Donnybrook Manor

ballooba

I was looking at two 3 bed houses in this estate on MyHome and Daft.ie this week. They look quite good value at around €850,000 for the area. The prices for the two have fallen quite dramatically in the last few months though. Anyone any ideas why this is the case?

Randomswinger

prices are falling everywhere

ballooba

Not by €100k+ they aren't. That's >10%.

gurramok

Yes they have, have a look at IPW reports, plenty of big drops especially from 'upmarket' houses of 850k types.

Afuera

ballooba wrote: »

They look quite good value at around €850,000 for the area.

How do you define value? An interest only mortgage on 850k would cost you around 3,500 EUR per month. Those very same houses you were looking at can be rented for 2,500 EUR per month.
www.daft.ie/24108

EDIT: In fact the same type of house can be rented for only 2,100 EUR p/m
www.daft.ie/2556

ballooba

The price of these houses back in 2001 was the Punt equivalent of €500k. They were initially put on the market at €945k less than 6 months ago and are now at €840k. As they approach the €750k level they look increasingly attractive.

Afuera wrote: »

How do you define value? An interest only mortgage on 850k would cost you around 3,500 EUR per month. Those very same houses you were looking at can be rented for 2,500 EUR per month.
www.daft.ie/24108

3 beds across the road on Belmont Avenue with the same Sq Ftage are going for €1,125k.

Afuera

ballooba wrote: »

As they approach the €750k level they look increasingly attractive.

And as they approach the €600k mark, they'll look even more attractive.

ballooba wrote: »

3 beds across the road on Belmont Avenue with the same Sq Ftage are going for €1,125k.

The huge divergance between the asking price and the price it can be rented for is very worrying though. Why do you think it is so great?

ballooba

Afuera wrote: »

And as they approach the €600k mark, they'll look even more attractive.

Yes, that would be nice, if it happens.

Afuera wrote: »

The huge divergance between the asking price and the price it can be rented for is very worrying though. Why do you think it is so great?

Beauty is in the eye of the beholder of course. I was at a party in one of the houses before and thought the house and estate were quite nice. There are nice shops, pubs and restaurants around. The area is really well served by buses (all the 46s). It's a short walk from the centre of town.

How Strange

Afuera..The huge divergance between the asking price and the price it can be rented for is very worrying though. Why do you think it is so great?

IMO, because regardless of how much your mortgage is, there is only so much you can charge for renting a property out regardless of location or how nice the house is. Even in Donnybrook, I don't think you would get more than €700 (max) per month for a double room.

ballooba

How Strange wrote: »

IMO, because regardless of how much your mortgage is, there is only so much you can charge for renting a property out regardless of location or how nice the house is. Even in Donnybrook, I don't think you would get more than €700 (max) per month for a double room.

€700 is pretty steep given that usually even if it is a double room there is only one person paying the rent. I agree. No matter what the room nobody is going to pay rates approaching that which could pay the mortgage on a decent one bed.

Afuera

ballooba wrote: »

I was at a party in one of the houses before and thought the house and estate were quite nice. There are nice shops, pubs and restaurants around. The area is really well served by buses (all the 46s). It's a short walk from the centre of town.

If you want to live there so much, why don't you rent out one of the places for 2,100 EUR a month? You would end up paying an extra 17,000 EUR in interest per annum if you purchased at the current asking price. Saving that money in a high interest account and allowing the market to level out a bit would put you in a much better position regarding buying there IMHO.

ballooba

Afuera wrote: »

If you want to live there so much, why don't you rent out one of the places for 2,100 EUR a month? You would end up paying an extra 17,000 EUR in interest per annum if you purchased at the current asking price. Saving that money in a high interest account and allowing the market to level out a bit would put you in a much better position regarding buying there IMHO.

My intention at the moment is buy to let until I need to move out. At a rent of €2,100 I would need to be topping up the rent to pay the mortgage. It's doable as long as the rental market doesn't change.

I'm not paying rent where I am but it's not my house. I will be looking to move out within 5 years or so.

Afuera

How Strange wrote: »

IMO, because regardless of how much your mortgage is, there is only so much you can charge for renting a property out regardless of location or how nice the house is. Even in Donnybrook, I don't think you would get more than €700 (max) per month for a double room.

It makes sense what you are saying but I still fail to see why there should be such a great difference between the rent and the mortgage. I think the problem might stem from the fact that rent is limited by the actual level of current salaries (i.e. the real world) while mortgages are tied to a notional value that has to be paid back sometime in the future (i.e. speculative).

Afuera

ballooba wrote: »

My intention at the moment is buy to let until I need to move out. At a rent of €2,100 I would need to be topping up the rent to pay the mortgage. It's doable as long as the rental market doesn't change.

With such a low yield, I don't think it is worth the risk to be honest. You would end up paying 17,000 EUR per annum to support your tenants living there, and could possibly face a higher loss than that in equity (you've said that it has already jumped down 100k in the last 6 months).

ballooba

Yeah, €17,000 is not really do-able. Although my mortgage wouldn't be that high. Will keep looking.

How Strange

Ballooba, I said €700 MAX. If I could afford to pay that for a room in a house share situation then I would be looking at buying a one bed apt.

Afuera, in the current market where property prices are very inflated the rental income will rarely meet the mortgage. That is why so many veteran investors are getting out/got out of the market. Buying to rent is not a good idea at the moment if you are looking to make a profit. If you can afford to subsidise the mortgage and hold onto the property for at least ten years then it might be a good investment. Most of the economists are warning the part-time investors who buy to rent and make a profit to stay away for the foreseeable future.

godtabh

How Strange wrote: »

Ballooba, I said €700 MAX. If I could afford to pay that for a room in a house share situation then I would be looking at buying a one bed apt.

Would you expect to be paying .€700 a month to the banks for a one bedroom apartment?

If you think you could do that in dublin i doubt it

Victor

For some reason I thought the proce was €500,000 and I was about to say "TAKE IT!"

They are well located, 400+ buses a day schools, pub, doctor, banks, shops. However, no Spar or Centras closer than Ranelagh. Centra Donnybrook is closed, so you have Donnybrook Fair or the petrol station which keeps odd hours.

How Strange

kearnsr...Would you expect to be paying .€700 a month to the banks for a one bedroom apartment? If you think you could do that in dublin i doubt it

No that is def wishful thinking. But I do have my fingers crossed for a continued dip in property prices. I reckon from what I've seen lately that €200-220k for a 1 bed could be a reality by next April. That would be just about affordable for a single person without living on bread and soup and making my own clothes for the next 20 years.

SkepticOne

If you are buying to let then it needs to be viewed in strict financial terms.

It only makes sense to buy to let if the rent you are getting from your tenants is greater than the rent on the money used to buy the place plus costs. Otherwise, you are subsidising your tenants. It does not make business sense.

If you are buying to let at those prices you will be subsidising your tenants to the tune of a grand a month. That's before paying off any capital on the house. Why would you want to invest in a loss making business? It does not bring you any closer to your goal of eventually owning your own place.

The only way I think this could make sense is if you believe that there's going to be significant capital appreciation in those five years in which case good luck to you.

ballooba

SkepticOne wrote: »

If you are buying to let then it needs to be viewed in strict financial terms.

I would never take an interest only loan. The only reason I would be topping up the mortgage from my current account would be if the tenants were helping to pay off the capital.

This is not a business, but it is an investment. The aim of the game is to use the tenants to pay off the mortgage or at least part of it. If I took out a mortgage with premium of €1,0000 a month then I wouldn't get much. By taking out a mortgage with a premium of €3,000 I am getting a lot more for my money but I can't live in it until I can afford the full mortgage. By that time a lot of the capital will be paid off.

By the time I decide to move in there would presumably be two incomes to pay the premium. I won't want my own place until that situation arises anyway. I'm not paying rent at the moment so I am in a good position.

godtabh

How Strange wrote: »

No that is def wishful thinking. But I do have my fingers crossed for a continued dip in property prices. I reckon from what I've seen lately that €200-220k for a 1 bed could be a reality by next April. That would be just about affordable for a single person without living on bread and soup and making my own clothes for the next 20 years.

An average 1 bed (were I live) is going for €300k and has been steady at this price for a while. I think if your going to expect a €100k-€80k drop in prices I think that would be wisfhful thinking.

A €300k one bed with maybe €20k-€50K despoit is double with a salary range of €35k-€45k

I'm doing it

Afuera

kearnsr wrote: »

Would you expect to be paying .€700 a month to the banks for a one bedroom apartment?

If you think you could do that in dublin i doubt it

I would have agreed with you if I hadn't seen this ad on Daft. An interest-only mortgage costing 700 p/m would give you about 170k EUR to play with so it's within range, although admittedly it's nowhere near Donnybrook.
www.daft.ie/1309896

Afuera

ballooba wrote: »

This is not a business, but it is an investment. The aim of the game is to use the tenants to pay off the mortgage or at least part of it. If I took out a mortgage with premium of €1,0000 a month then I wouldn't get much. By taking out a mortgage with a premium of €3,000 I am getting a lot more for my money but I can't live in it until I can afford the full mortgage. By that time a lot of the capital will be paid off.

Your plan would only work if your return was higher than the interest portion of the mortgage (otherwise you are subsidising your tenants for the pleasure of living in your home) AND/OR there was a large capital gain. The first 5 years will see almost none of the capital paid off. Check out the mortgage calculator at http://www.jeacle.ie/mortgage/ and play around with the "Annual Table" feature to see how much capital gets paid off every year.

SkepticOne

ballooba wrote: »

I would never take an interest only loan. The only reason I would be topping up the mortgage from my current account would be if the tenants were helping to pay off the capital.

Unfortunately they won't be helping to pay off any capital. They won't even be covering interest payments.

Your break even point would be if the tenants fully covered interest payments. Anything below that is money out of your pocket.

You will lose tens of thousands of euros with this scheme unless there is a huge amount of capital appreciation over the next five years. Otherwise you are better off saving the money and buying in five years.

godtabh

Afuera wrote: »

I would have agreed with you if I hadn't seen this ad on Daft. An interest-only mortgage costing 700 p/m would give you about 170k EUR to play with so it's within range, although admittedly it's nowhere near Donnybrook.
www.daft.ie/1309896

Dont know the last time I saw a property in dublin below €200k.

Is there a big hole in the ground its that cheap?

Afuera

kearnsr wrote: »

Dont know the last time I saw a property in dublin below €200k.

Is there a big hole in the ground its that cheap?

Yeah, I was pretty surprised to see it myself. I think it may even be within reach of the Luas which makes me wonder all the more.

How Strange

kearnsr Quote:..An average 1 bed (were I live) is going for €300k and has been steady at this price for a while. I think if your going to expect a €100k-€80k drop in prices I think that would be wisfhful thinking.
A €300k one bed with maybe €20k-€50K despoit is double with a salary range of €35k-€45k. I'm doing it

Do a search on myhome or daft for properties under €300k in the Dublin city area and you will be suprised to see alot of 1 beds for €240-270k and if, according to posters on the property crisis megathread here, you can realistically go in 20% below the asking price then it shows that prices are steadily dropping. And there is quite alot in the city centre not just in the suburbs. In some cases they are cheaper in the city.

There is a glut of 1 beds in Dublin and, again as predicted by posters on the property megathread, these will bear the brunt of a crisis. I'm waiting until next March because prices are still falling.

D'Peoples Voice

Victor wrote: »

For some reason I thought the proce was €500,000 and I was about to say "TAKE IT!"

They are well located, 400+ buses a day schools, pub, doctor, banks, shops. However, no Spar or Centras closer than Ranelagh. Centra Donnybrook is closed, so you have Donnybrook Fair or the petrol station which keeps odd hours.

Yes the centra just off Belmont Avenue in donnybrook has closed down, I believe they are putting in a new retail unit downstairs and letting the upstairs to tenants, just waiting for Planning permission.
The Petrol station at the top of Belmont Avenue is up for sale for the past 5 months with FULL PLANNING PERMISSION FOR APPARTMENTS, can't compete with Tesco petrol I guess.
Madigans pub at the other end of Belmont Avenue is closing down also, they are seeking planning permisison for ........what's the point, you can guess.
Also last year there were a few student houses refurbished on Belmont Avenue and have been on sale for months with seemingly no takers.
Don't forget, many of the houses are those old 19th/20th century houses where you have no driveway and are not allowed to change the facade, so that means you have to depend on street parking. People don't realise how difficult it is to get parking around there or Marlborough road!

godtabh

How Strange wrote: »

There is a glut of 1 beds in Dublin and, again as predicted by posters on the property megathread, these will bear the brunt of a crisis. I'm waiting until next March because prices are still falling.

Maybe where I am is the exception to the rule. Dont see it happening myself but at least I dont have to wait and see what happens. No plans to buy or sell for a long time

ballooba

ballooba wrote: »

I would never take an interest only loan. The only reason I would be topping up the mortgage from my current account would be if the tenants were helping to pay off the capital.

This is not a business, but it is an investment. The aim of the game is to use the tenants to pay off the mortgage or at least part of it. If I took out a mortgage with premium of €1,0000 a month then I wouldn't get much. By taking out a mortgage with a premium of €3,000 I am getting a lot more for my money but I can't live in it until I can afford the full mortgage. By that time a lot of the capital will be paid off.

By the time I decide to move in there would presumably be two incomes to pay the premium. I won't want my own place until that situation arises anyway. I'm not paying rent at the moment so I am in a good position.

Goddam it. I wrote a big post to reply to your point but it when missing when I logged in.

So I summerise it.

Buy now and it will appear that you are making money in the long run. However buying at a time when property is on the extremes of afforability and adjusting for a bumper mortgauge and tightening credit availability as well as inflation, you will actually lose money in real terms.

ballooba

ronoc wrote: »

Buy now and it will appear that you are making money in the long run. However buying at a time when property is on the extremes of afforability and adjusting for a bumper mortgauge and tightening credit availability as well as inflation, you will actually lose money in real terms.

The underlying assumption there is that property is on the extremes of affordability at the moment. Without some form of a time machine that cannot be known.

ballooba

ballooba wrote: »

The underlying assumption there is that property is on the extremes of affordability at the moment. Without some form of a time machine that cannot be known.

A big alarm bell is falling prices after sucessive interest rate rises. This is an indicator that property is at the limits of affordability. Our ratio of income to average house price suggests this also. I can't find those figures at the moment.

ballooba

ronoc wrote: »

A big alarm bell is falling prices after sucessive interest rate rises. This is an indicator that property is at the limits of affordability. Our ratio of income to average house price suggests this also. I can't find those figures at the moment.

Limits imply that they won't rebound higher.

SkepticOne

Ballooba, are you worried that if you don't secure a property now you won't be able to buy in five years because prices will have risen so much by then?

dazberry

How Strange wrote: »

No that is def wishful thinking. But I do have my fingers crossed for a continued dip in property prices. I reckon from what I've seen lately that €200-220k for a 1 bed could be a reality by next April. That would be just about affordable for a single person without living on bread and soup and making my own clothes for the next 20 years.

Well here's a 1 bed 220k apartment - not the best but far from the worst of locations... very handy for town. http://www.myhome.ie/search/property.asp?id=MDSBG306409, and if its any consolation, they were hitting 290k+ at the peak. The 2 beds now down at 315k where almost hitting 400k. Houses in the area haven't seen the same slide, but they're not selling.

D.

How Strange

AFAIK, that would be one of the better managed apartment blocks in the city, has some anti-social problems to contend with but is a good established development. Apartments would generally be snapped up quite quickly so it shows that things are changing.

Good news for people like me, not so good for those who are trying to sell

ballooba

ballooba wrote: »

Limits imply that they won't rebound higher.

Wage inflation accounts for some of the property boom. This was quite large at the height of celtic tiger. For the last few years house prices continued to rise steaply while wage inflation slowed to normal levels.
Why did house prices continue to rise?
The availability and cheapness of credit. Also 100% mortguges and loan terms being offered up 40 years means more money was available for purchasers. If people believe house prices can only go people will borrow as much as they can to get that house, pushing prices up.

I believe house prices in the country are going to go through some turbulance over the next few years for the following reasons:

* Interest rates will continue to rise despite the current money market woes. The ECBs prime concern is inflation and they have used their coded language recently to indicate more rises are on the way.
* The "credit crunch". Banks are now charging other banks more to lend money to each other. The banks will have to take the hit themselves (yeah right) or pass this onto new mortguage lenders. Some banks have already started passing this cost on to borrowers.
* 100% mortguages are on the way out. Banks are starting to cut back on their riskier loans.

ballooba

SkepticOne wrote: »

Ballooba, are you worried that if you don't secure a property now you won't be able to buy in five years because prices will have risen so much by then?

No. I want to start paying off the capital.

The same reason I have started a pension I guess.

Afuera

ballooba wrote: »

No. I want to start paying off the capital.

I hate to burst your bubble, but what you are suggesting is financial suicide. Have you ran the figures through Jeacle's Mortgage Calculator yet?

Assuming that you are able to get a 5-year fixed rate of around 4.5% you will have a monthly mortgage of 4,000 EUR p/m if it was for a 35 year term. Let's also assume that you can get someone to rent the property for 2,500 EUR p/m and that you have no periods of vacancy. This leaves you with a shortfall of 1,500 EUR every month and amounts to you paying 90,000 EUR to support your tenants during the 5 year period. The amount of capital you will have paid off the mortgage during that same period would only be around 55,000 EUR.

Take note that all the assumptions I made above are highly optimistic and I made no attempt to account for the other expenses you would have to take on as a landlord such as furnishing, maintaining, insuring, finding tenants, etc. On top of this, you will have to pay stamp duty of 76,500 EUR since you are not an owner-occupier of the property (you will also lose your FTB status forever in the process).

By my calculations, you are at least 111,000 EUR down at the end of 5 years unless there is capital appreciation to compensate your loss. Do you think that the next 5 years will deliver that kind of appreciation, and if so why?

ballooba

Maybe the property is not right. I'll have to have a look at how my two sisters are doing this. They have houses in the commuter belt and are only subsidising the mortgage by very little if anything at all. They have 4/5 bed houses they bought for between €600k and €700k.