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Am I mad to be buying a house?

  • 14-04-2010 04:29PM
    #1
    Registered Users, Registered Users 2 Posts: 32,387 ✭✭✭✭


    I am looking at buying a 300k house, nice place, 3 beds etc...

    I have a bunch of cash from my folks, my savings and no other debts. I'd be borrowing probably 200k.

    I live alone and spend 800 a month on rent for a ****ty rathmines single flat (ok it has a front room but its small).

    I could rent one of the bedrooms, and take one myself, and have an office in the other. The rent would almost cover the mortage as I see it and my outgoings get slashed while still taking this opportunity to get a place of my own.


    But while I cant see anything particularly dangerous (I'd be locking in the interest to a 3-5 year fixed to get over this current lunacy) ... I must admit I feel like I must be mad to consider it at this time...

    DeV.


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Comments

  • Registered Users, Registered Users 2 Posts: 32,387 ✭✭✭✭DeVore


    PS: Sorry, I dont mean this as a "examine my finances" I mean this as an economics question applicable to anyone thinking of buying a house now...

    DeV.


  • Registered Users, Registered Users 2 Posts: 4,235 ✭✭✭The_Honeybadger


    Nobody can tell you with any certainty what way house prices will go, you could be in negative equity this time next year, or your house could go up in value if it is in a sought after area, if you plan on staying there long term it doesn't matter anyway.

    Personally I think houses will fall more but who knows, if it's the right house for you and you can afford the repayments and have a solid job then why not


  • Closed Accounts Posts: 5,207 ✭✭✭meditraitor


    If you can buy and reduce your outgoings in the process then I think its probably a sound move.

    I cant see house prices going more than 10 or 15% lower than the current market price so if the economy makes even slow but upward progress over the next 5 years you should be back to even if not positive equity.

    If I could I would do what you are considering.


  • Registered Users, Registered Users 2 Posts: 901 ✭✭✭EL_Loco


    I think the points made when houses were very expensive still hold now they're falling.

    A mortgage is on you (anyone buying a house) and it lies with you to ensure you've the means to finance it, with an cushion of money for incidentals.

    If you can afford it, if you like the house, if you're happy to live in it for the next 10 - 15 years (minimum) then the actual price tag becomes less relevent.

    If you're asking have we hit bottom yet, I can't say. But again, that's only a concern if you're looking at it as an investment. not sure if that's any help.


  • Registered Users, Registered Users 2 Posts: 2,321 ✭✭✭IrishTonyO


    If you are planning on staying in the house for 5 years plus, then reckon with a fixed interest rate it might be a good time. Prices will fall some more, however interest rates will also rise.


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  • Registered Users, Registered Users 2 Posts: 13,778 ✭✭✭✭Inquitus


    Its hard to know the value of houses at the moment. Most houses are up for sale at a defined minimum rather than their true value. The minimum price perhaps being the amount someone needs to achieve to move to a bigger house, or the amount someone needs to cover their mortgage so they can emmigrate etc.

    Look on daft.ie or myhome.ie and you can see houses which are essentially the same on the same estates up for wildly differing prices 200k 300k etc.

    The market is stagnant as lenders won't lend to anyone but the best prospects, like yourself, with huge deposits and low risk.

    If you are happy paying 300k for the house, and feel its worth it, and house prices are near a bottom, sure go for it, but if you feel as some do that we have another 20% or more to go, hold fire for 6mths or a year and don't see your equity eroded by the great dublin housing pyramid scheme ;)

    If I was in your position, from what I have read from economists in the papers, and seen on the news, combined with sticking my finger in the air, I would say hold fire for 6mths maybe a year, as the market is still a ways off the bottom. I don't think until a decent level of lending returns we'll see a bottoming out and a return to growth.


  • Registered Users, Registered Users 2 Posts: 879 ✭✭✭woodseb


    ultimately it's your own decision, if you are buying for the long term and it is well within your means and its the place you want it may be the right decision

    don't rely on renting a room to make ends meet though - its not that easy to do and i can't see how the rent of a room anywhere in ireland would cover a 200k mortgage either?


  • Closed Accounts Posts: 3,619 ✭✭✭fontanalis


    You seem like you're smart and ballsy.
    Seriously, as long as you don't think of it as your golden egg that will make you rich in the near future or why not move into shared accomodation, you should get a better deal on rent.


  • Closed Accounts Posts: 9,364 ✭✭✭ei.sdraob


    you managed to save up a good amount and seem to have the head for it

    maybe save up a bit more for another year or two? while things continue to slide (unless you spot a good deal) everything is still on downward trajectory (despite what Brian says)

    time is on your side, especially if you have a good job


    do you have to live in Dublin (like work/family)? 300K gets you quite a bit out the West now :)


  • Registered Users, Registered Users 2 Posts: 13,778 ✭✭✭✭Inquitus


    ei.sdraob wrote: »
    300K gets you quite a bit out the West now :)

    All of Galway City and as far west as Spiddal most likely.........


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  • Closed Accounts Posts: 39,019 ✭✭✭✭Permabear


    This post has been deleted.


  • Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    Whilst it does not predict the future, I think this graph of prices in real terms over the last 40 years allows a sense of perspective on what we've been through. I think it is a good guard against the "surely they can't fall any more" sentiment that is sometimes expressed.

    4426306099_b7048df074_o.png


  • Registered Users, Registered Users 2 Posts: 3,699 ✭✭✭bamboozle


    if i was looking to buy today i'd be looking at 2 factors

    1- value - and there's plenty of it out there
    2 - job security, unfortunately i'm not guarenteed a job for life.


  • Registered Users, Registered Users 2 Posts: 13,227 ✭✭✭✭jmayo


    Head over to Accomodation and Property forum with this question and you will get the stock answer.
    That is prices are dropping with better value coming everyday, but if you can afford it, have great job security, can get a reasonable old fashioned mortage, don't mind feeling for next few years that you wasted money, desperately need a fixed abode for family reasons, don't intend on selling for years and years then fire ahead.

    Personally I think you are madder than a brush, but that's my opinion.

    I am not allowed discuss …



  • Closed Accounts Posts: 2,034 ✭✭✭deadhead13


    While a Goodbody Stockbokers report issued last week suggested that the Greater Dublin Area would see a recovery in house prices first, it also predicted there will be a further 10% drop, from 40% to 50%. I personally would wait.


  • Registered Users, Registered Users 2 Posts: 32,387 ✭✭✭✭DeVore


    See I wouldnt be selling this house any time soon. This isnt a quick investment.


    I would live in the house for a few years at least but I dont have a wife or kids or a car or any other debts. I could simply rent the house if I wanted to move away.

    DeV.


  • Registered Users, Registered Users 2 Posts: 785 ✭✭✭zootroid


    I haven't seen any figures to suggest the fall in house prices is beginning to level off. And for that reason I would continue to save, and try build up an even bigger deposit so you have to borrow less when you do decide to buy.


  • Closed Accounts Posts: 9,364 ✭✭✭ei.sdraob


    This post has been deleted.

    @df

    I recently bought and large site with uncomplete 4 bed on it in East Galway, took forever for negotiations and sale go thru (like 6 months)

    at discount that would make the NAMA chief's eyes water :D
    similar houses in places like Galway, Mayo and Wicklow are still asking north of 450K for...

    Im currently on my way to completing it for under 200-210K in total (with no debt involved), could probably finnish for less but I really dont want to cheap out on good insulation,windows and anything that will save money in longterm, while cost of goods hasnt fallen much the cost of labour has fallen alot, its interesting seeing builders compete with each others tooth for nail

    anyways theres no debt, and i be using large chunk of it as home office, so kill 2 birds with one stone

    but if i was in the position of the OP (third saved) i would have held back and saved more i think (im allergic to debt :P)

    DeVore wrote: »
    See I wouldnt be selling this house any time soon. This isnt a quick investment..
    You have sense :) houses are for living in not flipping


  • Registered Users, Registered Users 2, Paid Member Posts: 24,612 ✭✭✭✭Sleepy


    I feel house prices have further to fall for three main reasons:

    1. Interest rates will rise putting more mortgage holders at risk of default.
    2. The first group of defaulters the IBF afforded a 6 month moratorium on legal action to will be reaching the end of this moratorium from May.
    3. The level of denial of Ireland's current economic situation which is evident from most of the public sector and the amount of home owners who just can't face that they paid 2/3 times more for their property than they should have.

    That said, the golden rule of property still applies: Location, Location, Location. Properties in some of the more desirable areas of Dublin seem to be shifting reasonably quickly in the current market. I've spotted a few places in Clontarf that have sold within a month or two of being on the market.

    If you're going to take the plunge, be very, very cheeky with your offers. If you're not embarrassed by the percentage of the asking price you're offering, it's too high.

    As woodseb says, don't rely on managing to rent a room. Treat any rent you can get as a nice bonus. It's a renter's market at the moment and rents should continue to fall if the department of welfare realise they're over-paying for rent allowance and lower the limits.

    €800 a month for a single bed? I've just moved into a semi-furnished, newly renovated 3 bed house in Clontarf and am only paying €200 a month more than that. You could try talking to your landlord about a reduction but tbh, it sounds like you've out-grown the place.

    IF I can afford it by then, I'm hoping to start looking at properties early next year with a view to buying around Summer 2011. I'm not arrogant enough to suggest that this is when the market will bottom but my gut tells me it won't be too far from the bottom either way.


  • Registered Users, Registered Users 2 Posts: 901 ✭✭✭EL_Loco


    well factor in the decline, and offer based on the estimate of 10%, so in that case 280k looks good to them. They can sell now and get the money in their back pocket, or all parties can wait it out.

    They might be eager for a sale. you get your house quicker, they get their money quicker and you haven't had to put in the gap of 6 months.

    That said I'm sure every seller out there is being low balled at the moment, But you seem to have the money to back it up and would be ready to pull the trigger if the seller agreed. Get your loan approval from the bank anyway so you know where you stand. Shows the sellers you're serious about buying a house and not just kicking the tires.


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  • Closed Accounts Posts: 959 ✭✭✭changes


    DeVore,

    What sort of price were they asking for houses like the one you have your eye on during the boom.

    Is the asking price 300K? do you think you could get away with 250K.... less your 100k leaving a 150k Mortgage would be nice and manageable.


  • Closed Accounts Posts: 4,124 ✭✭✭Amhran Nua


    DeVore wrote: »
    I live alone and spend 800 a month on rent for a ****ty rathmines single flat (ok it has a front room but its small).
    Interest payments are the equivalent to the rent you pay, both are the profit margin for some third party. If the interest payments are excessively more than rent, its a bad idea to buy. Most commentators put normal prices at around 14-18 times annual rent for the area, if its not at that level you might want to wait a while, although with the Publican Party bending over backwards to reinflate the bubble it could go either way in the mid term.
    DeVore wrote: »
    I could rent one of the bedrooms, and take one myself, and have an office in the other. The rent would almost cover the mortage as I see it and my outgoings get slashed while still taking this opportunity to get a place of my own.
    I'll say the same to you as I said to another poster recently - prices will be falling for a few years more yet, and your savings will be simultaneously increasing, two factors which converge on having a larger deposit for a cheaper house, which reduces your interest repayments. I'm considering buying myself these days, but I'll leave it until 2013 or so before making any serious steps, for various reasons too lengthy for this discussion.

    If you can save €20k more and the price drops by €20k, you've just saved yourself €40 to €80k in interest, which is no small amount of money over the years. Also keep in mind that FTB tax advantages can evaporate if you rent out rooms, and you might end up having to repay the difference - revenue is ruthless these days.
    Sleepy wrote: »
    I feel house prices have further to fall for three main reasons:

    1. Interest rates will rise putting more mortgage holders at risk of default.
    2. The first group of defaulters the IBF afforded a 6 month moratorium on legal action to will be reaching the end of this moratorium from May.
    3. The level of denial of Ireland's current economic situation which is evident from most of the public sector and the amount of home owners who just can't face that they paid 2/3 times more for their property than they should have.
    *cough* five years overhang and we're still building houses *cough*.


  • Closed Accounts Posts: 39,019 ✭✭✭✭Permabear


    This post has been deleted.


  • Registered Users, Registered Users 2 Posts: 5,857 ✭✭✭Valmont


    This post has been deleted.
    Very nice; would these be the gold bars Ragnar Danneskjold gave you when you left the states? :D


  • Closed Accounts Posts: 39,019 ✭✭✭✭Permabear


    This post has been deleted.


  • Closed Accounts Posts: 18,163 ✭✭✭✭Liam Byrne


    Buying a house, maybe....

    Buying a home, no.


  • Closed Accounts Posts: 1,647 ✭✭✭MaceFace


    Anyone thinking of buying property now needs their head examined. Makes absolutely no financial sense.

    Taking the most recent data and look at your example:

    Daft.ie reported asking prices dropped by 3.4% nationally in the first quarter of this year. The average price is €235k. That equates to an average monthly drop of about €2700.

    So, assuming you had bought this house in Jan for 300k with a 200k mortgage, and further assume the sale price falls (data we don't have) were the same as asking price falls, you will be glad to know that your property will probably be worth less than €290k today, but your mortgage will only have gone down by €1350 (assuming 3% interest rate, 200k over 25 years). So, you have lost €9000 in the last three months.

    Meanwhile, you could have rented a similar house to the one you were going to buy for say 1k a month, which means you are down 3k over the last three months.

    You have saved yourself €6000 by not buying in Jan.

    (btw: not implying rent is dead money as you get something for it - a roof over your head).
    (bbtw: all the probablys because we don't know where in Dublin they are looking and what the actual price drops are for the area)


  • Closed Accounts Posts: 7,669 ✭✭✭Colonel Sanders


    DeVore wrote: »
    I could simply rent the house if I wanted to move away.

    There's not exactly a shortage of rentals out there so be very conservative in any assumption on what this house will rent for

    My personal opinion is that property has bit to fall yet (just one person's opinion) on the basis:
    • excess supply
    • unemployment still rising, also increasing emigration reducing demand
    • net wages will continue to fall as there are more pay cuts/increased taxes
    • further interest hikes on the way even if the ECB doesn't move
    • restricted lending for some time

    Have a read here for some advice either


  • Registered Users, Registered Users 2 Posts: 86,488 ✭✭✭✭Atlantic Dawn
    GDY151


    DeVore wrote: »
    I would live in the house for a few years at least but I dont have a wife or kids or a car or any other debts. I could simply rent the house if I wanted to move away.

    DeV.

    I would examine the rental market at the moment, it has collapsed and rents are still declining.

    Back to your original question, if I knew (who can know) that my job was secure or fairly secure for the next 10 years I would be in a position to purchase, however this country is heading for financial armageddon and unless you are lucky enough to have job security in the public service until the IMF come I would advise not purchasing a house as it will restrict your movement when you have to move abroad to find suitable employment.


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  • Registered Users, Registered Users 2 Posts: 387 ✭✭Wudyaquit


    I think it's a matter of risk versus return. There;s a certain risk that house prices could fall further - Colonel Sanders / Sleepy's posts above - but no real chance of return to offset it.
    Personally, I think it's very foolhardy to commit to something when the odds are stacked so strongly against you to make a profit.


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