What houses should cost.

RichardAnd

House prices are falling and it seems they are set to continue as such for a while yet. In some parts of the country, the fall has been considerable and in others, almost total (a lone house on a ghost estate is effectively worth nothing). But, in my opinion, the prices being asked in some parts of the country are still too high for what you get in return.

Thus, I would raise the question of just what would people consider to be a reasonable price for a house. For example, let's say that there is a house for sale in a nicely settled north Dublin area such as Artane or Raheny which is close enough to town and has a decent garden and parking space.

What sparked this thought in me was my maternal grandmother telling me that in mid 1960s, she and her late husband built a house in Navan for something in the region of 2000 pounds. Now people earned less back then but 2k in the 60s was still a far cry from 400k today.

At the moment, my parents are encouraging me to start looking at houses to buy. I'm somewhat against buying a house simply because I have absolutely no desire to mire myself in debt for the next 20 years and I'm content with renting, which they described to me as "dead money".

Prices may be falling, but they would need to come down before I even considered buying a home.

jimmyendless

This dead money thing is nonsense these days. Dead money is paying way over the odds for a property that will continue to devalue. I think there is a long way to go with property prices yet and am in no rush to buy.

On the other hand, building is alot cheaper now that it used to be obviously.
I think a ten year-ish mortgage with comfortable repayments should be the norm not scraping until your 70!

Justin Collery

Couple of interesting points here:

- If you adjust your grannys 2k from 1960 today you get 24k assuming 5% inflation over the period. Interestingly if you assume an inflation rate of 10% you get a today price of 258k, I suspect the truth is somewhere in between.

- Of course prices are driven more by what people are prepared to pay. On this measure the average house price should be about 2.5 -> 3 times the average salary, about €100k in Ireland.

There are many reasons why expensive houses are bad for society, expensive houses are a measure of how poor rather than how rich a society is. Just one example is negative equity. Lets say today we have 20,000 people with negative equity of €100k. If those people had been able to spend €100k less on their houses, and instead invested that 20,000 x €100,000 in local start up business the country would be in a very different place than it is now. I hope we learn from this crisis where we would prefer people put their money, investing in houses or investing in themselves.

JC

Spudmonkey

RichardAnd wrote: »

At the moment, my parents are encouraging me to start looking at houses to buy. I'm somewhat against buying a house simply because I have absolutely no desire to mire myself in debt for the next 20 years and I'm content with renting, which they described to me as "dead money".

Sounds to me like your parents need to stop the dead money way of thinking. Say for example you lost your job and had to emigrate, having sunk your money into a house isn't going to be much use to you if you have to leave.

I'd much rather have the few savings I have as cash in the bank (devalued as it may be) rather than bricks and mortar at the other side of the world. Sorry for the pessimistic view but until employment is more secure in this country this is the outlook I'd have.

RichardAnd

Spudmonkey wrote: »

Sounds to me like your parents need to stop the dead money way of thinking. Say for example you lost your job and had to emigrate, having sunk your money into a house isn't going to be much use to you if you have to leave.

I'd much rather have the few savings I have as cash in the bank (devalued as it may be) rather than bricks and mortar at the other side of the world. Sorry for the pessimistic view but until employment is more secure in this country this is the outlook I'd have.

That would be my take aswell. I've never grasped the "dead money" mantra. Spending money on rent is just like spending money on food, you need it to live.

But yeah, they are a bit keyed into that Irish need to own a house even though they are, in general, fairly astute people.

ei.sdraob

I know this graph only goes back to 1980

But it illustrated that there hasnt been a drop in GNP in the last 30 years, your parents generation @RichardAnd have only seen more or less continuous growth of the economy, ever expanding and easier credit
what we have now are near depression level drops in GNP which seems to continue to fall


While it often is a good idea to listen to your parents. I dont think they lived in an economy which contracted so much so quickly and more importantly in the case of housing (this thread) has such a large oversupply of property.

edit: heres graph from past thread i made based on CSO

ei.sdraob wrote: »

made a graph of housing completions based on CSO data
http://trl.to/anz2n

can be compared to UK > http://www.communities.gov.uk/news/corporate/696795

who build 9 times as many houses in 2007 as us, but have 14 times the population

disclaimer: i am a house owner so my views might be clouded and biased

swampgas

The "rent is dead money" meme was nicely debunked by another poster some time back - I can't find the post, but basically the interest you are paying on a mortgage can also be considered dead money.

Renting a property: pay rental to the landlord for the use of an asset.

Mortgage a property: pay rental (interest) to the bank for the use of an asset (some of their capital).

dubhthach

jcollery wrote: »

Couple of interesting points here:

- If you adjust your grannys 2k from 1960 today you get 24k assuming 5% inflation over the period. Interestingly if you assume an inflation rate of 10% you get a today price of 258k, I suspect the truth is somewhere in between.

- Of course prices are driven more by what people are prepared to pay. On this measure the average house price should be about 2.5 -> 3 times the average salary, about €100k in Ireland.

There are many reasons why expensive houses are bad for society, expensive houses are a measure of how poor rather than how rich a society is. Just one example is negative equity. Lets say today we have 20,000 people with negative equity of €100k. If those people had been able to spend €100k less on their houses, and instead invested that 20,000 x €100,000 in local start up business the country would be in a very different place than it is now. I hope we learn from this crisis where we would prefer people put their money, investing in houses or investing in themselves.

JC

There's a handy enough Irish Inflation calculator site: http://www.anthonykelly.com/inflation.html

It would seem the average yearly inflation for the period 1971 to 2010 is 6.5% (Cumulative inflation: 1081.4%). On an aside a house bought in 1988 for £70,000 would be worth €160,000 today if house prices had only moved with Inflation (ignoring all other factors). However we all know that such a house would be for sale on a multiple of this (3-6x)

dynamick

Two general methods of valuing houses are rent multiple (yield) and income multiple.

The first method is to look at a house as an asset that returns cash in the form of rental income. Given that house prices can fall or rise, you would expect a higher rate of return from a housing investment than something low risk like a German government bond. Bunds pay 3% so let's say you want 4%.

That's a net yield and houses cost money to maintain and managing a tenancy costs money. So let's add another 3% to the yield and we need a yield of 7% to make the investment OK. So that means the rent for a year should be 7% of the house price. In other words a hosue is worth about 170 times the market monthly rent.

Another method is to take the annual gross income of the kind of person who would live there and multiply by some handy number like 3.

irishh_bob

RichardAnd wrote: »

House prices are falling and it seems they are set to continue as such for a while yet. In some parts of the country, the fall has been considerable and in others, almost total (a lone house on a ghost estate is effectively worth nothing). But, in my opinion, the prices being asked in some parts of the country are still too high for what you get in return.

Thus, I would raise the question of just what would people consider to be a reasonable price for a house. For example, let's say that there is a house for sale in a nicely settled north Dublin area such as Artane or Raheny which is close enough to town and has a decent garden and parking space.

What sparked this thought in me was my maternal grandmother telling me that in mid 1960s, she and her late husband built a house in Navan for something in the region of 2000 pounds. Now people earned less back then but 2k in the 60s was still a far cry from 400k today.

At the moment, my parents are encouraging me to start looking at houses to buy. I'm somewhat against buying a house simply because I have absolutely no desire to mire myself in debt for the next 20 years and I'm content with renting, which they described to me as "dead money".

Prices may be falling, but they would need to come down before I even considered buying a home.

rent is no more dead money than food is dead money , or going to the pub , or getting a taxi home from town

old (er) people are funny , beit with voting FF no matter what or clinging to cliched views :rolleyes:

they say the price of a home should cost no more than four times ones anual salary , therefore if someone is earning 30 k per year , the right price for them is 120 k , if someone is earning 50 k per year , 200 k , thats a probabley a conservative rule of thumb but in the present climate , probabley a prudent and wise one

OMD

dynamick wrote: »

Two general methods of valuing houses are rent multiple (yield) and income multiple.

The first method is to look at a house as an asset that returns cash in the form of rental income. Given that house prices can fall or rise, you would expect a higher rate of return from a housing investment than something low risk like a German government bond. Bunds pay 3% so let's say you want 4%.

That's a net yield and houses cost money to maintain and managing a tenancy costs money. So let's add another 3% to the yield and we need a yield of 7% to make the investment OK. So that means the rent for a year should be 7% of the house price. In other words a hosue is worth about 170 times the market monthly rent.

Another method is to take the annual gross income of the kind of person who would live there and multiply by some handy number like 3.

People constantly come up with this simple but flawed formula. I have asked the question before (and have never gotten an answer) but how many countries, over say the last 30 years have properties averaged a 7% yield or have nearly all countries an over valued market?

Prices are dictated by supply & demand. House prices have risen hugely in places like Artane & Raheny and to a lesser extent Navan because the population of the country and more importantly Dublin has risen about 40% over the last 40 years. This increases demand for houses but only limited extra supply in Dublin city. Hence the "city" has spread to surrounding counties upping prices there. I am not saying prices are not over valued but to simply say prices should go up with inflation ignores reality. You also have to take into account average interest rates. In the 70s it was over 10% (not sure of actual figure). For last 10 years it is less than 5%. Finally add in increases in wages and decrease in taxes and you can see how hard it is to put simple formulas on house prices.

hmmm

Rents reflect the value that society places on living in a certain area, it's a very fair and accurate indicator of value in most cases. Where it isn't accurate is in areas with artificial rents, e.g. 1 bedroom flats paid for by rent supplement.

A figure of somewhere between 14 to 18 times rent represents average value to me. In most property crashes however the lower limit has been tested at the bottom of the market.

dynamick

OMD wrote: »

People constantly come up with this simple but flawed formula. I have asked the question before (and have never gotten an answer) but how many countries, over say the last 30 years have properties averaged a 7% yield or have nearly all countries an over valued market?

Many countries seem to have overvalue property markets that are correcting now. Globalisation has brought a synchronising of markets that previously moved independently of each other.

The USA rent-price ratio fo rhe past 50yrs is here:
http://www.lincolninst.edu/subcenters/land-values/rent-price-ratio.asp

The economist compares current rent-price ratios with their long-run averages to try to find whether markets are under or overvalued. Their latest report is here:
http://www.economist.com/node/17311841?story_id=17311841

Prices are dictated by supply & demand. House prices have risen hugely in places like Artane & Raheny and to a lesser extent Navan because the population of the country and more importantly Dublin has risen about 40% over the last 40 years. This increases demand for houses but only limited extra supply in Dublin city. Hence the "city" has spread to surrounding counties upping prices there. I am not saying prices are not over valued but to simply say prices should go up with inflation ignores reality. You also have to take into account average interest rates. In the 70s it was over 10% (not sure of actual figure). For last 10 years it is less than 5%. Finally add in increases in wages and decrease in taxes and you can see how hard it is to put simple formulas on house prices.

Yes interest rates are lower now (reverting to 5%) but for how long? The big change is the number of women working so two-income households have permanently pushed up house prices. That is reflected in the rents.

Increase in demand for housing is driven by population increase and also by smaller household size as families are smaller and it's less acceptable to live with your parents in your 20s/30s

This demand has been met by huge supply increase although probably not enough in Dublin.

The largest element of demand for housing over the last decade was of course speculative and credit fuelled. People bought housing because they though it would make them rich. With the expectation of riches gone and the credit removed, demand will fall to levels more closely related to expected yield. There's a good bit left to fall as disposable income it still dropping with tax increases.

Treehouse72

RichardAnd wrote: »

I'm content with renting, which they described to me as "dead money".

Explain it to them like this.

If you rented for the last 5 years spending €10,000 pa on rent, that's €50,000 in rent payments.

Ask them to think of a single property in the country that has fallen in value by less than €50,000 in the last 5 years. I doubt there is one. Renting in this period was the financially most prudent thing to have done, it just intuitively feels like €50,000 down the drain. But it emphatically was not.

Using the same logic, an average Dublin home is c. €240,000. If house prices fall by any more than 20% in the next 5 years, that is more than you will spend on rent. If rents fall, the saving is bigger still. In addition to which, you will forego the significant costs of property ownership in that time. I also think there is a multiplier effect in borrowing less money at the start of the mortgage, meaning that €50,000 is more valuable than it seems.

My personal view is that 20% is at the modest end of projections for coming price falls in Dublin (with the possible exception of some bottom-end city centre apartments, which are now not wildly overpriced).

sollar

Take the long view people. If you decide at 25 to rent for the rest of your life then you will have to hand over money every week for the next 50 to 60 years (add inflation). If you buy you could have the house paid off in 15 years and get to enjoy the rest of the time and money as you please.

Owning your own home provided you didn't pay over the odds for your house is still a much better idea imo.

RichardAnd

sollar wrote: »

Take the long view people. If you decide at 25 to rent for the rest of your life then you will have to hand over money every week for the next 50 to 60 years (add inflation). If you buy you could have the house paid off in 15 years and get to enjoy the rest of the time and money as you please.

Owning your own home provided you didn't pay over the odds for your house is still a much better idea imo.

I would like to own my own home but as people above have said, signing yourself up for a 15 year loan is akin to taking a gamble that you will not loose your income over that period. fifteen years is a long time.

This is why I pointed out that my grand parents paid a partly 2000 pounds for their home in the 60s. Now, inflation can be factored in but 2000 pounds to my grand parents was nothing like what 300k would be to me now. On top of this, they only borrowed about half of that money, having saved the rest themselves. So in effect, what I was saying was that they got themselves a house for a sum of money that didn't represent 20 years of debt to them.

If it ever happens that I can have a house for a modest price like that, I'll buy one, but until then I won't.

Permabear

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Geuze

A basic, no frills, semi-detached house costs about 90k to build.

That excludes land, financing, dev levies, etc.

OMD

dynamick wrote: »

Many countries seem to have overvalue property markets that are correcting now. Globalisation has brought a synchronising of markets that previously moved independently of each other.

The USA rent-price ratio fo rhe past 50yrs is here:
http://www.lincolninst.edu/subcenters/land-values/rent-price-ratio.asp

The economist compares current rent-price ratios with their long-run averages to try to find whether markets are under or overvalued. Their latest report is here:
http://www.economist.com/node/17311841?story_id=
.

So US Market averaged rental return of about 4.5 or 5% over last 40 years yet is not overvalued. Why should Ireland have a 7% return? again what other countries average 7%? Why do people should conform to economic models that the vast majority of countries do not?

Permabear

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ei.sdraob

Here is a handy calculator that would visually illustrate the figures involved, input/tweak figures to get an idea

to add to @Permabear's post, inflation has historically helped ease the "interest burden" but unfortunately for some we the economy in general is deflating/being static while prices are still dropping like stone

Geuze wrote: »

A basic, no frills, semi-detached house costs about 90k to build.

That excludes land, financing, dev levies, etc.

Your average semiD is about 90m^2 so yeah sounds about right at about @ 1000 per square meter, tho of course estates are build by large companies who can avail of economy of scales and i wouldn't be surprised (judging by standard of recent estates) that they where put up for much much cheaper, with serious corners being cut.

aside: my own recent experience in self-building came at 1333/m^2 but that included alot of extras such as work on the land and various luxuries (the "builders finish" came at under 1000/m^2 from top of head, including the cost of land fees etc)

sollar

Permabear wrote: »

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The point i was making is that so long as you don't over pay then its the best option imo.

300K is alot of money and 35 years is far too long. Hopefully them days are gone for a long while. 100K, 150K, 200K over 15 to 20 years is prob more likey the prices people will be facing over the next 5 to 10 years for an avg house.

So long as your sure you'll be able to manage the mortgage then having the house paid for by the time your 40 or 45 would be a comfortable place to be.

later12

Permabear wrote: »

This post had been deleted.

Taking your assumption that the value of the house should be around 15 times the annual lease on the property, that would mean that the same house (if €300,000 were its real value) would have an equivalent rental charge over the 35 year period of €20,000 per year or €700,000 over 35 years in rent alone. The mortgage, based on what you have laid out, however, would cost about €18,000 per year or €630,000 over a 35 year period.

Would a family be likely to pay more than an average of €2,000 per annum in taxes and renovations, or about €70,000 over the lifetime of the mortgage? Possibly. But they would typically have to pay such expenses anyway upon purchasing their home later in life anyway. Other advantages include the possibility of using the home as security against other personal or professional loans during the peak of their working and family lives provided that they owned the property.

Permabear

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Monty Burnz

RichardAnd wrote: »

I'm somewhat against buying a house simply because I have absolutely no desire to mire myself in debt for the next 20 years and I'm content with renting, which they described to me as "dead money".

Ask your parents whether the interest on the money you rent to buy a house is also dead money. You pay dead money towards the money you rent the exact same as you pay dead money towards the house you rent - only if prices are falling at 10% per annum or whatever it is right now, you're saving a fortune by renting.

Permabear

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recedite

Permabear wrote: »

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Eh.. how does the renter have all these savings, if he was spending the money on rent? At the end of the period he has nothing, but the mortgage payer has a house.
Basically, the renter is not tied down. "Dead money" is OK in the short term, if you don't plan on living permanently in the area you are in now.

Permabear

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lmimmfn

Permabear wrote: »

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dont forget another 12-15k on life assurance over that period

OMD

Permabear wrote: »

This post had been deleted.

There is a big problem with your figures here. In a normal property market (which we are not in yet as prices are still falling) landlords make a profit. So they pay the interest on the mortgage, pay all expenses, pay for repairs etc as you outlined above, pay taxes and still make a profit over the long term. So in the long term rent is more expensive than ownership. If it wasn't landlords would always make a loss. Also 15 year mortgages are far more common than 35 year mortgages.

By the way you said in a previous post you said house price should be 15 times rent. I have been asking people how many countries in the Western world have a property market that averages this? USA prices have been about 20 times rent for the last 50 years. Why do you believe Ireland should be different to the majority of the Western world.

dubhthach

OMD wrote: »

USA prices have been about 20 times rent for the last 50 years. Why do you believe Ireland should be different to the majority of the Western world.

Ireland is different from the rest of the Western World at moment, namely the value of property is more like 40-70 times the rental value of a property. I live in Sandymount in a 3bed rental property (townhouse/end of terrace) that costs a total of 15k a year to rent. Going by a x20 factor that means the property is worth €300k. However in a neighbouring estate there is a 2bed townhouse of the same age selling for close to €500k!

danbohan

dubhthach wrote: »

Ireland is different from the rest of the Western World at moment, namely the value of property is more like 40-70 times the rental value of a property. I live in Sandymount in a 3bed rental property (townhouse/end of terrace) that costs a total of 15k a year to rent. Going by a x20 factor that means the property is worth €300k. However in a neighbouring estate there is a 2bed townhouse of the same age selling for close to €500k!

selling ? or sold ?, people are still looking for totally mad money for houses in parts of dublin

OMD

dubhthach wrote: »

Ireland is different from the rest of the Western World at moment, namely the value of property is more like 40-70 times the rental value of a property. I live in Sandymount in a 3bed rental property (townhouse/end of terrace) that costs a total of 15k a year to rent. Going by a x20 factor that means the property is worth €300k. However in a neighbouring estate there is a 2bed townhouse of the same age selling for close to €500k!

I am not arguing for 1 second that many properties are not overvalued by a massive amount. I also fully expect house prices to continue to fall through 2011. My problem is this rent to price ratio that people keep talking about. People keep coming out with 14 or 15 times rent being a good rule of thumb to value property. This rule however does not apply to the vast majority of the Western World. Why should it apply to Ireland?

swampgas

OMD wrote: »

There is a big problem with your figures here. In a normal property market (which we are not in yet as prices are still falling) landlords make a profit. So they pay the interest on the mortgage, pay all expenses, pay for repairs etc as you outlined above, pay taxes and still make a profit over the long term. So in the long term rent is more expensive than ownership. If it wasn't landlords would always make a loss.

You are assuming that the landlord has a large mortgage on the property. In many cases the landlord would have acquired the property some time ago and would either have no mortgage, or a relatively small one.

The idea that I should be able to buy a house today with a 100% mortgage and rent it out immediately with a rent high enough to pay the mortgage and make a profit seems crazy to me. Are people actually trying to do this?

OMD

swampgas wrote: »

You are assuming that the landlord has a large mortgage on the property. In many cases the landlord would have acquired the property some time ago and would either have no mortgage, or a relatively small one.

The idea that I should be able to buy a house today with a 100% mortgage and rent it out immediately with a rent high enough to pay the mortgage and make a profit seems crazy to me. Are people actually trying to do this?

As I said over the long term (not immediately) landlords make a profit. Of course they do. If they didn't then there wouldn't be such a thing as landlords.

danbohan

OMD wrote: »

As I said over the long term (not immediately) landlords make a profit. Of course they do. If they didn't then there wouldn't be such a thing as landlords.

my beloved brother in law been the genius that he is bought 2 apartments in a western town for E345K and E299K respectively in 2007 , one is rented for E300 per month one is not rented , making money he is not !

OMD

danbohan wrote: »

my beloved brother in law been the genius that he is bought 2 apartments in a western town for E345K and E299K respectively in 2007 , one is rented for E300 per month one is not rented , making money he is not !

As I said "In a normal property market (which we are not in yet as prices are still falling)"

North_West_Art

the 'renting is dead money' notion, has left thousands of young people in the position that they are totally stuck, having to face the choice of staying in this country and try to pay their huge mortgages with the dole, after having become unemployed.... or emigrate to try to find work to pay off the mortgage on a house in Ireland that is lying empty because the rent market has collapsed across the country.
Money cant get much more dead than that, dont you think?

You are young, don't sign your life away to the banks.. unless that is, you are prepared to stay here for the next 10 - 15 years in the knowledge that you probably wont be able to sell your house if you want.

djpbarry

danbohan wrote: »

selling ? or sold ?, people are still looking for totally mad money for houses in parts of dublin

And some are getting it. I know of a bog-standard 2.5-bed property in The Gallops that recently went for somewhere in the region of €330k. The latest Daft report (www.daft.ie/report) would seem to suggest that this is about average for the area. Which is pretty staggering really.

Sesshoumaru

OMD wrote: »

As I said over the long term (not immediately) landlords make a profit. Of course they do. If they didn't then there wouldn't be such a thing as landlords.

Is that like the LTEV of buying?

dan_d

In answer to the OP's question, the point that almost everybody completely misses is that house prices are should cost what people can pay for them.

In the 1960's, his granny could build a house for 200eur (I've no idea what the interest rates were then). They were earning an amount per year that was proportional to that...what, maybe 100 pounds a month (very wild guess!!!)

In the early 80's my parents bought a house for 25k, at an interest rate of 14% over 25 years.They both worked, and earned salaries that allowed them to afford this.They were only allowed to borrow something like 3 times my Dad's annual wage, and my mother's wasn't counted at all, even though she was a teacher in a permanent job.They had no money for furniture, cutlery, nothing. Their friends, who were the same (and are a pilot and a teacher), couldn't afford a cooker for months when they bought their first house, and so used to eat in all their friends houses until they could. They are all still in the same houses.

We bought a house 3 years ago, for 370k. Interest was 5% at the time, and has dropped since. I don't know how many multiples of our wages our mortgage is. We had plenty of spare money (both earned about 40k each) and the house was completely furnished within 2 months, with luxuries!No loans were taken out, we furnished as we could afford it, and the kitchen is the same one we got in the house (it's a second hand house).But it's great.

So. In answer to your question, it's all relative.House prices are relative to the amount of money you have to spare from your salary every month. The problem for us was that credit was being thrown at us, interest rates were low, tax rates were low and terms for mortgages were extended by up to 20 years. We had a lot of spare money, and the old reliable credit cards. Of course money was going to keep flowing in, it would never stop and everything would always be fine. We never considered what we'd do if our income changed in any way (I say "we"- I'm not actually applying that to myself, as I did and acted accordingly), if anyone was unemployed, if interest rates rose, or our house price dropped. We bought so wholly and completely into the crap that was being spewed at us everyday by papers and the Government and the banks, we basically became like kids in a candy shop with money "give it ALL to us!!!". We learned to live in the right now...who cares about the future, sure it will all be fine.

The property market is governed by the money in people's pockets, followed by the amount the banks will lend them, the terms over which they can be loaned the money and the interest rates. And very little else. So when you ask what houses "should" cost - they will literally cost what you can pay for them. And that depends on when in time you happen to be born.

Chris_5339762

I'm currently mired in this debate as well, as I'm tempted to buy one of the (extremely nice) new apartments in the block I am renting in at the moment.

I live on my own in a 2 bedroom apartment so am spending €1000 per month on rent. I'm used to it, I realise its a lot but I wanted to live on my own so I'm prepared to pay it. Its a lovely apartment and there is some incredible **** around in the rental market that I wouldnt put the scummiest of students (or animals) in. [Mould in baths, lizards in the kitchen]

I can get a mortgage for less than, or approximately the same, as that. I'm going to be in Dublin for a long time. Rents are not going to go down; I hear rumours they're going up again and I fully expect my landlord to want to raise the price when my term is up.

I'm sick of the whole worry there is with the landlord basically having control of your life. He can decide that he doesnt want me in his apartment even though I'm a good tenant. I cant put pins in the wall to hang up a poster, I'm just sick of it and want a place I can call my own.

Incidentally since i'd be buying in the same block that i'm renting in now, I know how easy it would be to rent out myself if work fell through or something like that.

I dunno, I've not decided fully yet, but I'm sorely tempted to try and put in an offer.

Permabear

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Sponge Bob

Seeing as we have no banks any more there is no way for most people to get €100k to buy a house nowadays. If the majority of potential first time buyers are priced completely out, as they are now, then christ knows how much a house will cost in a year or two...a lot less than now.

Mass Emigration will smash the first time buyer demographic to pieces, they are the ones generally leaving nowadays. This further reduces the pool of likely buyers.

Furthermore that mortgage will cost you 5-6%, minimum, for the duration.

I'd say that the average semi in Dublin or Galway will be €100-200k soon and in places like Killybegs or Granard more like €30k. In commuter belt towns like Athenry or Enfirld they will be around €80-100k.

Apartments, save for high quality ones inside cities will cost even less. There are very few high quality apartments about.

Dannyboy83

danbohan wrote: »

selling ? or sold ?, people are still looking for totally mad money for houses in parts of dublin

Not just Dublin either, come have a look around the Southside of Cork.
Plenty of big, nicely located, EMPTY houses.
I didn't realise how many empties there were until I went looking in the Summer - it's quite astonishing tbh. Parts of Cork City are like the Ghost estates we keep earing about in the likes of Cavan etc.

A lot of those houses empty houses need work.
And underpinning.

So people are assuming that 225k is reasonable asking price for that house given the location, when the buyer knows he'll have to spend another 75k just to live there.

Another common theme is that they are executor sales, owned by family who live in USA/Oz or something. They appear to be in no rush to sell them and are doing nothing to maintain them. Only a matter of time before some of them will have to be knocked I'd say.

Meanwhile, you have loads of young families in Cork pushed way out to the outskirts or the commuter towns. Probably an awful lot in negative equity so moving back into the city is a mere pipe dream.
The one contrast I notice about Cork nowadays (and I've lived here all my life) is the the commuter towns are full of young people and the city is full of old people.

Dannyboy83

Sponge Bob wrote: »

Seeing as we have no banks any more there is no way for most people to get €100k to buy a house nowadays. If the majority of potential first time buyers are priced completely out, as they are now, then christ knows how much a house will cost in a year or two...a lot less than now.

Mass Emigration will smash the first time buyer demographic to pieces, they are the ones generally leaving nowadays. This further reduces the pool of likely buyers.

Furthermore that mortgage will cost you 5-6%, minimum, for the duration.

I'd say that the average semi in Dublin or Galway will be €100-200k soon and in places like Killybegs or Granard more like €30k. In commuter belt towns like Athenry or Enfirld they will be around €80-100k.

Apartments, save for high quality ones inside cities will cost even less. There are very few high quality apartments about.

Started a thread about this a short while ago.
http://www.boards.ie/vbulletin/showthread.php?t=2056106738

It's only a trickle at the moment, but the 12 month moratorium on repossessions has ended and the repossession rate is gradually picking up.

Sh1t >>>>>>>>>>>>>>>>>>>(FAN)

OMD

Sponge Bob wrote: »

Seei
Furthermore that mortgage will cost you 5-6%, minimum, for the duration.

.

This is an important point that has been brought up on this site before. The margins that banks are now charging are wiping out a lot of the savings people are making by prices falling. Variable rate mortgages are expected to hit an average of 5% this year (assuming ECB rates don't rise). So banks are increasing their margins to 4% on top of ECBs 1% rate. I am one of those who remortgaged a few years ago to get a tracker of 0.7% over ECB rate, so my mortgage rate (like many others who either bought or remortgaged in the boom) is 1.7%.

A 300k mortgage at 1.7% over 35 years would cost €946.27 a month
Assume a 40% drop in house prices.
a 180K mortgage at 5.0% over 35 years would cost €895.73 a month.

So a 40% drop in prices will give a 5% reduction in mortgage repayments. Add to that the abolition of TRS and the introduction of stamp duty for first time buyers and you can see a 40% price drop might actually see you paying more than someone who bought at the height of the boom.

Head The Wall

True but I don't see the 1% ECB rate lasting for 35 years so its not a great comparison

TurtleFace

sollar wrote: »

Take the long view people. If you decide at 25 to rent for the rest of your life then you will have to hand over money every week for the next 50 to 60 years (add inflation). If you buy you could have the house paid off in 15 years and get to enjoy the rest of the time and money as you please.

Owning your own home provided you didn't pay over the odds for your house is still a much better idea imo.

Sir I think I shall just live in a cave. No threat of inflation there

Lu Tze

OMD wrote: »

This is an important point that has been brought up on this site before. The margins that banks are now charging are wiping out a lot of the savings people are making by prices falling. Variable rate mortgages are expected to hit an average of 5% this year (assuming ECB rates don't rise). So banks are increasing their margins to 4% on top of ECBs 1% rate. I am one of those who remortgaged a few years ago to get a tracker of 0.7% over ECB rate, so my mortgage rate (like many others who either bought or remortgaged in the boom) is 1.7%.

A 300k mortgage at 1.7% over 35 years would cost €946.27 a month
Assume a 40% drop in house prices.
a 180K mortgage at 5.0% over 35 years would cost €895.73 a month.

So a 40% drop in prices will give a 5% reduction in mortgage repayments. Add to that the abolition of TRS and the introduction of stamp duty for first time buyers and you can see a 40% price drop might actually see you paying more than someone who bought at the height of the boom.

I would imagine a 40% drop in prices would result in shorter mortgage terms of 20 - 25 years making your argument void

OMD

Head The Wall wrote: »

True but I don't see the 1% ECB rate lasting for 35 years so its not a great comparison

Well of course it won't stay at 1%. My point is the banks margins are increasing to 4% from 0.7%. So when ECB Rate rises to 3% variable rate mortgage will be 7% compared to 3.7% to those on trackers.