Sell up FTB house now, rent for 1 year, then buy?

sapper

-Living in 3 bed semi in West Dublin with wife and 3 small kids. We love the house and our neighbours now but know long term that will change – our house will be too small once kids get into their teens, and our neighbours mostly all want to move up too.

-Our house is perfect for a first time buyer/young family starting off.

-We want to move to a bigger house in the same area (close to school, friends etc), but none for are available for sale now. There is a new development of larger houses being built nearby which we think we will like, and was originally going to be put up for sale in the spring

-An opportunity came up to rent a house nearby, so we signed a lease and put our house up for sale on the market. The thinking being that now is a good time to sell to FTB’s before the new CBOI guidelines are announced and kick in. We will be able to sell our house without a chain and move into a rental which is close to kids friends, schools.

In general we have figured out that selling up completely, renting while the sale goes through and then being a cash buyer is much cleaner for everyone. Nobody will sell to you if you have a house to sell and a mortgage to close first....

However just talked to the builder of the new development and it looks like he wont be ready to sell until late this year, early next year.

Worried that “cashing in my chips” selling up and renting now is a risky move – what if house prices go up and the proceeds we get for our house now are insufficient to buy the new development next year? Or (and Im hoping people will agree) is now the best time to sell a first time buyer house, given that there will be less first time buyers around once the CBOI guidelines kick in?

And yes we've paid a deposit etc but losing that would not be a factor if we decided to hold on to next year. Our house is still on the market no sales agreed yet (just been up a short while).

MayBea

sapper wrote: »

-Living in 3 bed semi in West Dublin with wife and 3 small kids. We love the house and our neighbours now but know long term that will change – our house will be too small once kids get into their teens, and our neighbours mostly all want to move up too.

-Our house is perfect for a first time buyer/young family starting off.

-We want to move to a bigger house in the same area (close to school, friends etc), but none for are available for sale now. There is a new development of larger houses being built nearby which we think we will like, and was originally going to be put up for sale in the spring

-An opportunity came up to rent a house nearby, so we signed a lease and put our house up for sale on the market. The thinking being that now is a good time to sell to FTB’s before the new CBOI guidelines are announced and kick in. We will be able to sell our house without a chain and move into a rental which is close to kids friends, schools.

In general we have figured out that selling up completely, renting while the sale goes through and then being a cash buyer is much cleaner for everyone. Nobody will sell to you if you have a house to sell and a mortgage to close first....

However just talked to the builder of the new development and it looks like he wont be ready to sell until late this year, early next year.

Worried that “cashing in my chips” selling up and renting now is a risky move – what if house prices go up and the proceeds we get for our house now are insufficient to buy the new development next year? Or (and Im hoping people will agree) is now the best time to sell a first time buyer house, given that there will be less first time buyers around once the CBOI guidelines kick in?

And yes we've paid a deposit etc but losing that would not be a factor if we decided to hold on to next year. Our house is still on the market no sales agreed yet (just been up a short while).

Hi, as a FTB and a potential purchaser of your house I would say to try selling it now, as the prices might stagnate in the second half of the year ...for some time. I would not expect a sharp rise from July/August onwards anyway.
Did you ask the builder when will the houses are going to be build?If you are hoping to buy from plans early next year you can only expect to move in 6-12 months later..

Mr.McLovin

Big gamble if you ask me, too big imo.

What is the post code, D15 D22?

sapper

MayBea wrote: »

Did you ask the builder when will the houses are going to be build?If you are hoping to buy from plans early next year you can only expect to move in 6-12 months later..

Yes - to be honest I was thinking I would sell now and sign the contract in the spring, so as the selling price and buying price would be broadly in line in relative terms and house prices wouldnt move too much either way between the sell and signing a contract with the builder. By having a year plus in between selling and buying prices could drop a lot (in my favour) or go up by 15-20% (which is what the real estate industry seems to be saying)

Not so bothered about waiting 6 months for them to be built and the keys delivered, at this stage just worried about the price agreed in the contracts.....

Piriz

i think you are making the right move(s)...although if you acted 5months ago it probably would have been better. i expect price drops to accelerate as the CB rules effect the market (might take six months) with most impact by end of this year notwithstanding further drops in 2016... just my prediction but i think you are right to get out of a chain, sell before price drops and ultimately get into a house that suits you needs... good luck..
any opportunity to invest your capital in the mean time?

spaceHopper

You are gambling that you can sell your house that house prices will go down and that the builder will sign a contract and finish the house in a year. At a time when the ecb is printing money. If that works there could be a rush of credit so the builder will not want to be locked into a contract. If it doesn't and prices fall then banks might no lend.

MouseTail

Its too big a gamble for me, Id stay put til something concrete came along.

ElizKenny

I know of several people who have been told by builders lately that they after "first on the list".
Only for the houses to be completed and the builders to say. "you are next on the list now"
Big risk for you OP.

The_Conductor

I'd echo many other people here.
There are two conflicting macroeconomic being applied- one is the vast increase in liquidity via Quantitative Easing. In an Irish context- this is an increase of 12 billion (20 billion - 7.8 billion for the Irish bonds currently held by the Irish central bank), in the Irish cash flow. The flipside of the coin- is the 20% deposit requirement- which is a prudent manner of offering loans- but vastly unpopular with the electorate. On the bright side- Patrick Holohan is not a directly appointed official- so he should be able to get it over the line without too much meddling.

We also have the new rules for investors (they are allowed a maximum 60% LTV ratio for any new loans).

So- lots of extra cash sloshing around- hopefully some of it will be earmarked for developers who are whinging about lack of access to funds.

Developers will have to accept that 250k for a 3 bed in the midlands- is not normal- nor 400k for a similar property in Dublin west........ Several Developers are on the record as saying they will not recommence building until such time as they can sell apartments in Portloaise for 200k (etc etc)

Developers have expectations of vast increases in prices. Dublin- and its immediate surrounds are suffering a drought- but not sufficient to drive prices into the realms where developers will actually build.

Are you being prudent selling now- with an expectation of price falls later on? There are too many factors to give a definitive yes or no- but if it is an area of high demand- what you're proposing is incredibly high risk..........

It would be interesting to come back in a year's time and to look at what you've done- and how it worked out.

As it stands- there are too many unknowns to suggest any particular course of action is better than another.........

ezra_pound

MouseTail wrote: »

Its too big a gamble for me, Id stay put til something concrete came along.

Yes. "Concrete built is better built. "

sapper

Thanks all, to be honest we are selling up and renting to get into a position to buy a house rather than as a gamble on the macroeconomy.

From the Irish Times last week:

But Keith Lowe, chief executive of DNG, warns that sellers are encountering problems of their own: “As there is no bridging finance in the market, some sellers are nervous to take the plunge, as they essentially have to sell first before they can buy and that uncertainty can be off-putting.”

After bidding on a few properties (and losing out) in the last few months, I'm pretty sure that even if I was top bidder, the vendor would have sold to the underbidder if they were cash buyers. My solicitor also tells me basically you would be mad to sign a contract to buy a house until you know for sure that your vendor (and more importantly their bank) is going to stump up the cash you need to buy - and you only know that for sure when you see the money in your account.

The deciding factor for us is the fact that we can rent a house that is actually quite nice and of a similar standard and location to the one we are in. The worry is that what I thought would be a wait of a few months to find a nice house to buy could turn into a year or more, and that prices could swing wildly against us.

Going back to the macroeconomy though ,I think the general assumption in Ireland over the last 10-20 years (shown here on boards too!) is that house prices do swing wildly up and down, so that people make mad profits or are shut out of the property market forever... but if prices were actually quite steady raising 2 or 3% a year, jumping off the property ladder and renting for a year or two wouldn't be a mad gamble...

I'm hoping Honohan goes the whole way on Friday as what he is doing should bring in stability in house prices, and stability will take the panic and the risk out of the decision to buy or rent. Yes first time buyers will have to save for a few more years, but they shouldnt have seen prices going up 50% in the meantime, and trader uppers like me wont have to worry about a ticking clock in between buying and selling...

The_Conductor

Sapper- we have the inverse of this being reported- even in this forum- where some sellers are writing an indefinite stay in the contracts of sale, pending their purchasing elsewhere. Aka- they sell the property- for a contractually agreed amount- and then continue to live there, indefinitely- pending the purchase of a new property.

The complete lack of bridging finance- is forcing some people to do weird and wonderful things.........