping from €1.25m to €800,000.

tHE vAGGABOND

What people are forgetting is Stamp Duty was a nominal charge associated with the registration of property titles and deeds- and only in exceptional cases did people hit the 6% or higher bands. This duty was not reformed to keep pace with the increases in property prices since the early 1990's. A true reform of stamp duty would return it to its previous quid-pro-quo, unfortunately the government have become intoxicated with the cash-flow it brings in.......

thats it in a nutshell..

Houses which were 100k 10 years ago are worth millions now! Where the stamp duty has hardly moved in 10 years [it moved once, by a small amount in a budget 4 or 5 years ago as far as I remember][

Where if the stamp duty was even index linked it would not be so slow/backward and bed as it is..

Well, all I know is that most of my mates and myself wont be voting for either of the government parties come the election in May. Its the only way they will listen, it seems..

A Random Walk

luckat wrote:

The problem with stamp duty is that when it hits a higher level, the tax is charged at that high level on the *whole* price, rather than it working like income tax, where each band is charged at a separate level.

Reforming that would make a big difference.

A big difference to who? Income tax is high in this country, "reforming" it (i.e. reducing it in half) would make a big difference to me, but I can't see it happening. Since when did putting more money in the hands of property owners become a government priority alongside health, crime etc?

SkepticOne

A Random Walk wrote:

Since when did putting more money in the hands of property owners become a government priority alongside health, crime etc?

Since a group of Sunday Independent journos started trying to sell their property porfolios in a slumped market.

Sponge Bob

SkepticOne wrote:

Since a group of Sunday Independent journos started trying to sell their property porfolios in a slumped market.

LOL, the Phoenix has dissected their large portfolios recently. Of course IF the same government is re-elected they will do nothing to stamp duty because the public obviously does not consider it an issue.

I would say the only effect of the Indo banging on about it is to create uncertainty in the anticipation that it may change after the election, they have not created a profound aversion to it simply becuase a first time buyer can buy below the stamp duty threshold of €317k in most of the state...but not where Indo journos like to live of course.

Its the next generation of Indo journos I care deeply for , not . They will end up in leafy Lucan , admirable Adamstown and beautiful Balbriggan and shall never grace the Horseshoe bar as their local unlike the last generation .

Maccattack

ixoy wrote:

Well that's terrible. I want property right now because I'm in a couple and we want our own space and somewhere to settle down. We don't want to share a place and we want security of tenancy - living in a rental situation, there's only a degree of control on how you live and even less on what you can do with the place.

We're looking for a home, not just an investment fund, and that's why I found the whole thing currently frustrating as to whether it's going to continue to decline or if now is as good as time as any (with respect to stamp duty, we'd be buying below 317k so it's a moot point for now).

Look. The thing about property is that like everything else there are peaks and valleys

Buying a house should be a long term thing. So what if you buy a house today for €350k and its worth €300k next week. You still wont lose anything.

You have to think long term. by the time you come to sell or you pay of your loan or whatever it will be worth more than what you paid.

The simple rule is. If you can afford to buy now. Buy now.

[QUOTE=Maccattack
You have to think long term. by the time you come to sell or you pay of your loan or whatever it will be worth more than what you paid.

The simple rule is. If you can afford to buy now. Buy now.[/QUOTE]


Totally agree with you on the long term thing. A house is somewhere to live in for most people. However the past few years the term "starter home" was drilled into people. A crash for people who bought "starter homes", be it townhouses or apartments, will be disastrous.

I cant agree with your simple rule however! It is ok for normal market conditions. But in a bubble, no. Its ok for very wealthy people in a bubble.
If you are aware that prices will decrease then why buy now when in a short peroid of time it will be cheaper? Why waste money? Especially when there is so much money involved. People work damn hard for their money, all the traffic and stress in modern Ireland - so why throw away this money?
I think the simple rule for a normal market is buy now if you can afford it but the simple rule for a bubble should be wait and see!

Maccattack

Deleted User wrote:

...wait and see!

So when do you decide to buy? Who could possibly predict when prices would bottom out?

Prices wont drop by hundereds of thousands. People might be a bit nervous now but that will change and people will start buying again.

If you need a house. by a house.

Afuera

Maccattack wrote:

So when do you decide to buy? Who could possibly predict when prices would bottom out?

The price will bottom out when positive yields return for investors and when the cost of renting vs buying returns to fundamentals.

I think that historically the annual cost of renting has been around 10-12 times the cost of buying. That would mean that a property costing 380,000 should be able to command a rent of about 32,000 every year (i.e. 2,650 p/m).

Maccattack wrote:

Prices wont drop by hundereds of thousands. People might be a bit nervous now but that will change and people will start buying again.

It could take many years for it to reach that stage.

Maccattack wrote:

If you need a house. by a house.

Far too simplistic.

babytooth

Maccattack wrote:

So when do you decide to buy? Who could possibly predict when prices would bottom out?

Prices wont drop by hundereds of thousands. People might be a bit nervous now but that will change and people will start buying again.

If you need a house. by a house.

you buy when its cheaper to pay a mortage than rent.

Renting is more convient than a mortage and therefore should be more expensive due to liquidity and ease of use and no responsibility for maintence.

At the moment, renting is cheaper, but upfront with rental payment vs mortage payment, not factoring in maintence costs, management charges, building insurance, cost of sale, lack of liquidity...etc...etc..

it just doesn't add up.

To say you should buy if you can afford it looks just at the affordability angle and not the value for money angle. why pay more than what its worth.

I see a suit i like for 400 euros, i need a suit, but i can borrow my brothers, or i can wait till next month when the sales are on and get it for 200 euro...i know what most ppl do in those situations.

Now magnify the amounts involved by a factor of a 1000....gets frightening...especially as you can't bring it back...or exchange it without paying massive stamp duty.


But i'm blue in the face explaining simple economic ideas to ppl who don't want to know, experience will be an eye-opener and the best lesson they could ever hope for...

enjoy it.

Maccattack

Maccattack wrote:

If you need a house. by a house.

You could also use money instead of coal

ixoy

Well renting doesn't offer much security - the landlord can, with an appropriate degree of notice, decide he wants to sell.
There's the fact that you've no room to really refurnish the place - your freedom to mould it to your tastes are limited and thus there's that pervading feeling of always living on someone else's property.

I crunched some numbers there and a mortgage repayment would, monthly, work out equivalent, or so, in an area like Balbriggan to renting in the town (cheaper in the case of new city centre appartments). Obviously, there's a convenience factor but surely that has to weighed against the points above?

Or I'll place it in other terms - say I was to wait out for this bubble burst. We rent for another year in the CC. That's a cost of about 1200pm for an annual total of 14400. On the property prices we're looking at, we'd have to see a 5% propety price drop over that period to make it a poor investment and we'd have lacked any permanence during this period. Or am I missing something in this regard?

Maccattack

babytooth wrote:

But i'm blue in the face explaining simple economic ideas to ppl who don't want to know, experience will be an eye-opener and the best lesson they could ever hope for...

enjoy it.

... and what 'experience' of this have you had? Buying a suit today or waiting for a sale is a poor analogy.

People need houses more than suits.

Property investment is a global thing these days. Yes prices may drop a bit but shrewd investors will jump in and pick up the bargains and wait for the inevitable rises.

If i was a first time buyer with the finance and saw a house i liked i would buy it and not 'wait and see'.

You could spend thousands renting while you wait or you could be sitting in your own house and getting on with life.

A Random Walk

ixoy wrote:

Or am I missing something in this regard?

I'm not sure how you are arriving your figures from to be honest - how are they being calculated? Renting at the moment is cheaper and makes more sense from a purely financial basis pretty much throughout Dublin at the moment. Note I said financial, you may value security of tenancy over the financials.

Remember that over the lifetime of a mortgage you of course pay off more than the mortgage because of the interest element. So if you pay nothing off of (say) a 400,000 house, at 4.5% you'd owe 418,000 after one year.

Baby_tooth is correct in what he says, at the moment from a financial point of view renting is no-brainer. I haven't seen a single housing bull use anything other than invective and peronal insults to justify their arguments that house prices will increase, whereas BT has had plenty of facts and figures to demonstrate his arguments. Put simply, if you're paying more in interest than you would pay in rent, assuming house prices remain steady, you are financially worse off.

Again, you may choose qualititative factors over financial factors in your decision to rent vs buy.

Ioxy - I agree with your points on security - renting v buying and all that but simply buying because you can afford to is tantamount to throwing money away
It just doesnt make sense in my book!

Calina

ixoy wrote:

I crunched some numbers there and a mortgage repayment would, monthly, work out equivalent, or so, in an area like Balbriggan to renting in the town (cheaper in the case of new city centre appartments). Obviously, there's a convenience factor but surely that has to weighed against the points above?

Or I'll place it in other terms - say I was to wait out for this bubble burst. We rent for another year in the CC. That's a cost of about 1200pm for an annual total of 14400. On the property prices we're looking at, we'd have to see a 5% propety price drop over that period to make it a poor investment and we'd have lacked any permanence during this period. Or am I missing something in this regard?

What is missing from this comment is an assessment of the cost of inconvenience. As in, if you are working in town, but living in Balbriggan, then you have to add the cost of commuting to the cost of the interest on the mortgage.

Assuming you decide to use the train, a taxsaver rail and bus Dublin area will cost you €980. Have you included that? Assume you drive, have you assessed the amount of time you will lose to traffic jams? Can you put a figure on how much money that time is worth to you?

I'd also add that on other fora - I'm thinking daft in particular - some estate agents are claiming that property prices have falling by up to 15% in parts of Dublin. South city Dublin. You need a fall in excess of 5% in Balbriggan to start making a loss. I can tell you some (relatively expensive two bedroomed) properties are down by about 10% in Swords - and even so they are taking a monumental amount of time to sell at the moment. The less expensive ones are down by around the same percentage I think.

Of course, if it is important to you to be able to paint the walls, then you probably can't put a figure on that. But I put a call on the commuting time. There's no point having a house whose walls you can paint if you're not around that much to actually look at them.

(edit - public transport ticket price)

Zambia

I agree with a house purchase in some ways but as far as financial I cant.

As we all know supply is still rising http://daftwatch.atspace.com/

This will equate to prices falling, as we all are seeing. This holds true in the outer areas of Dublin like Balbriggan

If you want a house in this zone I would say wait build up any cash reserve and you may pick up a bargain in a year as people just want shut of certain ex rental propertys.

We really should start asking when the slide will end...

ixoy

Calina wrote:

Of course, if it is important to you to be able to paint the walls, then you probably can't put a figure on that. But I put a call on the commuting time. There's no point having a house whose walls you can paint if you're not around that much to actually look at them.

I think that's a valid point and it does prey on my mind. A friend of mind lives in Balbriggan and works in the CC as I would be. He likes his apartment and the area but he has pointed out the commute to me as a factor. It's not being hung up on Balbriggan but that it appears to be one of the few affordable areas in Dublin for a first time buyer where I'd get a choice.

As to the waiting game - there's the counter-argument that I made previously regarding rent and the project min. cost of €15k for one year for a 2-bed. Rents are also rising and houses failing so the savings between the two are surely narrowing to some degree. At what point this goes in definitive favour of buying, is something that I can't determine.

Obviously, it's all speculative but what posters here seem to be saying is that I'd be better finding somewhere to rent, even at a typical cost of €1.2 p/m or so and waiting for 9-12 mo. to observe the propety market rather than rushing into it now. Would I be right?

Zambia

ixoy wrote:

Obviously, it's all speculative but what posters here seem to be saying is that I'd be better finding somewhere to rent, even at a typical cost of €1.2 p/m or so and waiting for 9-12 mo. to observe the propety market rather than rushing into it now. Would I be right?

I would say yes , if you do not need buy a house right now I would rent. If you monitor this forum I am sure you will be fore warned of the signs of any steadying of the market.

A Random Walk

A Random Walk wrote:

Remember that over the lifetime of a mortgage you of course pay off more than the mortgage because of the interest element. So if you pay nothing off of (say) a 400,000 house, at 4.5% you'd owe 418,000 after one year.

Sounds like, not the way to look at it, to me.
Surely one or two tennants would more than clear the interest element of that loan or at the very least add to the lifetime increase in value mathematics.
I know you will be paying tax on the rental income at the higher marginal rate but still.
Par example 60pw x 4 x 3 /100 x 60 x12 = 5184

Add a conservative 2000 annually for their share of the bills and a notional 1000 in mortgage relief and you have €8000 and probably a lot more of that €18k
Compound interest works in reverse too obviously so it's unlikely that those on a 4.5 rate are going to be oweing 18k extra of course at the end of each year,it's going to be a sliding downards number.

ixoy wrote:

I think that's a valid point and it does prey on my mind. A friend of mind lives in Balbriggan and works in the CC as I would be. He likes his apartment and the area but he has pointed out the commute to me as a factor. It's not being hung up on Balbriggan but that it appears to be one of the few affordable areas in Dublin for a first time buyer where I'd get a choice.

As to the waiting game - there's the counter-argument that I made previously regarding rent and the project min. cost of €15k for one year for a 2-bed. Rents are also rising and houses failing so the savings between the two are surely narrowing to some degree. At what point this goes in definitive favour of buying, is something that I can't determine.

It's the exact same decision as say 10 years ago only the numbers have changed for the worse.
The numbers in terms of how everybody values their time and in how much you have to spend.It's a fact of life that I doubt is going to change.I think procrastinating about it should be avoided and a decision should be made.It might be the wrong one lifestyle wise or perhaps financially but at least it's made.
Over the longer term though I think you are better putting money into your own pad if you can afford it and cancelling all savings and pension funds.
Your property is your pension.
I mean if you think you can have a reasonable amount of money to live and enjoy yourself after your mortgage payments each month then shur in 20 or 30 years time when it's paid off - you will have a house worth probably in tomorrows terms at least what it is worth today and you could flog it to an equity release or flog it altogether and rent somewhere you want to be in your 60's and have another lease of life.

It's a gamble but a reasonable flurry in my opinion- though doubtless a lot of people will disagree.

miju

so let me get this Tristame you are saying buy now sell your house and then rent in your 60s when security is more important ..... lol

ronbyrne2005

I guarantee that waiting to buy from this point on will be well worth it. No point overpaying and crippling your lifestyle for decades by overpaying. Even paying 1200 a month for rent you will still be better off waiting. Im sure there is things you can do to a rented place to make it feel more like your own place,you need to be imaginative in that regard. As someone else said buying miles from work just to own something doesnt make much sense, commuting costs(in time and monetary terms) are a big factor and if you want to sell in ten years to buy a house or aprtment closer to city/work you may find you have very little equity in the property if prices drop substantially(remember even if prices stay at current levels it is in real terms falling in value due to inflation). When thinking of buying somewhere compare what an interest only mortgage on the property would cost compared to what the rent is on an identical property in the same location, don't comare balbriggan to dublin city as its apples and oranges.
P.S Get an older landlord who is less likely to sell up so you can stay in a rented place longer.
http://www.moneyweek.com/file/27510/the-european-property-bubble-begins-to-hiss.html

Calina

Tristrame wrote:

Let me put it to you this way.
You may have a huge value in your house in your 60's and a state pension which if unlocked to money that you can enjoy life with doesn't equate to a lack of security to my mind.

Let me see if I get this right: you are suggesting that anyone on a private pension cashes in and buys a house because the house is their pension...right?

Okay...so are you suggesting equity release for a sixty six year old to uhem, get at the assets locked up in the bricks and mortar? Because if you are, I'm telling you you'd be better of going taking a hike. Or perhaps, cashing in and downsizing which, given much of today's property, might not be an option. Even the big houses that they are building are fairly small.

Most sensible people would suggest that both a house and a pension is desirable. In the position where I have to choose one, I'd go for a pension in the short term because the longer you have built it up, the more it's worth to you in the long run.

The point is this: property values are falling. Anyone with any sense would normally wait it out a bit and see just where they are going. But then, if this country had people with sense in it in general, we wouldn't have an asset bubble.

In any case, regardless of the property sale market, I would say that it is desirable that tenancy legislation is improved still further so that buying does not become an imperative.

The_Conductor

Forum rules being applied in this forum are similar to those in other forums- namely that if you disagree with a post, you refute the post, and do not attack the poster. Any further posting to this thread (or elsewhere in this forum) which breaks this fundamental rule will result an automatic banning for the offending party.


Shane