Article: Don't buy now -- estate agent's advice clashes with employer

connundrum

http://www.independent.ie/national-news/dont-buy-now--estate-agents-advice-clashes-with-employer-2031355.html

By Charlie Weston Personal Finance Editor

Tuesday January 26 2010

A former president of the Irish Auctioneers and Valuers Institute has clashed with one of Ireland's biggest estate agents over crashing property prices.

Aidan O'Hogan, who is a former chairman of Savills estate agents, says prices are still falling and that young people should rent homes and not buy while prices continue to fall over the next few years.

However, Savills itself -- which employs Mr O'Hogan as a consultant -- has insisted that its advice to potential purchasers is the exact opposite of Mr O'Hogan's.

Mr O'Hogan said that rents fell much more than house prices and there was a huge selection of houses out there for rent.

He claimed house prices had fallen by 50pc and it would be a few years yet before they stopped falling.

He acknowledged that rent was "dead money", but said that the first three years of a mortgage was also dead money as initial payments went only to pay off the interest on the mortgage.

Buying now would mean young people were tying themselves to a mortgage deal at a time when they needed to be flexible as they may need to move jobs and would probably end up in and out of work.

Although he works as a consultant to Savills, Mr O'Hogan's views are not shared by the agency, which is not involved in the rental market.

Head of residential sales at Savills, Ronan O'Driscoll, said Savills' view was that people should buy rather than rent, especially as prices, particularly in the second-hand market in suburban areas, were beginning to bottom out.

But Mr O'Hogan disagreed.

"Young people should rent and not commit to a heavy mortgage when they do not need to. There is an enormous supply of stock out there," he said.

Last week a study by academics based at NUI Maynooth concluded that there were 300,000 unoccupied houses in the State.

flexible

Mr O'Hogan said that buying was a good idea for established couples who find a well-priced house in an area where they want to live, but younger people should remain flexible.

The Irish have an obsession with buying, but that does not make sense in the current market.

Mr O'Hogan acknowledged that interest rates were set to rise, while fixed rates were at historically low levels.

The property market would take five years to recover, said Mr O'Hogan, and then it would only return to 2002 and 2003 levels.

brianthebard

Mr O'Hogan said that rents fell much more than house prices and there was a huge selection of houses out there for rent.

Is this really the case? I've seen two bed apts in Galway advertised online which were slow to move, but I didn't think rents were really coming down that much, certainly not more than house prices.

connundrum

I personally think that house prices are falling far quicker than rents, but take the fact that house prices were a bit more looney than rents to begin with.

In my area the average price of a 3 bed semi in 2008 was €450,000 - €500,000 with rent for the same house being an average of €1350pm.

Now the same houses are selling for between €320,000 and €350,000 but the rent is between €1150 - €1250pm.

The_Conductor

brianthebard wrote: »

Is this really the case? I've seen two bed apts in Galway advertised online which were slow to move, but I didn't think rents were really coming down that much, certainly not more than house prices.

Rent allowance has established an artificial floor on rental falls- as rent allowance levels fall- the rents in an area generally mirror the fall in the allowance. I.e. the state is determining the rate of fall of rent- by subsidising it with social welfare entitlements.........

jetski

Personally id say rents only fell so much because of the drop in interest rates.

And that enourmus supply of properties for sale has been dropping off quite livley as you can see in the graph

astrofool

What happened between sept and oct on that graph?

Himselfe

astrofool wrote: »

What happened between sept and oct on that graph?

Students going back to college maybe? Still seems like a huge fall though...

spockety

jetski wrote: »

Personally id say rents only fell so much because of the drop in interest rates.

And that enourmus supply of properties for sale has been dropping off quite livley as you can see in the graph

Indeed, it's gone from being an enormous supply to being a massive supply!

jmayo

astrofool wrote: »

What happened between sept and oct on that graph?

Maybe some of our more optimistic posters put their money where their mouths are and entered the market.
Afteral one of our more famous optimists said it was a good time to invest :rolleyes: