Irish Property Market chat II - read mod note post #1 before posting

ticktickboom · 08-09-2022 07:33PM

https://www.boards.ie/discussion/comment/119591445#Comment_119591445

I'm one of those renting in my late thirties. I'm approved for a certain amount, if interest rate rises continue it will effect my repayment amount. I will then need to look at cheaper houses or have a lower cut off point when bidding. There's thousands of me, so if everyone needs to adjust based on repayment capacity and interest rates, prices will drop.

Interest rates are guaranteed to go up at least another 1% this year so it doesn't take a rocket scientist to work out what'll happen if wages don't rise accordingly.

Separately, the energy crisis we're facing is likely going to cause a deep recession. A lot of manufacturing will be affected, SMEs and small businesses won't survive 4X bill hikes. Those whose job is unaffected will have way less cash in their pockets and won't be as confident about getting that big mortgage.This will take huge amounts of demand away.

IMO, The only way is down for prices or stagnation at best.

awec · 08-09-2022 07:41PM

https://www.boards.ie/discussion/comment/119591812#Comment_119591812

I get what you're saying, but here's an example:

Totally made up numbers, but imagine you're approved for 300k, but with the rate hikes you're now only approved for 250k. People who were approved for 350k are now only approved for 300k and so on.

There are 500 buyers for 300 houses. The rate increases trickle down, and a bunch of people drop out at the bottom. Now there are only 400 buyers for 300 houses.

What ends up happening is that houses at the very top of the market start losing value first. And it takes a long time to work it's way down to the houses you were originally looking at, because people keep dropping down the rungs but ultimately demand still more than meets supply as demand is reducing very slowly.

You could decide to wait until the houses you were originally looking at drop into your new price bracket, but this could take a couple of years or more, and you have no idea if it'll ever actually happen. In all of that time, you are paying rent. High rent. Hopefully you maintain an income to pay rent to avoid homelessness in this time.

On the other hand, let's imagine there are widespread job losses or income cuts. Suddenly, there's a huge drop in demand and 300 of those 500 buyers are suddenly removed from the market because they can no longer get a mortgage. Now you have 200 buyers for 500 houses, prices will drop much faster, and waiting here might make sense, but only if you are not one of the 300 who just got removed from the market.

I don't envy anyone who is currently in the market right now, it must be super stressful.

TLDR: if you want drops in price, realistically you need a ton of buyers removed from the market. And you need to hope you won't be one of them.

awec · 08-09-2022 07:53PM

Of course I could also be totally wrong, we’ll find out eventually! 😁

No certainties in this game as we’ve found out the past 5 or 6 years!

IWW2900 · 08-09-2022 09:03PM

https://www.boards.ie/discussion/comment/119591726#Comment_119591726

It is as straight forward as that. Of course there will be people who will buy now regardless due to life circumstances.

But there will also be many who will decide to opt out for a while. I know several people in their 20s who bought recently. Their decision was largely dictated by fear that they would never be able to buy. This will shift.

Investors will be flushed from the market. You dont understand what rising rates, cheap money and market sentiment does to markets.

awec · 08-09-2022 09:06PM

https://www.boards.ie/discussion/comment/119592321#Comment_119592321

Investors being flushed from the market is terrible news for renters and will only push rents even higher.

Is it your opinion that this will have no impact on people's ability to wait it out?

IWW2900 · 08-09-2022 09:16PM

https://www.boards.ie/discussion/comment/119592341#Comment_119592341

Thats if said investor was actually renting the property. There are owners out there who just sit on property while watching price rise. As soon as sentiment changes there are more sellers. I know this first hand.

Government "taxes" wont bring empty house back on the market as quick as falling prices can.

Then there are those small time flippers who buy a property, do a little work and sell for 20 percent more. This demand is all going to be wiped out once sentiment changes.

combat14 · 08-09-2022 09:18PM

https://www.boards.ie/discussion/comment/119591879#Comment_119591879

we dont necessarily need buyers removed from the market .. just as the previous poster stated .. interest rate rises will eventually affect repayment amounts and thus affect amounts to be borrowed .. thus having a serious affect on demand and downward pressure on house prices ... all without removing buyers from market ..

mcsean2163 · 08-09-2022 09:28PM

What ends up happening is that houses at the very top of the market start losing value first. And

...the buyer who was going to pay 800 pays 750 and so on down the line as the price of houses drop, IMHO.

Villa05 · 08-09-2022 09:49PM

There is an obvious flaw in @awec theory or am i missing something

Renters enter the market at the bottom rungs except for a crash similar to 08. Buyers at the middle/upper rungs don't fall down a rung, they stay in the house there in

Drog79 · 08-09-2022 09:51PM

I meant to quote the poster saying a mortgage with normal repayments from 2008 would likely be gone.

Nope, we've thrown everything we had at payments, in other word much more than the payments..... And still have a chunk to go. It's 14 years, most mortgages are 25-30 years.

awec · 08-09-2022 09:58PM

https://www.boards.ie/discussion/comment/119592655#Comment_119592655

I didn't mean ladder in that context.

I meant price buckets.

08-09-2022 10:22PM

The number of price drops on myhome.ie is risung by the hour, house prices are already on a downward spiril.

dontmindme · 08-09-2022 10:44PM

https://www.boards.ie/discussion/comment/119592885#Comment_119592885

Think that largely depends on what price bracket you're looking at.

Timing belt · 08-09-2022 10:45PM

https://www.boards.ie/discussion/comment/119592419#Comment_119592419

ability to repay is not what is restricting peoples ability to borrow it’s the LTI limit in a lot of cases. Maybe it will change in time if rates keep rising but as noted in the ECB speech today there are signs of a wage/inflation spiral and that will mean that the nominal price of housing will more than likely rise.

e.g.

if inflation is running at 10% and you have wage growth to try keep up with it then even if the house stays at the same price the property has dropped 10% in real terms. There is a reason why investors are attracted to property during an inflationary period because property tends to hold its value better than cash/bonds etc. It might be a mistake to assume than investors will exit.

There will be downward pressure on house prices but there is plenty of upward pressure out there also due to lack of supply and increasing costs to build.

combat14 · 09-09-2022 08:18AM

https://www.boards.ie/discussion/comment/119593025#Comment_119593025

appreciate LTI nominal house price increase concept assuming actual pay rises are provided by heavily struggling businesses...

the reality is that between interest rate and enormous cost of living increases (let alone job losses if businesses close due to energy cost spiral) repayment capacity is being massively affected whether we like to admit it or not - today's indo indicate an extra €3,000 (before income taxes are factored in) hit with more uncertainty on the way this winter.. this is a massive drag on would be FTB's potential purchasing pockets ...

Double whammy of mortgage and energy bill hikes to cost households extra €3,000

Costs for families to jump by up to €3,000

https://m.independent.ie/business/personal-finance/double-whammy-of-mortgage-and-energy-bill-hikes-to-cost-households-extra-3000-41974475.html

Bass Reeves · 09-09-2022 09:33AM

https://www.boards.ie/discussion/comment/119590454#Comment_119590454

The last of the trackers were given out in 2007/8. That is 15years ago. The last of them had trackers of 0.75%, the earlier ones are below1.5% with either the ECB rate or cost of funds.

These loans even if 30yl year loans are not at 1.5-2.25%. that is still exceptionally cheap money. However most are 2025 year morgages. I have a commercial loan at 1.5% over ECB rate. It's there since 2005 and the final payment is May 2025.

I could have paid it off 3-5 years ago but why would I . 100k was costing a thousand euro. Now 50k with present rises is costing a bit with 1k.

AySeeDoubleYeh · 09-09-2022 09:38AM

https://www.boards.ie/discussion/comment/119591726#Comment_119591726

You keep saying renting an apartment is more expensive than mortgage repayments but this is not true in many cases - and that's before the increase in mortgage repayment cost.

Another factor missed is that a couple with a child, for example, will likely be looking for a house that, at a minimum, provides them with 2 dedicated bedrooms plus 2 additional dedicated office spaces - or, at the very least, the potential for a seomra/attic conversion down the line to provide that additional space. They're not going to pay over the odds (in their mind) for a small 3-bed which leaves them working/living in a similarly cramped home environment. These people will 100% be discerning if they think things are falling. And, as all in the thread have acknowledged, this is not a small percentage of buyers.

It's clear you're speaking hypothetically rather than as someone who is actually in this situation.

awec · 09-09-2022 09:52AM

https://www.boards.ie/discussion/comment/119594127#Comment_119594127

It is true in most cases. Unless you are one of the lucky few paying well below the market rate in rent, you are almost certainly paying more every month than someone paying a mortgage on an equivalent property.

Renting is more expensive than paying a mortgage. Renting with kids is almost certainly more expensive than paying a mortgage, as in this situation there is usually no possibility of house sharing to reduce outgoings. Renting anything of reasonable size, suitable for family living, is incredibly expensive.

The couple in your example, who are shopping for either a 4 bed or a 3 bed with convertible attic, hypothetically living in a 2 bed apartment, are very likely to reduce their monthly outgoings by buying rather than renting.

Rents are almost certainly going to go up more. This waiting game is not as straightforward as people like to make out, rental outgoings can very easily eat up any potential gains you see from waiting, and if prices don't fall by as much as you think they will, or fall slower than you thought, it will be an expensive mistake.

Bass Reeves · 09-09-2022 09:58AM

https://www.boards.ie/discussion/comment/119594127#Comment_119594127

A couple renting a 2 bed apartment with 1-2 children are usually looking for a three bed Semi D or townhouse. It's unlikely that they will have savings to buy a 4 bed. If the have WFH in a two bed apartment they will WFH In a three bed semi

AySeeDoubleYeh · 09-09-2022 10:06AM

I mean... I am one of several dozen people I know who are ACTUALLY in the situation I described. 3-bed home with some room in the back garden to add in the seomra for 10-15k or whatever. Attic a secondary and obv more expensive option. that's what this cohort want. Need, even, as working from home is not going away. Don't tell me what people in this situation are doing because, as i said, you don't have a clue.

My rent is less than my mortgage repayments will likely be. Again, i know plenty of people in this situation.

None of this is to say myself or my peer group have the right of it, but for the love of jaysus stop speaking for other people when it's clear you don't understand them.

I could buy a house today (and i know that makes me lucky) - I choose not to. If prices rise and rise and rise then so be it, but for now i am prepared to wait.

Bass Reeves · 09-09-2022 10:17AM

https://www.boards.ie/discussion/comment/119594247#Comment_119594247

Could you have bought 2-4 years ago

AySeeDoubleYeh · 09-09-2022 10:41AM

No - got married, had a baby. Then Covid happened and the WFH requirement shifted our needs somewhat.

But even for people who could've bought 2018-2020 and chose not to, so what? You win your internet points, but the sentiment of this group in 2022 still exists.

JohnnyChimpo · 09-09-2022 10:42AM

https://www.boards.ie/discussion/comment/119594247#Comment_119594247

besides the point, but you'd get some tiny seomra for 15k these days, unfortunately

AySeeDoubleYeh · 09-09-2022 10:52AM

Ha, not surprising!

09-09-2022 11:52AM

https://www.boards.ie/discussion/comment/119594127#Comment_119594127

Rent is actually double the mortgage repayments in the case of many apartments, I'd love to see an example of one where the rent is below mortgage as I simply don't believe they exist in Ireland right now.

AySeeDoubleYeh · 09-09-2022 12:02PM

what reason on earth do i have to lie?

awec · 09-09-2022 12:04PM

https://www.boards.ie/discussion/comment/119594764#Comment_119594764

If their rent is way below market rate and capped by the RPZ.

It is possible, but they are the exception, not the norm.

AySeeDoubleYeh · 09-09-2022 12:22PM

https://www.boards.ie/discussion/comment/119594821#Comment_119594821

And there are a lot of properties that are rented by word of mouth rather than through daft etc. It way well be the minority, but it is not a small number of people.

Cyrus · 09-09-2022 12:24PM

https://www.boards.ie/discussion/comment/119594247#Comment_119594247

be interesting to see the numbers on this, its not very common.

drogon. · 09-09-2022 01:04PM

https://www.boards.ie/discussion/comment/119594764#Comment_119594764

Let’s not forget that over 54% of renters are getting support from the local council or government. That is huge as rents are being subsidies by the public coffers and renters aren’t paying the full rents. For a lot of these people, yes renting is still cheaper than a mortgage.

Irish Property Market chat II - *read mod note post #1 before posting*

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Irish Property Market chat II - read mod note post #1 before posting