Market price plus €20K

suave.4u · 28-07-2014 10:24am #1

Hi,

Looking for an apartment for sometime. Finally I found one in a location that suits us, but the price is 20-30K K more than the average cost.

The plan: We just married now and wish to live in this place for 7-10 years and then give it for rent and buy a bigger property. Unfortunately with the current means, we cannot afford a bigger house.

Question: The place will be then given for rent. So, is paying 20-30K more than the market rate now, a good proposition? is this s positive investment?

Regards,
Suave

Eldarion · 28-07-2014 10:49am

It's getting harder and harder to not think there's another bubble being inflated when I keep seeing/hearing things like this.

Mrs OBumble · 28-07-2014 11:46am

suave.4u wrote: »

Hi,

Looking for an apartment for sometime. Finally I found one in a location that suits us, but the price is 20-30K K more than the average cost.

The plan: We just married now and wish to live in this place for 7-10 years and then give it for rent and buy a bigger property. Unfortunately with the current means, we cannot afford a bigger house.

Question: The place will be then given for rent. So, is paying 20-30K more than the market rate now, a good proposition? is this s positive investment?

Regards,
Suave

Is the value of this particular apartment better than the average one? Eg better fittings, better amenities, better sunlight, privacy, insulation, etc?

It also depends on what proportion of the overall price 20k is: if the value is only 60k, then it's a lot more of an issue than if they value is 250k.

On a more practical note, what will happen if you pop out a couple of kids in the intervening years - is there space for them? Personally I'd find it very hard to predict what I will be doing in 7 years time.

suave.4u · 28-07-2014 4:17pm

Eldarion wrote: »

It's getting harder and harder to not think there's another bubble being inflated when I keep seeing/hearing things like this.

I know, but what to do. The rent has been increased and I need to buy something. With what the bank can give me, i cannot afford a bigger place now. What to do.

suave.4u · 28-07-2014 4:19pm

Mrs OBumble wrote: »

Is the value of this particular apartment better than the average one? Eg better fittings, better amenities, better sunlight, privacy, insulation, etc?

It also depends on what proportion of the overall price 20k is: if the value is only 60k, then it's a lot more of an issue than if they value is 250k.

On a more practical note, what will happen if you pop out a couple of kids in the intervening years - is there space for them? Personally I'd find it very hard to predict what I will be doing in 7 years time.

No, it is not better than the average apartment. In a nutshell, the prices have just increased.
I can only afford this place at this time and can put it 20 K more after some lending from my folks.
The place is sufficient for now, but hopefully I can save a bit more going forward and buy a bigger place.

bidiots · 28-07-2014 5:22pm

suave.4u wrote: »

I know, but what to do. The rent has been increased and I need to buy something

Here we go again people, buckle up.

suave.4u · 28-07-2014 10:30pm

bidiots wrote: »

Here we go again people, buckle up.

thanks for the wise crack.
No contribution, just some wit.

TheDriver · 28-07-2014 10:33pm

I concur, the pressure on "having" to buy was the issue last time and is ramping up again in parts of Dublin

Frank Lee Midere · 28-07-2014 10:35pm

suave.4u wrote: »

Hi,

Looking for an apartment for sometime. Finally I found one in a location that suits us, but the price is 20-30K K more than the average cost.

The plan: We just married now and wish to live in this place for 7-10 years and then give it for rent and buy a bigger property. Unfortunately with the current means, we cannot afford a bigger house.

Question: The place will be then given for rent. So, is paying 20-30K more than the market rate now, a good proposition? is this s positive investment?

Regards,
Suave

That all worked out well a few years ago. Get on the ladder as soon as possible.

Frank Lee Midere · 28-07-2014 10:37pm

suave.4u wrote: »

thanks for the wise crack.
No contribution, just some wit.

The contribution is.

1) don't panic.
2) don't assume that you will be able to afford a bigger house in a few years. You may be in negative equity.
3) save. Then buy a bigger house when this bubble collapses.

by the seaside · 29-07-2014 7:48am

I sympathise with your situation as it's very tough, but it doesn't sound as if you're paying 20k over market value but rather that the market value has increased.

Here are some questions I would ask myself are:

Am I OK if interest rates go up by 2 to 3% over 3 years?
Am I OK if interest rates go up by 5% over 3 years?
Can I afford the mortgage on a 5 year fixed rate (this doesn't mean you should necessarily get a 5 year fix, but it gives an indication of what the money markets think interest rates may average out at over 5 years - a simplification perhaps)?
How will it affect me, my potential family (if that's on the cards) if I am in negative equity and can't move?

Then balance that against the question:

What will happen if I don't buy now and prices continue going up?

These I think are the balance of your fears...

Then I would decide what is the most likely outcome, and I can't see how Dublin is anything other than a bubble, but I may be wrong and it may have further to inflate. Who knows for sure? But here is one reason why I think it's broken:

If I go onto www.myhome.ie (and I an assuming it has near 100% of the Co. Dublin market) there are 3,733 properties for sale in Co. Dublin which according to wiki has a population of 1,270,603. Picking a smaller English city with a thriving IT economy, I can see on www.rightmove.co.uk that Bristol has 2,711 properties for sale with a population of 432,500. This looks like an indicator that the market in Dublin is broken and that somewhere there is pent up supply that will hit the market eventually along with investment properties that are currently being held for capital gain, and this will see prices decrease significantly. But, make your own mind up - it's easier for me to say. I'm living in England - my missus is Irish and we would like to move over, but we will wait things out until the house price vs salary ratio makes it sensible for us to move over, and maybe we'll never go back and be left over here for good.

The last question I would ask myself in your situation is:

What are my alternatives to buying (I guess they are: Move to a smaller flat; move to a cheaper less nice are; move to a cheaper more distant area and commute. I would think carefully about these options before committing to buy)?
How much could I save per month alongside these options?

Best of luck.

by the seaside · 29-07-2014 7:48am

I sympathise with your situation as it's very tough, but it doesn't sound as if you're paying 20k over market value but rather that the market value has increased.

Here are some questions I would ask myself are:

Am I OK if interest rates go up by 2 to 3% over 3 years?
Am I OK if interest rates go up by 5% over 3 years?
Can I afford the mortgage on a 5 year fixed rate (this doesn't mean you should necessarily get a 5 year fix, but it gives an indication of what the money markets think interest rates may average out at over 5 years - a simplification perhaps)?
How will it affect me, my potential family (if that's on the cards) if I am in negative equity and can't move?

Then balance that against the question:

What will happen if I don't buy now and prices continue going up?

These I think are the balance of your fears...

Then I would decide what is the most likely outcome, and I can't see how Dublin is anything other than a bubble, but I may be wrong and it may have further to inflate. Who knows for sure? But here is one reason why I think it's broken:

If I go onto www.myhome.ie (and I an assuming it has near 100% of the Co. Dublin market) there are 3,733 properties for sale in Co. Dublin which according to wiki has a population of 1,270,603. Picking a smaller English city with a thriving IT economy, I can see on www.rightmove.co.uk that Bristol has 2,711 properties for sale with a population of 432,500. This looks like an indicator that the market in Dublin is broken and that somewhere there is pent up supply that will hit the market eventually along with investment properties that are currently being held for capital gain, and this will see prices decrease significantly. But, make your own mind up - it's easier for me to say. I'm living in England - my missus is Irish and we would like to move over, but we will wait things out until the house price vs salary ratio makes it sensible for us to move over, and maybe we'll never go back and be left over here for good.

The last question I would ask myself in your situation is:

What are my alternatives to buying (I guess they are: Move to a smaller flat; move to a cheaper less nice are; move to a cheaper more distant area and commute. I would think carefully about these options before committing to buy)?
How much could I save per month alongside these options?

Best of luck.

Eldarion · 29-07-2014 8:11am

Apologies OP, I didn't mean to hijack your thread a little.

By the seaside has it right. You're approaching this with the 2006 mentality. If you can take future speculation out of this entirely and just look at the purchase as it is right now. Are you happy with the location? Is it future proof if you find yourself with 2 kids over the next 10 years? Are you happy to spend 10+ years in the area? Are you completely comfortable with the mortgage repayments and are they ideally <33%, if not <25% of your monthly net income? Your house is not your pension, do not treat it as such.

I know it's a scary situation for you but it's exactly that fear mentality that got us into one of the biggest crashes we've ever seen.

draiochtanois · 29-07-2014 8:30am

This post has been deleted.

MouseTail · 29-07-2014 9:12am

by the seaside wrote: »

If I go onto www.myhome.ie (and I an assuming it has near 100% of the Co. Dublin market) there are 3,733 properties for sale in Co. Dublin which according to wiki has a population of 1,270,603. Picking a smaller English city with a thriving IT economy, I can see on www.rightmove.co.uk that Bristol has 2,711 properties for sale with a population of 432,500. This looks like an indicator that the market in Dublin is broken and that somewhere there is pent up supply that will hit the market eventually along with investment properties that are currently being held for capital gain, and this will see prices decrease significantly.

That's the core of the problem, there is no pent up supply. Certainly not nearly enough to satisfy demand. We haven't been building sufficient units for our demographics for years.

suave.4u · 29-07-2014 1:30pm

My scenario is a bit different. The apartment average price is 230 K, but to get one now I will have to shell out 260K.
However, the area is good and even if sell it after 5-7 years, I should be able to sell it at minimum 230K (we are certain of this).
Rent also is in the range 1100-1250 so, even if we don't sell this, it should go for rent.

So I was thinking, paying 30 K more now is equivalent of me gic=ving teh property for rent 3 years more (to balance out things).

29-07-2014 1:33pm

What will you do if its half its current value in 7-10 years OP?

Don't presume prices will keep going up. That's what happened too many people during the boom/bubble

TheDriver · 29-07-2014 1:50pm

There are no guarantees OP. Markets can fall as well as rise as we have all seen

draiochtanois · 29-07-2014 1:51pm

This post has been deleted.

Mrs OBumble · 29-07-2014 4:56pm

draiochtanois wrote: »

This post has been deleted.

Add in the life insurance that the OP will not need unless s/he gets a mortgage.

Eldarion · 29-07-2014 5:33pm

Mrs OBumble wrote: »

Add in the life insurance that the OP will not need unless s/he gets a mortgage.

And home insurance that the bank will insist on.

draiochtanois · 30-07-2014 9:00am

This post has been deleted.

Market price plus €20K

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