Why buy a house when it won't be worth 2009 prices again until 2020

Mugatu

It baffles me how people can say with confidence they know eaxctly what % will be taken off houses in 12 months. At the minute houses are falling in value by 1% a month meaning a maximum of -12% this time next year. On top of that daft have reported the rate of decline has slowed a lot since the end of last year. Housing stock in Dublin is decresing according to daft watch. Yet some people claim for a "fact" houses will be 20 - 50% cheaper next year.

As for the 50% from today. What house, what location, what price difference between now and the peak of 06/07, is it an apartment can the poeple actually sell in that much NE..... etc etc.

statss

Mugatu wrote: »

It baffles me how people can say with confidence they know eaxctly what % will be taken off houses in 12 months. At the minute houses are falling in value by 1% a month meaning a maximum of -12% this time next year. On top of that daft have reported the rate of decline has slowed a lot since the end of last year. Housing stock in Dublin is decresing according to daft watch. Yet some people claim for a "fact" houses will be 20 - 50% cheaper next year.

As for the 50% from today. What house, what location, what price difference between now and the peak of 06/07, is it an apartment can the poeple actually sell in that much NE..... etc etc.

how could trust daft? they rely house sales.

Senna

Mugatu wrote: »

It baffles me how people can say with confidence they know eaxctly what % will be taken off houses in 12 months. At the minute houses are falling in value by 1% a month meaning a maximum of -12% this time next year. On top of that daft have reported the rate of decline has slowed a lot since the end of last year. Housing stock in Dublin is decresing according to daft watch. Yet some people claim for a "fact" houses will be 20 - 50% cheaper next year.

As for the 50% from today. What house, what location, what price difference between now and the peak of 06/07, is it an apartment can the poeple actually sell in that much NE..... etc etc.

Asking prices may be dropping by 1% but selling prices are dropping by much more, making daft reports interesting but pretty much worthless. Alot of houses are being pulled by canny sellers to rent instead. They stay on the rented market for a few months until canny realizes that it wont rent either then it pops up on daft again, i'd expect more of these over the next 3 months.

The average house price is still 270k (open to correction, cant be bothered looking), that includes a hell of a lot of 1&2 bed flats and houses in unsuitable locations. Average wages are dropping also. 32k would be a fairly average wage to take as an example, if we say 4 times average wage that an average price of 128k or nearly half the current rates. 4x average wage is generous, but it justifies many peoples belief that we have another 50% to go. In my own personal view the average house prices (statistics of country, not any one particular house) will be around 100k in todays money when the market bottoms out.

giftgrub

I've been renting for the last ten years and am about to buy my first home

I liked renting, the good thing is you can live almost anywhere you want

However personal circumstances chance, married now, with a baby

Our house cost 450k late last year, we're getting it for 315k

If it drops so be it, we can afford the mortgage, and we have a home of our, barring the arrival of triplets anytime soon we wont be moving!!

am i bovvered

Senna wrote: »

32k would be a fairly average wage to take as an example, if we say 4 times average wage that an average price of 128k or nearly half the current rates. 4x average wage is generous, but it justifies many peoples belief that we have another 50% to go.

I am no expert but this is a Q I have always wondered...
Traditionally banks took between 3~5 times a persons salary into account for a mortgage, but that was set at a time when the norm was that every home had only one income. Nowadays almost every home has two incomes, so at 32k that would mean 64k. Even if we call that figure 50k x 4 = 200k.

I am not talking the market up or down... I do not know... my feelling is there is still away to go before the bottom but not as far as some here predict.

Freddie59

mathie wrote: »

So by your calculations just wait twice as long and houses will be free.:

Remember where you heard it first.;):D

bobbiw

I dont think prices will be free. A lot depends on the credit market though.

Less people are qualifying for loans now. You need to think about the mentality that people are going to go through.

Just like people previously would buy a shed to get on the property ladder, now they will be scared because of the talk of negative equity.

No one wants to buy a house today for 300k and have it 270 before the end of the year.

People will start to think that they are better off with 20k profit than to hold on and not be able to sell. The mega estates of poor quality housing will be hit hard.

Apartments will be hit badly as well.

Location may be a part of it but overall prices have to come down. Ireland is not the economic powerhouse that it was.

Amazing that it went from being the best economy in europe (or the world) to being the biggest cautionary tale.

Goverment were foolish not to prepare for this. But then again they had never had prosperity and I doubt they are that bright.

Fighting Irish

faceman wrote: »

Why are you glad? Thats an uneducated, idiotic statement to make.

Because everything was over priced

Fighting Irish

Mugatu wrote: »

It baffles me how people can say with confidence they know eaxctly what % will be taken off houses in 12 months. At the minute houses are falling in value by 1% a month meaning a maximum of -12% this time next year. On top of that daft have reported the rate of decline has slowed a lot since the end of last year. Housing stock in Dublin is decresing according to daft watch. Yet some people claim for a "fact" houses will be 20 - 50% cheaper next year.

As for the 50% from today. What house, what location, what price difference between now and the peak of 06/07, is it an apartment can the poeple actually sell in that much NE..... etc etc.

I think Dublin house prices are always going to be different than the rest of the country, same with other major cities/countries

Senna

am i bovvered wrote: »

but that was set at a time when the norm was that every home had only one income. Nowadays almost every home has two incomes,

But so many couples both had to work just to afford a mortgage. If houses were at a traditional levels (which they will be) many husbands or wife's can afford to stay at home and look after the kids, rather than working to pay a mortgage and childcare.
With our high unemployment levels i think a one earner family will be the norm of those that purchase houses after the bust.

ntlbell

am i bovvered wrote: »

I am no expert but this is a Q I have always wondered...
Traditionally banks took between 3~5 times a persons salary into account for a mortgage, but that was set at a time when the norm was that every home had only one income. Nowadays almost every home has two incomes, so at 32k that would mean 64k. Even if we call that figure 50k x 4 = 200k.

I am not talking the market up or down... I do not know... my feelling is there is still away to go before the bottom but not as far as some here predict.

not true.

usually one of the incomes will be dropped at some point be it having kids etc.

when they have kids they have huge costs like creche fee's child minder fee's which can eat a huge amount of one of the incomes

again it's not as simple as X amount wages you need to work out what YOU can afford based on your circumstances and lifestyle choices a bank cant do this for you

mrgaa1

http://news.bbc.co.uk/1/hi/business/8062926.stm
http://news.bbc.co.uk/1/hi/business/8063520.stm

Some interesting news from Asia.

We all became property speculators - and property investors. So now that most of those are gone the real investors are starting to move in and buy the bargains that are available. These are the people who see the long term viability of property - not just housing but commercial. And who says house prices will take ten years to come back - who knows whats going to happen? One thing is for absolute sure house prices will rise as it costs a lot more now to build them and materials such as plasterboard, plastics, tiles etc... are all rising - 10% this year alone and another increase coming. So those who are doing renovations will see these prices - labour may come down but not a whole pile.

CiaranC

mrgaa1 wrote: »

And who says house prices will take ten years to come back - who knows whats going to happen?

Its nearly 20 years in Japan and they havent "come back"

Freddie59

mrgaa1 wrote: »

And who says house prices will take ten years to come back - who knows whats going to happen? One thing is for absolute sure house prices will rise as it costs a lot more now to build them and materials such as plasterboard, plastics, tiles etc... are all rising - 10% this year alone and another increase coming. So those who are doing renovations will see these prices - labour may come down but not a whole pile.

I asked you before - are you a developer/employed in the construction industry?

House prices will rise, you say. When? After they've tumbled to historic lows is te bit you've conveniently left out.

And the price of materials? This will not dictate the price of houses. The market will. End of story.

Fighting Irish

mrgaa1 wrote: »

http://news.bbc.co.uk/1/hi/business/8062926.stm
http://news.bbc.co.uk/1/hi/business/8063520.stm

Some interesting news from Asia.

We all became property speculators - and property investors. So now that most of those are gone the real investors are starting to move in and buy the bargains that are available. These are the people who see the long term viability of property - not just housing but commercial. And who says house prices will take ten years to come back - who knows whats going to happen? One thing is for absolute sure house prices will rise as it costs a lot more now to build them and materials such as plasterboard, plastics, tiles etc... are all rising - 10% this year alone and another increase coming. So those who are doing renovations will see these prices - labour may come down but not a whole pile.

:rolleyes:

gurramok

Good logic.

They will rise again very soon according to mrgaa1. Now, hardly any Irish based citizens are buying at todays prices primarily because of affordability\job problems\budget eating wages etc, so who will buy all these expensive houses?

International investors who see bargains in the Irish market? :P

mrgaa1

Freddie59 wrote: »

And the price of materials? This will not dictate the price of houses. The market will. End of story.

This statement has to be the funniest thing I've ever read. If you buy materials that cost - lets say €100 - and you pay someone €30 to use them - BTW thats €100+€30 = €130 - now you would add some profit - lets say 5% so thats €6.50 and we add those figures together we get €139.50. And you go to sell it - why would any sane person sell for less than this? You have to pay the supplier of the materials and you have to pay the person who used them. Profit has to be made - normally you'd cost in your other items such as insurance, utility bills etc.. which I haven't done in this instance.
Don't give me the usual rubbish about market conditions - everything has a cost that it just can't go below. Its not financially viable. So materials, labour, insurance, health & safety (this includes scaffolding, PPE, machines in reasonable order, toolbox talks, risk assessments etc..), tea hut, storage hut, toilet & wash facilities, van(s) &/or lorry(s), diesel, tools, bank facilities, tax man, VAT man all have costs that have to be met.
Market conditions are only viable to the point where its not viable to sell at a cost less than what it costs to cover all expenditure. This is what business is about - covering your costs.

Fighting Irish

mrgaa1 wrote: »

This statement has to be the funniest thing I've ever read. If you buy materials that cost - lets say €100 - and you pay someone €30 to use them - BTW thats €100+€30 = €130 - now you would add some profit - lets say 5% so thats €6.50 and we add those figures together we get €139.50. And you go to sell it - why would any sane person sell for less than this? You have to pay the supplier of the materials and you have to pay the person who used them. Profit has to be made - normally you'd cost in your other items such as insurance, utility bills etc.. which I haven't done in this instance.
Don't give me the usual rubbish about market conditions - everything has a cost that it just can't go below. Its not financially viable. So materials, labour, insurance, health & safety (this includes scaffolding, PPE, machines in reasonable order, toolbox talks, risk assessments etc..), tea hut, storage hut, toilet & wash facilities, van(s) &/or lorry(s), diesel, tools, bank facilities, tax man, VAT man all have costs that have to be met.
Market conditions are only viable to the point where its not viable to sell at a cost less than what it costs to cover all expenditure. This is what business is about - covering your costs.

Materials won't go down in price


EVERYTHING in Ireland was/is overpriced, everyone was kidding themselves

jape

mrgaa1 wrote: »

This statement has to be the funniest thing I've ever read. If you buy materials that cost - lets say €100 - and you pay someone €30 to use them - BTW thats €100+€30 = €130 - now you would add some profit - lets say 5% so thats €6.50 and we add those figures together we get €139.50. And you go to sell it - why would any sane person sell for less than this? You have to pay the supplier of the materials and you have to pay the person who used them. Profit has to be made - normally you'd cost in your other items such as insurance, utility bills etc.. which I haven't done in this instance.
Don't give me the usual rubbish about market conditions - everything has a cost that it just can't go below. Its not financially viable. So materials, labour, insurance, health & safety (this includes scaffolding, PPE, machines in reasonable order, toolbox talks, risk assessments etc..), tea hut, storage hut, toilet & wash facilities, van(s) &/or lorry(s), diesel, tools, bank facilities, tax man, VAT man all have costs that have to be met.
Market conditions are only viable to the point where its not viable to sell at a cost less than what it costs to cover all expenditure. This is what business is about - covering your costs.

SkepticOne

mrgaa1 wrote: »

Don't give me the usual rubbish about market conditions - everything has a cost that it just can't go below. Its not financially viable. So materials, labour, insurance, health & safety (this includes scaffolding, PPE, machines in reasonable order, toolbox talks, risk assessments etc..), tea hut, storage hut, toilet & wash facilities, van(s) &/or lorry(s), diesel, tools, bank facilities, tax man, VAT man all have costs that have to be met.
Market conditions are only viable to the point where its not viable to sell at a cost less than what it costs to cover all expenditure. This is what business is about - covering your costs.

But none of that means you're going to sell at that price. What happens then? How much are you making from a house that won't sell at a price that covers your costs?

Photojoe

irlrobins wrote: »

You're relocating for work.

You're getting married and need bigger place.

You now have children and can't fit in a two bed apt.

You want to downsize.

You want to move to an area with less social problems

You can get a bargain.

You've separated from your partner.

You want a holiday home.

You're fed up with the long commute.

Or because at the end of the day, you've done your research, worked on the financials, found a place you like, don't care about negative equity and feel that now the time is right for YOU.

Rent
Rent
RentRentRent
RentRentRentRentRentRentRentRentRentRent

CiaranC

mrgaa1 wrote: »

Don't give me the usual rubbish about market conditions - everything has a cost that it just can't go below. Its not financially viable.

I get that you probably work in the construction industry and are mortgaged up to your neck. I feel for you, I do, Id be in the same situation only for circumstance.

The market is everything.

Nothing has a cost that it "just cant go below". If there is no market demand for something, then it will not sell. How much it costs to make is IRRELEVANT.

Photojoe

CiaranC wrote: »

I get that you probably work in the construction industry and are mortgaged up to your neck. I feel for you, I do, Id be in the same situation only for circumstance.

The market is everything.

Nothing has a cost that it "just cant go below". If there is no market demand for something, then it will not sell. How much it costs to make is IRRELEVANT.

That guy obviously has never heard of manufacturing innovation. If companies took his approach we'd never have home computers or tvs.

dan_d

People will always need somewhere to live.that's why the first time buyers market is so lucrative.Because there will always be first time buyers.Plus other people who need to move house for various reasons. Some people dont' want to rent (me included).Thats why.
To be honest it doesn't really matter either. If you're happy enough to buy now then go for it.Otherwise wait. I wouldn't think about it too much.

Freddie59

mrgaa1 wrote: »

This statement has to be the funniest thing I've ever read. If you buy materials that cost - lets say €100 - and you pay someone €30 to use them - BTW thats €100+€30 = €130 - now you would add some profit - lets say 5% so thats €6.50 and we add those figures together we get €139.50. And you go to sell it - why would any sane person sell for less than this? You have to pay the supplier of the materials and you have to pay the person who used them. Profit has to be made - normally you'd cost in your other items such as insurance, utility bills etc.. which I haven't done in this instance.
Don't give me the usual rubbish about market conditions - everything has a cost that it just can't go below. Its not financially viable. So materials, labour, insurance, health & safety (this includes scaffolding, PPE, machines in reasonable order, toolbox talks, risk assessments etc..), tea hut, storage hut, toilet & wash facilities, van(s) &/or lorry(s), diesel, tools, bank facilities, tax man, VAT man all have costs that have to be met.
Market conditions are only viable to the point where its not viable to sell at a cost less than what it costs to cover all expenditure. This is what business is about - covering your costs.

You really don't get this - do you? NO-ONE CAN AFFORD THESE HOUSES. That is the bottom line.

The banks won't lend - as they're concerned that the value of the house will drop.

Buyers (myself included) won't buy - for the same reason.

So you can go on about 'covering costs':rolleyes: all you like.

The money - or the will to buy - is not there. AKA the market dictating a price. Comprendé, Hombré?

Now, I'll ask you again:

Are you a property developer, working in the building industry, or Tom Parlon?:D

wyndham

bobbiw wrote: »

The idea that you should borrow 2.5 times your salary is crap.

If I make 200k a year that means I take home around 12k a month.

A 500k mortgage will cost me around 3k a month. Leaving me with 9k a month to spend.

Now if I make 20k a year that might make sense but the more you make the less it does.

As for prices falling, they will continue to. The houses that are the most secure are the older ones believe it or not. Good 70s and 80s built 3-4 bed semi or detached homes are more desireable and better built than the crap that builders put out in the last decade.

So not everything will drop by 50%.

But a lot will, you are going to see a lot more 5 figure sales in the next 2-3 years than in the last 20 and that wont just be apartments.

Where are you getting your figures?

Currently, a gross salary of €200k would give a net monthly take home of c.€8,500. This will reduce after the next couple of budgets when higher earners will be hit hard.

Also, that monthly repayment would be correct on a 4% interest rate over 20 years. Current rates are 4.75%+. http://www.propertyfile.net/rates.htm

At a 7% rate, which is more realistic, repayments would be closer to 4k.

Thus, disposable income is going to be squeezed from both ends. A 3% rise in income tax for higher earners would reduce 200k Mans take home by €500 per month. A 1% rise interest rates would have a similar effect, assuming a 500k mortgage. Lot of people are also facing paycuts as an aside.
Ignoring all the stealth taxes and dirty little tax rises that are going to come in the next couple of budgets- Road tax, waste charges, petrol.

Factor in impending domestic rates, and all other costs of living, motoring and all associated costs, childcare (if he wants)@ up to €1k per skull per mth (http://www.askaboutmoney.com/showthread.php?t=80671), education, utilities, holiday, few bob to throw in the pension plan, etc, etc, etc, and 200k Man looks like he can still manage to finance his 500k mortgage, just about.

Of course, he could live on beans on toast, not get married or have kids or a tv or not build that extension or convert the attic and get the bus to work and probably knock lumps out of his mortgage, but there wouldn't be much point in living.

God help the 80-100k combined income couple with 2 kids who bought that 500k house in 2006 or a 700k house or a 900k house.

2.5 times primary salary + 1.5 second salary is the bottom line and will be the fundamental settling point for house prices in the coming period.

Further discussion here:

http://www.thepropertypin.com/viewtopic.php?f=4&t=21906

Firetrap

Well, just like prices shot up to ludicrous levels, they can drop too. Forget all that stuff about materials etc. They were sold for as much as people were prepared to pay for them (and what the banks were prepared to lend...)

Freddie59

Firetrap wrote: »

Well, just like prices shot up to ludicrous levels, they can drop too. Forget all that stuff about materials etc. They were sold for as much as people were prepared to pay for them (and what the banks were prepared to lend...)

Indeed. Well said.

harsea8

wyndham wrote: »

Where are you getting your figures?

Currently, a gross salary of €200k would give a net monthly take home of c.€8,500. This will reduce after the next couple of budgets when higher earners will be hit hard.

Also, that monthly repayment would be correct on a 4% interest rate over 20 years. Current rates are 4.75%+. http://www.propertyfile.net/rates.htm

At a 7% rate, which is more realistic, repayments would be closer to 4k.

Thus, disposable income is going to be squeezed from both ends. A 3% rise in income tax for higher earners would reduce 200k Mans take home by €500 per month. A 1% rise interest rates would have a similar effect, assuming a 500k mortgage. Lot of people are also facing paycuts as an aside.
Ignoring all the stealth taxes and dirty little tax rises that are going to come in the next couple of budgets- Road tax, waste charges, petrol.

Factor in impending domestic rates, and all other costs of living, motoring and all associated costs, childcare (if he wants)@ up to €1k per skull per mth (http://www.askaboutmoney.com/showthread.php?t=80671), education, utilities, holiday, few bob to throw in the pension plan, etc, etc, etc, and 200k Man looks like he can still manage to finance his 500k mortgage, just about.

Of course, he could live on beans on toast, not get married or have kids or a tv or not build that extension or convert the attic and get the bus to work and probably knock lumps out of his mortgage, but there wouldn't be much point in living.

God help the 80-100k combined income couple with 2 kids who bought that 500k house in 2006 or a 700k house or a 900k house.

2.5 times primary salary + 1.5 second salary is the bottom line and will be the fundamental settling point for house prices in the coming period.

Further discussion here:

http://www.thepropertypin.com/viewtopic.php?f=4&t=21906

Although I completely agree with your sentiment, I think the eating beans thing and not being able to afford a tv is taking things a bit far. If your example refers to a "200k man" then the likelihood is that, if he has kids, his missus stays at home and minds the brood rather than going to work and paying for childcare (and if she does work, the net income would be higher) Anyway, assuming that he has no kids, even after a 6% rise in income tax and an interest rate rise to 7%, our man has, using your calculations ~€3500 to spend after his mortgage payment (net income €7500 - €4000 mortgage). Say all these stealth taxes knock another €500 a month off his disposable income, then he still has ~€3000 left. Unless he has a huge pension and other major debts, like very large personal or car loan payments, he'll certainly be able to afford something fancier than beans (not that there is anything wrong with beans...I quite like skinheads on a raft myself every now and then;)) Joking aside though, I'm not sure that a situation where over 50% of your salary is required for your mortgage is a good idea regardless of your salary.

Senna

Fighting Irish wrote: »

I think Dublin house prices are always going to be different than the rest of the country, same with other major cities/countries

Dublin prices will always be dearer, but if a 3 bed semi costs 70k in Sligo for example, how much more would Dublin prices be? more yes, but not multiples of national prices. From the land and heritage site Dublin prices were 50-60% more than waterford (cheapest) traditionally.