Our situation first time buyers

pokerface_me

Looking for some advise guys, i'm 31 she's 28 married 5 years 3 beautiful daughters. I work full time and she works parttime. Our weekly income is about 700 euro, we have saved 20,000 into the bank in 2 years basically we want to buy our first house while property is in a slump. We currently live in a council house and we could probably buy this fairly cheap from them but we don't like the area and if we buy it it could be a while before we sell it, due to the housing market.

We have no loans or bills, no car loans credit union loans or credit cards.
Only out going is household bills, eircom, and esb...gas is on a meter and our council rent is 50 euro a week.

What do you recommend for us and what is the best route for us to take, i know income isn't great but my job and her parttime job is rock solid and we have both been in employment for numerous years. Any questions feel free to ask, and thanks for your help.

whizzbang

I would suggest you hold out another year, prices are not going to rocket up again any time soon. Keep saving and working like you are and you will be able to get a great place to live at a reasonable price.

The_Conductor

First of all- managing to save 20k, while on limited income, and with 3 young daughters- is astounding. Well done.

If you are looking at property- look at it as a long term investment- not an asset that you will sell in a short term (10-15 year) window.

There are additional costs of ownership associated with owning a property that you do not have to meet at present- such as possible management charges, building's insurance, water charges (due next year), property tax (if and when it comes up) etc. You also have all the usual bills- most of which you are meeting at present.

Given your financial history and lack of debt- you would in all probability qualify for a mortgage- most probably in the 200k region (subject to whatever criteria a lending providor might have in place). While you are paying EUR50 a week rent at the moment- the interest component of a mortgage @ ~200k might reasonably be in the region of 150-160 a week- 3 times your current outgoing. Its just something to keep in mind.

Personally I'd advise that you continue saving- prices are continuing to fall, and with some of the tax proposals on the table announced today- it looks likely that prices may continue to do so.

partyguinness

Well done on saving that much.

Why dont you look at social and affordable housing with the Local Authority. Apparently there are thousands empty all over the country with the Councils unable to shift them.

There spread out all over the place in nice 'respectable' areas in mixed developments with little risk of being gettoised or stigmatised.

MG

smccarrick wrote: »

If you are looking at property- look at it as a long term investment- not an asset that you will sell in a short term (10-15 year) window.

But at the same time, that's no reason to overpay. I'd agree with the poster who said there is no need to rush in within the next 12 months. No indicators (such as unemployment) point to a bottoming out in house prices. You have time on your side, use it. Remember if you save 20k in that time it'll pay for a lot of your kids education (for instance).

Good luck! (Great to hear stories of sensible people who believe in saving before buying).

AARRRGH

Property isn't really in a slump. It's in a slump compared to bubble prices, but it's not in a slump compared to reality.

You should wait another year or two, as this will enable you to save yourself probably 100k or so over the lifetime of the mortgage.

pokerface_me

Thanks for all the reply guys, i think the general concensus is to wait another year or 2. This is not a problem and it will boost our deposit if we save another 10k, as i said we are in a council house in the Tallaght area, its not the best of places but we are both from around here and there is no major anti-social problems in the area, we have this option also available to us.

We are 5 years in the house next febuary and for every year we spend here we get a 3% discount + all rent deducted from value of house. We applied in 2005 to buy the house and they gave us a value of 240,000 less 13,000 for 1 year in house and rent reduction. So in 2005 we could have purchased for 227k.

I wonder if its worth having another look at this option, houses in the area are on the market for 150k-200k at the moment, and we would be entitled to a hefty discount, what do you think?

MG

pokerface_me wrote: »

Thanks for all the reply guys, i think the general concensus is to wait another year or 2. This is not a problem and it will boost our deposit if we save another 10k, as i said we are in a council house in the Tallaght area, its not the best of places but we are both from around here and there is no major anti-social problems in the area, we have this option also available to us.

We are 5 years in the house next febuary and for every year we spend here we get a 3% discount + all rent deducted from value of house. We applied in 2005 to buy the house and they gave us a value of 240,000 less 13,000 for 1 year in house and rent reduction. So in 2005 we could have purchased for 227k.

I wonder if its worth having another look at this option, houses in the area are on the market for 150k-200k at the moment, and we would be entitled to a hefty discount, what do you think?

Let me be clear I don't know the value of your current house now or in the future but given some of the valuation methodolgies discussed on this forum it is not impossible that the house could end up being worth 100k. I'm not saying that will happen I'm just saying that such a scenario is not impossible and you should factor that into your scenario planning.

I've given this advice before and many people are sceptical but try valuing it in a number of ways. I would suggest these 4:
1. Annual rent by a factor of somewhere between 14 and 20. If my maths are correct, you are paying 5800 per annum rent (correct me if I am wrong), implying a valuation of between 81 and 116k.
2. Taking an average house as being valued at €1600 per sq m, ask yourself how far from an average house is yours. Judging on your own description of the area and the fact that the 05 valuation was maybe 20-30% below the national average, try seeing what 1000 to 1400 per sq m
gives you.
3. Deduct 40-60% from the 05 price (between 96 and 144k)
4. Look around your estate and if you know what the neighbours do, guesstimate their average annual income and multipy by 3.5 and by 6.

These are all intended to give you a range of its real worth. They are likely to give you a fairly wide range but only by considering the implications of all these can you really work out what's best for you and your family.

(I'm happy to explain the rationale behind each of these methods)

Again, I'm delighted to hear your story, you should feel really good about your current position, you are well positioned to set up your family for a good financial life. This is the biggest financial decision of your life, so take your time and do lots of research.

mrgaa1

first of all to the OP - you say 700 euro income a week and you save 200 of that. That is incredible - I wish I could save that much.
Secondly you could keep looking and wait and save a pile more and wait
Thirdly - you could find something now and buy.
However as per a previous post I think some of the proposed tax changes will mean further price reductions - as to what reductions we shall have to wait and see. If it was me I'd wait and see but I'd keep looking so as to find the one I want and keep an eye on it in case someone else is after it.

pokerface_me

Mg thats an excellent post helps quite alot, as for saving 200 out of 700 everyweek its pretty simple to do, we live by a golden rule if we cant afford it we dont buy it. We have a 02 car 1 sun holiday this year and 1 week in Dingle, sky t.v and a decent life in general, my point is really it can be done with a little bit of planning.

Back to the house purchase, we have decided to wait till January to have another look at the market and see what we can afford to buy, i think 200k is just about realistic and we are happy with that. We will shop around for best value and don't really want to exceed 800per month all in. Have looked at affordable housing and its not what we are after.

Also just to note on the council house we are in, i'm going to spend the 50 quid and get the council to re-value it and let them offer it to us again with all the deductions + current market conditions in place. I'm thinking they may come back with an offer of 100k-120k which would not be a bad price. Will let you all know what price they give me.

Any more thought, opinions and help welcomed extremley