Buyer bubble burst...

beeno67

WhatsGoingOn wrote: »

You'd want to get yourself a new car Biggles. My commute is 60 miles a day (30 each way) and I spend about €130 a month on diesel.

Perhaps an underestimate of true costs
The AA give estimates on cost of motoring
http://www.aaireland.ie/infodesk/cost_of_motoring.asp

BigglesMcGee

WhatsGoingOn wrote: »

You'd want to get yourself a new car Biggles. My commute is 60 miles a day (30 each way) and I spend about €130 a month on diesel.

I'll have yours

So do you commute into Dublin city center for that?

adam.number2

To be fair, she did say 50 miles each way, but still 1000 is well off

((100 miles x 22 days ) / 40 miles to the gallon ) * 6.40 Euro per gallon) = 352 Euro

Thats probably at a max, i.e. 40 miles to the gallon might be a poor enough mileage.

DonJose

adam.number2 wrote: »

To be fair, she did say 50 miles each way, but still 1000 is well off

((100 miles x 22 days ) / 40 miles to the gallon ) * 6.40 Euro per gallon) = 352 Euro

Thats probably at a max, i.e. 40 miles to the gallon might be a poor enough mileage.

Add onto that tolls, road tax, insurance, parking and it adds up.

DublinDilbert

adam.number2 wrote: »

To be fair, she did say 50 miles each way, but still 1000 is well off

((100 miles x 22 days ) / 40 miles to the gallon ) * 6.40 Euro per gallon) = 352 Euro

Thats probably at a max, i.e. 40 miles to the gallon might be a poor enough mileage.

I'd say your fuel cost (€350) is spot on, but you'd also have to factor in the other costs too:-

->The cost of the car and depreciation on it, doing almost 25K miles / year will mean the car will be loosing at least €300/month.

->if your hitting that mileage in a diesel you'll be looking at getting it serviced every say 3 or 4 months say, so you'd probably want to put away €70/month...

->Then there's toll roads, if you use the M50 twice / day, that will be €80/month...

->Tax on a 1.9 would be about €40/month

I don't think it would be as high at €1000 / month, but would definitely be above €700/month...

adam.number2

Agreed, was only calculating fuel costs (roughly) as that was what Ms McGee mentioned. The other costs are too variable to estimate, but certainly on a normal car, depreciation, insurance, tax and repairs all add up.

WhatsGoingOn

DublinDilbert wrote: »

I'd say your fuel cost (€350) is spot on, but you'd also have to factor in the other costs too:-

->The cost of the car and depreciation on it, doing almost 25K miles / year will mean the car will be loosing at least €300/month.

->if your hitting that mileage in a diesel you'll be looking at getting it serviced every say 3 or 4 months say, so you'd probably want to put away €70/month...

->Then there's toll roads, if you use the M50 twice / day, that will be €80/month...

->Tax on a 1.9 would be about €40/month

I don't think it would be as high at €1000 / month, but would definitely be above €700/month...

True, but whether you drive 5 miles or 50 miles, you'll still have to pay tax and insurance on the car. You'd still have depreciation (although granted there would be mre with higher mileage). I drive to Dublin, but I don't use tolls, so that is out too. The car can be serviced for €120 every 10,000 miles (you don't have to go to a main dealer to get it seviced). I used to live 10 miles from work, now I live 30. I'd say in real terms it is costing me an extra €100 a month.

adam.number2

WhatsGoingOn wrote: »

True, but whether you drive 5 miles or 50 miles, you'll still have to pay tax and insurance on the car. You'd still have depreciation (although granted there would be mre with higher mileage). I drive to Dublin, but I don't use tolls, so that is out too. The car can be serviced for €120 every 10,000 miles (you don't have to go to a main dealer to get it seviced). I used to live 10 miles from work, now I live 30. I'd say in real terms it is costing me an extra €100 a month.

I'd say you'd be (roughly) wrong.

((Extra 40 miles per day x 22 days ) / 40 miles to the gallon ) * 6.40 Euro per gallon) = Euro 140.80

Presuming, diesel 40 miles to the gallon and 22 working days in the month.

johnnyskeleton

DonJose wrote: »

Add onto that tolls, road tax, insurance, parking and it adds up.

Someone who uses a car in Dublin will have these same costs. To compare like with like (i.e. to see how much someone who lives outside of Dublin is worse off than someone in Dublin) you should compare the extra fuel costs only.

Otherwise, you should be comparing the cost of public transport in Dublin and public transport from outside Dublin (a similar figure I would imagine).

astrofool

johnnyskeleton wrote: »

Someone who uses a car in Dublin will have these same costs. To compare like with like (i.e. to see how much someone who lives outside of Dublin is worse off than someone in Dublin) you should compare the extra fuel costs only.

Otherwise, you should be comparing the cost of public transport in Dublin and public transport from outside Dublin (a similar figure I would imagine).

Exactly, I know when I had to get a car (no public transport went to work, despite it being only a 10/15 min drive away), I now look at what it would cost to drive the car somewhere based on fuel cost.

E.g. to drive to town or to get the bus.

Petrol + parking about €6

Bus return for 2 about €8

The extra 20kms won't really affect depreciation, so I'd always choose to drive (unless going into a pub ).

WhatsGoingOn

adam.number2 wrote: »

I'd say you'd be (roughly) wrong.

((Extra 40 miles per day x 22 days ) / 40 miles to the gallon ) * 6.40 Euro per gallon) = Euro 140.80

Presuming, diesel 40 miles to the gallon and 22 working days in the month.

My car does 55mpg (and I have got 60mpg on some days)!
Anyway, we are getting away from the original posts, sorry.

Noteb

Two friends bought a house 2 years ago.
They agreed to sell after two years.

Now with the market as it is- selling isn't easy.

Friend 1 wants to buy with fiance now.
Frend 2 would be happier to stay- but knows friend 1 is getting married.

Friend 1 and fiance need to buy a home. Should they buy friend 2 out ( if all parties agree).

What solutions can you offer ?- any advice apreciated

BigglesMcGee

Well it was only a rough guess for petrol in a 2L car driving in and out of Dublin City center. Its not a reflectionof commuting costs for every permutation but im sure we'll all agree that it would be a significant chunk of money out of your pocket.

WhatsGoingOn

BigglesMcGee wrote: »

Well it was only a rough guess for petrol in a 2L car driving in and out of Dublin City center. Its not a reflectionof commuting costs for every permutation but im sure we'll all agree that it would be a significant chunk of money out of your pocket.

Yes, but it would not be as significant as the extra interest you need to pay on a higher mortgage due to the premium price of living closer to the city centre.

BigglesMcGee

WhatsGoingOn wrote: »

Yes, but it would not be as significant as the extra interest you need to pay on a higher mortgage due to the premium price of living closer to the city centre.

I think it definitely would.
Also, Dont forget time sitting in traffic is a high penalty to pay too.

DublinDilbert

WhatsGoingOn wrote: »

True, but whether you drive 5 miles or 50 miles, you'll still have to pay tax and insurance on the car. You'd still have depreciation (although granted there would be mre with higher mileage). I drive to Dublin, but I don't use tolls, so that is out too. The car can be serviced for €120 every 10,000 miles (you don't have to go to a main dealer to get it seviced). I used to live 10 miles from work, now I live 30. I'd say in real terms it is costing me an extra €100 a month.

I know what your saying about tax and insurance, but lets say you live in navan and work in navan, you don't need to go out and by a 1.9TDI to commute the round trip to dublin, you can buy a 1.4 corrolla for example....

€120 is very cheap for a service, also diesels have a much shorter service interval than petrols. For most modern cars your looking at €50 for the oil alone! Also at 24K / year, you'll be looking at getting the timing belt changed every other year. You'd also be looking at a full set of tyres at the same time.

Tolls are actually becoming a very big expense, using the m50 twice per day for work 5 days / week, would cost pretty much the same as taxing and insuring my car for the year!

I don't think people really calculate the full cost of commuting till they move and have to pay it week in / week out.

I get the impression that people who moved to commuter land during the boom, got possibly a really nice house etc, they are now only seeing the cost to them, in terms of money and time. They were happy to commute when on paper their house was rocketing in value, now as its falling they realise they may be trapped there for some years to come....

blast05

If the ECB base rate reaches 7% variable rates for mortgages could be in the 9-10% range

And if the cow jumped over the moon .... sure if mortgages eached that level, the mortgage crisis throughout Europe would be many times bigger than what happened in the US

and thats one reason why prices will keep coming down until that person on 30-40k(like most of us) can afford an apt in the main city in a decent area

And show me the capital city of a western world country where the average industrial wage will allow you to buy a property in the centre of the city

I think the rest of the country is on a complete loser as far as property is concerned though.

Take a 5 bed 3 year old detached house 2 miles from Athlone town centre in a well maintained estate in good part of town with an asking price for 320K - just a few hundred yards off the Galway Dublin road. Will be 50 minutes from Galway outskirts (in 2-3 years when motorway is open) and 1 hour from M50 (when Athlone to Kilbeggan is open in a month or so) ... sounds reasonable to me

johnnyskeleton

blast05 wrote: »

And if the cow jumped over the moon .... sure if mortgages eached that level, the mortgage crisis throughout Europe would be many times bigger than what happened in the US

While I am also sceptical of PaElGrande's prediction, the fact that it could make mortgages extremely difficult to pay is not something that will deter the ECB - apart from anything else I think the Irish borrowing madness far exceeded most of the rest of Europe.

But as for your cow jumping over the moon reference - in the late 80s early 90s interest rates for mortgages were around this level so don't be deceived into believing that it couldn't possibly happen.

blast05

in the late 80s early 90s interest rates for mortgages were around this level so don't be deceived into believing that it couldn't possibly happen.

Yes, but we were'nt part of the ECB then. If interest rates went to the levels of the 80's and early 90's or even to the level of PaElGrande's prediction then we would see a global recession only beaten in the last century by that of the 1930's imho. Would inflation really be top priority then ?

Firetrap

While the rates may not hit the heights of the early 90s, who's to say that the ECB won't keep increasing the rate? We're a tiny cog in a large machine.

Pa ElGrande

blast05 wrote: »

Yes, but we were'nt part of the ECB then. If interest rates went to the levels of the 80's and early 90's or even to the level of PaElGrande's prediction then we would see a global recession only beaten in the last century by that of the 1930's imho. Would inflation really be top priority then ?

The low interest rates we've had since 2001 are the exception rather than the rule. Since the ECB is relatively young in terms of volume of statistical data, an idea may be to use the Bundesbank statistics as a guide to historical trend which is around 6-7%, usually in times coincident with high oil prices the rates have been higher at around 10%.
More importantly the banks need to rebuild and/or repair their capital base and the only way to do this is to attract savings, this means having to raise interest rates rather than depend on their customers inertia.

IMHO: A 1930's style depression is not out of the question starting circa 2010, the wall street crash happened in 1929, but the worst effects were not seen until 1933 and only ended with the end of World War 2.

adam.number2

Firetrap wrote: »

While the rates may not hit the heights of the early 90s, who's to say that the ECB won't keep increasing the rate? We're a tiny cog in a large machine.

Because equally, Europe is only a cog in a large global machine. It cannot consider itself in isolation. We (europe) aren't an island :-) All these things are relative, so the rates in other countries also dictate what the rate must be here... they cant allow too large a differential between ECB and the FED, japanese rate, uk rate, etc.

Pa ElGrande

adam.number2 wrote: »

Because equally, Europe is only a cog in a large global machine. It cannot consider itself in isolation. We (europe) aren't an island :-) All these things are relative, so the rates in other countries also dictate what the rate must be here... they cant allow too large a differential between ECB and the FED, japanese rate, uk rate, etc.

ECB Monetary policy

Although the Treaty establishing the European Community clearly establishes maintaining price stability as the primary objective of the ECB, it does not define what "price stability" actually means. With this in mind, in October 1998 the Governing Council of the ECB announced a quantitative definition of price stability.

The Governing Council of the ECB has defined price stability as "a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%". Price stability "is to be maintained over the medium term".

The Governing Council confirmed this definition in May 2003 following a thorough evaluation of the ECB's monetary policy strategy. On that occasion, the Governing Council clarified that, within this definition, it aims to maintain inflation rates below but close to 2% over the medium term.

The reference to "the HICP for the euro area" indicates that the goal of the ECB's monetary policy is price stability in the euro area as a whole, and that it aims to give full and effective protection against losses in the purchasing power of money. The HICP is the index that most closely approximates the changes over time in the price of a representative basket of consumer goods and services purchased by euro area households.

The phrase "below 2%" sets a clear upper boundary for the rate of measured HICP inflation that is consistent with price stability over the medium term. At the same time, aiming for low positive inflation rates "close to 2%" provides "an adequate margin to avoid the risks of deflation". Likewise, the ECB's quantitative definition of price stability takes into account the possible presence of a measurement bias in the HICP and the implications of inflation differentials of a structural nature within the euro area.

The wording "over the medium term" signals that monetary policy cannot fine-tune developments in prices or inflation over short horizons of a few months. Changes in monetary policy always affect prices with a significant time lag, and the magnitude of the eventual impact is uncertain. This implies that monetary policy cannot offset all unanticipated shocks to the price level in a short period of time. Some short-term volatility in inflation is therefore inevitable.

The Harmonised Indices of Consumer Prices (HICP) is currently running around 3.3%.
While we don't exist on our own, eventually the economies of the USA and Japan are going to be forced to raise their interest rates, else they will feel the backlash caused by price inflation from their own populations.

WhatsGoingOn

BigglesMcGee wrote: »

I think it definitely would.
Also, Dont forget time sitting in traffic is a high penalty to pay too.

4 bed house on 0.5 acre 25 miles from Dublin, mortgage approx €400,000. Interest paid over life time of mortgage approx €520,000 (5.5% APR)

No equivalent within 5 miles of Dublin, so for comparison use a 4 bed detached house, mortgage approx €700,000. Interest paid over life time of mortgage approx €910,000 (5.5% APR)

That works out at €1300 a month in mortgage interest payments alone.

Calina

BigglesMcGee wrote: »

€50k isnt high earning though.

It is a measure of the insanity in this country that fifty thousand euro is not considered high earning. It is subject to the higher tax rate, There is something completely wrong in a country when people who are considered high enough earners to pay tax at the higher rate but are equally considered poor enough to be entitled to subsidised housing. It's also 30% above the average industrial wage in Dublin.

House prices are too high. The average house is still roughly 10 times the average salary and in Dublin, the average one bedroomed apartment is up to 8 times the average salary. This is not sustainable. Either salaries are going to have to skyrocket which will bring with it some serious unemployment or house prices are going to have to fall.

adam.number2

Pa ElGrande wrote: »

The Harmonised Indices of Consumer Prices (HICP) is currently running around 3.3%.
While we don't exist on our own, eventually the economies of the USA and Japan are going to be forced to raise their interest rates, else they will feel the backlash caused by price inflation from their own populations.

I think we're agreeing with each other here... I'm just pointing out that the EUs focus on keeping inflation in line, is not their only consideration. They cannot/will not increase to significantly higher rates, without all the other ECB equivalents increasing theirs. That's not going to happen anytime soon.

BigglesMcGee

WhatsGoingOn wrote: »

4 bed house on 0.5 acre 25 miles from Dublin, mortgage approx €400,000. Interest paid over life time of mortgage approx €520,000 (5.5% APR)

No equivalent within 5 miles of Dublin, so for comparison use a 4 bed detached house, mortgage approx €700,000. Interest paid over life time of mortgage approx €910,000 (5.5% APR)

That works out at €1300 a month in mortgage interest payments alone.

Arent people going to have to start living in Semis and apartments. There are many choices in Living arrangement to be had. Not all are affordable to all people. Yes some may hav to move out to find cheaper alternatives, but the cost to their childrens lives, and their own lives is considerably more expensive, and fuel (even if someone has a legendary 60MPG car) is only going up, at a serious rate. Unless you get a job out in the coutry near where you live. Then you're on the pigs back, til you have to find another job.

The simple fact is that Dublin, while maybe in trouble with the downturn is the more desirable and neccesary place to live in Ireland. You have to pay a premium for this. It wont be long til you cant even drive 20 miles into Dublin City center in a reasonable amount of time, if at all. Its the train or nothing. Im dying to get a bit of country peace and quiet but i know that at some point i'll have to look back in Dublin for a job. Not worth the move.

I predict country flight very soon. When prices stabilize in Dublin and plumet in the rest of the country due to people having to live close to Dublin because the commute will not be possible anymore. A sad state of affairs indeed.

gurramok

blast05 wrote: »

And show me the capital city of a western world country where the average industrial wage will allow you to buy a property in the centre of the city

I think your quoting my post here but you must be the second person that just does not get what i had typed.

I had said the whole of Dublin city and suburbs not just the city centre where affordability is the issue.

Without drawing a map to describe to those who have difficulty knowing Dublin.
That means anywhere from the city centre to Tallaght, hop over to Bray(lets say its swallowed up in Dubland as it really is) and all the way up to Howth and across again to the northern outskirts of Santry/Coolock then across to Blanchardstown and then hop to Leixlip(yeh, its swallowed too ), that area that has 1.1m inhabitants according to the last census.

Now after saying Dublin city and suburbs, many towns close by would fit into the criteria i had described where a single earner on 30-40k cannot afford even 1bed/2bed apts which most have been built to cater for single occupancy during the boom due to lax building regulations(shoeboxes).

Even 50k'ers cannot afford them, i think people earning 50k/yr reckon they have achieved something in life in a high earning job and deserve better than been able to afford a 1bed/2bed in a no-go area of Dublin where prices are cheapest for now(200-220k) or else commute it out from the likes of Navan.

Calina describes the folly aspect of the whole situation which is why its a bubble and renters should continue to rent as they have huge advantages.

blast05 wrote: »

Take a 5 bed 3 year old detached house 2 miles from Athlone town centre in a well maintained estate in good part of town with an asking price for 320K - just a few hundred yards off the Galway Dublin road. Will be 50 minutes from Galway outskirts (in 2-3 years when motorway is open) and 1 hour from M50 (when Athlone to Kilbeggan is open in a month or so) ... sounds reasonable to me

Outskirts is the key here, just dont be working in the 'inskirts' which is where most jobs are in both places and yes Galway has a serious traffic problem like Dublin, just dont believe the estate agent hype when they describe it as 'only an hr from Athlone to Galway outsikrts'

beeno67

Calina wrote: »

It is a measure of the insanity in this country that fifty thousand euro is not considered high earning. It is subject to the higher tax rate, There is something completely wrong in a country when people who are considered high enough earners to pay tax at the higher rate but are equally considered poor enough to be entitled to subsidised housing. It's also 30% above the average industrial wage in Dublin.

House prices are too high. The average house is still roughly 10 times the average salary and in Dublin, the average one bedroomed apartment is up to 8 times the average salary. This is not sustainable. Either salaries are going to have to skyrocket which will bring with it some serious unemployment or house prices are going to have to fall.

€50k is not high income. It is well less than the average nurse or garda. So for example 2 nurses married on average salary (excluding overtime) earn about €110,000. So the average house price is about 3 times their joint salary. Also in the last 10 years the amount of income tax people pay has dropped greatly, making housing much more affordable.

Calina

The average salary for a nurse with between 10 and 19 years of service is 39KE. Here is the source for that figure. As for gardai, I have not looked.

That being said, whether you like it or not, 50K is a high salary. There are people who are trying to raise families for less. The other issue is you are assuming that two salaries will always be available for semiD purchase. People need to have babies so no they are not.

The only way housing has been made more affordable for the last four or five years is by increasing mortgage terms and upping permitted LTVs. UNfortunately, the banks have wised up to the folly of high LTVs and are demanding deposits which people have to save now and that takes time. Reducing income tax shouldn't be directly for the benefit of banks but if increased spending power is going into mortgages, then that's exactly what is happening.