Am I mad to even think about buying this?

johnjohn3423

I viewed a house in Galway that was priced at €265,000.
The EA says there is an offer of 220 on it, but sure could you believe that.
It’s a 4 bed semi close to town that was built before the boom by a reputable builder.
http://www.myhome.ie/residential/brochure/21-tara-grove-wellpark-galway-wellpark-galway-city/1257720
With the way the market is today what is the max that anybody should be prepared to buy this for?


Is it the case that anybody that can hold off buying for 2/3 years should do so, no matter what?

Kimia

Looks quite old fashioned - you'd have to redo that kitchen, looks like something out of the 80's. Quarter of a million, very hefty to be shackling yourself to that for the rest of your life. If you're not going to sell it on, and it'll be your home for over a decade then yea go for it.

Mr. Loverman

It will sell for 160 tops in a few years.

If you plan to live there forever and you are financially secure then you have nothing to worry about.

mathie

Mr. Loverman wrote: »

It will sell for 160 tops in a few years.

Marty McFly is that you?

Mr. Loverman

mathie wrote: »

Marty McFly is that you?

It doesn't take a DeLorean to know the Irish economy is ****ed and will be for a long time.

House prices are only going in one direction. No point deluding yourself otherwise.

Mr. Loverman

Let's pretend this house in Tara Grove will get the rent they want, EUR 850.

Let's pretend they can rent it out for 12 months of the year = 850 x 12 = 10200

Let's pretend they are on an interest free mortgage.

Let's pretend they will have their tenant forever.

Let's pretend they will never have any extra costs such as tax, repairs, insurance, etc.

Let's pretend rents will stay the same.

At 160,000 that is a yield of 6.375% per year.

If you then go back to reality and include things like tax, repairs, insurance, lack of tenants, falling rents, hassle, etc. you are talking about a lot lower than 6.375%.

Your money would probably be better off in a deposit account.

So when you take all of this into account 160k is probably a little bit on the high side.

Of course, I understand it is hard to accurately value a property, but with growing emigration, growing unemployment, growing taxes, etc. and no end in sight, I think it's fair to say no matter how you look at it, house prices are bolloxed for years to come.

robd

johnjohn3423 wrote: »

I viewed a house in Galway that was priced at €265,000.
The EA says there is an offer of 220 on it, but sure could you believe that.
It’s a 4 bed semi close to town that was built before the boom by a reputable builder.
http://www.myhome.ie/residential/brochure/21-tara-grove-wellpark-galway-wellpark-galway-city/1257720
With the way the market is today what is the max that anybody should be prepared to buy this for?


Is it the case that anybody that can hold off buying for 2/3 years should do so, no matter what?

There's always an offer at about 15% under asking. EA's use it as a tactic to set a floor on offers.

Another trick is to be really candid and tell you that they know it's a bit over priced but the vendor will accept an offer of X (X being approx 85% of asking).

EA's don't understand macro economics and where the market is going so they'll point blankly refuse any low ball offers.

So, to be honest I wouldn't bother making an offer at the moment. You're just not going to get any value whatsoever this year. In 2/3 years, we'll hopefully have the banks sorted one way or another by the EU/ECB, interest rates will be a few percent higher, and property taxes will have kicked in.

So yes hold off for those 2/3 years.

mathie

Mr. Loverman wrote: »

It doesn't take a DeLorean to know the Irish economy is ****ed and will be for a long time.

It actually does.
Define "a long time".
Do you think we're going to be in recession/depression for 2/5/10/20/50 years?

Mr. Loverman wrote: »

House prices are only going in one direction. No point deluding yourself otherwise.

Yeah I'd agree they're only going one direction.
They question is when will that direction change?

nxbyveromdwjpg

Mr. Loverman wrote: »

Let's pretend this house in Tara Grove will get the rent they want, EUR 850.

Let's pretend they can rent it out for 12 months of the year = 850 x 12 = 10200

Let's pretend they are on an interest free mortgage.

Let's pretend they will have their tenant forever.

Let's pretend they will never have any extra costs such as tax, repairs, insurance, etc.

Let's pretend rents will stay the same.

At 160,000 that is a yield of 6.375% per year.

If you then go back to reality and include things like tax, repairs, insurance, lack of tenants, falling rents, hassle, etc. you are talking about a lot lower than 6.375%.

Your money would probably be better off in a deposit account.

So when you take all of this into account 160k is probably a little bit on the high side.

Of course, I understand it is hard to accurately value a property, but with growing emigration, growing unemployment, growing taxes, etc. and no end in sight, I think it's fair to say no matter how you look at it, house prices are bolloxed for years to come.

This post confuses me, he's not looking for an investment return he's looking for a home. You can't live in a deposit account.

The price will be what someone is willing to pay today, what's in the posts above wont be far off.

Theboinkmaster

mathie wrote: »

It actually does.
Define "a long time".
Do you think we're going to be in recession/depression for 2/5/10/20/50 years?



Yeah I'd agree they're only going one direction.
They question is when will that direction change?

Won't change for quite a long time mathie - once prices bottom out in 3 to 5 years we could have another 10 years of stagnation before prices finally move in line with inflation.


Mr Loverman is spot on with his valuation - that house's final value will be €100-150k tops.

Theboinkmaster

nm wrote: »

This post confuses me, he's not looking for an investment return he's looking for a home. You can't live in a deposit account.

The price will be what someone is willing to pay today, what's in the posts above wont be far off.

His post demonstrates what the price is likely to bottom out at, at the end of the crash.

Therefore paying €220k for an asset that will most likely be bought in 3 years time for €150k would be lunacy.

mathie

Theboinkmaster wrote: »

Won't change for quite a long time mathie - once prices bottom out in 3 to 5 years we could have another 10 years of stagnation before prices finally move in line with inflation.

I'd be thinking fairly similar myself.

Theboinkmaster wrote: »

Mr Loverman is spot on with his valuation - that house's final value will be €100-150k tops.

Theboinkmaster wrote: »

His post demonstrates what the price is likely to bottom out at, at the end of the crash.

Therefore paying €220k for an asset that will most likely be bought in 3 years time for €150k would be lunacy.

Just because the rental yield dictates that this house should be 100-150K tops doesn't mean it will be.
Would a vendor who has a higher than 150K mortgage on the place be prepared or even able to take a bid less than that?

Unfortunately we're seeing a lot of sellers sticking to their guns to get what they're 'worth'.
It'll take the the 'D's (Debt, Death, Divorce) to get a property to actually sell.

johnjohn3423

Thanks for all the responses. Seen as I have no pressing need to buy except to stop renting I guess it’s a waiting game so.

mathie

johnjohn3423 wrote: »

Thanks for all the responses. Seen as I have no pressing need to buy except to stop renting I guess it’s a waiting game so.

I can't see any upside to buying now save for it's a unique property that rarely comes to market.

When we bottom out prices won't shoot up.

We've ECB rate rises to come to so that'll put more pressure on peoples ability to hold onto a mortgage or to get a new one.

johnjohn3423

Do ye think that people who are saving up will buy when they can afford and so keep the market from going down too far or are these people few and far between today with the way the economy is?

magneticimpulse

Hi Johnjohn
Yes you are mad to think about buying it.

I would advise you to listen to the news. And come back to 2011 with us lad. We are not in 2007!!! This house realistic should be no more then 90,000euro!!!

Someone mentioned 160K, it should be on daft.ie for that price.

265k is a major major dream estimate. Sorry to burst your bubble, but your not the only one to still think buying a house now is good. Just dont follow the footsteps of other people.

I dont blame the banks or government for Ireland's crisis. I think its people who make complete misjudgements themselves. This would be a huge mistake. Can you not see that?

Interest rates in Europe WILL increase. Ireland is kidding itself by thinking it can "default" the loan. When will the country wake up and be an adult. Ireland's puperty teen years are certainly over...its time to live in the real world, with REAL MONEY!!

I.S.T.

johnjohn3423 wrote: »

Thanks for all the responses. Seen as I have no pressing need to buy except to stop renting I guess it’s a waiting game so.

How much rent are you paying per year? You need to take that into account when estimating how much you will save by waiting for prices to drop. I'd say that house is worth €120K.

Mr. Loverman

johnjohn3423 wrote: »

Do ye think that people who are saving up will buy when they can afford and so keep the market from going down too far or are these people few and far between today with the way the economy is?

It's hard to say.

Myself and the girlfriend, we are saving like crazy, and the plan is to buy for cash in a few years.

It is hard to predict just how low prices will go, but in my opinion houses are still seriously overpriced.

Treehouse72

nm wrote: »

This post confuses me, he's not looking for an investment return he's looking for a home. You can't live in a deposit account.

The price will be what someone is willing to pay today, what's in the posts above wont be far off.

You are thinking about it all wrong.

If the sums show that the house is worth €160,000 and you pay €250,000, that is €90,000 that you are not spening on your kids' education, on nice holidays that gve you relief from the stress of life, meals out with your spouse, a new second hand car every 5 years rather than every 10 years, a new redecoration of the house from time to time....

Loverman's excellent post has ABSOLUTELY NOTHING WHATSOEVER to do with property investment (except in the narrow sense that that's where his calculation comes from). Discussing prices and true "value" in this way is simply a proxy for the money you are wasting by overpaying that could otherwise be spent improving quality of life.

I.S.T.

magneticimpulse wrote: »

with REAL MONEY!!

Real money??? Are you referring to the kind they print out of thin area?! What's real about that!

Dymo

Can someone explain how there so many experts of the Galway housing market here. I don't know the Galway market so I couldn't tell whether its good value or not. But some houses are selling in the country so some people have money to buy.

Getting a 4% return was about normal before the property boom and people left inflation to increase the capital on the property but I can't see any capital increasing for a long time 4-5 years maybe more.

alb

Treehouse72 wrote: »

You are thinking about it all wrong.

If the sums show that the house is worth €160,000 and you pay €250,000, that is €90,000 that you are not spening on your kids' education, on nice holidays that gve you relief from the stress of life, meals out with your spouse, a new second hand car every 5 years rather than every 10 years, a new redecoration of the house from time to time....

Loverman's excellent post has ABSOLUTELY NOTHING WHATSOEVER to do with property investment (except in the narrow sense that that's where his calculation comes from). Discussing prices and true "value" in this way is simply a proxy for the money you are wasting by overpaying that could otherwise be spent improving quality of life.

Exactly, this is called Oppurtunity Cost. It scares me how many people on boards discussing property don't seem to understand it, or are ignoring it.

Buying something for a higher price than you could have payed, is a cost, even if you can afford it at the higher price.

Mr. Loverman

Dymo wrote: »

Can someone explain how there so many experts of the Galway housing market here. I don't know the Galway market so I couldn't tell whether its good value or not. But some houses are selling in the country so some people have money to buy.

Getting a 4% return was about normal before the property boom and people left inflation to increase the capital on the property but I can't see any capital increasing for a long time 4-5 years maybe more.

I am not an expert on the Galway property market, but I have a strong interest in economics and was warning people about the bubble a few years before it popped.

To me, it's common sense: if a couple on the average wage are struggling to afford an average home (e.g. a semi-d) there is something wrong. They should comfortably be able to afford the average home, and should not need to panic if one of them is temporarily out of work.

In my mind this means the average home should cost about 120k.

The crazy thing is if every seller agreed with this, it would only be a matter of time before it became reality.

jmayo

Treehouse72 wrote: »

You are thinking about it all wrong.

If the sums show that the house is worth €160,000 and you pay €250,000, that is €90,000 that you are not spening on your kids' education, on nice holidays that gve you relief from the stress of life, meals out with your spouse, a new second hand car every 5 years rather than every 10 years, a new redecoration of the house from time to time....
...

Actually it is not just the upfront €90,000 difference, you need to factor in how much that would be over the lifetime of the mortgage, assuming of course one is getting a mortgage.
Thus the €90,000 difference over a few years could end up being €130,000 over many years.

As regards people asking whether the house is value for money.
Well maybe it is priced competitively relative to other similar houses in the area at this exact time, and so "at this exact time" it is value for money in the current market.
It appears even rosier if we compare it to what it was valued 5 years ago.
It would in fact appear a steal.

But the question one must ask and the one that whoever buys it will have to live with it, is whether it will keep it's current value over the next few years ?

And I think most people would reckon the answer to the last question is it will definetly drop in price.

My opinion is that one should look at house prices circa mid 90s as idea what prices should be at.
At the moment I reckon prices are circa 2001/2002.
And that was when the real bubble took off, but prices had been increasing throughout the 90s in particular the latter years of the dotcom bubble.

Now whenever a bubble bursts the prices drop back to a point lower than what they were at the start of the bubble.
I am sure someone can bring up the bell curve for irish construction bubble to highlight this.
Something along the lines of this from Japan and US.

Idbatterim

Op, I still think thats mad money for what your getting. The post above this hits the nail on the head. Borrowing it is one thing, paying back is another. I think buying at the moment given the state of the economy, and imminent interest rate rises, global crisis, that its more reckless now than buying in 07! Who cares what a "fair" valuation is, as a buyer you want prices to undershoot and hopefully for alot of us they will! Id continue to save, put money into decent interest earning account. While I agree with prudence and planning, you are living now, I wouldnt be watching every cent now and depriving myself so I could tie myself into a ton of debt for decades, put it that way. The fall in house prices is probably way more than your saving and it doesnt involve you lifting a finger!

blacktalons

8, WELLPARK GROVE, WELLPARK, GALWAY., Wellpark, Galway City. this house is bigger,FULLY detached,NO management fees,and is in the estate beside tara grove,also about 60 meters from the bus stop, might be worth a look.

magneticimpulse

IrishSpeedTraps wrote: »

Real money??? Are you referring to the kind they print out of thin area?! What's real about that!

Real Money...CASH!! If you dont have it in your pocket dont buy it!!

magneticimpulse

Mr. Loverman wrote: »

I am not an expert on the Galway property market, but I have a strong interest in economics and was warning people about the bubble a few years before it popped.

To me, it's common sense: if a couple on the average wage are struggling to afford an average home (e.g. a semi-d) there is something wrong. They should comfortably be able to afford the average home, and should not need to panic if one of them is temporarily out of work.

In my mind this means the average home should cost about 120k.

The crazy thing is if every seller agreed with this, it would only be a matter of time before it became reality.

Not even 120k...im the above average educated person with a PhD in Chemistry. I cant find a job in the masses of pharmaceutical companies which litter Ireland. If im struggling after 8 years University and 4 years industrial experience under my belt...and still unemployed. I dont know how the average Leaving Cert, young person is going to cope!!!

I aint no expert. But if its difficult for me...what about the people who have less education, less experience or less job prospects? At the end of the day, doesnt matter what your trained in, everyone can be subjected to unemployment and in the Irish Economy there are is nothing certain right now.

Zamboni

blacktalons wrote: »

8, WELLPARK GROVE, WELLPARK, GALWAY., Wellpark, Galway City. this house is bigger,FULLY detached,NO management fees,and is in the estate beside tara grove,also about 60 meters from the bus stop, might be worth a look.

Is that house in Wellpark?

antiskeptic

johnjohn3423 wrote: »

I viewed a house in Galway that was priced at €265,000.
The EA says there is an offer of 220 on it, but sure could you believe that.
It’s a 4 bed semi close to town that was built before the boom by a reputable builder.
http://www.myhome.ie/residential/brochure/21-tara-grove-wellpark-galway-wellpark-galway-city/1257720
With the way the market is today what is the max that anybody should be prepared to buy this for?


Is it the case that anybody that can hold off buying for 2/3 years should do so, no matter what?

That much reported auction (with 85 properties countrywide and low maximum reserves) lists a modern 4 bed in Lucan with a max reserve of 130k. It might get snapped up at the reserve. It might sell way beyond the reserve. It might not sell at all (though I'd be hard pushed to bet on that).

I'd wait and see what happens before I'd consider shelling out your kind of money in Galway. Auctions in mid-april so you won't have to wait long to see/


http://www.daft.ie/allsopspace/

Slydice

it's a 4 bed semi-detached asking 265

there's a 5 bed detached asking 250 near it on the google map

I'm not familiar with the area but if the areas aren't too different then the 4bed semi-d sellers don't look to be grounded in reality (but only from my first impression)

The_Conductor

I'll just add to this-

The Economist had a comprehensive global house price survey 2 weeks ago.
They looked at the Irish market and decided on a scientific basis, that prices in Dublin are currently ~15% above where fundamentals might suggest they should be- and outside Dublin- ~25% above fundamentals.

Certain property types obviously are a deadweight- notably apartments/townhouses/duplexes and in estates out of Dublin (other than the previous property types)- semi-detached properties.

There are 3 separate issues at the moment.

1. Sellers are by and large being totally unrealistic with their pricing.
2. Buyers are similarly being unrealistic- but in the opposite direction.
3. Liquidity is pretty much non-existant- there are very few mortgages being offered and drawn down out there.

Add into this mix- market fundamentals- and we're in for one hell of a bumpy ride........

johnjohn3423

I know the area fairly well. The other estate next to it is larger and not of the same quality. It possibly has more students in it as well.
As in the original post the builder of the house in question has a good reputation. So taking all things into consideration it would worth more than in the next estate over.

But not going to do anything now for a few years, just sit it out.

Treehouse72

smccarrick wrote: »

1. Sellers are by and large being totally unrealistic with their pricing.
2. Buyers are similarly being unrealistic- but in the opposite direction.
3. Liquidity is pretty much non-existant- there are very few mortgages being offered and drawn down out there.

But doesn't No. 3 negate No. 2 to a large degree?

To take that to an extreme by way of illustration, if there were literally no credit for mortgages then the floor on house prices would be people's deposits. A few tens of thousands for a house.

So the question becomes, how much credit is there to top-up those deposits? NAMAwinelake says - using Irish Banking Federation stats - that the fall in the number of mortgages given out is - gulp - down 87% from peak by Q4 '10 (30,000>4,000), while the drop in Euro terms is - double gulp - 94%!!:

http://namawinelake.wordpress.com/2011/02/28/mortgage-market-freezes-up-in-q4-2010/

I am not enough of an economist* to properly analyse this, but I do ask myself if the credit pool available is down 90%, why shouldn't prices reflect a not dissimilar fall? After all, THAT was the money being used to set the prices, so....?

The final question then being, is there a reason to believe this credit stream will start flowing again? Me no think so.



* Ed: Actually, I'm not an economist at all!

ei.sdraob

@OP

for 260K you can build one kick arse house about 3x the size and fit it out to latest regulations and own taste about 10 mins drive from city

a house like the one you pointed out would cost about 120K to build
so you are paying 140K for the "site" and have the privilige of being attached to another home and small garden

the groutch

nice house, but needs a bit of modernisation and doesnt exact stand out front the crowd, you should be able to still get a similar place for less next year

coup1917

Am keeping a close eye on things as well myself at the moment..

I sold towards the end of last year...Got the full asking price as luckily there were 2 bidders, one fell away but had received the full offer from the remaining bidder..

I like the look of Oranmore, its close to Galway city, but it is seriously over priced - there are crazy prices on some places. 300k - 500k on some detached houses...

I'm not sure anyone could get a mortgage much more than 250K at the moment, and most people interested in buying would not want that sort of debt either.

We are still in no mans land currently as regards a property crash. I think that will change very soon as reality sets in; & interest only payments or moratoriums expire..

Then the fire-selling will really begin.. Its nearly time for people to get off the 'soft landing' & wake up to the crash we are looking at...