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

wyndham

harsea8 wrote: »

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.

Fair enough, the beans reference was a bit far, I wholeheartedly agree on the 50%+ being uncomfortable. A general budget rule of thumb is that your rent or mortgage payment should be less than 30 percent of your income. If a homeowner spends 30 percent or more of her income on housing costs, the government and most lenders consider them to be financially burdened.

So our man is left with €3000 to play with assuming there are no childcare costs and no pension and no paycuts. Utilities- Gas, ESB, Phone, Broadband, Waste Charges to service the home will eat about €500 of that. Domestic rates and water charges are in the pipeline, pardon the pun. These costs can only be guessed at the moment.

Motoring costs will eat at the very least €500 more per month.

Blackjack

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.

Some interesting news from Ireland from 2 years ago:
The smart ballsy guys are buying up property right now!

johnnyskeleton

Blackjack wrote: »

Some interesting news from Ireland from 2 years ago:
The smart ballsy guys are buying up property right now!

As true now as it was back then, it's always a good time to buy property (although the sentence before he said there is never a good or bad time to buy property).

I feel sorry for anyone who bought on this guy's advice.

shoegirl

For a lot of places, its still just as expensive to rent, and the tax relief is vastly better for owners than it is for tenants. If you are on the upper tax band in particular.

I do think its a bit of a misconception that rents have come down, remember they've come down from LA levels with many tenants on low incomes.

ntlbell

shoegirl wrote: »

For a lot of places, its still just as expensive to rent, and the tax relief is vastly better for owners than it is for tenants. If you are on the upper tax band in particular.

I do think its a bit of a misconception that rents have come down, remember they've come down from LA levels with many tenants on low incomes.

how can it be a misconception? they're either came down or they didn't

the fact that they're coming down from ridiculous heights is irrelevant.

bobbiw

Buying in a bust is a good idea, if you

a) are in a bust

b) want something in that country.

Now Ireland is not in a bust, its only begining, you might be ok buying a place in 2-3 years but its only the begining and its going to drop a lot more.

Ireland is not like other countries its economy was artifical and its moving to eastern europe, your best bet is to buy property in Poland.

rinty

are you "mad" Poland is in a much worse property bubble than Ireland ever was...
Try paying 200.000 for a house in poland on a hundred euros a week..Invest in POland,, LOL. check the facts buddy

AARRRGH

The problem is most people don't realise prices aren't amazingly cheap at the moment; most people I've spoken to think there is "great value" out there at the moment.

Most people are not buying because:

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.

rinty

in relation to eastern europe,they are really in a strange place with their income mortgage ratio.. I know several people over there (poland) who have bought houses and their annual income is about 5000 euro. A 2 bedroom apartment is a least 100.000.. Do the math??? I think we are going to the same place as them..soon our wages will be crap too.. Why do the polish pay these prices when they so obviously cant aford them???????????????????????

gurramok

rinty wrote: »

in relation to eastern europe,they are really in a strange place with their income mortgage ratio.. I know several people over there (poland) who have bought houses and their annual income is about 5000 euro. A 2 bedroom apartment is a least 100.000.. Do the math??? I think we are going to the same place as them..soon our wages will be crap too.. Why do the polish pay these prices when they so obviously cant aford them???????????????????????

Alot of those buyers worked abroad. A Polish bloke I worked with bought an apt for 70k there in cash(not Warsaw, another major city), saved all the money he earned over here and returned home mortgage free with a job offer of course!

rinty

sorry i also meant to add.. at least in Ireland we had a huge jump in income over the last 10 yrs which at least partly explains why we payed through the roof..... but in poland and czech,,they had no major jump in wages that i heard about??Why have they now the biggest property bubble,much worse than Ireland. and they still are paying these prices as if they are going to get higher,,which is impossible unless they plan to rob their neighbours to pay their giant mortgages

rinty

but i know Polish people paying 100.000 for a small apartment(not a house)..who have never worked abroad...they earn 100 euros a week and they are teachers and carpenters etc
There are loads of lucky one who bought beforee 2006 but those who buy now are been rode by the bank???same in Czech

rinty

70k would buy you a very basic apartment in a major polish city..You could buy a house for that in parts of Ireland.

bangersandmash

rinty wrote: »

70k would buy you a very basic apartment in a major polish city..You could buy a house for that in parts of Ireland.

But you're probably not going to buy a house in a major Irish city for that - the areas where those high incomes you mentioned are (or were) concentrated.

The_Conductor

Poland are spending 15 billion in EU structural funds between now and 2013- not just on infrastructural projects- but also football stadiums (they are sharing the tournament with the Ukraine). Poland is splashing out EU dosh in the way we used (and its Irish dosh too- as we are a net contributor to the EU budget).

Poland is in a strange place- its so totally out of kilter with whats happening elsewhere- they are screaming to their expats to come home and help out- they don't have sufficient numbers of construction and professionals to make use of the resources at their disposal.

Poland's wages are shooting up- as ample money is chasing scarce labour. It is very doubtful that it will ever reach Irish levels- which are being sustained at artificially high levels by an inappropriate social welfare regime (its also whats sustaining rental levels- as the HSE payments have established a defacto floor on how low rent can/will fall).

Ireland is totally the other end of the spectrum- we're currently borrowing 58-60m a day to cover social welfare expenditure and other current expenditure. We are not being bailed out by the EU- we are being allowed increase our national debt back to Italian levels- most projections show us on 200% debt to GDP ratio by 2020 (if we implement the 4 billion a year cuts proposed by the EU- and significantly higher if we don't).

We are not going to be bailed out- and the private sector is hocked to its gills even worse than the public sector on this occasion- thats the big difference with where we were at in the 1980s- at least then the private sector was largely debt free.

Where are we going? I can see significant immigration picking up- Australia is already doing up recruitment campaigns for Irish professionals willing to make a new life down under- if I hadn't ties, I'd be very interested......

Diarmuid

rinty wrote: »

70k would buy you a very basic apartment in a major polish city..You could buy a house for that in parts of Ireland.

Sure. places like this in Roscommon

Fighting Irish

bobbiw wrote: »

Buying in a bust is a good idea, if you

a) are in a bust

b) want something in that country.

Now Ireland is not in a bust, its only begining, you might be ok buying a place in 2-3 years but its only the begining and its going to drop a lot more.

Ireland is not like other countries its economy was artifical and its moving to eastern europe, your best bet is to buy property in Poland.

.

the_syco

Freddie59 wrote: »

Why would you borrow a mortgage now when you may need only to borrow 50% of that amount in two years time? THAT is life really.:)

If it's still on the market in two years time, it's a dump. Otherwise, it'll be gone, and you may be living in some dump regretting not buying it.

Freddie59

the_syco wrote: »

If it's still on the market in two years time, it's a dump. Otherwise, it'll be gone, and you may be living in some dump regretting not buying it.

How will it (wherever it is) be a dump in two years time? There are houses for sale now which were on sale two years ago which are in the same nick (we viewed them) and the fact is, as I've already said, why pay 50% more for something now - when it will be 50% cheaper in a couple of years time?

Even if it had deteriorated slightly, and you had to do some running repairs, you'd do quite an amount of work, having saved €150k on a €300k house.;):)

20goto10

Freddie59 wrote: »

How will it (wherever it is) be a dump in two years time? There are houses for sale now which were on sale two years ago which are in the same nick (we viewed them) and the fact is, as I've already said, why pay 50% more for something now - when it will be 50% cheaper in a couple of years time?

Even if it had deteriorated slightly, and you had to do some running repairs, you'd do quite an amount of work, having saved €150k on a €300k house.;):)

There's 2 reasons why a house won't sell in a falling market:

1. the price is wrong
2. its a dump and will not sell at any price.

So assuming you're not looking to buy a dump, what you are banking on is that the price is wrong and the vendors will take 2 years to drop it to the correct price. The average house is taking 6 months to sell at the moment. That means it takes roughly about 3 months to find the right price which generates enough interest to allow the vendor to confidently fix the price and probably about another 3 months maximum to find a buyer at that price (or slightly below as nobody pays the asking price).

What makes you think it will take 2 years to sell a decent house?

Kipperhell

It has already been said but worth repeating. You can't be sure of what it will be worth in a few years time. It is probable that it will be worth less but 50% is guaranteed in anyway. There were many people who got the prices wrong for a long period of time.

10 years ago I was thinking prices would stabilise any minute and they didn't. As a result of that many friends of mine managed to have much larger houses in better area and have less of a mortgage and none in some cases. One actually has a smaller mortgage than me on his second property which is comparable to my home.

Some friends waited and are now waiting some more. If they wait 10 years like you said they will be 45+ getting their own home. Which is fine for some but many people would prefer to have roots. They will be 45+ with a 20 year mortgage while I will be a similar age with 5 years left.

That is not even considering the fact they will have furniture and the like to buy. I am not aware of any of my friends having substantial savings to off set their renting years. One of the benefits of renting is you only rent what you need at the time where with property you often buy in expectation. This benefits you financially but it could also be said when you have your own place you often have more space than you need.

If people keep renting rents will eventually go up. Every year people move out of parents places and once the current oversupply is filled it will happen. The current panic is not much different to the earlier panic about prices going up.

I personally prefer having my own decor and enjoy having my own furniture. I know some people who bought new cars over the last 10 years that have spent more money on them than they could have lost on property, buying in the last 5 years.

The stage you are at in your life is very important.

bangersandmash

Kipperhell wrote: »

If people keep renting rents will eventually go up. Every year people move out of parents places and once the current oversupply is filled it will happen.

You could easily list a few factors that might compensate for the above.

• More supply coming on to the market when NAMA begins to provide cash to complete existing developments and develop certain sites.
• Many potential vendors are putting their properties on the rental market rather than selling "for less than it's worth". This applies to investment properties but also to executor sales. That provides a steady stream of additional properties coming on to the rental market.
• Instead of renting, some people may return to their parents' home due to financial difficulties.
• Home-owners being forced to rent-a-room due to meet mortgage repayments, increasing supply of rental accommodation. Probably will become more frequent as interest rates begin to creep up.
• Emigration

Kipperhell

bangersandmash wrote: »

You could easily list a few factors that might compensate for the above.

[/LIST]

All possible to completely negate the general flow but assuming the population doesn't actually fall dramatically eventually the properties could be empty and demand will never ever match supply. Personally in the long run I very much doubt that. Possible and probable are not the same

bangersandmash

Kipperhell wrote: »

All possible to completely negate the general flow but assuming the population doesn't actually fall dramatically eventually the properties could be empty and demand will never ever match supply. Personally in the long run I very much doubt that. Possible and probable are not the same

Aside from the above and the existing over-hang, do you not think it's probable that the in the medium-term construction industry will be able to at least match demand with supply? Apparently we have enough zoned land to meet demand for the next 22 years.

Kipperhell

bangersandmash wrote: »

Aside from the above and the existing over-hang, do you not think it's probable that the in the medium-term construction industry will be able to at least match demand with supply? Apparently we have enough zoned land to meet demand for the next 22 years.

I would probably not expect much housing to be constructed over the medium term. There are going to be areas with mass vacancies but there will be high demand areas too. It just doesn't make sense to build mass housing at the moment.

I rent some properties for family members and not one has dropped more than 15% and have never been vacant for longer than a week in the last 5 years. Location,location, location remains the case.

gurramok

Kipperhell wrote: »

If people keep renting rents will eventually go up. Every year people move out of parents places and once the current oversupply is filled it will happen. The current panic is not much different to the earlier panic about prices going up.

To add to bangersandmash's post. When the bottom of the sales market is reached, there will be a significant migration of renters who had been waiting at the side for the bottom to come.(i might be one of them)

That'll destroy any recovery in the rental market.

Kintarō Hattori

Oh after reading this thread what to do, what to do??? Currently the missus and myself are renting. We are both in our early 30s and thinking of buying a house in and around Dublin city centre once our lease is up in January of next year.
We've been to the bank and they will (at the moment anyway) give us a mortage which would enable us to buy a house somewhere around the 230k mark. So what to do, hold off buying somewhere or take the plunge and get somewhere now and start enjoying it. We're in it for the long haul. We want somewhere to call our own, somewhere to put our mark on and that we can start a family with. Basically all the things you can't do with rented accomodation.


So what to do. Hold off for another year and pay up to 10k in rent or buy somewhere now. Looking at a mortage within our budget after mortage relief we'd be paying around E800 per month. We enquired what the repayments would be like once the rates go back up to say around 5.5% and it'd be about E1200, currently well within our earnings.

So again, what to do.

gdael

Kintarō Hattori wrote: »

Oh after reading this thread what to do, what to do??? Currently the missus and myself are renting. We are both in our early 30s and thinking of buying a house in and around Dublin city centre once our lease is up in January of next year.
We've been to the bank and they will (at the moment anyway) give us a mortage which would enable us to buy a house somewhere around the 230k mark. So what to do, hold off buying somewhere or take the plunge and get somewhere now and start enjoying it. We're in it for the long haul. We want somewhere to call our own, somewhere to put our mark on and that we can start a family with. Basically all the things you can't do with rented accomodation.


So what to do. Hold off for another year and pay up to 10k in rent or buy somewhere now. Looking at a mortage within our budget after mortage relief we'd be paying around E800 per month. We enquired what the repayments would be like once the rates go back up to say around 5.5% and it'd be about E1200, currently well within our earnings.

So again, what to do.

You sound like us
We're in the very same situation and about to close.
You know you can fix your rate if it suits you to as well.
Only you can decide if its right for yourselves though.

bangersandmash

Kipperhell wrote: »

I would probably not expect much housing to be constructed over the medium term. There are going to be areas with mass vacancies but there will be high demand areas too. It just doesn't make sense to build mass housing at the moment.

There is a substantial number of development sites in high demand areas that have been ready-to-go for some time. A prime example is the Dun Laoghaire golf club site. The idea that developers or banks will sit on such sites for the next 20 years is implausible.

Kipperhell wrote: »

I rent some properties for family members and not one has dropped more than 15% and have never been vacant for longer than a week in the last 5 years. Location,location, location remains the case.

Perhaps your properties were previously keenly priced. But in the D4/D6 rental markets I've seen 20-30% drops for 2 beds in the last 3 years in many modern developments. Rents in these areas were particularly over-priced at the peak so inevitably they have further to fall. There'll always be a strong rental market in such areas, but as with property prices, the idea that rental levels won't fall significantly in "nice areas" is a fallacy.

Kipperhell

bangersandmash wrote: »

There is a substantial number of development sites in high demand areas that have been ready-to-go for some time. A prime example is the Dun Laoghaire golf club site. The idea that developers or banks will sit on such sites for the next 20 years is implausible.

I never said anything would remain idle 20 years. The thread is about ten years and I would say some people are going to lose more money. Your article even points out that they are trying to buck the current trend which is my point.

bangersandmash wrote: »

Perhaps your properties were previously keenly priced. But in the D4/D6 rental markets I've seen 20-30% drops for 2 beds in the last 3 years in many modern developments. Rents in these areas were particularly over-priced at the peak so inevitably they have further to fall. There'll always be a strong rental market in such areas, but as with property prices, the idea that rental levels won't fall significantly in "nice areas" is a fallacy.

I never mentioned "nice areas". There is more to the market than D4/6. Rents haven't all fallen at the rate you are suggesting.

I suggest you actually read what somebody says rather than assume their moderate view is fundamentally wrong because it does not believe in the extreme views of others.