First time buyer- Buy or wait?

jinish

Looking for any financial expert’s advice.

Background

We are first time buyers. Literally put a deposit for a new house, only few weeks to sign the contracts. Currently renting, approximately 1200/- month and being increased 4% every year. New house price 400k in North Co Dublin, mortgage repayment around 1450/-.

We were cognisant about the uncertainty around Brexit, its impact and the trade wars. We knew that house price is over inflated. However we sat down and decided to buy now before the help to buy expires.

Last few days more and more news coming out about a fall in house prices and my wife is more worried about these developments. Our options are

1. Go ahead and buy using help to buy scheme and start paying mortgage rather than rent

2. Wait for a clearer picture (we don’t know how long it will take)

Does anybody think that there would be a crash to leave us on negative equity? Any opinions welcome.

C3PO

Maybe I’m wrong but I don’t believe that there has been a fall in house prices - just a slow down in the rate of price increase?

jinish

C3PO wrote: »

Maybe I’m wrong but I don’t believe that there has been a fall in house prices - just a slow down in the rate of price increase?

Second hand homes prices started falling. Evident from property price register.
However new build is still going up.

TheShow

I don't there there is a clear answer to this.

Brexit will happen, and prices have softened a little, but the huge demand and housing supply shortage is still there which, in theory should keep house prices up.

The Central Bank rules are probably more responsible for the softening in house prices, in essence, the measures they put in place to stop the market overheating are working.

I can't honestly see a sharp decline in house values until we reach a point where the production has got to a point where demand has drastically reduced.

Also, if you are buying a house "for life" as it were, negative equity not really relevant as values will fluctuate over time. If its a steppingtone property then negative equity is probably more relevant for you.

In essence, if you're happy to pay the price for the house now, then do so. If you think its overvalued significantly, then maybe hold off but for how long?? who knows?

pjdarcy

Are you buying this house thinking that it will be your home for the rest of your lives or are you buying it as a stepping stone to something bigger in a few years?

ec18

negative equity will only affect you if,

1) circumstances change and you end up in arrears with the house seized and the bank can't recoup the outstanding mortgage balance
2) you intend selling it at a profit to move on elsewhere

if you are using help to buy to purchase then one of the conditions is that you must live in the home for 5 years, so negative equity could be less of an issue if you are looking at option 2?

The main consideration though is that does this house suit your current and future needs or are you just buying it because you don't want to be renting anymore?

jinish

TheShow wrote: »

I don't there there is a clear answer to this.

Brexit will happen, and prices have softened a little, but the huge demand and housing supply shortage is still there which, in theory should keep house prices up.

The Central Bank rules are probably more responsible for the softening in house prices, in essence, the measures they put in place to stop the market overheating are working.

I can't honestly see a sharp decline in house values until we reach a point where the production has got to a point where demand has drastically reduced.

Also, if you are buying a house "for life" as it were, negative equity not really relevant as values will fluctuate over time. If its a steppingtone property then negative equity is probably more relevant for you.

In essence, if you're happy to pay the price for the house now, then do so. If you think its overvalued significantly, then maybe hold off but for how long?? who knows?

Thanks. That was the reason we decided to buy anyway. Each year we spend around 14500 for rent alone helping the landlord to pay his mortgage. can not do it anymore.

jinish

pjdarcy wrote: »

Are you buying this house thinking that it will be your home for the rest of your lives or are you buying it as a stepping stone to something bigger in a few years?

We will be living there for at least 5 years. If my circumstances change drastically (hope it will) I might move. But it will take a minimum 5 years.

Bowlardo

recessions is coming within the year. Wait it out

jinish

ec18 wrote: »

negative equity will only affect you if,

1) circumstances change and you end up in arrears with the house seized and the bank can't recoup the outstanding mortgage balance
2) you intend selling it at a profit to move on elsewhere

if you are using help to buy to purchase then one of the conditions is that you must live in the home for 5 years, so negative equity could be less of an issue if you are looking at option 2?

The main consideration though is that does this house suit your current and future needs or are you just buying it because you don't want to be renting anymore?

It will suite our needs for next 5-10 years. The reason I rushed is because I can not rent anymore. Its a small house, very old, getting sick all the time and not good..

s7ryf3925pivug

Not a financial expert, but fixed rate mortgages are probably going to increase, so that's a factor in the costs if you choose to wait.

pjdarcy

jinish wrote: »

We will be living there for at least 5 years. If my circumstances change drastically (hope it will) I might move. But it will take a minimum 5 years.

Hmmm, that does add some complexity given the state of Brexit etc so it's a tough one. Personally I would bite the bullet and buy the house. Even if there's a recession it won't last forever and house prices will always rebound.

I suppose you have to ask yourself the question about how you would feel if a recession happens and you got stuck living in the house for more than 5 years.

TheShow

Bowlardo wrote: »

recessions is coming within the year. Wait it out

you should change your user name to Nostradamus with insight like that.

JustMe,K

I'd buy, fix the mortgage and then you know where you are and as you say you are paying your own mortgage not your landlords. Just be aware that there are always extra costs with a property you own as opposed to rent, repairs and furnishings etc are your own responsibility. If you are both in a good financial position, and you can easily afford your repayments and rebuild a financial cushion then even if your property is only worth what you pay for it now in 5 years, you should still be better off than spending the next 5 years renting. Just don't make the mistake people did a few years back by buying properties that they saw as stepping stones to something better, this needs to (imo) suit your perceived medium term needs.

TheShow

jinish wrote: »

Thanks. That was the reason we decided to buy anyway. Each year we spend around 14500 for rent alone helping the landlord to pay his mortgage. can not do it anymore.

Thats a good a reason as any to make a decision to buy a house. At least you will have an asset to show for what you're paying out at the end of the day.
If you're happy living there for the forseeable and it suits your medium to long terms needs, then whether it is in negative equity or not is largely irrelevant.

Get Real

If you're buying a house to live in for the long term, house price fluctuations -either up or down- shouldn't affect you.

What you need to ask is can you afford the mortgage payment. If you can, (and generally it's lower than rent) buy.

I would definitely buy. Get yourselves out if the uncertain rental market. The worry isn't worth it. "Will rent go up again? How permanent is the lease?" Etc etc.

As long as you're buying a house for a home, and not as a speculative investment, buy. The repayments will largely be the same in 5 years as they are now. You have no idea what rent will be or where you'll be living in 5 years in the current rental market.

jinish

Get Real wrote: »

If you're buying a house to live in for the long term, house price fluctuations -either up or down- shouldn't affect you.

What you need to ask is can you afford the mortgage payment. If you can, (and generally it's lower than rent) buy.

I would definitely buy. Get yourselves out if the uncertain rental market. The worry isn't worth it. "Will rent go up again? How permanent is the lease?" Etc etc.

As long as you're buying a house for a home, and not as a speculative investment, buy. The repayments will largely be the same in 5 years as they are now. You have no idea what rent will be or where you'll be living in 5 years in the current rental market.

Thank you!

jinish

Thanks for all the quick responses. Great prespective from differnet angles.
I was 95% inclined to buy, but my miss was bit worreid.
We can certaily afford mortgage even if one looses the job (extreme scenario)
The house is big enough to accomodate us for medium term and will defo suit our needs. We don't neccessarily need to upgrade the house if it not for luxury.
Finally decided to go ahead and sign the contracts next week.
Thank once again for all your input.

Wait it out. Back in bubble territory at the moment. It'll change.

Lumen

You will almost always suffer a paper loss with a new build because the tax incentives and CBI rules have made them cheaper than the same house bought second hand.

A bit like buying a new car. But people still do it for various reasons.

Point: the market value of the asset only really matters when you sell.

antiskeptic

jinish wrote: »

Looking for any financial expert’s advice.

Background

We are first time buyers. Literally put a deposit for a new house, only few weeks to sign the contracts. Currently renting, approximately 1200/- month and being increased 4% every year. New house price 400k in North Co Dublin, mortgage repayment around 1450/-.

We were cognisant about the uncertainty around Brexit, its impact and the trade wars. We knew that house price is over inflated. However we sat down and decided to buy now before the help to buy expires.

Last few days more and more news coming out about a fall in house prices and my wife is more worried about these developments. Our options are

1. Go ahead and buy using help to buy scheme and start paying mortgage rather than rent

2. Wait for a clearer picture (we don’t know how long it will take)

Does anybody think that there would be a crash to leave us on negative equity? Any opinions welcome.

Why would house prices drop due to a hard Brexit? Massive job losses on this side of the Irish sea would be one reason. As would the associated recession.
Which means the banks are going to pucker up tight when it comes to mortgage loans in that event. Lend on a falling knife?

It would be precisely like it was just after the last financial crash. Couple I know stepped away from a 2007 buy when advised by someone in the know that now wasn't the time to buy a house. Prices crashed but there was no way get a loan. 2015 and they were still renting - prices risen and banks lending but their ability to finance couldn't keep up. Think they bought this year. A lost decade.

BryanF

antiskeptic wrote: »

A lost decade.

amen

briaineo

Bowlardo wrote: »

recessions is coming within the year. Wait it out

Probably right about recession(s)

Possibly looking at a double whammy brexit and the incoming global slowdown.

If I had the cash in my back pocket to buy a house I certainly would not buy at the moment.

Interest rates will rise and if your not fixed for the entire mortgage it could spell serious trouble down the line

Graham

Alternatively, interests rates don't rise, the OP spends an additional €70k in rent for the next 5 years in the hope that property prices drop and mortgages are readily available whenever they're convinced the prophesied slowdown has bottomed out.