Looking for Advice on Whether to Buy Affordable Housing Apt in Current Times...

blobert

Hello,

Last November my partner and I had our names pulled out of the Dublin City Council Affordable Housing Draw for a 2 bedroom apartment in a new apartment development in Grand Canal Dock, Dublin 2.

At the time we were delighted, we'd get to buy a 2 bed apartment in the city centre for €225,000 (with the usual affordable housing conditions) which seemed a fantastic deal.

Now, nearly a year later (and due to a recluctance by the banks to sign up to the scheme) we are finally able to proceed with the purchase. One plus side of Dublin Docklands taking so long to sort the scheme out is that the prices of the apartments have fallen. This means that their initial valuation of €450,000 for the place should now be reduced and that we should be able to get a larger % of the property for €225,000. This should mean we'll own about 60% of the apartment (between year 10-20 they give over the other 40%)

We are still planning to go ahead with it, but with the changes that have taken place and the current property market, it just feels like a very bad time to be buying a home, especially an apartment. But for the fact that this place is half price, we certainly would not be thinking of buying at the moment.

I just wanted to run through my thoughts on the matter and see if people think they are logical.

1. It still seems to make sense to buy it. Our current rent in the Dublin 2 area is €1300 a month. We can hopefully get a 25 year mortgage paying back around the same per month. Apartments in this building rent for €1600 per month (I know these will most likely fall) so presumably the opportunity to buy a place with mortgage payments less than the renting cost is still a good thing? A 2 bed apt in the city centre should also be more likely to hold/increase in value than most other places I would imagine.

2. We are probably not going to live here for 20 years. We are both in our mid-late 20's now. Chances are we are not going to live here for the full 20 years (I'd like to be able to move to a house with garden if/when we have kids in the future). But even assuming that we live here for 10 years and then sell the place (splitting the sale price 60/40 with Dublin Docklands) I still think we would be in a better position than having paid €150,000 in rent in the meantime. I'm pretty sure we are protected from negative equity through the scheme (will have to double check on this) but again it seems to make sense to buy the place based on this.

We both like the apartment lots, it's very big, on the 5th floor with a big patio/balcony and lots of windows. We think it would be a great place to live for the forseeable future and as I say, the only alternative at the moment would be to continue renting for the next few years and "see what happens". I know people say the "dead money" argument of renting is wrong but my girlfriend has been renting for 10 years at this stage and so sees the opportunity to buy a place for the same price as renting as appealing, I have to say I agree.

Like I said I think we are going to go ahead but I just wanted to get people's thoughts on the matter.

If you think we are making a terrible mistake please let me know:)

Thanks

punchestown

Any plans for children?

blobert

See Number 2 above, thanks

SimpleSam06

blobert wrote: »

Apartments in this building rent for €1600 per month

Would you ordinarily be renting in this building?

blobert wrote: »

I still think we would be in a better position than having paid €150,000 in rent in the meantime.

How much will you have paid in interest on the loan during this time, keeping in mind that banks front load interest payments?

blobert

SimpleSam06 wrote: »

Would you ordinarily be renting in this building?

No, my point is that we would be living in a significantly nicer home for the same cost as renting our current one.

SimpleSam06 wrote: »

How much will you have paid in interest on the loan during this time, keeping in mind that banks front load interest payments?

Probably about €150,000, but is this not unavoidable when taking a mortgage?

If you think buying this place is a bad idea, do you think that renting and "waiting and seeing" is the best option?

Thanks for your input

gamer

you are in a good area ,nice big apartment ,at least you are saving on rent ,that is a fair price ,i know some1 bought a 1bed apartment in 2006,for 250k private and its very small,you are getting a good deal.say you live there 15 years ,some changes in price will have no affect on you.
i would be wary about buying an apartment if it was a small 1bed apartment at present.compare the prices of houses on daft.ie ,in city centre ,eg cabra, to see if you are getting a fair price.i presume theres services charges to be taken in to account.

blobert

Thanks,

It's about 800sq ft, 900 with patio/balcony so it should be plenty big enough for 10-15 years.

There will be management fees as with all apts.

If I knew I'd be there for 20 years then this would be a no brainer as it's a half price apartment in Dublin 2, I still think it's a good deal even if we are only there for 10-15 years...

SimpleSam06

blobert wrote: »

Probably about €150,000, but is this not unavoidable when taking a mortgage?

The only question here is will you get better accommodation at a cheaper price if you wait it out. The answer to that is, probably, yes. Will it be sufficiently better value to justify waiting? Its impossible to say. 800 square feet is not large at all, in my opinion.

By the way, how much are management company fees on top of your mortgage?

blobert

SimpleSam06 wrote: »

The only question here is will you get better accommodation at a cheaper price if you wait it out. The answer to that is, probably, yes. Will it be sufficiently better value to justify waiting? Its impossible to say. 800 square feet is not large at all, in my opinion.

By the way, how much are management company fees on top of your mortgage?

Not sure of management fees yet, there is very little communal space areas to be maintained, for the area I'm guessing €1500-2000.

I don't think I'll ever get a 2 bed apt in the city centre for less than €225,000 regardless of how long I wait, I realise the attached conditions do not make this purchase as straightforward as that.

In terms of "Will it be sufficiently better value to justify waiting?" I guess that depends on how far you think prices have to fall, I'm guessing you think there is still a long way to go?

Any other advice would be much appreciated.

Thanks

chump

blobert wrote: »

Not sure of management fees yet, there is very little communal space areas to be maintained, for the area I'm guessing €1500-2000.

I don't think I'll ever get a 2 bed apt in the city centre for less than €225,000 regardless of how long I wait, I realise the attached conditions do not make this purchase as straightforward as that.

In terms of "Will it be sufficiently better value to justify waiting?" I guess that depends on how far you think prices have to fall, I'm guessing you think there is still a long way to go?

Any other advice would be much appreciated.

Thanks

Sorry, but do you get the whole place for that price or 60%?

I am unsure of the details of the scheme, any chance of a quick summary? :pac::)

blobert

The €225,000 represents 50% of the market value (which they claim as €450,000). The apt was valued about 18 months ago so I believe it should have fallen in value, hence our 225,000 should get about 60% equity (depending on current valuation).

If you sell between year 0 and 10 you pay back 50% of the selling price (or 40% if you own 60% of the place), between year 10 and 20 Docklands give you over 5% each year (assuming they own 50%) until year 20 where you own 100% of the place.

So if you did not sell within 20 years you are getting the place for €225,000.

Hope this makes it clearer

chump

blobert wrote: »

The €225,000 represents 50% of the market value (which they claim as €450,000). The apt was valued about 18 months ago so I believe it should have fallen in value, hence our 225,000 should get about 60% equity (depending on current valuation).

If you sell between year 0 and 10 you pay back 50% of the selling price (or 40% if you own 60% of the place), between year 10 and 20 Docklands give you over 5% each year (assuming they own 50%) until year 20 where you own 100% of the place.

So if you did not sell within 20 years you are getting the place for €225,000.

Hope this makes it clearer

thanks blobert, can you rent it is the big question! :pac:

blobert

Officially you can rent a room but it must remain your "principle place of residence".

I will be looking closely at the contracts to see what the deal is in relation to this as it is likely to be an important factor.

chump

blobert wrote: »

Officially you can rent a room but it must remain your "principle place of residence".

I will be looking closely at the contracts to see what the deal is in relation to this as it is likely to be an important factor.

OK,
There is no way you'll stay and live there for 10+ years.
And there's no way you'll get away with renting it out for 10 years (years 11-20).
That sort of nullifies the benefit of 'eventually' owning 100% for the price of 60%, as this is very unlikely to happen.

Based on this assumption, the question then is

1. Is there a risk of your 'equity' in it being depreciated? Ie. Is the value (the full 100%) likely to decrease and if it does how does your 60% be affected?

2. Looking at it as a pure rental play how does the price stack up when you include the annual service charge and what is the lost 'benefit' of TRS relief and first time buyers stamp duty relief.

Victor

It doesn't sound like a bad deal. What you need to make sure is that the valuation and contracts reflects market value now, not 1-2 years ago.

blobert

Victor wrote: »

It doesn't sound like a bad deal. What you need to make sure is that the valuation and contracts reflects market value now, not 1-2 years ago.

Thanks, we are going to go ahead with it I think, I don't like the idea of waiting 3-5 years to see what happens and I still think being able to pay the mortgage for less than rent in the city centre represents a good deal.

Making sure the place is correctly valued is the priority and having a thorough read of the contracts to make sure we are fully aware of all conditions.

Thanks for the advice folks

BrightonRoad200

Affordable Housing, Share Ownership, Decision Time - Thoughts

I put down a deposit of €3,000 and this will start the ball rolling. I’m getting the property will Dublin City Council.I have being given the apartment for €258,000 down from €272,000 at a current market valuation.

My main concerns are:

None of the apartments are owned yet but the developer through a management company is renting them out, there are about 200 of them. The developer has not sold any of them yet.

House’s/Apartments are dropping in the current market so the properties could be 20% cheaper this time next year.

Yes or no, will I go for it and what would your thoughts be?

uncanny

BrightonRoad200 wrote: »

Yes or no, will I go for it and what would your thoughts be?

Apartments in Ireland in 2008 are like the bank shares in 2007. Past their peak and about to go off a cliff.

However unlike bank shares they won't lose 90% of their value, probably between 60% and 70% from peak at the bottom in 2011/2012.

If your apartment is on at 30-40% of 2006 prices then consider it, otherwise run a mile.

BrightonRoad200

I need to investigate the original price but I assumed it was €350,000 but was surprised when they said €272,000 as it seemed not much of a difference between what I'm meant to pay and the difference. There affordability is the difference of €16,000 which is not a great deal!