Are we all F***ed?

LegacyUser

Hi there guys,

Firstly I apologise for posting this in PI as it has nothing to do with my relationship and/or my genitals. I would prefer to post this anonymously as I will be stating my age, income and area i live...

I and my partner (8 years together engaged to get married next year) are 24 and stand in a pretty amicable financial situation.

Male IT specialist: 57,000 per annum.
Female social care worker: 38,000 per annum.

Grand total of 95,000 per annum.

We currently rent a 2 bed apartment in south side Dublin (cabinteely) for 1400 a month.

We are looking at the possibility of buying a house, but are limited to our options due to having only a very small deposit (19000 ish). we have only been able to get a 95% mortgage with one provider (ebs) and are under a time constraint to get a house sorted before the 95% is taken from us (about 2 months i'd say) as mortgage rates drop further and further.

We want to buy as we are sick of paying stupid money on rent in our area, we are sick of paying our landlords mortgage, we want to try and sort the house before the wedding (parents paying for wedding and a stipulation of this was we sorted the house before wedding) and we also wish to have some privacy as living with others caused us considerable stress in the past.

We are looking in the south county Dublin (yeah right...) and the north Wicklow area. due to our deposit restriction we sit on the potential for a 380,000~ish property which is pretty achievable in Wicklow. For example we found our dream house in north bray in the region of 390,000 for a 3 bed semi detach with great potential in a lovely secluded estate.

My concerns are this, how the hell are people expected to buy in this day and age... the mortgage repayments for a 4 years fixed rate (tracker mortgage my HOLE with the way the interest rates are going) runs in the region of 2200 per month, this doesn't even include the necessary house insurance, life assurance or mortgage payment protection.

As a couple of 24 earning just shy of 100,000 a year i for one would have considered us pretty f*cking successful but the incomprehensible prices we are expected to pay for housing in Dublin are leaving us fearful for our future if we are to take out a mortgage. If i lost my job within the next five years we couldn't possibly survive on one wage, and heaven forbid we choose to procreate in the next 7 years... lose one wage or pay 1200+ for creche fees...

Also with the current recession and rising interest rates, where will that leave me in 5 years with potential redundancies, job losses or wage cuts to retain a job...

Ultimately the housing market seems like a very daunting and scary place for us at present and we really wonder how people manage(d)... to me a mortgage of 1600 sounds like heaven... am I really to believe in 4-5 years time i would consider our 2200 as comfortable as a current 1600 mortgage?

I, as just one of the thousands of the young Dublin population am fearful of my position in this country, I am really just looking for some advise or words of encouragement that i shouldn't just pack in our dreams and emigrate or give up entirely...

Thank you very much for reading this post, it nearly helped me to write it all down... as i said please feel free to move this thread and i'm sorry for the admin work it entails

to end with a joke:

Whats grey, ugly and hangs off a satellite dish... every apartment in my block

madser

House prices are plumeting hold tight and you'll get sorted. Your young sucessful and starting out, your bound to feel under presure, but don't worry there never is a good time to buy a house have a child get married etc. but all these things will happen and you'll be fine.

Your doing much better than most people your age.

Tell me to mind my own business but do you live in Tullyvale or Glen na Ri by any chance:D

Victor

Lets not get into specifics please.

MortgageFear wrote: »

We currently rent a 2 bed apartment in south side Dublin (cabinteely) for 1400 a month.

Do you need a 2-bed?

We want to buy as we are sick of paying stupid money on rent in our area, we are sick of paying our landlords mortgage

So you want to pay for you bank manager's bonus instead? You want to buy into a falling market?

I realise that you would like a place of your own, before the wedding, but don't throw good money after bad. Start working full time on a deposit.

Fysh

I'll be honest, with the current state of the housing market buying is not a good idea unless you're certain that the house you buy is one you'd be happy living in for the next 20-30 years.

Ye're both doing pretty well financially, why not keep renting and keep building up your deposit? Rushing into buying because that's the rule your parents imposed in exchange for paying for the wedding seems daft; if you're that keen on buying and buying now perhaps consider scaling back the wedding and contributing the money saved from that towards your deposit.

PurpleBerry

Well of course they don't want to keep renting! Why should their hard work go toward lining their landlords pockets?

LegacyUser

Victor wrote: »

Lets not get into specifics please.Do you need a 2-bed?
So you want to pay for you bank manager's bonus instead? You want to buy into a falling market?

I realise that you would like a place of your own, before the wedding, but don't throw good money after bad. Start working full time on a deposit.

Granted a 2 bed may be a little too much space, but both rooms are at capacity and often used (i use the spare as an office when i work from home).

On the failing market point, i do agree its a failing market and its been beneficial thus far to allow us to buy so close to south dublin... I just feel very depressed that I am unable to buy a reasonably priced house in my area due to uncontrollable circumstances.

fysh wrote:

I'll be honest, with the current state of the housing market buying is not a good idea unless you're certain that the house you buy is one you'd be happy living in for the next 20-30 years.

judging by how these things go, peaks and troughs etc do you really feel it will be upwards of 20 years before prices catch up? I understand that buying in the short term will have an associated loss but so long as we are happy to stay in the house until the price comes back up again do we have much to worry?

We are interested in buying a home rather than buying purely for investment interests...

fysh wrote:

Rushing into buying because that's the rule your parents imposed in exchange for paying for the wedding seems daft; if you're that keen on buying and buying now perhaps consider scaling back the wedding and contributing the money saved from that towards your deposit.

its not a hard and fast rule, i feel foolish for placing that as a reason to consider buying. ultimately what we had hoped was to get settled into our new home prior to the wedding, the prospect of returning from our honeymoon to rented accommodation was not all that appealing.

Thank you both for your opinions as it has given me more food for thought,

4Xcut

Neesa wrote: »

Well of course they don't want to keep renting! Why should their hard work go toward lining their landlords pockets?

Because in this situation it may be the better course of action for a while. House prices are sinking, a mortgage means they will have to stay there for a good while(many years) and the lower cost of rent as oppossed to paying mortgage will allow them to save a deposit and have to take a smaller mortgage when the house prices sink more.

There is a mid-set in this country that rent is dead money and that you must get on the property ladder asap. This is not the case. Especially if you have to get huge mortgages(using phrases like only 95%). Some people even get 110% martgages, how bout this, buy the house and do it up as you can afford.

Sarn

It is difficult. Just be thankful you're not doing it on your own. Based on your two salaries you must be pulling in around €6000 net. There should be a sizeable chunk of disposable income left after basic expenses. I'd look at what you are spending your money on and set about some serious saving. You should be able to build up a decent deposit in no time.

As people have mentioned, house prices are falling. I would rather go about paying for the wedding myself than be forced into buying a house now. You both have €19k now, by next year it will be a lot more if ye set your minds to it. Maybe you could pay the wedding yourself and when the time is right get a helping hand with the mortgage instead?

I can understand the desire in owning your own place. Just think of renting (and saving) now as offsetting the interest that you pay on a mortgage.

jesus_thats_gre

Victor wrote: »

So you want to pay for you bank manager's bonus instead? You want to buy into a falling market?

20k into the landlords pocket or 100k into the banks/developers pocket..

petethebrick

Wow- At 24 you're doing great- don't be too stressed. To be honest I'd agree with some of the other posters- leave it another year or two to buy. You're gonna get much better value for money and a better mortgage even taking inot consideration the lost money on rent^^

Overheal

Victor wrote: »

Do you need a 2-bed?

Make babies much?

Real Estate always bounces back, but for the moment prices everywhere seem to keep dropping. The problem being as you mention, banks aren't lending out money like they used to, but that will hopefully turn around before too long. Just keep your eyes out for the bank rates to shift and then jump on the house hunt before the property prices jump back up.

cance

having tried to respond to this thread and it not showing up its probably easier for me to just own up and admit its myself to answer the posts on this thread i did change location between posts so maybe the good mods in here saw me as a potential troll

Firstly i would like to thank everyone for taking the time to read my mini lament (maybe not so mini but meh) and responding as it has really helped me to make sense of my situation. Myself and my lovely OH are getting really frustrated with reality vs our dreams/plans and are just trying to make real sense of our options.

We have two bedrooms as i use the second bedroom as an office for work at home and other projects i do for pocket money... i understand this can be construed as excess or even waste but i figured after all the hard time we have put into our career progression this was a mini luxury we deserved... i also understand how counter productive to our saving potential it is... learning from our mistakes i suppose is what being human is all about.

using the wedding as an excuse to buy a house was foolish and to be honest it wasnt really the basis for the decision to try to buy, not only this but it wasnt what i was trying to say. we saw an opportunity to buy with the prices of houses we sought reaching our range and the ability to buy with the 95% mortgage a year in advance of the wedding.

I suppose ultimately what you are saying is true that waiting would be more of a financially sound idea, but again whether we hold out or buy is ultimately our choice.

Fysh, do you really feel that it will be 20-30 years before the market troughs and peaks again to current prices?

Fysh

Re: the current state of the market - I don't really have a specific idea for how long it'll take for the market to stabilise, but that wasn't what I was referring to.

What I was trying to get at is that the last ten or fifteen years have heavily encouraged the commoditisation of property such that everyone is supposed to get onto the property market as soon as they possibly can because a house is not just something you live in, it's an investment.

Whereas the current situation of painfully expensive mortgages, difficulty obtaining loans and house prices slowly declining suggests that if you do want to buy, it's probably best to plan on the longer term - in the sense that if you buy a place and it takes longer than you anticipate for prices to come back up to a point where you can sell without being put in a tight spot while doing so, at least you'll be living in a place that you're happy with and which meets your needs.

IanCurtis

Wealthy couple don't know whether to buy or rent.

Why is this in Personal Issues?

fastrac

The lifestyle must be good if you only got 19 k saved.Try to get some of those wages into a bank .You have to take the pain short term to beat the bank.

Madame Razz

to be fair 2200 between the two of you is 1100 each, plus your life assurance etc, add on 100 each; thats 1200 each.


Happily my mortgage is quite small but I have several friends who earn in or around what your other half earns, and pay a mortgage of more than 1200 a month themselves; and they manage fine.

So i really don't see why you're freaking out; its no biggie; you should manage a mortgage that size easily enough; albeit maybe living less of the good life; but thats one of the joys of home ownership!!

foggy_lad

Ye need to save a lot more and stop giving yourselves luxuries just because you think you deserve them! and possibly think about moving from where you are. My rent for two bed townhouse in the southeast used to be ?750 a month which is lot less than you are paying. And rents are starting to come down now.

4Xcut

If between you, you are earning a hundred grand this year, you should easily have 100 grand saved by this time next year. This is the time to do it, no kids, no mortgage(although that's what you are saving for), etc. There's basically food and rent for the two of ye.

Realistically, ye could get 60k.

tman

A lot of people may be ****ed, but the two of you are safe as houses (pardon the pun)
I'd say just save hard for a year or so before buying.

Wish I was in your situation at 24... I'm just about to turn 26 now and still nowhere near it!

watna

Cance, I feel your pain! It's something that plays on my mind too. As you know we're from the same area and I really wouldn't like to buy outside that. It's where all my friends and family are and I know the area so well. I try not to think of buying a house too much because it's so scary!

My OH has been brilliant about things. He's from South Africa/New Zealand and doesn't seem to have this violent need all Irish people have to own property (all my friends talk about it a lot and we really are very young, my father is always pointing out that he didn't own property until he was about 33/34 and he's doing alright for himself now!). We're living in NZ now so we don't need to think about buying for a while but his opinion is that we should only buy if we can afford it to be in the area we really want and it's not going to bankrupt us. Otherwise what is the harm in renting? In many European countries i.e. Germany people never own and always rent. He is so good when I start to worry about if we'll ever afford a house. We're even thinking of buying in Wellington and renting it our when we go back to Ireland and waiting a good few years to buy in Dublin. What I'm trying to say (maybe not too clearly) is that owning your own house is not the be-all and end-all. You're getting married which is stressful and expensive enough. Why not cut yourself a break and give yourself a certain length of time i.e. two years to save more for a deposit and be in a better position to buy and get a better idea of the market. I'm sure your parents will understand, they must have a good idea of the market. I know my parents are concerned I won't come back from NZ because we won't be able to afford to buy in Ireland!

I completely understand about wanting a two bed place to yourself. Myself and my oh shared for a year or two and living with other people as a couple just doesn't work. We have a two bed place now and I love having the spare room. However, it may be worth your while finding a cheaper place/sharing (with the most normal people who can find!) just for a year to save more money. The thought of having to share again doesn't thrill me but if we really had to do it I would.

Hope some of my ramblings made sense and helped a little!

hefty_langer

If you are planning on buying in Wicklow, why don't you move out there for a year/two where rents are lower, stick the rent money you save into a bank for your deposit... reckon that'll speed things up a bit... makes sense to me.

Wibbs

This is more suited to the property & accommodation forum, so I'll move it there where you may get a different slant. If you want it moved back PM me, but I'm not seeing the personal issue to the degree that warrants it staying here.

The_Conductor

watna wrote: »

I start to worry about if we'll ever afford a house. We're even thinking of buying in Wellington and renting it our when we go back to Ireland and waiting a good few years to buy in Dublin. !

Hi Watna- just remember that you loose your First Time Buyer status and the favourable stamp duty it brings, if you buy elsewhere. Its not so much an issue if you do look at new houses- but if you decide you'd like a garden, you're looking at second hand properties, and the propensity to get fleeced by the taxman is so much greater.......

The_Conductor

Cance- a 19k deposit is quite reasonable. As per the other posters- I would also suggest continuing to save towards your deposit- apart from anything else- you will get quoted much better rates by the mortgage institutions the lower the LTV (Loan to Value) ratio of the house you propose to buy is.

Your combined salary is very decent, but akin to what everyone else is suggesting- you really need to look at your outgoings and prioritise better.

Re: renting or buying- I disagree with the get on the property ladder brigade...... At the moment its still far cheaper to rent, than to buy an equivalent property. If you were to buy that 2 bedroomed apartment that you are in- it is highly likely that the interest component of the mortgage repayment would vastly exceed the rent that you are currently paying- ignoring all the other costs associated with ownership of the property. So- the landlord is effectively subsidising your accommodation- far from the picture that many people would have you believe that you are paying his mortgage for him........

Particularly in the current market- do not feel pushed into property ownership.

As an aside- the ownership rules on non-locals buying into communities in Wicklow/Laois and some other areas are up in the courts at the moment. It is highly probable that the rules will proven illegal- most probably opening a lot of developments to purchasers that they were previously excluded from. Keep an eye on this.

Paulw

In fairness to the OP, you must be living the good life.

I bought a 3 bed apt on my own, costing 280k. I earn less than you do (alone). My earnings are about 55k.

I pay my mortgage, bills, and everything else, and still have money for 2 holidays a year.

You really need to start to investigate your spending. With what you and your partner earn, you should be able to save plenty. Stop living the high life, tighten your belt a little, and you can afford almost any property you want.

AARRRGH

Why do you feel so insecure that you must rush into buying a home? With your large salaries it's unlikely you're going to become homeless, so what's the rush?

It makes absolutely no sense to buy now. There are very bad times coming (I wouldn't be surprised if one of our banks collapse) so it's unlikely house prices are going to "recover" for a long time.

If your mortgage is going to be 2200+, and your rent is 1400, you are immediately saving 800 a month if you continue renting. Put this towards your deposit.

Also, calm down your lifestyle so you are saving around an extra 1000 or 2000 per month.

In 3 or 4 years time when you go to buy, you'll have over 100k saved. Not only will house prices be way cheaper than they are today, but the amount of interest you'll save by having such a large deposit is ridiculous, i.e. a few hundred thousand euros in interest.

I understand you want to build towards the future, but for the moment save your money and know you are doing the right thing.

johnnyskeleton

MortgageFear wrote: »

We currently rent a 2 bed apartment in south side Dublin (cabinteely) for 1400 a month.

We want to buy as we are sick of paying stupid money on rent in our area, we are sick of paying our landlords mortgage, ...and we also wish to have some privacy as living with others caused us considerable stress in the past.

We are looking in the south county Dublin (yeah right...) and the north Wicklow area.

...
My concerns are this, how the hell are people expected to buy in this day and age... the mortgage repayments for a 4 years fixed rate (tracker mortgage my HOLE with the way the interest rates are going) runs in the region of 2200 per month, this doesn't even include the necessary house insurance, life assurance or mortgage payment protection.
...
I, as just one of the thousands of the young Dublin population am fearful of my position in this country, I am really just looking for some advise or words of encouragement that i shouldn't just pack in our dreams and emigrate or give up entirely...
...
Whats grey, ugly and hangs off a satellite dish... every apartment in my block

It seems to me that rather than wanting to buy, you are getting annoyed with the property you are currently renting. I would therefore advise a move in the short to medium term because:
1) renting allows you to move to a different area/apartment whenever you get sick of the old one, and with no strings attached.
2) you are paying over the odds for that place, and you can get a lot of 2 beds for under €1200 in the south dublin/south county dublin area. Here's a 2 bed house just outside Dublin 4 for €1300. You could even get a 2 bed apt in a georgian building in a fancy part of the city centre for €1350.
3) Apart from the massive difference between renting and buying at the moment, house prices are dropping (a good thing for someone wanting to buy in a few years) and rents are also dropping (a good thing for anyone renting at the moment) so as other posters have said it makes no sense to buy at the moment.
4) I would always recommend to someone thinking of buying that they first try to rent in the area / in a similar property if possible. That way, if the walls are paper thin, if there are a lot of drunks on the street of a friday/saturday night or if there are serious anti-social elements in the area, you can rent there to find these things out which you never would have known if you just bought straight out.

MortgageFear wrote: »

As a couple of 24 earning just shy of 100,000 a year i for one would have considered us pretty f*cking successful but the incomprehensible prices we are expected to pay for housing in Dublin are leaving us fearful for our future if we are to take out a mortgage. If i lost my job within the next five years we couldn't possibly survive on one wage, and heaven forbid we choose to procreate in the next 7 years... lose one wage or pay 1200+ for creche fees...

Also with the current recession and rising interest rates, where will that leave me in 5 years with potential redundancies, job losses or wage cuts to retain a job...

These are the factors that people simply haven't been thinking about over the last few years, because if the worst did happen, they could usually sell the property for more than they bought it for. This is no longer the case, and so you need to be very careful re: your circumstances before buying. I would recommend that you simply refuse to take out a mortgage that is:

1) greater than 90% of the purchase price
2) for a period longer than 20 years
3) more than 4 times your income plus 2 times your partner's income (and it would be no harm to ignore your partner's income altogether).

Also, while I don't personally recommend it, a lot of people like to get Mortgage Repayment Protection insurance (MRPP). This usually costs an extra few quid per month, and if you lose your job it will pay your mortgage for a few months while you look for a new one. You're really paying for the peace of mind, as IME getting them to actually pay up for MRPP is like trying to get blood out of a stone, but if you know it's there you might feel safer.

MortgageFear wrote: »

Ultimately the housing market seems like a very daunting and scary place for us at present and we really wonder how people manage(d)... to me a mortgage of 1600 sounds like heaven... am I really to believe in 4-5 years time i would consider our 2200 as comfortable as a current 1600 mortgage?

The housing market really is a daunting place (read the bubble thread or go to thepropertypin.com). If you buy now and get into difficulty in 4-5 years time, don't expect any sympathy. You know the risks, you know the impossibility of servicing such a loan, and now that people are starting to realise that property prices don't always go up, you are entitled to wait until the market suits you, rather than the other way around.

The reality is that you probably will have children in the next few years and that will mean less income and more expenses. If you insist on a mortgage that suits you (as above) you will probably only be able to raise about €200k or so for a €220k property. Prices may well have fallen to that point in 4-5 years time (either in actual terms or in real terms i.e. your wages and inflation will increase while prices remain static) but even if they don't, the best way to secure your family's future is not to buy at all costs, but to buy when you can afford to do so. If this means living in rental accomodation and scrimping and saving for the next 5 years, so be it.

Best of luck whichever way it goes.

WRENALDO

Between yourself and your girlfriend (wife to be ) you are earning 100,000 a year and you are still not happy, go to a village in Kenya for two weeks and then you will have a differnet perspective on things.

punchestown

4Xcut wrote: »

If between you, you are earning a hundred grand this year, you should easily have 100 grand saved by this time next year. This is the time to do it, no kids, no mortgage(although that's what you are saving for), etc. There's basically food and rent for the two of ye.

Realistically, ye could get 60k.

19k already saved so 81k to go. Earning 100k (approx) for the next year and you are expecting them to save 81% of it!!:eek: Its Ireland not Egypt we are living in. With a good bit of effort I would expect them to reach 50k by this time next year. In the period we are entering in terms of cash being King and cheap credit a thing of the past, they will be in an excellent position (providing both jobs are still secure) Have patience, save hard and you will get you rewards op. You could look back on the advice received in this thread in a years time and be thankful that you held back.

AARRRGH

WRENALDO wrote: »

Between yourself and your girlfriend (wife to be ) you are earning 100,000 a year and you are still not happy, go to a village in Kenya for two weeks and then you will have a differnet perspective on things.

I think the title of the thread is very interesting: "Are we all ****ed?"

This guy is clearly comparing himself to others, hence the "Are we all" rather than "Am I".

We all know trying to keep up with the jones's just results in unhappiness and debt.

If he focussed on his life and stopped watching what others are doing, he wouldn't be in a panic to be seen owning a home and doing well for himself.

/No offence OP

cance

Thanks to everyone for taking the time to post replies as you have really opened my eyes to the possibilities we face in a few years.

there have been a few over estimated saving potentials due to the sheer amount of tax we pay but the moral behind what is being said is very valid. To be fair i didnt consider us to be living the "high life" but i do see where money can be saved.

WRENALDO wrote: »

Between yourself and your girlfriend (wife to be ) you are earning 100,000 a year and you are still not happy, go to a village in Kenya for two weeks and then you will have a differnet perspective on things.

How much i earn is not a reflection of my unhappiness, i fail to see why you would drag under developed countries into my confusion about the housing market

dublindude wrote: »

I think the title of the thread is very interesting: "Are we all ****ed?"

This guy is clearly comparing himself to others, hence the "Are we all" rather than "Am I".

We all know trying to keep up with the jones's just results in unhappiness and debt.

If he focussed on his life and stopped watching what others are doing, he wouldn't be in a panic to be seen owning a home and doing well for himself.

/No offence OP

None taken, and i do have to laugh at the "are we all ****ed" comment i decided to open with as it should have read "will i be fucked"

oh, and just to finish i should probably mention my wage was increased substancially with a newish job so we havent really had a chance to get used to the influx of money... might be best to take now as an opertunity to curve our spendings while we are not used to it.

bringitdown

Hi OP

Best advice I could give is one I recieved when houses were mouthwateringly cheaper than they are now! "Don't buy until you have to".

Save some money and keep liquid, perhaps try and neg. a better deal on rent that is a fair chunk for a depressed rental market too! In fact I'd call that amount extortion even when rents were silly expensive.

You are very young at 24 and being tied to a mortgage in what is likely to be a falling market for some time yet is going to break your hearts.

Raskolnikov

MortgageFear wrote: »

We are looking at the possibility of buying a house, but are limited to our options due to having only a very small deposit (19000 ish). we have only been able to get a 95% mortgage with one provider (ebs) and are under a time constraint to get a house sorted before the 95% is taken from us (about 2 months i'd say) as mortgage rates drop further and further.

First thing, I wouldn't consider E19,000 a small sum of money at all. Secondly, everyone else is in the same situation with regards to getting a mortgage. In the short-term (I'd say for the next year anyway), I can only see property prices continuing to fall, even people in the industry will admit this.

My advice would be to completely slash your expenditure and save like hell. If you're looking for some tips and advice, try the askaboutmoney money makeover forum.

In a years time, hopefully you'll have closer to 50k and I'm sure you'll find that the 400k house you were looking at, is now closer to 350k.

Good luck!

Iago

lol

cance

out of curiosity, would anyone like to hazard an educated guess at the drop in house prices we will face in the next few years?

i have read over the propertypin at length and although everyone agree's there will be a sizeable decrease, i would be interested in hearing opinions on just how low things are going to go.

The_Conductor

cance wrote: »

out of curiosity, would anyone like to hazard an educated guess at the drop in house prices we will face in the next few years?

i have read over the propertypin at length and although everyone agree's there will be a sizeable decrease, i would be interested in hearing opinions on just how low things are going to go.

Well- with short to medium term inflation of 5-6%, within 2 years property would have fallen by 12% in real terms (even if it stands still in nominal values- which it isn't- its averaging a 1.2-1.4% fall and accelerating at present (May figures are the most recent ones we have)).

At these sort of figures- you're looking at possibly a 15% fall (this year) in nominal values, increasing to at least 20% when inflation is factored into the equation.

Obviously some sectors of the market will fair far better than others- both ends of the market, the massively over priced upper end and the massively overpriced lower end, will both bear the brunt of the depreciation.

None of us have crystal balls though- if we did, we'd all be rich!

S.

johnnyskeleton

cance wrote: »

out of curiosity, would anyone like to hazard an educated guess at the drop in house prices we will face in the next few years?

i have read over the propertypin at length and although everyone agree's there will be a sizeable decrease, i would be interested in hearing opinions on just how low things are going to go.

First off, you have to look at where we are at at the moment. I think the most accurate estimate is late 2005 prices (the ERSI/PTSB drops are a few months behind and put us around Jan 06 I believe). However, some people still believe we are at the peak (i.e. August 06) and others believe (despite all evidence to the contrary) that prices have increased since then at the same rate that they were during the boom.

But on the basis that they are now approx December 2005, they might drop at around 10% for this year and another 10% in 2009, so about 18-19% off Dec 2005, being approx 30-35% off peak (August 06). At these prices, houses will still be over-valued, but I just don't think vendors will drop prices below this. Also, most of the downward pressure will come from sales of newbuilds by developers, repossessions (or forced sales), emigration and the credit crunch. In 2010 these factors will have run their course and rather than drop prices further, prices will stagnate at this level for a few years until wage increases (i.e. inflation) bring houses down to what's they're really worth. It would even seem likely that prices will overshoot, so in maybe 10 years time it will actually be good value to buy again.

The usual caveats apply, no crystal ball etc. In any event, I have just stolen the normal international economic model for economic bust and applied it to Ireland.

AARRRGH

It's hard to say, but I reckon the horrible apartment blocks which have sprung up everywhere, e.g. this kind of crap will reduce quite dramatically. I expect to see two bed apartments for under 150k.

I also expect the commuter areas to drop considerably.

The city centre and "nice" areas like Ranelagh and Blackrock will remain out of reach for the average singleton.

I think it's going to be a long, painful process, lasting quite a few years.

cance

Thank you all again for your valid and much appreciated input.

orbital83

we want to try and sort the house before the wedding (parents paying for wedding and a stipulation of this was we sorted the house before wedding)

This is unbelievable. Your parents are obviously old-skool "property only goes up rent is dead money" brigade. Who do they think they are to hold you to ransom in your mid 20s?
Sorry if this sounds harsh, but you need to tell them to go stuff themselves.

OP, if I were you, I'd continue renting and sit on my hands for a year.

So you're paying the landlord's mortgage now.
When you buy, chances are you'll be paying the same amount in mortgage interest to the bank, and your property will most likely be dropping a grand a month in value.
Not sure how that is more satisfying.

You ask "how can people afford to take on these mortgages?"
Well the answer is, they can't.
House prices have fallen, but they are still way off their true values.
Many sellers are holding out, refusing to drop prices, waiting for an economic recovery that is not coming any time soon. Banks are still rolling over the developers' loans, hoping the celtic tiger will return.
Eventually, reality will bite, banks will lose patience, shareholders will demand answers, foreign interbank lenders will tighten the noose, and repossessions and forced sales will begin.

Unemployment is rising, and the prospects for pay rises in most jobs are bleak. Public sector workers are facing a pay freeze. Private sector workers will be lucky to hang onto their jobs.
The recession is likely to cause an increase in emigration.
Food, electricity, petrol, mortgage interest - these costs are all rising. People have less to spend at the end of each month.
The government is cutting back on spending, and it looks like taxes will be ramped up to plug the deficit in the next budget.

In short, there won't be too much easy money sloshing around Ireland for the next while.
In this environment, I find it hard to imagine how house prices will not fall further, and I mean dramatically.

Find yourself a good, high interest fixed deposit account, and put your 19K in there for a year so you can't touch it.
Open a good regular saver account, make cutbacks in your spending and commit yourself to saving at least 1K per month.
This time next year, review the situation. I'd be very surprised if the market wasn't much more affordable.

Some interesting sites
http://daftwatch.atspace.com
http://www.thepropertypin.com
http://www.treesdontgrowtothesky.com

The_Conductor

dublindude wrote: »

It's hard to say, but I reckon the horrible apartment blocks which have sprung up everywhere, e.g. this kind of crap will reduce quite dramatically. I expect to see two bed apartments for under 150k.

They're not far off 150 at the moment. List prices may be 230-240, but cash offers of 170-180 are being accepted- not a million miles from your 150k......

Once again- I'd emphasise to anyone thinking of using the AH scheme- make sure you get the property revalued to reflect current market conditions......

DonJose

Neesa wrote: »

Well of course they don't want to keep renting! Why should their hard work go toward lining their landlords pockets?

OMG not another "rent is dead money" post!!! I returned to Ireland 2 years ago. I rent a house that was valued at €380k in 2006, I pay €800 in rent. 2 years later the same houses are selling for €305k. Thats a drop of €75k, I paid €19,200 in rent over the past 2 years. If I buy the house I am renting, I will have saved €55k. Happy renter

BobbyD10

dublindude wrote: »

It's hard to say, but I reckon the horrible apartment blocks which have sprung up everywhere, e.g. this kind of crap will reduce quite dramatically. I expect to see two bed apartments for under 150k.

I also expect the commuter areas to drop considerably.

The city centre and "nice" areas like Ranelagh and Blackrock will remain out of reach for the average singleton.

I think it's going to be a long, painful process, lasting quite a few years.

It's a pity the correction was not a quick and sharp one, which may have resulted in the buyers returning to the market and thus keeping the economy on the road. There are still crazy prices still being sought for those two bed apartments.

DonJose wrote: »

OMG not another "rent is dead money" post!!! I returned to Ireland 2 years ago. I rent a house that was valued at €380k in 2006, I pay €800 in rent. 2 years later the same houses are selling for €305k. Thats a drop of €75k, I paid €19,200 in rent over the past 2 years. If I buy the house I am renting, I will have saved €55k. Happy renter

Very nice example, there is probably many people who wish they did as you.!

travellerI

It suits banks, estate agents, property developers etc., if ordinary people unthinkingly repeat mantras such as "rent is dead money". As previously stated on this thread interest paid on huge mortgages in a collapsing market is the deadest money there could possibly be. Anyone who swallowed this spin since the end of 2005 and bought a house is probably now in negative equity and yes F***ed. Most objective economists in Ireland - that is those not employed by banks, building societies and estate agents - believe that property will give up 60% of its gains made during the bubble (2001-2006) in the coming years. Anyone who claims that they can call the bottom of the market is lying and personally I wouldn't think about even considering purchasing until 2011.

AARRRGH

BobbyD10 wrote: »

It's a pity the correction was not a quick and sharp one, which may have resulted in the buyers returning to the market and thus keeping the economy on the road. There are still crazy prices still being sought for those two bed apartments.

I agree. If we could just get the price reductions over with (i.e. speed up the reductions) we would be back on track to normality.

johnnyskeleton

dublindude wrote: »

I agree. If we could just get the price reductions over with (i.e. speed up the reductions) we would be back on track to normality.

While I agree with you, one reason this doesn't happen is the massive human cost - i.e. all those poor first time buyers who bought in the last 4-5 years will have their financial lives ruined (not to mention the massive stress they will be under). I have a few friends in this situation, and even though I tone down my views on the economy, it is quite painful for them to hear any talk of property at the moment.

SimpleSam06

johnnyskeleton wrote: »

all those poor first time buyers who bought in the last 4-5 years will have their financial lives ruined (not to mention the massive stress they will be under).

On the other hand, the sooner it stops going down, the sooner they can begin the decades long crawl to positive equity again. So really, the faster the bottom is hit the better for everyone.

johnnyskeleton

SimpleSam06 wrote: »

On the other hand, the sooner it stops going down, the sooner they can begin the decades long crawl to positive equity again. So really, the faster the bottom is hit the better for everyone.

But for prices to hit the bottom, we will have to see FTBs hit the wall and sell at a fraction of what they bought for. While I agree that we better take our medicine sooner rather than later, I think this scenario is still a little too unpallatable for most people, including those who actually have a say in it (banks, judges, politicians).

SimpleSam06

johnnyskeleton wrote: »

But for prices to hit the bottom, we will have to see FTBs hit the wall and sell at a fraction of what they bought for.

Why would the FTBs need to hit the wall, nobody is forcing them to sell at those prices? With 40% of an unprecedented overhang going to investors at the height of the bubble, never mind plain old unsold inventory along with normal movement in the market, there is more than enough to go round without bankrupting anyone except developers and speculators.

It just means they can't move house. But generally speaking, they can't move house anyway and won't be able to until prices start recovering, or until they get the mortgage paid off.

Maybe I'm missing your point.

jmayo

Maybe I am wrong but I don't believe it is when FTBs are forced to jump.
They will only be forced to jump if they lose their jobs or repayments become impossible.
As the optimists on here say, it doesn't matter if you are in negative equity if you can maker the repayments and don't want or rather need to move.
You have a stock of unsold properties that developers are hanging onto.
Eventually the banks will be forced to push for these to be sold off to recoup some of the loans.
Then there are the investors, the ones that remortgaged family homes to buy investment properties and the ones that are on interest only mortgages in hope of capital appreciation. With rising unemployment, immigrants going home and indeed Irish emmigrating, they will find renting harder and thus they will have to take a hit and cut their losses.
Also some of these people will discover that their property in sunny Beach or Bansko isn't worth much either on the resale market.
That is when the real tears start.

johnnyskeleton

SimpleSam06 wrote: »

Why would the FTBs need to hit the wall, nobody is forcing them to sell at those prices? With 40% of an unprecedented overhang going to investors at the height of the bubble, never mind plain old unsold inventory along with normal movement in the market, there is more than enough to go round without bankrupting anyone except developers and speculators.

It just means they can't move house. But generally speaking, they can't move house anyway and won't be able to until prices start recovering, or until they get the mortgage paid off.

Maybe I'm missing your point.

Just to be clear, I'm not saying that in order to be a property crash there need to be FTBs hitting the wall, what I'm saying is I don't think the bottom can be reached until all those who are overstreched (whether it be due to a change in circumstances or simply inability to keep up with payments and rising cost of living) have accepted the reality of their situation. Unfortunately the choice for people in these situations is to:
a) try to muddle through in the hope of eventually getting back on track or property prices recovering enough to sell the property, pay off the mortgage, and make a clean start;
b) sell and make good on whatever they can.

I guess I'm not saying that as a matter of logic it has to happen, rather I can't see the bottom of the market until a lot of people have gone through some very bad times, and while I don't feel sorry for a lot of them, there will inevitably be a lot of FTBs who hit the wall.