Affordable apartment

Basicilly

My girlfriend and i have been offered an affordable 2 bed appartment in Fairview. The council have valued it at 400k which is obviously overvalued. We have been offered the appartment for 275k. My worry is that in 4-5 years we may decide to sell to move abroad/down the country which we will mean we will be subject to the clawback of 31.25%.

I have spoken to the council and they agreed that it was a good idea to bring in an independent valuer for the property. My question is where my threshold for the new valuation should be for a buy/don't buy decision. Anyone been through this process before or any general advice would be greatly appreciated.

jdivision

Really that's down to individual circumstances. You need to do the maths on the clawback because I don't think you fully understand it.

The_Conductor

Further- the whole idea of the Affordable Housing Scheme is to put a permanent roof over your head. If you´re planning on moving abroad in 4-5 years, regardless of the price of the property and the reduction on the OMSP that you´re getting- in the current climate you are most probably far better off renting (at least until you decide whether you are going to stay in the country longterm or not).

Personally I think its insane buying an apartment if you intend to emmigrate in 4-5 years time, but thats only my own personal opinion.

Basicilly

Ideally i would like the option to move and keep the appartment which i hope to be in the financial position to do. I guess my biggest fear is negative equity.

i've generally heard figures of between 20% and 40% from the height to the bottom of the market. Given the price of 400k put on the appartment by DCC it could possibly drop to between 320k and and 240k. I don't think this is likely in dublin city centre but am wondering what you think. How far do you think the property will drop?

jdivision

Basicilly wrote: »

Ideally i would like the option to move and keep the appartment which i hope to be in the financial position to do.

It has to be your principle private residence so you don't have that option

Basicilly

As far as i understand it there is a way around this using the rent a room policy. Sign up for this policy whereby you can rent a room and just rent it for the price of two rooms meaning you are a resident in theory.

jdivision

So you're already looking to scam the system? That's great.:rolleyes:

Basicilly

i didn't say i would do it but circumsatnces may change. If i need to move down the country to look after a family member or if i break up with my girlfriend etc. I would then need to vacate the appartment. Should i keep it vacant in this case? or should i sell it because i can't afford the mortgage and rent elsewhere?

anyway, this is not relevant to my original posting. Do you have anything relating to this posting to say. How low do you think the property market will go?
Am i likely to end up in negative equity if i buy this appartment?

SimpleSam06

Basicilly wrote: »

Am i likely to end up in negative equity if i buy this appartment?

Yes, quite likely I would say.

Basicilly

How much and how long for? I know the UK market took 18 years to return to its previous height after a property bubble burst in the 80's. This was a similar case in the japeneese market. Other markets with more severe initial downturns similar to Ireland began to recover after 2 or 3 years. Is the Irish market going to drop much further in Dublin city centre or has the fall began to slow off. I'm putting a figure of a 25% drop from the peak into my model with the market starting to pick up by the middle of 2010. Is this a valid estimate in your opinion or am i being too conservative.

The_Conductor

Basicilly wrote: »

How much and how long for? I know the UK market took 18 years to return to its previous height after a property bubble burst in the 80's. This was a similar case in the japeneese market. Other markets with more severe initial downturns similar to Ireland began to recover after 2 or 3 years. Is the Irish market going to drop much further in Dublin city centre or has the fall began to slow off. I'm putting a figure of a 25% drop from the peak into my model with the market starting to pick up by the middle of 2010. Is this a valid estimate in your opinion or am i being too conservative.

I wouldn´t call it conservative, I´d call it optimistic in the extreme.
Economic indicators are continuing to deteriorate, people´s purchasing power is continuing to fall, financial liquidity is unlikely to ever reach the crazy levels that sustained the property market for the past few years- with salary multiples returning to "normalisation", as Austin Hughes puts it. We are currently at July 2005 price levels, and they were considered by rational economists to be over 50% over valued at that point in time.

If you are looking at an international comparison to hold Ireland up to- we are in a similar boat to Spain, only our bubble developed over a longer period of time than their´s, which would logically suggest that it would take a lot longer for base to be hit than in Spain (or indeed The Netherlands and Denmark- the other 2 Eurozone countries in property related bubbles at the moment).

If you are buying on the assumption that property prices will commence rising again by 2010, you need to seriously reaccess what you are doing.

I´m not even going to comment on your remarks about the rent-a-room scheme, sufficient to say there is a unit in the Revenue Commissioners looking at that scheme along with FTB declarations, as a result of a significant number of suspicious transactions. If you do play fast and loose with the Revenue Commissioners- they will catch up with you eventually, its just a matter of time.

SimpleSam06

Basicilly wrote: »

I'm putting a figure of a 25% drop from the peak into my model with the market starting to pick up by the middle of 2010. Is this a valid estimate in your opinion or am i being too conservative.

Asking prices are already down 15% or so, maybe a bit more, and you can get 10% off almost anywhere just by asking for it, so your 25% has already been reached, and no slowing in the pace of the crash to be seen.