Donnybrook Manor

ballooba

ronoc wrote: »

Buy now and it will appear that you are making money in the long run. However buying at a time when property is on the extremes of afforability and adjusting for a bumper mortgauge and tightening credit availability as well as inflation, you will actually lose money in real terms.

The underlying assumption there is that property is on the extremes of affordability at the moment. Without some form of a time machine that cannot be known.

ballooba

ballooba wrote: »

The underlying assumption there is that property is on the extremes of affordability at the moment. Without some form of a time machine that cannot be known.

A big alarm bell is falling prices after sucessive interest rate rises. This is an indicator that property is at the limits of affordability. Our ratio of income to average house price suggests this also. I can't find those figures at the moment.

ballooba

ronoc wrote: »

A big alarm bell is falling prices after sucessive interest rate rises. This is an indicator that property is at the limits of affordability. Our ratio of income to average house price suggests this also. I can't find those figures at the moment.

Limits imply that they won't rebound higher.

SkepticOne

Ballooba, are you worried that if you don't secure a property now you won't be able to buy in five years because prices will have risen so much by then?

dazberry

How Strange wrote: »

No that is def wishful thinking. But I do have my fingers crossed for a continued dip in property prices. I reckon from what I've seen lately that €200-220k for a 1 bed could be a reality by next April. That would be just about affordable for a single person without living on bread and soup and making my own clothes for the next 20 years.

Well here's a 1 bed 220k apartment - not the best but far from the worst of locations... very handy for town. http://www.myhome.ie/search/property.asp?id=MDSBG306409, and if its any consolation, they were hitting 290k+ at the peak. The 2 beds now down at 315k where almost hitting 400k. Houses in the area haven't seen the same slide, but they're not selling.

D.

How Strange

AFAIK, that would be one of the better managed apartment blocks in the city, has some anti-social problems to contend with but is a good established development. Apartments would generally be snapped up quite quickly so it shows that things are changing.

Good news for people like me, not so good for those who are trying to sell

ballooba

ballooba wrote: »

Limits imply that they won't rebound higher.

Wage inflation accounts for some of the property boom. This was quite large at the height of celtic tiger. For the last few years house prices continued to rise steaply while wage inflation slowed to normal levels.
Why did house prices continue to rise?
The availability and cheapness of credit. Also 100% mortguges and loan terms being offered up 40 years means more money was available for purchasers. If people believe house prices can only go people will borrow as much as they can to get that house, pushing prices up.

I believe house prices in the country are going to go through some turbulance over the next few years for the following reasons:

* Interest rates will continue to rise despite the current money market woes. The ECBs prime concern is inflation and they have used their coded language recently to indicate more rises are on the way.
* The "credit crunch". Banks are now charging other banks more to lend money to each other. The banks will have to take the hit themselves (yeah right) or pass this onto new mortguage lenders. Some banks have already started passing this cost on to borrowers.
* 100% mortguages are on the way out. Banks are starting to cut back on their riskier loans.

ballooba

SkepticOne wrote: »

Ballooba, are you worried that if you don't secure a property now you won't be able to buy in five years because prices will have risen so much by then?

No. I want to start paying off the capital.

The same reason I have started a pension I guess.

Afuera

ballooba wrote: »

No. I want to start paying off the capital.

I hate to burst your bubble, but what you are suggesting is financial suicide. Have you ran the figures through Jeacle's Mortgage Calculator yet?

Assuming that you are able to get a 5-year fixed rate of around 4.5% you will have a monthly mortgage of 4,000 EUR p/m if it was for a 35 year term. Let's also assume that you can get someone to rent the property for 2,500 EUR p/m and that you have no periods of vacancy. This leaves you with a shortfall of 1,500 EUR every month and amounts to you paying 90,000 EUR to support your tenants during the 5 year period. The amount of capital you will have paid off the mortgage during that same period would only be around 55,000 EUR.

Take note that all the assumptions I made above are highly optimistic and I made no attempt to account for the other expenses you would have to take on as a landlord such as furnishing, maintaining, insuring, finding tenants, etc. On top of this, you will have to pay stamp duty of 76,500 EUR since you are not an owner-occupier of the property (you will also lose your FTB status forever in the process).

By my calculations, you are at least 111,000 EUR down at the end of 5 years unless there is capital appreciation to compensate your loss. Do you think that the next 5 years will deliver that kind of appreciation, and if so why?

ballooba

Maybe the property is not right. I'll have to have a look at how my two sisters are doing this. They have houses in the commuter belt and are only subsidising the mortgage by very little if anything at all. They have 4/5 bed houses they bought for between €600k and €700k.