Buying in the next 6 months. Smart or very stupid?

fasty

I've been looking at my finances and if I hold off on getting a new car that I don't need and save for the next 3 - 6 months, I should have enough cash for a deposit on a house.

It will be a bit tight financially unless I rent out a room but it's doable.

The thing is, I'm getting mixed advice from people. Some think it's worth waiting for prices to drop more, others (my parents for example) think its a great idea.

I know prices go up and down, but I don't know how long I should play the waiting game!

seamus

Depends on your long-term plans, really. If you're looking for a home to live in for the next 5 - 10 years and you expect promotions & pay rises in work, then I would say owning your own home may be the best option.

On the other hand, if you're just looking for a place to live and plan on upgrading in a year or three, I would recommend finding a similar place to rent and saving the excess.

Since you imply that you would be stretching yourself, I would not recommend buying. All it would take is a couple of interest hikes or oversupply in the rental market and you find yourself unable to meet your mortgage.

The benefits of owning are obvious - you can do what you like with the house, do what you like in the house and otherwise feel much more at home. Renting means you're effectively a guest in someone else's place. While you retain full residential rights, it doesn't just feel the same. For me anyway - some people love renting.

You will rent a place for less than you'd pay in a mortgage though, which is the obvious benefit of renting. Renting is also more flexible - if you need a bigger or smaller place, you can move much easier and don't need to stress about selling it on.

fasty

Thanks for the info. It would certainly be somewhere I would live for 5 - 10 years. I'm more interested in having a home of my own that I can decorate how I see fit and relax in than I am moving all over the place. I would also like to share with people on my terms. I thought renting would be great, it's not really for me. I keep pretty busy socially, but I like my quiet time.

When I say it would be tight, I mean without rental income I'd have to forego a few luxeries rather than struggle to make payments but my job is pretty secure and I should continue to do well financially over the next few years.

For what it's worth, I would be looking at moving to somewhere around Maynooth or perhaps Lucan if I found the right place.

El Stuntman

consider this:

there is a massive oversupply of housing (350k empty units), a deteriorating macro-economic picture (rising unemployment, slowing growth, falling competitiveness, our biggest investor and export market is in recession) and a credit crunch. Plus current prices are still wildly overvalued compared to fundamentals....

all point to house prices falling back a lot further imo

also, I would say that if you have to rent out a room and do without a car, then you can't afford it. You should be paying out no more than 1/3 of your disposable income on housing, be that rent or mortgage...

good luck with your decision

seamus

El Stuntman wrote: »

there is a massive oversupply of housing (350k empty units)

Got a link for this figure? Can't find it anywhere.
That would be around 23% of the total stock, which seems to be way above the figure of 15% that was quoted at some point last year. A couple of links I got from searching was predicting 20% empties by 2010 so 350,000 seems to be incorrect. I could be proven wrong though.

OP, you will find here that there will always, regardless of the state of the market be people telling you to go for it you'll be fine and others telling you that if you go for it, you're ****ed.

What really matters is what you would prefer to do. Buying a property is taking a gamble of sorts, much like buying shares. You may lose and particularly if you focus on the short term, ups and downs are inevitable. However, as a long-term investment, you can generally expect the price of property to match inflation, more-or-less. Nobody who has bought property in Ireland (and most other countries) in the last 50 years has come out with a loss after 20 years. It takes a fairly specific set of circumstances for property prices to drop continually in the long-term, as happened in Japan.

A mortgage is a loan and you end up paying back a lot in interest. Rent is not a loan, but you pay your rent and it goes to someone else. If you're smart with your money you can save the excess on rent and come out with a nice sum. Inevitably though, someone else owns the home that you're living in and calls the shots. So it's a psychological thing. There are thousands of people who would never entertain the idea of buying, even in a skyrocketing market and thousands who hate renting and would rather own a depreciating home that's theirs instead of renting.

Unless you're specifically asking, "What should I do to end up with the most money?", then neither viewpoint is wrong. It's really up to whichever you prefer.
However, in terms of managing your costs best, I would recommend adding six months onto your timeframe. 2008 is going to be turbulent. There will be significant job losses in construction (which is a large portion of our economy), ECB interest rates look as though they could go either way and wages look like they may stagnate for many industries. By the end of the year, we should have a much better idea of how the next few years will pan out, but at the moment it's equally likely that you could be paying lots more or lots less on a mortgage in December.

jackal

I would point out that the areas the OP is interested in have seen steep price drops and large amounts of unsold, near identical stock stagnating on the market. I see nothing other than downward pressure on prices in ireland in general and in those areas in particular. The properties available are almost all identical 3 bed semi-d's. With little to differntiate the houses, price will be the deciding factor in shifting the houses there.

Sitting tight for another 6-12 months could save you tens of thousands, which makes a huge difference to your cashflow for the forseeable. Alternatively, making firesale level offers on a number of properties and seeing if anyone bites could net you a decent saving. A desperate seller might take a below par offer if they need to sell urgently.

fasty

Cheers guys, I think I'll wait 6 months and keep saving, then take stock of what things are like then.

Just to clarify, I have a small but perfectly functional car that I'll get another year or two out of before it's even close to a banger, I'm just allocating the money I had saved for a new car to a deposit on a house instead!

astrofool

I've noticed there hasn't been the same downward pressure in the area I'm looking at right now (3/4-bed semi-d's in Dublin South East)

jdivision

People have kept asking prices as high as they can but are accepting lower offers. My friend recently bought a two-bed house in D3, asking price e395k, offer of e350k accepted.

Do-more

It might be a good idea to talk to your bank to see if you could get mortgage approval for the amount that you think you will have to borrow.

At least that way you will know if it's possible at all and even if it's 6 months down the line before you decide to buy you will have the ground work done with the bank.

I do think it would be wise to sit on the fence for 6 months, personally I think that we are in for some more solid falls this year and into next year, but I'm not qualified to give anyone any advice, so the decision you take has to be your own.

Firetrap

It depends too where you're hoping to buy. I want to buy in Kilkenny city and the prices aren't dropping :mad: Perhaps there isn't the overhang that there is in other places.

promethius

I'd continue renting, if you're going to rent a room it's going to be some of the same issues as sharing except you're now the landlord and responsible for gettting rent out of them, fixing stufff etc.
If your parents are telling you it's a good thing, keep in mind that they've probably never seen a full scale housing crash (unless they were in the uk in the 80's) and have become accustomed to rising values. They've fallen considerably last year and there is a huge oversupply. House is a home etc but bear in mind if you screw this up you're going to be left paying it off for up to 40 years in the case of some mortages. I'd leave it for at least a year then have a rethink. IMO opinion the housing market is about to get a lot worse. Good luck.

SimpleSam06

Prices are falling. What does it cost you to wait?

gurramok

Firetrap wrote: »

It depends too where you're hoping to buy. I want to buy in Kilkenny city and the prices aren't dropping :mad: Perhaps there isn't the overhang that there is in other places.

3 or 4 drops from the first report of the year http://irishpropertywatch.110mb.com/25_JAN_2008/PRICE_DROPS_25_JAN_2008.htm

A handful in previous reports.

Tbh, Kilkenny city(not county) seems to be lagging in the price falls, i just don't see what could be holding them up as there is nothing down there in major employment other than the obvious tourism industry?

Plus uncertainty over the local brewery, whats left?

jdivision

Asking prices might not be dropping but suspect most vendors, as in Dublin, would accept offers. Firetrap don't be afraid to go see places and then make an offer well below the asking price that is good for you but don't be surprised if they say no and another "bidder" emerges. My brother did this recently and, while his offer was rejected, another bidder mysteriously emerged and offered 10 grand more. EA couldn't believe it when my brother wouldn't make another offer - on my advice he told them to come back to him when they were prepared to make a deal. The house is still for sale so looks like that mysterious other bid didn't come to fruition if you know what I mean

seamus

jdivision wrote: »

Asking prices might not be dropping but suspect most vendors, as in Dublin, would accept offers. Firetrap don't be afraid to go see places and then make an offer well below the asking price that is good for you but don't be surprised if they say no and another "bidder" emerges. My brother did this recently and, while his offer was rejected, another bidder mysteriously emerged and offered 10 grand more. EA couldn't believe it when my brother wouldn't make another offer - on my advice he told them to come back to him when they were prepared to make a deal. The house is still for sale so looks like that mysterious other bid didn't come to fruition if you know what I mean

Yep. Completely agree with this. If you like a property but are happy to sit it out, then put down your price and leave it at that. EA's will still try to convince you to offer more to secure the deal or sometimes bring up a phantom bidder.
Plenty of EA's are having trouble grasping the buyer's market concept. When you offer 20k less, they'll tell you that the previous offer (which fell through) was 10k less than asking, so why in God's name would you offer 20k less? Hold your nerve. They want to sell their home more than you need to buy it. Someone will bite.

Beware of Remax agents in particular. Their income is based on selling homes and that's what they want to do. They don't care about the buyer, they don't care about the vendor, all they want to is see the house sale agreed and will do anything to get you to agree ASAP.

tHE vAGGABOND

Beware of Remax agents in particular. Their income is based on selling homes and that's what they want to do. They don't care about the buyer, they don't care about the vendor, all they want to is see the house sale agreed and will do anything to get you to agree ASAP.

Every estate agent on the planet earth is on some kind of commission [clearly Remax are on more than HOK drones!], so its in their interest not only to complete the sale, but get the buyer to pay as much as possible..

At best, its the estate agents job to get the best deal possible for the vendor, their only service to the purchaser is to facilitate the sale!

seamus

tHE vAGGABOND wrote: »

Every estate agent on the planet earth is on some kind of commission [clearly Remax are on more than HOK drones!], so its in their interest not only to complete the sale, but get the buyer to pay as much as possible..

At best, its the estate agents job to get the best deal possible for the vendor, their only service to the purchaser is to facilitate the sale!

Remax operate in a sort of franchise where every agent is their own boss. So remax agents in particular are hungry for it and also have to deal with tonnes of competition from their colleagues in the same office.

I've found them more ruthless than other EAs, to avoid straying into libel territory.

martian1980

It seems that our friends in AIB don't think that a recovery in prices is likely in the near future

http://www.fxcentre.com/monthly/200801_IrishHousingMarketMonthly.pdf

TJM

gurramok wrote: »

3 or 4 drops from the first report of the year http://irishpropertywatch.110mb.com/25_JAN_2008/PRICE_DROPS_25_JAN_2008.htm

A handful in previous reports.

Tbh, Kilkenny city(not county) seems to be lagging in the price falls, i just don't see what could be holding them up as there is nothing down there in major employment other than the obvious tourism industry?

Plus uncertainty over the local brewery, whats left?

Funny, I've noticed this as well. It's certainly nothing to do with supply, with the plethora of new places going up around the Ring Road. Any other ideas?

Featherl

Buy as soon as possible, house prices have dropped €20-30 k which is huge!

goldenbrown

and save

Gurgle

fasty wrote: »

It would certainly be somewhere I would live for 5 - 10 years. I'm more interested in having a home of my own that I can decorate how I see fit and relax in than I am moving all over the place.

jdivision wrote:

People have kept asking prices as high as they can but are accepting lower offers. My friend recently bought a two-bed house in D3, asking price e395k, offer of e350k accepted.

^^ QFT
A friend of mine offered €350k for a 3-bed semi in Leixlip advertised at €410k.

The seller spent a few weeks trying to get a better offer out of her, then accepted the €350k.

Theres plenty of 'second homes' on the market now where the owner is panicking and will accept a much lower offer than their asking price.

OP, if I was in your position I would try to buy soon at a knockdown price before the market settles and people know what their property is worth.

martian1980

with over a years' supply of houses lying around unsold, things won't be getting competitive any time soon. take your time.

PWEI

Gurgle wrote: »

^^ QFT
A friend of mine offered €350k for a 3-bed semi in Leixlip advertised at €410k.

The seller spent a few weeks trying to get a better offer out of her, then accepted the €350k.

Theres plenty of 'second homes' on the market now where the owner is panicking and will accept a much lower offer than their asking price.

OP, if I was in your position I would try to buy soon at a knockdown price before the market settles and people know what their property is worth.

I'm considering moving and I've seen a house that I like that's advertised at €430k.Now I know the house is overpriced because the particular estate agent who is selling always has their properties advertised about 5-7% more than similar properties in the area.On top of this the whole house needs a makeover, new kitchen,bathroom,floors etc.Given all this and the current slump in the property market if i was to make an offer what should I offer?

seamus

10-15% below the asking, at least.

Gurgle

PWEI wrote: »

I'm considering moving and I've seen a house that I like that's advertised at €430k.Now I know the house is overpriced because the particular estate agent who is selling always has their properties advertised about 5-7% more than similar properties in the area.On top of this the whole house needs a makeover, new kitchen,bathroom,floors etc.Given all this and the current slump in the property market if i was to make an offer what should I offer?

lol, not enough information

If it was me, I would find out what the highest sale price was for a similar house in the same area, and knock off 15%.

Advertised prices are meaningless, especially now.

PWEI

The house next door sold only last week for €410k but this house was immaculate with new kitchens and new bathrooms. It also had an extremely large garden for a 3 bed semi which was beautifully landscaped.It was advertised at €430k also and only got so close to the asking price because of the extremely good condition and large garden.Would an offer of 350K be a little bit too cheeky or would 380k be more realistic.

seamus

PWEI wrote: »

The house next door sold only last week for €410k but this house was immaculate with new kitchens and new bathrooms. It also had an extremely large garden for a 3 bed semi which was beautifully landscaped.It was advertised at €430k also and only got so close to the asking price because of the extremely good condition and large garden.Would an offer of 350K be a little bit too cheeky or would 380k be more realistic.

You're not trying to make friends, it's a business transaction So you want to get as much as you can for as little as possible.

That said, if you offer something way too low you're almost letting it be known that you can afford more - if you could only afford €350k, you wouldn't even be looking at houses marketed at €410k. They may hold out in expectation of you bringing it up.

Gurgle

PWEI wrote: »

Would an offer of 350K be a little bit too cheeky or would 380k be more realistic.

Whats wrong with cheeky if it could save you €30k?

PWEI

So I ended up putting a couple of offers in via email.The house next door sold for 415,000 but was in immaculate condition and had a huge garden.
So I told the agent that I wanted to offer 350,000 because the house needed a lot of work and needed to be modernised.The house needs all the carpets pulled out and replaced,needs to be painted throughout and also needs a new kitchen and new bathrooms.This is the reply I got back.


Many Thanks for your offer but I am afraid it is a little too low for what the owners are looking for.

We have reduced the price to 420,000 as we are aware that the house next door, which I believe to be in better order but doesn’t benefit from the attic conversion and the extension, went for 415,000.

We would hope to achieve close to the same amount for number 15.

Please feel free to come back with a higher offer and I will put it to the owners.


So I went back with an offer of 370,00 and now the owners have come back and said that they'd accept 400,000.I have not replied to the agent yet but I'm not going to go that high considering its a buyers market now.This time next year they might be lucky to get 350,000 for the house. Incidentally its a 3 bed semi in Swords.