After the crash

uberwolf

This could be put in the bubble burst thread, but I have a specific topic to discuss. Which presumes the bears have it.

I'm broadly siding with the bears in the bubble thread. We've seen the peak, and the speculation is now how far does the crash go.

Most of the users of boards don't have the benefit of the same level of perspective as the generation ahead of us. My parents were in the UK in the late 80's. Without being burned they viewed the crash up close.

Her view on my own circumstances as an FTB was that if I didn't need to sell then it was no sweat. Grossly inflated 80's prices in the UK were quickly surpassed a number of years later in the next surge, wiping the losses experienced. Such is the nature of cycles.

Are the bears concerned for the next year, or the next decade? If they're not buying now, when will the right time be? Will they be propping up the rental market until then?

patrickolee

Well I would probably be considered on the bull side of the debate in the bubble thread, but I don't feel myself that I am. Just argue against some of the incorrect assertions being made. I do think there will be a crash/fall/bubble burst, but it won't be as spectacular as some are hoping for/predicting.

As regards your question, I suppose one could say if you hung on for a year or maybe two, you could make a saving on your purchase price and thus a reduced monthly repayment. It would be tricky, as I guess you are eluding to, to judge it just right and buy at the absolute bottom. It's gambling with your home and potentially wasting two years repayments, spending it on rent instead. Difficult one to answer.

P.S. I too had a relation (sister) who got caught badly in the uk 80s crash. She ended up with two houses, when a sale in the chain fell through. She struggled on with both mortgages for 3 or 4 years by renting one out to the corpo. Now she's laughing as the prices are way over what she bought for. But it was tough for her for a while.

uberwolf

patrickolee wrote:

P.S. I too had a relation (sister) who got caught badly in the uk 80s crash. She ended up with two houses, when a sale in the chain fell through. She struggled on with both mortgages for 3 or 4 years by renting one out to the corpo. Now she's laughing as the prices are way over what she bought for. But it was tough for her for a while.

For those 3 years she looked like a mug though!

it serves my question though. Will I never get my money back for my apartment, or will I just have to wait a few years - theoretical apartment, I don't want to get into specifics of carrick on shannon s-23 apartments!

stepbar

Once the section 23 benefits are exhaused you are indeed screwed. They are like a bad plague in Leitrim. They are SFA people who could afford a 200k mortgage. If they can they dont work in Leitrim, they work in Sligo or surrounding counties. As it is I would imagine that you are loosing money; am I right or wrong in making that assertation?

I know a chap who has a 1 bed up for sale in Portarlington (no s23), he has no offers on the table and is struggling to get viewings, nevermind sell.

The_Conductor

Unfortunately there is a very good reason why the apartments in Carrick were built with Section 23 support- quite simply because the tax incentives were about the only reason anyone would buy one. Personally I do not think that Apartment complexes in Carrick-on-Shannon are viable in the medium term, and once the Section 23 relief expires, that unless you are happy enough to stay there long term, that you haven't got a snowballs chance in hell of getting your money back.

patrickolee

uberwolf wrote:

For those 3 years she looked like a mug though!

Ack well, I don't think she was too worried about that tbh. She was just unfortunate to get caught in a chain... and she wasn't alone. She was very stressed though.

A Random Walk

I wouldn't worry too much about picking the right moment to buy. For most of the past century, house prices varied by a % or two a year, not the 10-20% variance of the past decade. Once this excess bubble froth is blown off, I'd expect houses to resume their normal economic cycle.

I'm expecting prices to fall, fall some more and then reach a relatively stable level. This is based on the experience of the past, I'm sure some bulls will be along shortly to tell you "this time it's different". It never is.

What's this comment about "propping up the rental market" about? I know plenty of people (including myself) who are reasonably well off, happy to rent and don't want to buy. You need to get this attitude out of your head that renters are merely frustrated wannabe homeowners.

patrickolee

A Random Walk wrote:

I wouldn't worry too much about picking the right moment to buy. For most of the past century, house prices varied by a % or two a year, not the 10-20% variance of the past decade. Once this excess bubble froth is blown off, I'd expect houses to resume their normal economic cycle.

I'm expecting prices to fall, fall some more and then reach a relatively stable level. This is based on the experience of the past, I'm sure some bulls will be along shortly to tell you "this time it's different". It never is.

What's this comment about "propping up the rental market" about? I know plenty of people (including myself) who are reasonably well off, happy to rent and don't want to buy. You need to get this attitude out of your head that renters are merely frustrated wannabe homeowners.

Just out of interest, what age are you?

uberwolf

You need to get this attitude out of your head that renters are merely frustrated wannabe homeowners.

that's an aggressive turn of phrase, presumably you're frustrated by meeting this attitude a lot? What I meant is as follows, without reference to those who are renting by choice and content to do so, there will be a lot of people who are unable to buy even at any reduced price - because the banks having been stung will tighten the purse strings.

Reducing the number of potential purchasers means that the rental market is in better stead.

What does this mean for the post crash environment?

A Random Walk

uberwolf wrote:

Reducing the number of potential purchasers means that the rental market is in better stead.

What does this mean for the post crash environment?

In the short term when sellers are not willing to reduce the prices they are selling at it means a rental squeeze. This has been discussed a few times here I think and was being predicted on here in early 2006. We seem to have entered that phase.

Eventually though it's pretty much a zero sum game. You have a total stock of houses, some are rented and some are purchased. The percentages might vary, but you can't have a long term situation with massive rents and massive house prices, there is an equilibrium somewhere.

This situation has so far been playing out as the bears predicted, and we are tracking the US which is about 12 months ahead of us. If you look at what's going on in the US, that's where I think we will be over the next year.

Victor

The trick is to be moving on buying before the bottom and moving on selling before the top.

stepbar

That's easy said.......

Shane™

patrickolee wrote:

Just out of interest, what age are you?

Just out of interest, what difference would this make?

The question of when people will buy will not be price dependant I think buy time dependant. Conversely with a crash houses may become less affordable coupled with less panic about "getting on the ladder" could mean people will buy whenever they are ready.

Pa ElGrande

uberwolf wrote:

Are the bears concerned for the next year, or the next decade? If they're not buying now, when will the right time be? Will they be propping up the rental market until then?

If you don't need to sell and can maintain your employment then you will do ok. Prices may even hold their nominal value in areas where there is strong local employment and stable established community, however these will be exceptions, where prices have risen steepest, they will fall the most.

What happens if you need to move to another town to take up a new job but you can't carry the cost of selling your house for less than you paid? Likewise if you want to move out of that single or two bed apartment to start a family? You might be able to rent it, if local area employment supports this. Rents are likely to keep rising mainly due to banks tighter lending criteria meaning people don't have the option of buying without significant savings, guaranteed employment etc.

When you take out a 35/40 year mortgage, realise that few people work continuosly thoughoout their lifetime, there will be periods of unemployment or illness. Based on previous experience wage inflation reduced the mortgage payments and people were able to pay off their loans early, which was extremely fortunate for people who got caught out by endowment mortgages. How do you get wage inflation in an open globalised economy when the credit tap is turned off?

Also an increasing numbers of top-up mortgages are being taken out secured against the present perceived property value, when prices are falling, banks will be reluctant to hand them out, this will have a knockon effect on home extensions, car sales, property in Sunny Beach, Bulgaria, holidays etc.

There will be a wave of mass unemployment, possibly hitting 10-12% by 2012 (This is speculation on my part based on what happens in other crashes). The rise in unemployment will also be combined with a resumption in emmigration, Remember UK & Irish builders were able to find work in Germany during the last UK crash due to the German reunification boom. Will there be such an option this time? European demographics on the whole are not good with the baby boomer generation retiring en-masse and low reproductive rates, so there is not much headway for growth in 'old' Europe.

In answer to the question posed, my reckoning is once the dust settles in several years time we are going to have a situation more like German citizens experience today vis renting and buying. The undercapitalised amatuer landlords will be wiped out and renting will become a stable long term option aided by proper regulation in response to the significant population who rent.

l3rian

patrickolee wrote:

As regards your question, I suppose one could say if you hung on for a year or maybe two, you could make a saving on your purchase price and thus a reduced monthly repayment. It would be tricky, as I guess you are eluding to, to judge it just right and buy at the absolute bottom. It's gambling with your home and potentially wasting two years repayments, spending it on rent instead. Difficult one to answer.

yes it's going to be eludingly tricky just not buying and saving about a grand a month by renting, compared to a risky mortgage

you bought at the end of 2005 right?

TCollins

Shane&#8482 wrote:

Just out of interest, what difference would this make?

The question of when people will buy will not be price dependant I think buy time dependant. Conversely with a crash houses may become less affordable coupled with less panic about "getting on the ladder" could mean people will buy whenever they are ready.

I would think it makes a huge difference.
5 years ago i was footloose and fancy free. Didint care about ever owning a house. In fact i hated the very thought of being stuck in one place with a mortgage. Couldnt afford one anyway as i was relatively poor compared to today. And i loved moving every few years.


Fast forward to today. I am in my mid thirties. I am in a long term relationship. Thinking about children. Money burning a hole in my pocket as i am much much better off than i was then.
The idea appeals to me very very much to settle down into a house that is mine, get a shed, do DIY and little projects i cant do in rented houses and i'm sick to death of moving every few years.

I would say the factors that changed my feelings on owning instead of renting are as follows.

1 - Older and more wanting to settle down.
2 - Owning and not being forced to move is very important for children.
3 - The gf wants to settle down too and get married.
4 - We both have good jobs and loads of money and savings so we can afford it (but it has to be said we dont want to buy at the top either , so we are waiting til next year to start moving on this - hopefully we'll have a better idea of where property is going then)
5 - I'm sick of being careful of what i do in other peoples houses (i want to screw a projector into the ceiling )


Its just different stages in life. If me 5 years ago (who thought i knew everything anyway) ever met myself today i could never understand what changed me into who i am today.

So i think a persons stage in life has a direct bearing on their thoughts and hopes for where they want to be next.

patrickolee

TCollins wrote:

Its just different stages in life. If me 5 years ago (who thought i knew everything anyway) ever met myself today i could never understand what changed me into who i am today.

So i think a persons stage in life has a direct bearing on their thoughts and hopes for where they want to be next.

I didn't quote it all for brevity, but pretty much, ditto for me.

Shane™

patrickolee wrote:

I didn't quote it all for brevity, but pretty much, ditto for me.

OK, same goes for me, married with children (well one). I still don't see the point in asking someones age, most people interested in this topic are old enough to buy. I hate this question and I think the poster whom you questioned sounded mature and reasonable.

BTW, just for the record I think prices will drop by up to 50%, and take a few years, but the country will be in a very bad way at that stage so I'm emigrating and if the economy picks up and house prices are on the up again I'll come back. But, as I've been told before, that's me and I'm aware not everybody can do this.

patrickolee

Shane&#8482 wrote:

I still don't see the point in asking someones age, most people interested in this topic are old enough to buy. I hate this question and I think the poster whom you questioned sounded mature and reasonable.

No question that the individual is mature, certainly that is not why the question was asked. The reason the question was asked was the poster had asserted

"I know plenty of people (including myself) who are reasonably well off, happy to rent and don't want to buy".

This was true for me, when I was younger, but not as I got older and time for a mortgage was running out. i.e. a 36 year old cannot get a 30 year mortgage, so there is a point at which you run out of time and it isn't that old! So the reason for the question, was to get some context on where the poster was coming from in his/her life, not to assert a lack of maturity.

daveirl

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Beta2

patrickolee wrote:

a 36 year old cannot get a 30 year mortgage

I regret to inform you that your incorrect. A 40 year old from work drew down a 30 year mortgage in December.:eek:

Its shocking to see banks giving that length of Mortgage to someone that old. Gone are the days of the 20 - 25 year mortgage. Sad thing is he was a first time buyer, bought a tiny flat, probably be hit the hardest during the crash.

To the OP, I think its time to adopt the "Wait and See" approach, keep saving your money and revisit the idea next year. That said don't leave it as longs as the guy above!

patrickolee

daveirl wrote:

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:-) Depends on the 36 year old and how much they like their beer I'd say!

Beta2 wrote:

I regret to inform you that your incorrect. A 40 year old from work drew down a 30 year mortgage in December

Things have changed so. The wouldn't let me get a 35 year mortgage (not that I wanted one) because it would have put my repayment after 65. Poor chap. But then it could be worse, we could be japanese!

patrickolee

Actually on closer inspection, looks like BOI haven't changed their rules yet

From http://www.1st-start.co.uk/answers.htm#Q04

"Q05 : What is the maximum term acceptable under the 1st
Start scheme?

The maximum term is 35 years or the normal retirement age
of the buyer applicant, whichever is the sooner. "

But Ulsterbank are different,
From http://www.ulsterbank.ie/ri_04.asp?id=PERSONAL/MORTGAGES/LEGAL_INFORMATION

"The minimum term of the mortgage is 5 years and the maximum term is 40 years provided age is not over 70 at maturity date"

So looks like the numbers are changing, principle is the same though, there is an age limit to making that leap.

conor_mc

Beta2 wrote:

I regret to inform you that your incorrect. A 40 year old from work drew down a 30 year mortgage in December.:eek:

Did they have to get their 6-year-old to go guarantor...?!?!?

Afuera

Beta2 wrote:

I regret to inform you that your incorrect. A 40 year old from work drew down a 30 year mortgage in December.:eek:

Madness. Reminds me of the "youth mortgages" they have at the moment in Spain. 50 year mortgages for those in their early twenties.

Nobody can deny that there are afforability issues if the banks have to rely on stunts like these.

gurramok

Mate of mine did get a 35 yr mortgage on his own at age 36 for a 2 bed apt late last year.

Don't know which bank he is with but he is a high earner which might have made a difference, he is overpaying his mortgage each month to round down the years to pay it off.

esmeralda

daveirl wrote:

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Should have but more than often do not have. One of the reasons for renting when you are young is to have more money at your disposal to enjoy. Yes, it should get saved, but it usually doesn't, and practically never in the quantities required.

Completely agree with patrickolee, same thing happened to me, except that it wasn't a question of starting a family - just wanted somewhere to call home. Also did not enjoy the thought of eventually having to pay rent on a pension. Hence I'm with those that feel age is a very relevant question, it changes your whole thought process and actions, no matter how mature you are.

Calina

I sat in a bank manager's office one day bemoaning the fact that from the time I was 22 to the time I was 28, I had spent it travelling around Europe, working different jobs, different countries. And that perhaps instead of doing that, I should have settled into a job at 23 and saved for a deposit and then maybe I'd be in a position to buy an overpriced property in Ireland.

He said I was far better off. That he had couples coming into him to release equity, feeling trapped that they'd somehow missed out on something.

Saying that someone "should" have saved x amount of money by the time that they were 36 because they'd have 10 years of saving blah blah blah is, in my opinion, somewhat judgemental. People make different choices, have different values.

One of the things that shocks me most about Ireland - even now - is how there is this expectation that there is a way to do things, and you are judged on how you conform to the local standard, be it in going out and getting trashed, be it in the type of job you are supposed to have, how much money you should be saving, what kind of house you should live in. Ultimately the houses we are building are a reflection of this. For a country that produced some of the greatest writers and rock musicians in the last century we are remarkably staid and boring. Even with the Catholic Church sidelined we still try to compel people to conform to some sort of a ridiculous and ridiculously boring standard.

The issue in this country is not that people should have saved 10% of the price of a house by the time they are 36 - that goes without saying. The issue is that the 10% has, for the past ten years, been a moving feast, harder and harder to attain as it goes always that little bit past what you can reasonably hope to save if you are single based on the cost of living in this city. The average salary is not especially high; cost of housing is. Renting on your own is extortionately expensive in this area. Not just the city, but outside the city also. I would not be looking to buy if I could rent on my own without it bankrupting me and if tenancy legislation in this country was a little more than lip service.

There used to be a Virgin Atlantic ad saying that if your life was to flash across your eyes, you should make sure you've a lot to watch.

The way I see it, a lot of people in Ireland - particularly 22 and 23 year olds - are going to have a lot of DIY to watch and not much else. They may be perfectly happy with it. I don't care. I do know, however, that the only way I could have saved 25000E over the past five years was if I shut myself away in a box and had no life whatsoever.

I know which one I would prefer.

The key issue in Ireland is simple. Property - at present - is far, far too expensive to buy and tenancy legislation is far far too weak for long term use.

No one will have the guts to say that property should never have been allowed to rise as fast as it did - if you dared suggest such a heresy over the past 5 years the reactions were extremely hostile. People like feeling rich and rising property prices made them feel rich.

The problem is this: for it to go on, you need people to buy into. The numbers who can or are willing are dwindling.

I may or may not buy somewhere in the next five or six years. I do not know. It doesn't matter to me. What matters, ultimately, is that no industrial/activity sector is ever allowed to distort the economy in Ireland the way property investment has done for years. We had it all before us and instead of building for a growing economy for the future, we built things we couldn't export.

I don't believe the country needs to be peopled by macro economic experts across the board. But I do think we need a little bit of cop on and it's sadly lacking.

Do I regret 5 years travelling around Europe and no house? No. I don't. Because I see my friends who didn't do anything and if I ask myself would I do it any different if I had my time all over again, the answer is still no.

A semiD in Lucan isn't worth missing any of the things I would have missed if I hadn't done things the way I did. I didn't drink my youth and money away. I travelled it away.

Is that so bad?

daveirl

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Paulw

daveirl wrote:

This post has been deleted.

That's not always the way. I'm 35 and took out a 35 year mortgage. I have enjoyed life, but don't consider that I have totally wasted my money. I have pensions and savings that will enable me to live quite comfortably when I retire.

I don't have large debt over my head, aside from the mortgage. I am still fairly fluid with my cashflow. I only use my credit card when I have to, and most things are paid up front.

But, I considered all things when I took out my mortgage, and decided that it was more comfortable to pay off the mortgage over 35 years (factoring in a double interest rate over when I took out the mortgage), rather than getting a 25-30yr mortgage and having to live on the edge.

I don't care if the value of my property goes up or down, as long as I am happy living there and can comfortably afford the mortgage. I plan to live where I am for at least the next 5 years.