Depressing Dublin House prices

spockety

MCD. wrote: »

So... I just bought a house in South Dublin for 385,000 with an 88% mortgage.

Two incomes (approaching 80k a year total).

The house is a 3 bed semi.

Purchased as a first family home. If we need to sell it in 10 years wed like to get more for it but its not bought as an investment as such.

At this stage if it went arse over tits the most we would lose on it would be 10% which is our deposit.

Did I do a good thing or not?

If your lifestyle can afford the repayments, and you have factored in some lifestyle shocks (e.g. the arrival of kids, loss of one of your jobs), and you love the house and love the area, then congratulations on your new home.

Can I ask what bank gave you that loan? At the repayments you mention, I reckon someone has given you a 35 year mortgage of €338K on a variable rate of 4.5%, would that be right? If interest rates hit 6.5% (not beyond the realms of possibility), the repayments go up to over €2K a month.

I think that's quite a lot for your income. I probably wouldn't have borrowed more than about €240K on that income to be straight, so hopefully your income goes up as expected in the future.

gaius c

I wish you the best of luck with it MCD but I am a little flabbergasted that a bank is giving you such a large mortgage relative to your income. Could be the age profile as most buyers on that kind of money would be in their thirties. Or the jobs. Safe public sector jobs get major kudos from the banks.

Oral Surgeon

MCD. wrote: »

So... I just bought a house in South Dublin for 385,000 with an 88% mortgage.

Two incomes (approaching 80k a year total).

The house is a 3 bed semi.

Purchased as a first family home. If we need to sell it in 10 years wed like to get more for it but its not bought as an investment as such.

At this stage if it went arse over tits the most we would lose on it would be 10% which is our deposit.

Did I do a good thing or not?

Good luck with it, I'd keep monthly savings going to help cover any rises in the future.

OS

air

There is a lot of talk about how the banks have tightened up on lending. While gross salary multiples may have reduced, net incomes have reduced significantly due to tax increases. Furthermore effective interest rates have increased greatly (trackers no longer available, variable rates increased) so net multiples are relatively unchanged from the boom.
The only real change seems to be that lenders are now carrying out some due diligence in order to verify the salaries & job security of borrowers.

If MCM repays the 338k over 20 years this means repayments of 516k approx + deposit of 45k = 561k
Net income is approx 60k so this means they need to work approx 10 full years to pay for the house at current income levels.
Repaying it over 20 is thus probably realistic enough, this gives them another 15-20 or so years to save towards retirement etc.

The downside of us paying so much for our houses is that it swallows up a huge portion of our lifetime earnings meaning that our standard of living is far less than it could be with our income levels.

If banks were restricted to lending over 20 years or less we would all spend less of our lives working hard to compete with one another for mediocre housing.

GreeBo

air wrote: »

If banks were restricted to lending over 20 years or less we would all spend less of our lives working hard to compete with one another for mediocre housing.

Most of the housing we have is mediocre housing though.

I really can't see how this can ever change, 90% of houses available have crappy BER ratings.

gaius c

GreeBo wrote: »

Most of the housing we have is mediocre housing though.

I really can't see how this can ever change, 90% of houses available have crappy BER ratings.

But weren't we told that our houses were so expensive because they are built to exacting standards that make them so much more expensive than houses in other countries?

air

GreeBo wrote: »

Most of the housing we have is mediocre housing though.

I really can't see how this can ever change, 90% of houses available have crappy BER ratings.

I agree completely obviously, I don't even mind the idea of paying half a million for a house if someone can afford it, the standard of house it buys you in Dublin is a major let down though.

Piriz

the possibility/probability of increases to interest rates will have a major impact on mortgage loans and affordability etc., and property values..

does anyone have any informed predictions on interest rate increases?

spockety

air wrote: »

There is a lot of talk about how the banks have tightened up on lending. While gross salary multiples may have reduced, net incomes have reduced significantly due to tax increases. Furthermore effective interest rates have increased greatly (trackers no longer available, variable rates increased) so net multiples are relatively unchanged from the boom.
The only real change seems to be that lenders are now carrying out some due diligence in order to verify the salaries & job security of borrowers.

If MCM repays the 338k over 20 years this means repayments of 516k approx + deposit of 45k = 561k
Net income is approx 60k so this means they need to work approx 10 full years to pay for the house at current income levels.
Repaying it over 20 is thus probably realistic enough, this gives them another 15-20 or so years to save towards retirement etc.

The downside of us paying so much for our houses is that it swallows up a huge portion of our lifetime earnings meaning that our standard of living is far less than it could be with our income levels.

If banks were restricted to lending over 20 years or less we would all spend less of our lives working hard to compete with one another for mediocre housing.

Problem is is that 338K over 20 years at 6.5% results in monthly repayments of €2.5K, which would be crippling on his income.

I think long mortgage terms are here to stay

air

spockety wrote: »

Problem is is that 338K over 20 years at 6.5% results in monthly repayments of €2.5K, which would be crippling on his income.

I think long mortgage terms are here to stay

I think you missed my point completely.
Historically most house purchases are funded via mortgages.

In the example you give if the lenders restricted the term to 20 years for all borrowers the house would simply sell for a lower price.

The eventual purchaser would then end up spending less of his or her life paying for it.

spockety

air wrote: »

I think you missed my point completely.
Historically most house purchases are funded via mortgages.

In the example you give if the lenders restricted the term to 20 years for all borrowers the house would simply sell for a lower price.

The eventual purchaser would then end up spending less of his or her life paying for it.

No I totally understand what you're saying, unfortunately I don't think we will be going back to 20 year terms.

35 year terms are advantageous for the banks, they make more money in interest over the term.

It's an amazing drain on the economy though, I'm amazed there isn't more debate about it.

In Ireland expensive housing = a good thing.

At the same time you have people in the media going on about the need for people to spend money in the "real economy" etc.

It is head banging stuff.

air

That's about the size of it all right.
Mortgages are a necessary instrument to allow people spread the significant cost of building a home over an affordable period.

Long mortgage terms however only serve to make money for bankers and land owners once house values rise much above build costs + reasonable site cost.

House prices far above build costs only serve to make the region uncompetitive in the long term.

For example a multinational might decide to locate in a different country where the staff can be paid far less and still enjoy an equivalent or better standard of living than they would here.

spockety

air wrote: »

That's about the size of it all right.
Mortgages are a necessary instrument to allow people spread the significant cost of building a home over an affordable period.

Long mortgage terms however only serve to make money for bankers and land owners once house values rise much above build costs + reasonable site cost.

House prices far above build costs only serve to make the region uncompetitive in the long term.

For example a multinational might decide to locate in a different country where the staff can be paid far less and still enjoy an equivalent or better standard of living than they would here.

Problem is, in Ireland "house prices going up means we are all getting rich". It's like a big cultish ponzi scheme. Nobody seems to realise where the money is coming from..