Are we all F***ed?

bringitdown

Hi OP

Best advice I could give is one I recieved when houses were mouthwateringly cheaper than they are now! "Don't buy until you have to".

Save some money and keep liquid, perhaps try and neg. a better deal on rent that is a fair chunk for a depressed rental market too! In fact I'd call that amount extortion even when rents were silly expensive.

You are very young at 24 and being tied to a mortgage in what is likely to be a falling market for some time yet is going to break your hearts.

Raskolnikov

MortgageFear wrote: »

We are looking at the possibility of buying a house, but are limited to our options due to having only a very small deposit (19000 ish). we have only been able to get a 95% mortgage with one provider (ebs) and are under a time constraint to get a house sorted before the 95% is taken from us (about 2 months i'd say) as mortgage rates drop further and further.

First thing, I wouldn't consider E19,000 a small sum of money at all. Secondly, everyone else is in the same situation with regards to getting a mortgage. In the short-term (I'd say for the next year anyway), I can only see property prices continuing to fall, even people in the industry will admit this.

My advice would be to completely slash your expenditure and save like hell. If you're looking for some tips and advice, try the askaboutmoney money makeover forum.

In a years time, hopefully you'll have closer to 50k and I'm sure you'll find that the 400k house you were looking at, is now closer to 350k.

Good luck!

Iago

lol

cance

out of curiosity, would anyone like to hazard an educated guess at the drop in house prices we will face in the next few years?

i have read over the propertypin at length and although everyone agree's there will be a sizeable decrease, i would be interested in hearing opinions on just how low things are going to go.

The_Conductor

cance wrote: »

out of curiosity, would anyone like to hazard an educated guess at the drop in house prices we will face in the next few years?

i have read over the propertypin at length and although everyone agree's there will be a sizeable decrease, i would be interested in hearing opinions on just how low things are going to go.

Well- with short to medium term inflation of 5-6%, within 2 years property would have fallen by 12% in real terms (even if it stands still in nominal values- which it isn't- its averaging a 1.2-1.4% fall and accelerating at present (May figures are the most recent ones we have)).

At these sort of figures- you're looking at possibly a 15% fall (this year) in nominal values, increasing to at least 20% when inflation is factored into the equation.

Obviously some sectors of the market will fair far better than others- both ends of the market, the massively over priced upper end and the massively overpriced lower end, will both bear the brunt of the depreciation.

None of us have crystal balls though- if we did, we'd all be rich!

S.

johnnyskeleton

cance wrote: »

out of curiosity, would anyone like to hazard an educated guess at the drop in house prices we will face in the next few years?

i have read over the propertypin at length and although everyone agree's there will be a sizeable decrease, i would be interested in hearing opinions on just how low things are going to go.

First off, you have to look at where we are at at the moment. I think the most accurate estimate is late 2005 prices (the ERSI/PTSB drops are a few months behind and put us around Jan 06 I believe). However, some people still believe we are at the peak (i.e. August 06) and others believe (despite all evidence to the contrary) that prices have increased since then at the same rate that they were during the boom.

But on the basis that they are now approx December 2005, they might drop at around 10% for this year and another 10% in 2009, so about 18-19% off Dec 2005, being approx 30-35% off peak (August 06). At these prices, houses will still be over-valued, but I just don't think vendors will drop prices below this. Also, most of the downward pressure will come from sales of newbuilds by developers, repossessions (or forced sales), emigration and the credit crunch. In 2010 these factors will have run their course and rather than drop prices further, prices will stagnate at this level for a few years until wage increases (i.e. inflation) bring houses down to what's they're really worth. It would even seem likely that prices will overshoot, so in maybe 10 years time it will actually be good value to buy again.

The usual caveats apply, no crystal ball etc. In any event, I have just stolen the normal international economic model for economic bust and applied it to Ireland.

AARRRGH

It's hard to say, but I reckon the horrible apartment blocks which have sprung up everywhere, e.g. this kind of crap will reduce quite dramatically. I expect to see two bed apartments for under 150k.

I also expect the commuter areas to drop considerably.

The city centre and "nice" areas like Ranelagh and Blackrock will remain out of reach for the average singleton.

I think it's going to be a long, painful process, lasting quite a few years.

cance

Thank you all again for your valid and much appreciated input.

orbital83

we want to try and sort the house before the wedding (parents paying for wedding and a stipulation of this was we sorted the house before wedding)

This is unbelievable. Your parents are obviously old-skool "property only goes up rent is dead money" brigade. Who do they think they are to hold you to ransom in your mid 20s?
Sorry if this sounds harsh, but you need to tell them to go stuff themselves.

OP, if I were you, I'd continue renting and sit on my hands for a year.

So you're paying the landlord's mortgage now.
When you buy, chances are you'll be paying the same amount in mortgage interest to the bank, and your property will most likely be dropping a grand a month in value.
Not sure how that is more satisfying.

You ask "how can people afford to take on these mortgages?"
Well the answer is, they can't.
House prices have fallen, but they are still way off their true values.
Many sellers are holding out, refusing to drop prices, waiting for an economic recovery that is not coming any time soon. Banks are still rolling over the developers' loans, hoping the celtic tiger will return.
Eventually, reality will bite, banks will lose patience, shareholders will demand answers, foreign interbank lenders will tighten the noose, and repossessions and forced sales will begin.

Unemployment is rising, and the prospects for pay rises in most jobs are bleak. Public sector workers are facing a pay freeze. Private sector workers will be lucky to hang onto their jobs.
The recession is likely to cause an increase in emigration.
Food, electricity, petrol, mortgage interest - these costs are all rising. People have less to spend at the end of each month.
The government is cutting back on spending, and it looks like taxes will be ramped up to plug the deficit in the next budget.

In short, there won't be too much easy money sloshing around Ireland for the next while.
In this environment, I find it hard to imagine how house prices will not fall further, and I mean dramatically.

Find yourself a good, high interest fixed deposit account, and put your 19K in there for a year so you can't touch it.
Open a good regular saver account, make cutbacks in your spending and commit yourself to saving at least 1K per month.
This time next year, review the situation. I'd be very surprised if the market wasn't much more affordable.

Some interesting sites
http://daftwatch.atspace.com
http://www.thepropertypin.com
http://www.treesdontgrowtothesky.com

The_Conductor

dublindude wrote: »

It's hard to say, but I reckon the horrible apartment blocks which have sprung up everywhere, e.g. this kind of crap will reduce quite dramatically. I expect to see two bed apartments for under 150k.

They're not far off 150 at the moment. List prices may be 230-240, but cash offers of 170-180 are being accepted- not a million miles from your 150k......

Once again- I'd emphasise to anyone thinking of using the AH scheme- make sure you get the property revalued to reflect current market conditions......

DonJose

Neesa wrote: »

Well of course they don't want to keep renting! Why should their hard work go toward lining their landlords pockets?

OMG not another "rent is dead money" post!!! I returned to Ireland 2 years ago. I rent a house that was valued at €380k in 2006, I pay €800 in rent. 2 years later the same houses are selling for €305k. Thats a drop of €75k, I paid €19,200 in rent over the past 2 years. If I buy the house I am renting, I will have saved €55k. Happy renter

BobbyD10

dublindude wrote: »

It's hard to say, but I reckon the horrible apartment blocks which have sprung up everywhere, e.g. this kind of crap will reduce quite dramatically. I expect to see two bed apartments for under 150k.

I also expect the commuter areas to drop considerably.

The city centre and "nice" areas like Ranelagh and Blackrock will remain out of reach for the average singleton.

I think it's going to be a long, painful process, lasting quite a few years.

It's a pity the correction was not a quick and sharp one, which may have resulted in the buyers returning to the market and thus keeping the economy on the road. There are still crazy prices still being sought for those two bed apartments.

DonJose wrote: »

OMG not another "rent is dead money" post!!! I returned to Ireland 2 years ago. I rent a house that was valued at €380k in 2006, I pay €800 in rent. 2 years later the same houses are selling for €305k. Thats a drop of €75k, I paid €19,200 in rent over the past 2 years. If I buy the house I am renting, I will have saved €55k. Happy renter

Very nice example, there is probably many people who wish they did as you.!

travellerI

It suits banks, estate agents, property developers etc., if ordinary people unthinkingly repeat mantras such as "rent is dead money". As previously stated on this thread interest paid on huge mortgages in a collapsing market is the deadest money there could possibly be. Anyone who swallowed this spin since the end of 2005 and bought a house is probably now in negative equity and yes F***ed. Most objective economists in Ireland - that is those not employed by banks, building societies and estate agents - believe that property will give up 60% of its gains made during the bubble (2001-2006) in the coming years. Anyone who claims that they can call the bottom of the market is lying and personally I wouldn't think about even considering purchasing until 2011.

AARRRGH

BobbyD10 wrote: »

It's a pity the correction was not a quick and sharp one, which may have resulted in the buyers returning to the market and thus keeping the economy on the road. There are still crazy prices still being sought for those two bed apartments.

I agree. If we could just get the price reductions over with (i.e. speed up the reductions) we would be back on track to normality.

johnnyskeleton

dublindude wrote: »

I agree. If we could just get the price reductions over with (i.e. speed up the reductions) we would be back on track to normality.

While I agree with you, one reason this doesn't happen is the massive human cost - i.e. all those poor first time buyers who bought in the last 4-5 years will have their financial lives ruined (not to mention the massive stress they will be under). I have a few friends in this situation, and even though I tone down my views on the economy, it is quite painful for them to hear any talk of property at the moment.

SimpleSam06

johnnyskeleton wrote: »

all those poor first time buyers who bought in the last 4-5 years will have their financial lives ruined (not to mention the massive stress they will be under).

On the other hand, the sooner it stops going down, the sooner they can begin the decades long crawl to positive equity again. So really, the faster the bottom is hit the better for everyone.

johnnyskeleton

SimpleSam06 wrote: »

On the other hand, the sooner it stops going down, the sooner they can begin the decades long crawl to positive equity again. So really, the faster the bottom is hit the better for everyone.

But for prices to hit the bottom, we will have to see FTBs hit the wall and sell at a fraction of what they bought for. While I agree that we better take our medicine sooner rather than later, I think this scenario is still a little too unpallatable for most people, including those who actually have a say in it (banks, judges, politicians).

SimpleSam06

johnnyskeleton wrote: »

But for prices to hit the bottom, we will have to see FTBs hit the wall and sell at a fraction of what they bought for.

Why would the FTBs need to hit the wall, nobody is forcing them to sell at those prices? With 40% of an unprecedented overhang going to investors at the height of the bubble, never mind plain old unsold inventory along with normal movement in the market, there is more than enough to go round without bankrupting anyone except developers and speculators.

It just means they can't move house. But generally speaking, they can't move house anyway and won't be able to until prices start recovering, or until they get the mortgage paid off.

Maybe I'm missing your point.

jmayo

Maybe I am wrong but I don't believe it is when FTBs are forced to jump.
They will only be forced to jump if they lose their jobs or repayments become impossible.
As the optimists on here say, it doesn't matter if you are in negative equity if you can maker the repayments and don't want or rather need to move.
You have a stock of unsold properties that developers are hanging onto.
Eventually the banks will be forced to push for these to be sold off to recoup some of the loans.
Then there are the investors, the ones that remortgaged family homes to buy investment properties and the ones that are on interest only mortgages in hope of capital appreciation. With rising unemployment, immigrants going home and indeed Irish emmigrating, they will find renting harder and thus they will have to take a hit and cut their losses.
Also some of these people will discover that their property in sunny Beach or Bansko isn't worth much either on the resale market.
That is when the real tears start.

johnnyskeleton

SimpleSam06 wrote: »

Why would the FTBs need to hit the wall, nobody is forcing them to sell at those prices? With 40% of an unprecedented overhang going to investors at the height of the bubble, never mind plain old unsold inventory along with normal movement in the market, there is more than enough to go round without bankrupting anyone except developers and speculators.

It just means they can't move house. But generally speaking, they can't move house anyway and won't be able to until prices start recovering, or until they get the mortgage paid off.

Maybe I'm missing your point.

Just to be clear, I'm not saying that in order to be a property crash there need to be FTBs hitting the wall, what I'm saying is I don't think the bottom can be reached until all those who are overstreched (whether it be due to a change in circumstances or simply inability to keep up with payments and rising cost of living) have accepted the reality of their situation. Unfortunately the choice for people in these situations is to:
a) try to muddle through in the hope of eventually getting back on track or property prices recovering enough to sell the property, pay off the mortgage, and make a clean start;
b) sell and make good on whatever they can.

I guess I'm not saying that as a matter of logic it has to happen, rather I can't see the bottom of the market until a lot of people have gone through some very bad times, and while I don't feel sorry for a lot of them, there will inevitably be a lot of FTBs who hit the wall.

DublinWriter

OP - among all the old rent vs buy arguments here, I'm surprised that no one has mentioned that you should be thinking that you are buying your first home, rather than your first house.

It's not the best of ideas to base your decision on purely monetary and investment grounds; you're a young couple starting off in life and obviously have decided to set up home together.

Best of luck.