Housing Bubble Bursting

beeno67

gurramok wrote: »

Good grief, thats twisting statistics with words.

That may be true of everyone that bought in the last 80 years, we're talking can anyone afford to buy now!!

But Gurramok, you are the one saying prices are plummeting. Dropping 20% or so. Surely houses are now easier to afford even if banks want a larger deposit. Houses are now more affordable than they have been for a while.

Gegerty

Calina wrote: »

Actually, you need to be very careful with that figure. Does it make allowances for pension contributions? Because I strongly doubt that it does. If it doesn't, I would suggest that it is highly imprudent to get to the age of 30 or 35 and not have started to make provision for your retirement.

OK fair point, lets put in a healthy pension contribution of €400. That gives you a take home pay of €2942. My point still stands.

Gegerty

Calina wrote: »

Also, a lot depends on what you consider a home. That figure might buy you a decent house in parts of Limerick and Roscommon, but it buys you - at best - a one bedroomed apartment in Dublin. Most of the jobs pushing 50K I suspect are in Dublin and not in Limerick and Roscommon. Most people would not necessarily consider said apartment as a "home" but a stepping stone to something more suitable like a two bedroomed apartment.

Oh ok its not just a home for everyone in the country, but its a nice and big home for everyone in the country.

Take a look at myhome.ie. It gives live quotes of mortgage repayments. You can get a 3 bedroom semi-d house in Dublin on that salary.

Firetrap

So if these houses are so affordable and clearly great value, why are house prices falling?

Calina

Current affordability rules recommend that you do not spend more than one third of your net disposable income on accommodation.

Being generous, that gives you, out of the 3000 per month you're flinging out there, 1000E to play with.

The current cost per 100,000 borrowed is approximately 485E depending on your mortgage agreement. So, 1000E or so will enable you to borrow approximately 210,000E, or a little over. There'll be some TRS of course but the last time the government ran into financial difficulties, mortgage interest relief was a number one victim. I wouldn't be depending on it.

In Dublin, this completely limits your options as there are comparatively few properties available for under 250K and most of those are going to be of the one bedroomed non-home variety forcing a trade up requirement if you want to settle in any way. Most apartment sales now require a deposit of between 10 and 20% of the property value which implies the need to save roughly a half to one year's net income at least first up.

beeno67 - your point doesn't actually dilute my argument too much. 34.5K still isn't enough anyway.

beeno67

Firetrap wrote: »

So if these houses are so affordable and clearly great value, why are house prices falling?

People are expecting prices to drop further.

beeno67

Calina wrote: »

need to save roughly a half to one year's net income at least first up.

beeno67 - your point doesn't actually dilute my argument too much. 34.5K still isn't enough anyway.

My point was that this is not the true figure anyway. It was selective use of figures.

Calina

Gegerty wrote: »

Take a look at myhome.ie. It gives live quotes of mortgage repayments. You can get a 3 bedroom semi-d house in Dublin on that salary.

Really? All I am finding is cost per 100000 borrowed which is currently quoting 491E.

SO what three bedroomed semi d is available on that salary?

Calina

Gegerty wrote: »

Oh ok its not just a home for everyone in the country, but its a nice and big home for everyone in the country.

and while we're at it, it's not and again you're back into emotional over sensationalisation.

I pointed out that what was accessible were, for the most part one bedroomed apartments, which, in this country are extremely poorly designed. I don't know too many people who would actually want to live in them long term. Hence, not a home. We had a building boom where we built a load of investment property but not property designed for living in. Believe me, I've looked at more than a few of them.

Firetrap

beeno67 wrote: »

People are expecting prices to drop further.

This of course wouldn't have anything to do with them being overpriced in the first place.

beeno67

Calina wrote: »

Really? All I am finding is cost per 100000 borrowed which is currently quoting 491E.

SO what three bedroomed semi d is available on that salary?

Calina, why should someone on modest salary, with no real savings be able to afford a 3 bedroomed house? ie a house for 3 people

bangersandmash

Gegerty wrote: »

OK fair point, lets put in a healthy pension contribution of €400. That gives you a take home pay of €2942. My point still stands.

Are you honestly suggesting that the individual in question will then have €2942 to spend on a mortgage? You must be assuming he/she does not have (a) children, (b) a car, (c) health insurance, (d) a social life, (e) the need to maintain the property and/or pay management fees, (f) other existing debts, (g) the requirement to eat/drink.

In most countries it is generally considered unwise for a household to spend more than ~30% of its gross income on housing (whether that be rent or mortgage). For a single individual on 50k, that gives a maximum of €1250 to play with. Assuming this individual is a FTB with a deposit of 20k, BOI will give him/her a 35 year mortgage for €210k.

So for 230k in total, Daft indicates that this individual earning well over the average national income can just about manage to buy a small apartment in Balbriggan or Ongar. Is it even remotely reasonably to say that this is the best a well-paid professional in his/her 30s can aspire to?

Edit: Calina got there way ahead of me

Firetrap

Erm...they used to. Granted, they had to have a deposit saved up but a lot of people grew up in 3 bedroomed houses in cities and towns in Ireland. What's more, there was only one income coming into the house because mum generally stayed at home. And dad wasn't necessarily in a high-earning job either.

bangersandmash

beeno67 wrote: »

Calina, why should someone on modest salary, with no real savings be able to afford a 3 bedroomed house? ie a house for 3 people

Translates as: why should someone on modest salary, with no real savings be able to have a family.

beeno67

bangersandmash wrote: »

Translates as: why should someone on modest salary, with no real savings be able to have a family.

No it doesn't. That is just daft. So unless you own your own 3 bed semi detached house you cannot have a family?

bangersandmash

beeno67 wrote: »

No it doesn't. That is just daft. So unless you own your own 3 bed semi detached house you cannot have a family?

So let us hear your alternatives then. Do you propose that a family is raised in a 600sqft apartment indefinitely, or that the children grow up at the mercy of Ireland's flimsy rights for security of tenure?

Suggesting that a household with a modest income should be able to afford a 1000sqft house in a less desirable part of Dublin does not sound unreasonable. I have seen this argument made elsewhere, but to paraphrase:

In the bad old days in Dublin, a low-income family could afford a house in Coolock, a middle-income family could afford a house in Rathfarnham, and high-earners could buy in Rathgar. Now that we are a wealthy nation, based on currently lending criteria, a mid-to-high earning FTB will be able to afford an apartment in Tallaght, or possibly Sandyford if they're really on a good wage. There is something amiss here.

A Dub in Glasgo

The amount of elitist stuff from some here is quite astonishing :eek:

gurramok

beeno67 wrote:

According to the government, 67% of people earn 34.5KE per year or less. quote]
This is not true. According to Gurramok 67% of people earn this. Not quite the same thing

Nope, i didnt provide made up stats unlike some.

Its the govts stats after tax credits are applied. (see for yourself YET AGAIN http://www.budget.gov.ie/2008/AnnexA.html )

beeno67 wrote:

But Gurramok, you are the one saying prices are plummeting. Dropping 20% or so. Surely houses are now easier to afford even if banks want a larger deposit. Houses are now more affordable than they have been for a while.

They are slightly easier to afford for a tiny number now. As they go down in price, they will come to a level for the masses to afford.
Houses have been more affordable for a tiny number since 2005.

Gegerty

Calina wrote: »

Current affordability rules recommend that you do not spend more than one third of your net disposable income on accommodation.

Being generous, that gives you, out of the 3000 per month you're flinging out there, 1000E to play with.

The current cost per 100,000 borrowed is approximately 485E depending on your mortgage agreement. So, 1000E or so will enable you to borrow approximately 210,000E, or a little over. There'll be some TRS of course but the last time the government ran into financial difficulties, mortgage interest relief was a number one victim. I wouldn't be depending on it.

In Dublin, this completely limits your options as there are comparatively few properties available for under 250K and most of those are going to be of the one bedroomed non-home variety forcing a trade up requirement if you want to settle in any way. Most apartment sales now require a deposit of between 10 and 20% of the property value which implies the need to save roughly a half to one year's net income at least first up.

beeno67 - your point doesn't actually dilute my argument too much. 34.5K still isn't enough anyway.

When I bought my house I was left with very little after the mortgage. You make sacrifices and you get by and more importantly you work hard at earning more. It's tought to start with. It always has been. We have it so easy these days compared to FTBs of the 70's and 80's.

Listen your argument does not hold and now you're changing it. The fact is "people" can afford homes. Nice homes too. Apartments are a fact of life in the 21st century and should not be considered bad investments or unsuitable for living.

I agree we have some awful properties out there with no prospects whatsoever. I'm not for a second suggesting people now should be stupid with their money. I'm saying they don't need to be. There are quality homes out there for bargain prices. The notion that prices need to drop so that someone on €35K can afford a 3 bed or even a 2 bed is ridiculous.

gurramok

Gegerty wrote: »

The notion that prices need to drop so that someone on €35K can afford a 3 bed or even a 2 bed is ridiculous.

So, lemme see. If they cannot afford a 2bed+, they should be able to afford a 1bed then?
35x5times income = 175k.

Good luck at providing a 1bed apt at that price as of today.

So there we have it, of the the majority of the workforce who earn 35k who wish to buy in Dublin have nowhere to buy.

bangersandmash

Gegerty wrote: »

The fact is "people" can afford homes. Nice homes too. Apartments are a fact of life in the 21st century and should not be considered bad investments or unsuitable for living.

They're bad investments if their value keeps falling while being stuck with increasing management charges. Most Dublin apartments are unsuitable for living for families. Hence the demand for 3+ beds terraced/semi-Ds.

Calina

Gegerty wrote: »

Listen your argument does not hold and now you're changing it. The fact is "people" can afford homes. Nice homes too. Apartments are a fact of life in the 21st century and should not be considered bad investments or unsuitable for living.

1) Link to some of those nice homes that someone can afford with a mortgage repayment of 1000E per month. If it's my money, then the decision was to what constitutes "nice" is mine...so let's see some of them.

2) I have lived in apartments in a lot of places - other countries with lots of money sloshing around them too. A lot of apartments in Dublin are appallingly badly designed and do not constitute as "nice" in my book.

beeno67

bangersandmash wrote: »

So let us hear your alternatives then. Do you propose that a family is raised in a 600sqft apartment indefinitely, or that the children grow up at the mercy of Ireland's flimsy rights for security of tenure?

Suggesting that a household with a modest income should be able to afford a 1000sqft house in a less desirable part of Dublin does not sound unreasonable. I have seen this argument made elsewhere, but to paraphrase:

In the bad old days in Dublin, a low-income family could afford a house in Coolock, a middle-income family could afford a house in Rathfarnham, and high-earners could buy in Rathgar. Now that we are a wealthy nation, based on currently lending criteria, a mid-to-high earning FTB will be able to afford an apartment in Tallaght, or possibly Sandyford if they're really on a good wage. There is something amiss here.

For God's sake RENT. RENT. RENT. 25% of people rent. I am not saying people must buy. Quite the opposite. Buy if you can. Rent if you cannot.

Gegerty

Calina wrote: »

1) Link to some of those nice homes that someone can afford with a mortgage repayment of 1000E per month. If it's my money, then the decision was to what constitutes "nice" is mine...so let's see some of them.

2) I have lived in apartments in a lot of places - other countries with lots of money sloshing around them too. A lot of apartments in Dublin are appallingly badly designed and do not constitute as "nice" in my book.

No I'm not linking to other peoples houses. Use the search facility. As I've said, you've changed your argument from people cannot afford a home to people cannot afford a nice home and now to people cannot afford what you constitute as a nice home, which quite frankly is above standard. And fair play to you for setting high standards for yourself, I wish you every success. But for those who do not set high standards and who do not work towards high standards, I wouldn't wait around for a 3 bed house to be handed to you on a plate.

Calina

Gegerty wrote: »

No I'm not linking to other peoples houses. Use the search facility. As I've said, you've changed your argument from people cannot afford a home to people cannot afford a nice home and now to people cannot afford what you constitute as a nice home, which quite frankly is above standard. And fair play to you for setting high standards for yourself, I wish you every success. But for those who do not set high standards and who do not work towards high standards, I wouldn't wait around for a 3 bed house to be handed to you on a plate.

Look, I didn't do anything other that point out that for some people, a one bedroomed apartment is not a home, it's a stepping stone to something else. For most people, actually it isn't a home. People want homes, not overpriced investoboxes that they have to pay through the nose for because people before them did.

You have said there are nice three bedroomed houses out there that someone on 50K a year can afford. You are not providing them. From that I can only assume that you can't. End of.

Calina

beeno67 wrote: »

For God's sake RENT. RENT. RENT. 25% of people rent. I am not saying people must buy. Quite the opposite. Buy if you can. Rent if you cannot.

Tenancy legislation in Ireland doesn't provide anywhere near enough security of tenure for a lot of people particularly when it comes to schools, children and getting the latter into the former.

latenia

Gegerty wrote: »

Listen your argument does not hold and now you're changing it. The fact is "people" can afford homes. Nice homes too. Apartments are a fact of life in the 21st century and should not be considered bad investments or unsuitable for living.

I agree we have some awful properties out there with no prospects whatsoever. I'm not for a second suggesting people now should be stupid with their money. I'm saying they don't need to be. There are quality homes out there for bargain prices. The notion that prices need to drop so that someone on €35K can afford a 3 bed or even a 2 bed is ridiculous.

The reason his argument doesn't hold with you is that you really don't seem to have any grasp of basic economics combined with a head full of half-baked ideas plucked from the hype surrounding the bubble.

Apartments should be considered extremely bad investments and have been proved so. Why? Because they are unsuitable for living. They're fine for singles or young couples in their 20's for a few years, after that forget it.
IMO the average 1-bed in Dublin city centre is worth 120-150k and will be available for that price in 3 years time.
Have a look at the apartment market in Manchester or Leeds (funnily enough these both had large numbers of Irish investors) to see what the future might hold for Dublin.
Intrinsically, a house is worth about 40-50k; anything after that is dictated by the market. The market is the person buying the house. At some point the financial needs and expectations of the buyer and seller meet and you arrive at the price.
You call the notion that the average person on the average wage should be able to afford the average house 'ridiculous'. Think again about what you just said. Is it ridiculous that these people should be able to drive a Toyota, shop at Tesco, go to Majorca for 2 weeks every summer or other 'average' things? Why is buying a house different?

Can you show me a link to one of these house you consider a 'bargain' and I'll tell you exactly why it isn't.

Calina

latenia wrote: »

...

Apartments should be considered extremely bad investments and have been proved so. Why? Because they are unsuitable for living. ....

While I agree with the bulk of what you have said, just on this I want to highlight that most other European countries manage to build apartments that are suitable for longer than the first five or six years after you graduate. They build some bad stuff too (thinking some HLMs in France) We'd a unique opportunity to get it right given all the building done in the past 10 years. We blew it.

I would have no problem living in an apartment if 1) they were built and designed for people to live in, rather than people to trade like in Monopoly 2) had ample storage 3) were not subject to some of the most amazing whims in management leases 4) management companies and agencies were more effectively regulated 5) people in Ireland lost the idea that a concierge is a luxury item which had to be paid for through the nose. Rent free for a concierge could be an option, for example, and some of the new apartments might be kept better 6) they weren't built as stand alone gated estates, but planned into urban development with squares and provision for public transport.

beeno67

Is anyone here over 40. This idea that houses should cost 3.5 times one income is ridiculous. When I bought my first property it was 5 times my salary (I didn't buy alone) and I was on a very good salary. I bought what would now be called a starter home. Certainly not suitable for a familyWe faced 14% interest rates. Get real people. These glory days of cheap houses did not exist.

iguana

Gegerty wrote: »

When I bought my house I was left with very little after the mortgage. You make sacrifices and you get by and more importantly you work hard at earning more. It's tought to start with. It always has been. We have it so easy these days compared to FTBs of the 70's and 80's.

Really? Well why is it that in 1986 my binman dad was able to afford a 4 bed house in a nice area, but in 2006 myself and my husband with a combined 6 figure salary and a 6 figure deposit could just about consider a seriously dilapidated terrace in Crumlin? (We've lived in London since 2005 but have kept ourselves aware of our options if we returned.) Nobody is saying you shouldn't have to work hard to own your own home. The majority of people here who expect more and bigger drops are also saying potential buyers will need a good credit rating and to have saved a decent deposit.

As bangersandmash has pointed out people with low salaries should be able to aspire toward houses in Tallaght, Coolock or Rialto. People with middle-range salaries should be able to aspire to own in Glasnevin or Rathfarnham. And it should be possible for people with big salaries to aspire to decent houses in Rathgar, Ranelagh or Donnybrook. I think this is the point that you are forgetting.