Collapsing house prices? We ain't seen nothing yet

mathie · 18-08-2010 8:23am #1

http://www.independent.ie/opinion/analysis/collapsing-house-prices-we-aint-seen-nothing-yet-2301078.html

THE most comprehensive report on the Irish property market is out and it evidences the total destruction of wealth of a certain generation. According to the wonderfully detailed work done by Ronan Lyons at Daft.ie, asking prices countrywide fell by just over 4pc in the second three months of the year -- a slightly larger fall than in the first quarter.

The yield is the main thing for me now.
I'm looking at buying at the momnet but my latest yield calculation on a property was just under 3.5%.

Slydice · 18-08-2010 10:24am

McWilliams pretty much laying out some blame there:

So for Ireland to recover, there will have to be a 'lost generation' who will be largely shut out of whatever economic future this country experiences.

This generation trap is the poisonous legacy of the Ahern-Cowen years.

"A lot done, a lot more to do."

Yeah, right.

whippet · 18-08-2010 10:42am

well I am jumping ship now, about 10k in negative equity. Sell the gaf, pay back the bank .. hardball some poor unfortunate who is trying to rent their own negative equity 'investment' to a low low monthly rental price.

Stay debt free for a couple of years and hoard a bit more cash.

Then when things get a little more settled I may think about buying again.

rugbyman · 18-08-2010 10:50am

whippet wrote: »

well I am jumping ship now, about 10k in negative equity. Sell the gaf, pay back the bank .. hardball some poor unfortunate who is trying to rent their own negative equity 'investment' to a low low monthly rental price.

Stay debt free for a couple of years and hoard a bit more cash.

Then when things get a little more settled I may think about buying again.

I think this is good thinking, but there are several factors to be taken into account, location of house(sellability), total fall in value, time into mortgage and perhaps most important, whether or not you will be able to get a mortgage again.

regards, rugbyman

HardyEustace · 18-08-2010 10:55am

rugbyman wrote: »

I think this is good thinking, but there are several factors to be taken into account, location of house(sellability), total fall in value, time into mortgage and perhaps most important, whether or not you will be able to get a mortgage again.

regards, rugbyman

Also whether or not you have a tracker.

jetski · 18-08-2010 11:00am

"The suggestion here is that prices in Dublin -- having fallen by 50pc in the city centre since the peak -- are not at the bottom yet but might be getting close"

"In order to make a 7pc yield at the present average rent, the average price of houses would have to fall to €135,620. This suggests a huge further drop in average house prices here."

Thats a contradiction by my books....

whippet · 18-08-2010 11:23am

in fairness a future mortgage shouldn't be a problem, we really didn't draw down anything close to what we were offered a few years ago and have savings along with no other personal debt. Plus we are probably in a much better financial position job wise over the last 12 months.

the plan could be to buy a site for cash and then mortgage only the new build.

I am so glad I didn't over extend myself back when I did buy. Keeping it modest as the time was a bit of a saviour.

The_Conductor · 18-08-2010 11:26am

mathie wrote: »

The yield is the main thing for me now. I'm looking at buying at the momnet but my latest yield calculation on a property was just under 3.5%.

I'd be looking for a yield of at very least double this- to take into account impending interest rate rises, and the volatile Irish economy. At the end of the day though- yield is only one measure of the desirability of any given property.

whippet · 18-08-2010 1:27pm

smccarrick wrote: »

I'd be looking for a yield of at very least double this- to take into account impending interest rate rises, and the volatile Irish economy. At the end of the day though- yield is only one measure of the desirability of any given property.

my next property purchase will be a 'home' and I won't give a monkey's about yields or future prices. I will take out a mortgage based on what I want to spend on my home and then make the builders fight over who can provide me with the best possible house for that price.

dan_d · 18-08-2010 3:04pm

HardyEustace wrote: »

Also whether or not you have a tracker.

Mortgages existed before the tracker, and will do again.

Fair play to whippet - at some point you have to bite the bullet if your'e struggling.(not you personally, just a general you)

HardyEustace · 18-08-2010 3:27pm

dan_d wrote: »

Mortgages existed before the tracker, and will do again.

ABsolutely, and not disagreeing with you there!

They are a nice thing to have though!

whippet · 18-08-2010 3:37pm

dan_d wrote: »

Mortgages existed before the tracker, and will do again.

Fair play to whippet - at some point you have to bite the bullet if your'e struggling.(not you personally, just a general you)

fortunatly enough I am not struggling but I want out of suburbia and am more focused on the real important things in life! At the moment I know I can buy my way out of the current lifestyle for 10K and rather than see it as a painful cost I am looking at it costing three or four times that in 12 months which would turn in to a trap.

It does blow the idea of that new motor I was looking at !!

SamG · 18-08-2010 4:43pm

"The suggestion here is that prices in Dublin -- having fallen by 50pc in the city centre since the peak -- are not at the bottom yet but might be getting close"

"In order to make a 7pc yield at the present average rent, the average price of houses would have to fall to €135,620. This suggests a huge further drop in average house prices here."

Thats a contradiction by my books....

You're misinterpreting what he says...

He is saying that other people are suggesting we're near the bottom. He then goes on to rubbish this vested interest speak in the rest of the article.

Treehouse72 · 18-08-2010 5:16pm

whippet wrote: »

my next property purchase will be a 'home' and I won't give a monkey's about yields or future prices. I will take out a mortgage based on what I want to spend on my home and then make the builders fight over who can provide me with the best possible house for that price.

You do see the irony of the fact you are saying this whilst €10k NE and about to liquidate the biggest asset you will ever own in the middle of the biggest asset crash in world history? My point: perhaps you should give a monkeys about yield. Indeed, perhaps if you had done so first time around you wouldn't be in NE today! And maybe if more people in your position had thought about things like yield (and other such tedious trivialities) taxpayers like me wouldn't be paying back debt that people like you took on.

What pisses me off so much, and leads me to be so curt, is that the lessons are now there for us to see. And yet people still refuse to learn those lessons. "My next property..." you say, wishing 2006 back again. "Make the builders fight...." you say, Canny words if ever I heard them. "Yields don't matter" you say, despite all we have learnt about the property market. And despite the fact you know to your own financial cost just why it is yields matter. I dunno, sorry to pick a fight, but something just really bugs me about your post to be honest.

And some practical advise. If you are €10k in NE, it is probably safe to assume that is an optimistic figure, since people tend to be optimistic in these scenarios. And if that €10k figure is any older than a month, it is already out of date. We also know that property is falling in price by up to 3% per month in some areas and that it will take you some time to get your property on the market. It is also fair to assume that unless you price it competitively (ie way below the competition) it probably won't sell. Or, if it gets offers that those offers will be significantly below your €10k notional loss. Bottom line, I think your €10k figure will need adjusting upwards before it all shakes down and you should price that in now rather than taking several months to find out what you should already know.

Merch · 18-08-2010 5:33pm

Treehouse72 wrote: »

You do see the irony of the fact you are saying this whilst €10k NE and about to liquidate the biggest asset you will ever own in the middle of the biggest asset crash in world history? My point: perhaps you should give a monkeys about yield. Indeed, perhaps if you had done so first time around you wouldn't be in NE today! And maybe if more people in your position had thought about things like yield (and other such tedious trivialities) taxpayers like me wouldn't be paying back debt that people like you took on.

What pisses me off so much, and leads me to be so curt, is that the lessons are now there for us to see. And yet people still refuse to learn those lessons. "My next property..." you say, wishing 2006 back again. "Make the builders fight...." you say, Canny words if ever I heard them. "Yields don't matter" you say, despite all we have learnt about the property market. And despite the fact you know to your own financial cost just why it is yields matter. I dunno, sorry to pick a fight, but something just really bugs me about your post to be honest.

And some practical advise. If you are €10k in NE, it is probably safe to assume that is an optimistic figure, since people tend to be optimistic in these scenarios. And if that €10k figure is any older than a month, it is already out of date. We also know that property is falling in price by up to 3% per month in some areas and that it will take you some time to get your property on the market. It is also fair to assume that unless you price it competitively (ie way below the competition) it probably won't sell. Or, if it gets offers that those offers will be significantly below your €10k notional loss. Bottom line, I think your €10k figure will need adjusting upwards before it all shakes down and you should price that in now rather than taking several months to find out what you should already know.

Excuse my ignorance, but can you explain yield simply or in detail, what we (people/prospective buyers) should be looking at when buying property

whippet · 18-08-2010 6:42pm

Treehouse72 wrote: »

You do see the irony of the fact you are saying this whilst €10k NE and about to liquidate the biggest asset you will ever own in the middle of the biggest asset crash in world history? My point: perhaps you should give a monkeys about yield. Indeed, perhaps if you had done so first time around you wouldn't be in NE today! And maybe if more people in your position had thought about things like yield (and other such tedious trivialities) taxpayers like me wouldn't be paying back debt that people like you took on.

You sound like one of them pompous gits from Thepropertypin. YOU will not be paying a penny back due to me. I am currently 10k in NE and covering the shortfall from my own back pocket. So be careful you don't fall off that high horse just yet.

Treehouse72 wrote: »

What pisses me off so much, and leads me to be so curt, is that the lessons are now there for us to see. And yet people still refuse to learn those lessons. "My next property..." you say, wishing 2006 back again. "Make the builders fight...." you say, Canny words if ever I heard them. "Yields don't matter" you say, despite all we have learnt about the property market. And despite the fact you know to your own financial cost just why it is yields matter. I dunno, sorry to pick a fight, but something just really bugs me about your post to be honest.

I know exactly what I am getting in to. I am getting debt free, sitting tight for a couple of years with the intention of building a house which intend to live out my remaining days with my family, pets, classic cars, family close by.

In building a house, I will be in control of costs, budget and what the final price will be ... once I am happy in what I am paying out each month for the following 15/20 years I don't see what the problem is.

The future value of a house only matters if you intend to sell it. While I got burned buying the starter home at close to the peak ... lesson learned and my own financial security will bail myself out.

Treehouse72 wrote: »

And some practical advise. If you are €10k in NE, it is probably safe to assume that is an optimistic figure, since people tend to be optimistic in these scenarios.

Actually its based on an offer.

Treehouse72 wrote: »

And if that €10k figure is any older than a month, it is already out of date. We also know that property is falling in price by up to 3% per month in some areas and that it will take you some time to get your property on the market.

Offer is about 4 days old

Treehouse72 wrote: »

It is also fair to assume that unless you price it competitively (ie way below the competition) it probably won't sell. Or, if it gets offers that those offers will be significantly below your €10k notional loss. Bottom line, I think your €10k figure will need adjusting upwards before it all shakes down and you should price that in now rather than taking several months to find out what you should already know.

you know what they say about assumptions.

All in all, I am not an investor of property, nor do I intend to. I value quality of life above the daily worry of what the market is doing.

The insecurity of property investors and people who can't see a house as a home is so far from my world I can't really fathom it.

I make my money from other investments which have been quite good for me over the last number of years ... hence I can actually stomach the NE that I am currently in.

MuffinsDa · 19-08-2010 9:18am

whippet wrote: »

You sound like one of them pompous gits from Thepropertypin. YOU will not be paying a penny back due to me. I am currently 10k in NE and covering the shortfall from my own back pocket. So be careful you don't fall off that high horse just yet.
[/QOUTE]

+1 ! That is so arrogant and ignorant from Treehouse72, especially after you explained your financial situation and intentions so clearly.
Don't fall of that high horse indeed, and reserve your judgment for yourself!!!

mathie · 19-08-2010 11:22am

Merch wrote: »

Excuse my ignorance, but can you explain yield simply or in detail, what we (people/prospective buyers) should be looking at when buying property

1. Take the annual rent that you'd get for the property. Some people say to only count 11 months of the year for this value as the propperty will rarely be let 100% of the time.
2. Divide the value in (1) by the price of the property
3. Multiply by 100.

So say for example a house rents for 1K.
Annual rent = 11K.
Say it's priced to sell for 350K.
11K / 350K * 100 = 3.14%

Now McWilliams says investors should be looking at a yield of at least 5%.
So this house would be 'worth' 220K... allegedly.

The_Conductor · 19-08-2010 11:58am

whippet wrote: »

You sound like one of them pompous gits from Thepropertypin. YOU will not be paying a penny back due to me. I am currently 10k in NE and covering the shortfall from my own back pocket. So be careful you don't fall off that high horse just yet.

Whippet- Warning- we do not permit personal abuse on this forum. If you disagree with what someone else posts- refute it factually- do not get personal. This warning goes to everyone else too, and is the only warning I'm going to post here. Any more personal attacks- and the protagonist will have a holiday from posting in this forum.

Regards,

SMcCarrick

MuffinsDa · 19-08-2010 1:44pm

Treehouse72 wrote: »

You do see the irony of the fact you are saying this whilst €10k NE and about to liquidate the biggest asset you will ever own in the middle of the biggest asset crash in world history? My point: perhaps you should give a monkeys about yield. Indeed, perhaps if you had done so first time around you wouldn't be in NE today! And maybe if more people in your position had thought about things like yield (and other such tedious trivialities) taxpayers like me wouldn't be paying back debt that people like you took on.

SMMccarrick, disappointed to see your biased warning to Whippet, when you have completely ignored the above paragraph from Treehouse which is a more cynical form of personal attack. But clearly since his views are close to yours that doesn't matter to you!!

Feel free to give me a holiday for raising my voice about your double-standards by the way, fairness to me is more important than silly arguments on boards. and a sentence like " taxpayers like me wouldn't be paying back debt that people like you took on. " is an unfair personal attack no matter how you'd like to dress it.

btw I have no connection to whippet and have never come across him/her here or elsewhere...

The_Conductor · 19-08-2010 1:52pm

MuffinsDa wrote: »

SMMccarrick, disappointed to see your biased warning to Whippet, when you have completely ignored the above paragraph from Treehouse which is a more cynical form of personal attack. But clearly since his views are close to yours that doesn't matter to you!!

Feel free to give me a holiday for raising my voice about your double-standards by the way, fairness to me is more important than silly arguments on boards. and a sentence like " taxpayers like me wouldn't be paying back debt that people like you took on. " is an unfair personal attack no matter how you'd like to dress it.

btw I have no connection to whippet and have never come across him/her here or elsewhere...

My warning is to all posters.
You really have no idea of what my point of view is- most of the regular posters will be only too happy to attest to my relatively neutral views on most matters.

If you have an issue with a particular post- report it- listing your reasons for reporting it, and I will look at it. There were several people who chose to report Whippet's post for instance- however people preferred to bitch here about Treehouse and his/her point of view- than report their post- no-one reported their post......

I do not have the time to go and read through every single post in all the fora I moderate- I rely heavily on those who frequent the fora reporting any misbehaviour or abuse they encounter.

Regards,

SMcCarrick

whippet · 19-08-2010 2:42pm

smccarrick wrote: »

Whippet- Warning- we do not permit personal abuse on this forum. If you disagree with what someone else posts- refute it factually- do not get personal. This warning goes to everyone else too, and is the only warning I'm going to post here. Any more personal attacks- and the protagonist will have a holiday from posting in this forum.

Regards,

SMcCarrick

no problem !

MuffinsDa · 19-08-2010 2:46pm

fine!
reported, Let's see who's relatively neutral then :-)

oflahero · 19-08-2010 2:50pm

MuffinsDa wrote: »

fine!
reported, Let's see who's relatively neutral then :-)

Shed the thin skin man. I wouldn't have phrased it the way Treehouse did, true, and it might've come across as a bit arrogant, but there was no personal abuse there.

Merch · 19-08-2010 2:53pm

mathie wrote: »

1. Take the annual rent that you'd get for the property. Some people say to only count 11 months of the year for this value as the propperty will rarely be let 100% of the time.
2. Divide the value in (1) by the price of the property
3. Multiply by 100.

So say for example a house rents for 1K.
Annual rent = 11K.
Say it's priced to sell for 350K.
11K / 350K * 100 = 3.14%

Now McWilliams says investors should be looking at a yield of at least 5%.
So this house would be 'worth' 220K... allegedly.

I thought it was something to do with rents versus price but wasnt certain how exactly it was worked out, so where is the supposed sweet spot for yield 5%?
am I mistaken or does that mean if rents fall prices have to fall accordingly to become attractive? also in the good (so called) times rents and property prices were both higher but the yields might still have looked good? no?
But now its down to the rent you can achieve coupled with a price that corresponds to approx 5%?

whippet · 19-08-2010 2:58pm

actually that yield calculation seems not to take in to consideration finance costs. taking a yield of 5% over 15 / 20 years.

The actual cost of purchasing would be dependent on the mortgage size and interest rate over the life of the mortgage. It would be fair enough for a cash buyer.

quozl · 19-08-2010 3:04pm

Merch, during the height of the bubble yields were down as low as 2 to 3% because while rents were somewhat higher, sale prices were much higher.

A yield of 7% would be more the sweetspot you refer to. I think McWilliams is deliberately under-stating his case so as to avoid spurious arguments over the exact yield to be used.

Merch · 19-08-2010 3:37pm

so either rents have to go up or prices come down (either by a good amount)
and if they dont rise or fall dramatically, should people wait to get on the ladder?
Now that prices have dropped a good bit I'd thought its better to get on but I'm inclined to think there is more to go.
Having said that, even if you lose money on a property to live in after say 5 years, lets say 50%, then you still have the other 50% even if you owe more (assuming you can afford to pay it and its where you are happy to live)
But if you rented in that time you'd have nothing.
I'm sure plenty will dissagree

The_Conductor · 19-08-2010 3:53pm

MuffinsDa wrote: »

fine!
reported, Let's see who's relatively neutral then :-)

Ok- you've reported the post.
If you could clarify the issue you have with the post, I'd be grateful.

Whippet advised he intends to jump ship- is roughly 10k in negative equity, but intends to rent and save money and re-enter the property market when things calm down. Fair enough. He is unhappy with his current lifestyle and views 10k as a reasonable price to pay to exit his current situation and move elsewhere. Also fair enough.

Treehouse72 came back with how he as a taxpayer (as are all of us) are paying for people not giving a fig about yields- and how this resulted in property prices that were wholly unsustainable.

Treehouse72- should not have personalised his/her post- however given the manner in which Whippet responded (which was also very personal in nature)- they were more than capable of defending themselves.

I could go on an editting and deleting spree on this thread- deleting the posts of both Treehouse72 and Whippet. Both were personal in nature and taking snipes at each other- however both posters defended themselves and made valid points towards each other.

I have issued warnings to all posters regarding personalising their responses- this applies to both Whippet and also Treehouse72. If you disagree with what another poster posts- you should refute it factually, without resorting to personalising your post. However- if you put personal information into the public domain- and someone then comments or offers an observation on it- its a grey and unhappy area.

No bans or posting suspensions issued to any posters in this thread- though several people are skating on thin ice.

Ps- if you are reporting a post- which you should do with any post you have an issue with- please detail why you're reporting it.........

S.

Treehouse72 · 19-08-2010 6:16pm

whippet wrote: »

You sound like one of them pompous gits from Thepropertypin. YOU will not be paying a penny back due to me. I am currently 10k in NE and covering the shortfall from my own back pocket. So be careful you don't fall off that high horse just yet.

First whippet, let me quote some of my post back to you:

Treehouse72 wrote: »

What pisses me off so much, and leads me to be so curt, is....

.....I dunno, sorry to pick a fight, but something just really bugs me about your post to be honest.

And some practical advise....

What that amounts to is an acknowledgement that I am being harsh in advance of anyone telling me as much. If I was simply interested in attacking you I would have called you a "smug git" or whatnot. But I didn't. I went out of my way to almost apologise that I was being so short. You could return the magnanimity by not frothing so much and calling me names.

On the substance of your complaint, read what I said again (my emphasis):

And maybe if more people in your position had thought about things like yield (and other such tedious trivialities) taxpayers like me wouldn't be paying back debt that people like you took on.

I do not say I am paying your NE. When posting I was going to say I didn't mean you because it was clear in your post you were carrying the €10k. But I didn't because we're not children so I hoped you would see what I meant. Unfortunately you didn't. If you think I'm dancing on the head of a pin here, ask yourself why I used the language I did rather than simply saying "I'm paying your NE". I didn't say that because that's not what I meant.

I know exactly what I am getting in to. I am getting debt free, sitting tight for a couple of years with the intention of building a house which intend to live out my remaining days with my family, pets, classic cars, family close by.

Cool. My advice was simply that you wait for yields to tell you when to buy so that you don't end up forking out another €10k next time around. On it's own terms, this is very good advice.

But more importantly, your criteria for judging when the right time to buy is will in all likelihood very closely correspond to what's happening to yields whether you realise it or not. You will recognise that moment as "I can afford this now"...in fact though, this will almost undoubtedly also be at the moment when yields make sense. I am simply codifying your gut feeling.

The future value of a house only matters if you intend to sell it. While I got burned buying the starter home at close to the peak ... lesson learned and my own financial security will bail myself out.

You bought near peak and today have an offer in €10k below that price? Wow. I am genuinely stunned to hear that, given almost every house in the country is down 30%+ since peak and prices across the board are back to 2001 or 2002 levels. But I take you at your word and congratulate you for not being in a worse position, because you very easily could have been.

And I agree the value of a house only matters if you want to sell. But the price you buy it for matters right away. Every penny more you pay than it's neutral "value" deprives your family of expendable income and thus quality of life. The blitheness with which people dismiss €10k here and €20k there is frightening, considering the compound cost of these sums over the lifetime of a mortgage. They amount to adding years to your working life!! As an investor you more than anyone should know about these small margins and how important they can be. So when you say this:

All in all, I am not an investor of property, nor do I intend to. I value quality of life above the daily worry of what the market is doing.

...you are getting it all wrong when you dismiss the stuff I'm talking about. Because ALL IT IS ABOUT is the quality of your family's life. I couldn't give a rat's arse about property values or investment. I care that people do bloody stupid things that risk their families' happiness and that underpins everything I say.

Finally, I admit that I sometimes forget there are people in distress behind these posts and will try to be less confrontational where possible.

Damie · 19-08-2010 6:21pm

Merch wrote: »

so either rents have to go up or prices come down (either by a good amount)
and if they dont rise or fall dramatically, should people wait to get on the ladder?
Now that prices have dropped a good bit I'd thought its better to get on but I'm inclined to think there is more to go.
Having said that, even if you lose money on a property to live in after say 5 years, lets say 50%, then you still have the other 50% even if you owe more (assuming you can afford to pay it and its where you are happy to live)
But if you rented in that time you'd have nothing.
I'm sure plenty will dissagree

PersonsA rents for 5 years at 8000* per year, therefore 40,000 down.
PersonsB buys for 300,000* after 5 years is 50% less therefore 150000 down.

PersonsA then can buy for 150000, so therefore after 5 years, has a total of 190000 spent on rent and mortgage.
PersonsB after 5 years has a mortgage of 300000, but its worth 150000.

Add in that PersonsA is 'free' for 5 years while PersonsB has a pretty heavy noose around the auld neck...

Is this what you mean?:D

*figures are taken at random from my head - but still not far off!

Merch · 19-08-2010 9:57pm

Damie wrote: »

PersonsA rents for 5 years at 8000* per year, therefore 40,000 down.
PersonsB buys for 300,000* after 5 years is 50% less therefore 150000 down.

PersonsA then can buy for 150000, so therefore after 5 years, has a total of 190000 spent on rent and mortgage.
PersonsB after 5 years has a mortgage of 300000, but its worth 150000.

Add in that PersonsA is 'free' for 5 years while PersonsB has a pretty heavy noose around the auld neck...

Is this what you mean?:D

*figures are taken at random from my head - but still not far off!

I see what you mean,maybe I shouldnt have used my comparison of 5 years, in that case in the short term a renter is better off, that is if they intend to buy and are fortunate to have the money at the same time as the market is down (or are able to get a mortgage at all). I was meaning that if person B bought and ultimately paid their mortgage and compared it to someone that rented for the same time, the renter would have nothing after 25 years and the homeowner would have the value of the property.

the_syco · 19-08-2010 10:40pm

whippet wrote: »

I will take out a mortgage based on what I want to spend on my home and then make the builders fight over who can provide me with the best possible house for that price.

Have lots of fun getting a mortgage without a house - if you stop paying, the bank may just get a useless half-built shell, thus most banks won't give you a mortgage. A loan, yes, and maybe at the same rate, but I doubt a mortgage.

As for the cheapest house: cheap never equals quality. It just means you'll be spending more in later years. Ensure you get a full time engineer who isn't mates with the builder to look at the site every day to ensure that nothing is getting done wrongly: have read often enough about it here, in regards to self builds.

Damie · 19-08-2010 10:46pm

A bit tongue in cheek with that last example but i think it has a point....

Think about it tho, after 25 years, although someone who rents for say, 10 of those years, thats a lot of wasted money......but the personB who takes the mortgage of 300000 out will have to pay back over 500000 by the end of the 25 years.

If the personA, who is renting, is lucky enough to buy the same property at 150000 then they will be able to pay it off quicker, for less and still be in the same position as personA....my head hurts, im off to bed

iPlop · 20-08-2010 5:17am

I bought a house back in April for 240k.The house was a second hand house and 9 years old.I know the area very well as my family live there.The house went on the market in July '08 for 400k and has just dropped ever since ,I think I snapped up a bargin knowing what most people paid for there's in the area;)

oflahero · 20-08-2010 8:09am

Merch wrote: »

I was meaning that if person B bought and ultimately paid their mortgage and compared it to someone that rented for the same time, the renter would have nothing after 25 years and the homeowner would have the value of the property.

It's easy to view the choice as simply as a) pay a mortgage or b) pay rent. In this context it looks like a no-brainer - pay a mortgage and in 25 years you'll have a gaff.

But of course it's not that simple. If you're paying a mortgage, you're paying the price of the gaff PLUS rent. The rent is the mortgage interest which you're paying to the landlord, the bank. I never fail to be amazed at how much money this actually amounts to over the lifetime of the typical mortgage - the first time I played around with Karl Jeacle's mortgage calculator it was an eyeopener. 175k interest on a 300k mortgage @ 4% over 25yrs, 475k in total! Cripes.

The reason the choice looks like a stark 'rent OR mortgage' is that currently and for the last few years interest rates have meant that mortgage interest repayments have been historically low. This is why people can get away with saying 'Sure why would I rent, and pay some other fella's mortgage for him?'

This can only change as mortgage interest relief is phased out and interest rates inevitably rise (SVRs going up already, and the Germans will need to have a look at inflation soon.) Then the choice won't look so simple anymore...

Zamboni · 20-08-2010 8:30am

Septic Leper wrote: »

I bought a house back in April for 240k.The house was a second hand house and 9 years old.I know the area very well as my family live there.The house went on the market in July '08 for 400k and has just dropped ever since ,I think I snapped up a bargin knowing what most people paid for there's in the area;)

How much do you think this bargain has dropped in value since April?

whippet · 20-08-2010 8:42am

the_syco wrote: »

Have lots of fun getting a mortgage without a house - if you stop paying, the bank may just get a useless half-built shell, thus most banks won't give you a mortgage. A loan, yes, and maybe at the same rate, but I doubt a mortgage.

shouldn't be a problem as I intend to paying for the site with savings, I am not mortgaging that part of it. Both of us in very much secure full time employments on a combined income in excess of 140k per annum and a healthy savinging account.

the_syco wrote: »

As for the cheapest house: cheap never equals quality. It just means you'll be spending more in later years. Ensure you get a full time engineer who isn't mates with the builder to look at the site every day to ensure that nothing is getting done wrongly: have read often enough about it here, in regards to self builds.

its all about context. You can get quality a cheap pricing depending on how you go about it. I source high end equipment & services for a living, I understand how to get the best value. Believe me I will not be looking at cutting corners and as this will be a house for life it will be built the way I want it to be.

iPlop · 20-08-2010 3:11pm

Zamboni wrote: »

How much do you think this bargain has dropped in value since April?

That's a good question and impossible to answer at the moment because there are similar houses to mine in the area for 350K and smaller ones for 270k ,then one identical to mine for 285k and then some new ones for 240k.I think at the moment it's no body really knows what house prices are really supposed to be.I'll give you an example...There is a girl I know that is selling her house up here for 400K ,she will never get somebody to buy this but her attitude is "well that what I paid for it":rolleyes:

Snakeblood · 20-08-2010 3:58pm

Damie wrote: »

A bit tongue in cheek with that last example but i think it has a point....

Think about it tho, after 25 years, although someone who rents for say, 10 of those years, thats a lot of wasted money......but the personB who takes the mortgage of 300000 out will have to pay back over 500000 by the end of the 25 years.

If the personA, who is renting, is lucky enough to buy the same property at 150000 then they will be able to pay it off quicker, for less and still be in the same position as personA....my head hurts, im off to bed

You're still getting something for renting. It's not wasted unless you rent a place but decided to live under a bridge instead of living there

gbee · 20-08-2010 4:02pm

whippet wrote: »

Stay debt free for a couple of years and hoard a bit more cash.

WOW! you have CASH?
I thought that was just a myth?
You say where is CASH?

cgarrad · 20-08-2010 4:10pm

You would want to think carefully about buying a house.

Prices are nowhere near the level they should be at historically or in terms of how many ounces of gold (the only true wealth) it would take to buy one.

Also when the euro comes apart thanks to greece spain and possibly ourselves you will be left with a €300,000 which you will have to pay off in punts.

Yo might get a euro for 2-3 punts if that happens.

The timeline for buying a house is after 2014, catching the bottom will prove difficult due to these (as well as several others) variables.

Damie · 20-08-2010 4:14pm

Snakeblood wrote: »

You're still getting something for renting. It's not wasted unless you rent a place but decided to live under a bridge instead of living there

Im renting at the mo, I dont see it as a waste, as my previous posts have shown but to the 'investor' type, it probably looks like a waste to be 'paying someone else's mortgage'....

Blackjack · 20-08-2010 9:49pm

cgarrad wrote: »

You would want to think carefully about buying a house.

Prices are nowhere near the level they should be at historically

Agree with this bit

cgarrad wrote: »

or in terms of how many ounces of gold (the only true wealth) it would take to buy one.

Also when the euro comes apart thanks to greece spain and possibly ourselves you will be left with a €300,000 which you will have to pay off in punts.

Yo might get a euro for 2-3 punts if that happens.

This is not going to happen.

cgarrad wrote: »

The timeline for buying a house is after 2014, catching the bottom will prove difficult due to these (as well as several others) variables.

Somewhat agree with this bit, but it won't be as a result if Ireland leaving the Euro. Its not in our Economic interest, in any way shape or form, to do so.

Variables will be Public Spending, Rate of Employment, Interest rates and general state of World Economy, amonst many others.

cgarrad · 21-08-2010 10:35am

Our leaving the euro will not be our decision.

Greece is going to default, its just a matter of when.

Some areas are reporting 80% unemployment.

If spain follows suit there is no way the euro in its current form can survive and if they let greece and spain fall we will be next in line.

If the ECB dont actually pull the trigger (it wont be too palatable to let others fail while saving little old ireland) then the bond market will.

The euro is a great idea in principle but the mechanisms it runs by are flawed.

Sothern europe are a bunch of layabouts and cant be equated to northern europe, which is exactly what the euro did.

Mind you it was worse here, people including friends of mine throwing multiples of their salaries at investments they really did not understand.

Merch · 21-08-2010 11:12am

oflahero wrote: »

It's easy to view the choice as simply as a) pay a mortgage or b) pay rent. In this context it looks like a no-brainer - pay a mortgage and in 25 years you'll have a gaff.

But of course it's not that simple. If you're paying a mortgage, you're paying the price of the gaff PLUS rent. The rent is the mortgage interest which you're paying to the landlord, the bank. I never fail to be amazed at how much money this actually amounts to over the lifetime of the typical mortgage - the first time I played around with Karl Jeacle's mortgage calculator it was an eyeopener. 175k interest on a 300k mortgage @ 4% over 25yrs, 475k in total! Cripes.

The reason the choice looks like a stark 'rent OR mortgage' is that currently and for the last few years interest rates have meant that mortgage interest repayments have been historically low. This is why people can get away with saying 'Sure why would I rent, and pay some other fella's mortgage for him?'

This can only change as mortgage interest relief is phased out and interest rates inevitably rise (SVRs going up already, and the Germans will need to have a look at inflation soon.) Then the choice won't look so simple anymore...

I agree with the first paragraph, but not the second as at times rents have been higher than an actual mortgage and you are paying towards something you will own.
I've seen that calculator before, its good, I think I saw it first on the business pages/tab of an Irish newspaper (cant recal which) but it was removed/or I couldn't find it there when I looked last AND yes it is shocking when you actually see the amount of interest that is being paid in front of your eyes like that, even though I was already aware that it works out so much.
So maybe paying rent isn't such a bad prospect, except there seem to be few rules or little regulation regarding how landlords treat tenants and keep properties (I know there are part 4 tenancies and the PRTB) but you still have less say and security over how you run your life, good if you have a landlord that will look after things but bad if they dont.
Just thinking about it now, I understand on the Continent that rented properties are mostly unfurnished and people simply bring their own beds,suites of furniture and washing machines etc, that might make for a better scenario for renters here too. No worries or concerns about who slept in the bed and what they might have, washing machine is tenants own responsibility to sort out ie no waiting on landlord AND make people feel they are making a place for themselves with their own possessions and not having some grotty living room suite! ?

Damie wrote: »

Im renting at the mo, I dont see it as a waste, as my previous posts have shown but to the 'investor' type, it probably looks like a waste to be 'paying someone else's mortgage'....

I'm not saying it's a waste, its a situation that suits many people, some may want and like to rent and may end up being better off for it, I think that if there were rules regarding maximum rents possible for size property for area (rent control? so rents cant get out of hand in the future again, not fixed figures per se, more fixed percent allowable increases or something to do with being fixed to an amount of inflation). Proper facilities for tenants to do things officially so that registering for council bin,tax is one process A so landlords cant get away with paying their liability B so tenants feel (and act) like a responsible part of the community with a vested interest and not looked/treated or feel like some sub class of habitants.

cgarrad · 21-08-2010 12:46pm

One major flaw of that calculator is that while it does account for inflation the headline rate of inflation given is massaged to say the least.

If your paying the tail end of a 30 year mortgage off now your paying peanuts, not only due to the comparable appreciation but also due to massive inflation over the years.

Take a pint of milk or a loaf of bread in 1980 and compare it now and you get an idea.

Still buying property at the moment for investment or even so as not to rent is a bad idea.

There are way better investments out there.

Blackjack · 21-08-2010 2:04pm

cgarrad wrote: »

Our leaving the euro will not be our decision.

Greece is going to default, its just a matter of when.

Some areas are reporting 80% unemployment.

If spain follows suit there is no way the euro in its current form can survive and if they let greece and spain fall we will be next in line.

If the ECB dont actually pull the trigger (it wont be too palatable to let others fail while saving little old ireland) then the bond market will.

The euro is a great idea in principle but the mechanisms it runs by are flawed.

Sothern europe are a bunch of layabouts and cant be equated to northern europe, which is exactly what the euro did.

Mind you it was worse here, people including friends of mine throwing multiples of their salaries at investments they really did not understand.

Its not going to happen - we're not leaving the Euro, and we're not going to get kicked out of it either.

amacca · 21-08-2010 3:00pm

cgarrad wrote: »

Our leaving the euro will not be our decision.

If spain follows suit there is no way the euro in its current form can survive and if they let greece and spain fall we will be next in line.

If the ECB dont actually pull the trigger (it wont be too palatable to let others fail while saving little old ireland) then the bond market will.

How can you be so sure?

Is the above just your opinion?

Are you basing it on evidence?

Are you basing it on rumour?

Do you work in ECB or are you hearing this from people that might have an inside track of some sort?

Do you really believe its just a matter of when?

Not really challenging you, just would like more of a justification for the certainty......it seems like you think its a slam dunk.

amacca · 21-08-2010 3:07pm

Blackjack wrote: »

Its not going to happen - we're not leaving the Euro, and we're not going to get kicked out of it either.

well Blackjack I suppose Ill have to ask you how you can be so sure also ..... for forms sake

Interested to hear peoples reasoning...cgarrad gave some (scant I thought but I'm by no means an expert) justification for his convictions

Blackjack · 21-08-2010 5:03pm

amacca wrote: »

well Blackjack I suppose Ill have to ask you how you can be so sure also ..... for forms sake

Interested to hear peoples reasoning...cgarrad gave some (scant I thought but I'm by no means an expert) justification for his convictions

Everything you need to know is here.

Collapsing house prices? We ain't seen nothing yet

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