Affordable Housing Scheme

RadiantGirl

Hi All

I am a first time buyer and really really trying to save a deposit to buy privately, very hard on your own.

I know another alternative is affordable housing, I have read the details and understand that if you sell the house within 20 years you have to give a 20% clawback to the coucil along with anything you may owe the lender. Also you cannot rent out the entire house unless you are living there aswell.

Just wanting to see if anyone has gone with the affordable housing and to get opinions on it as I am trying to decide whether to hold out and buy privately (another year of saving) or do the affordable housing and be able to buy this year.

Any advice or information would be greatly appreciated.

x

The_Conductor

At present it is significantly cheaper to buy a property on the open market, than it is to get one on the Affordable Housing Scheme. The problem with the AH scheme is councils have decided they can't sell below a certain levels, and you can't negotiate with them- whereas developers will stampede to your door and are very open to negotiate on price/fixtures etc.

I believe there has been a relaxation on the clawback element of the AH scheme (post the instruction from the Department of the Environment in March of last year), however given current prices of property in the scheme- and the fact that they simply bear very little semblence to open market prices- along with the restrictions the scheme implies, mean this once attractive scheme is now pretty much dead in the water.

RadiantGirl

Hi smccarrick

Thank you very much for your reply. I currently have just over €10,000 in savings, some people are telling me to try and get a private house with that and see what I can get but realistically would I be better to keep going and try and get up the €20,000.

Just wondering in these times are the banks etc willing to take a lower deposit than the traditional average of min €20,000?

Sorry for the stupid questions but I am doing this on my own and don't really have anyone to go to for advice.

Your help is much appreciated x

The_Conductor

RadiantGirl wrote: »

Hi smccarrick

Thank you very much for your reply. I currently have just over €10,000 in savings, some people are telling me to try and get a private house with that and see what I can get but realistically would I be better to keep going and try and get up the €20,000.

Just wondering in these times are the banks etc willing to take a lower deposit than the traditional average of min €20,000?

Sorry for the stupid questions but I am doing this on my own and don't really have anyone to go to for advice.

Your help is much appreciated x

The other way of looking at this- is prices are continuing to fall. There are very few secondhand properties on the market at present- as people are waiting 'for prices to recover'. Keep in mind though- that the only thing keeping any brake on prices falling even faster- is that interest rates have not started to rise yet. Interest rates are at a historic low of ECB overnight rates of 1%. Normalisation of rates- would see this increasing to 4.5% You don't really have to be much of a financial wizard to understand that if interest rates increase by another 3.5%- that any price falls to date will appear as moderate when compared to the carnage rises of this stature would entail.

Interest rates are going to rise- of that there is no doubt- the timing is open to interpretation- it could be 2014 before they fully rise the 3.5% given the stagnant French and German economies- but they most certainly will rise (and the new head of the ECB is the former chair of the Bundesbank........)

If I were you- I'd hang on in there- over the next year or two- save another 10-15k and with a deposti of 25k you'd be in a very strong position- when interest rates do rise, and further pricing carnage occurs.......

brianocar

To re-iterate what smccarrick has already said...

I'd advise you to buy a house yourself and forget about the AHS. 20-25K of a deposit would certainly make for a better starting point. Don't worry about prices going up in a hurry. It seems highly unlikely to me. If there is going to be any rapid/dramatic change in the prices, it will be a downward one so you have only to gain by waiting! There are several things that can happen in the next year to drive the prices down further (selling blitz, NAMA, interest rate increase) and nothing that I can think of that will cause them to rise (at least not quickly anyway).

It mightn't be any harm to enquire at one or two banks about a mortgage now just so you know where you stand. This might help you to identify potential pitfalls with your application and do something about them in the next year or two. (Things like proof of regular savings over a 6-12 month period and building up the actual amount of savings).

I bought an apartment on the AHS 3 years ago. There was a significant difference then between the AHS price verses the open market price. That difference is no longer there. As far as I can see, the AHS now offers practically no benefit and has the following disadvantages:

- You don't get to pick a property that matches your needs (ticks all the boxes). Of course, you can decline an offer and wait for a better property but it's a bit of a lottery and can take a long time.
- You can't rent it out (officially)
- You don't fully own it until 20 years after purchase. As you know, if you sell it before that, you have to pay back the council a percentage of what you sell it for.

I'm 'stuck' with an AHS apartment now that I can't sell (it's worth considerably less than I paid for it), can't rent (not allowed), doesn't at all suit my needs/housing-preferences and can't move out of! Don't make the same mistake

All that said, the way things were at the time and have turned out since, I would be in considerably more trouble if I had bought the same apartment for the market value at the time.

The_Conductor

I'd just add that the US central bank out of the blue increased the interest rate to banks borrowing from it by .5% catching commentators and economists totally unawares, as they had not forecast any change for some time to come. Norway, Australia and Brazil- all increased rates in the past 3 weeks, and China has mandated its banks increased their liquid assets by fully 25% in an attempt to cut down on inflationary pressures. Its seriously only a matter of time before the ECB plays a similar card.

RadiantGirl

Hi Guys

Thanks so much for your replies. It's very hard doing this on your own when you don't really have a clue. I was thinking of meeting with a few banks but thought they would get annoyed and think I was wasting their time because I did not have my full deposit.

Thanks for all your advice it is much appreciated more than you will know.

Thanks again
RG x

Peterx

Another thing to note is that the affordable housing units are finished to a different (lower) spec then the open market ones.

Open market all the way, this was a social initiative that was swallowed up by a falling market and no longer makes any sense.