David McWilliams predicts further 50% fall in house prices

johnnyskeleton · 16-05-2009 8:32pm

smccarrick wrote: »

If you are going down that road- which is something that has to be explored, the minimum wage must be severely cut, or even abolished- along with triple time for Sunday work etc. The reason none of the sandwich bars open on a Sunday- and most pubs cut back on bar food etc- is staff costs.....

At the risk of being branded a free market capitalist, there are more people wanting public sector jobs now than there are places. There are also far too many places. The public sector will take whatever you give them, and if they balk send them packing. First cut all politicians pay so that you can't be accused of double standards. Then, crack the civil service and quangoes, with massive job lossses and pay cuts. If they strike, they are easily replaceable with more efficient and cheaper Poles. Finally, the more essential parts will be inclined to take modest pay cuts without striking. But the public sector needs a firm hand to guide it.

As for cuts in the minimum wage, I don't think it's realistic to cut the minimum wage further than by the level of inflation and/or by increasing it less than inflation if/when inflation comes back. Over 5 years or so, we should try to get back in line. Anything more drastic would be disasterous, as I don't think it will yield any increase in jobs in the short term.

As for social welfare, this does need to be cut (i.e. everything needs to be cut) but I can see merit in cutting the long term recipients by more than the recently unemployed (especially as they have contributed so much by way of PRSI stamps).

These are the things that need to be done for the good of the country, but these are also the reasons why skeleton will never be elected to public office.

tedstriker · 16-05-2009 10:29pm

I think we will see a social welfare cut in the next budget in some form or another.

Freddie59 · 17-05-2009 12:01am

Gurgle wrote: »

50?
People?

I don't believe either part.
More likely hundreds of corporate entities.

https://www.tribune.ie/business/news/article/2009/apr/12/most-toxic-loans-held-by-just-50-developers/

Just 50 property developers, many of whom owe money to nationalised Anglo Irish Bank, account for the majority of the €90bn of property loans scheduled to go into the new National Asset Management Agency (NAMA), according to people with knowledge of the full details of the scheme.

Believe it now, my friend?

Daragh101 · 17-05-2009 2:07am

Male30something wrote: »

From today's Sunday Business Post

"...in a world where house price speculation is over, Irish house prices will have to fall on average by 50 per cent from where they are today to be worth buying."

then again david mc really doesnt no that much, where does he get his figures?

by the way i have no dought property will fall futher, but this really is very random by him.

Gurgle · 17-05-2009 9:50am

Freddie59 wrote: »

https://www.tribune.ie/business/news/article/2009/apr/12/most-toxic-loans-held-by-just-50-developers/

Just 50 property developers, many of whom owe money to nationalised Anglo Irish Bank, account for the majority of the €90bn of property loans scheduled to go into the new National Asset Management Agency (NAMA), according to people with knowledge of the full details of the scheme.

Believe it now, my friend?

I think you misunderstood my post.
50 'property developers' does not refer to 50 people.

These 50 corporations which owe all the money can go into liquidation without any impact on the wealth they have already earned for the directors.

In fact, letting exactly that happen would probably have been planned well in advance by the directors.

They can throw their hands up and let the company sink, with no legal link between the company's debts and their personal wealth.

johnnyskeleton · 17-05-2009 11:03am

Gurgle wrote: »

These 50 corporations which owe all the money can go into liquidation without any impact on the wealth they have already earned for the directors.

Unless the companies traded while insolvent.

Gurgle wrote: »

In fact, letting exactly that happen would probably have been planned well in advance by the directors.

Some of them would have, but I think you overestimate others. If they really had planned in advance for this eventuality, don't you think they might have tought twice about some of the bigger purchases e.g. Irish glass bottlers site, Juries Ballsbridge etc?

Gurgle wrote: »

They can throw their hands up and let the company sink, with no legal link between the company's debts and their personal wealth.

If they gave a personal guarantee to the bank or if funds were moved from the companies to their personal accounts as a fraudulent transfer they can be recouped.

The_Conductor · 17-05-2009 11:47am

johnnyskeleton wrote: »

At the risk of being branded a free market capitalist, there are more people wanting public sector jobs now than there are places. There are also far too many places. The public sector will take whatever you give them, and if they balk send them packing.

The totally unprecedented interest in

1. Unpaid leave
2. Career breaks of up to 10 years duration
3. Early retirement

post the budget and the public sector/private sector bashing- would lead one to disagree with your hypothesis. Those elements of the public sector who have the opportunity to vote with their feet- are doing so. This is particularly acute in the civil service- which is now below skeleton staffing (which is why they are proposing to bring in the employees from the quangoes in to try to staff divisions again).

Its fine to assume that people will balk- practice, even to date, has proven otherwise.

It would be fairest on the public sector to be honest- to focus on where the bulk of the waste is- the HSE. The civil service is already at the lowest level per head of population in the world- and good luck with any plans to reduce nos of teachers/gardai etc......

johnnyskeleton wrote: »

First cut all politicians pay so that you can't be accused of double standards. Then, crack the civil service and quangoes, with massive job lossses and pay cuts. If they strike, they are easily replaceable with more efficient and cheaper Poles. Finally, the more essential parts will be inclined to take modest pay cuts without striking. But the public sector needs a firm hand to guide it.

Nice headlines- facts on the ground do not support this.
There is no justification for the salaries and allowances our politicians are paid- nor the salaries of the boards of the quangoes. The civil service has had its 6 year defacto embargo on recruitment turned into a formal embargo- and is at its lowest numbers since the early 1970s (given the 1980s were an anamoly when the government used it as a dumping ground to manipulate unemployment figures). Quangoes- should be abolished- left right and centre. Go for it. Its not the case that you can simply replace civil servants and other employees subject to the Official Secrets act- with non-nationals. Perhaps you're just going for populist headlines- but its simply not doable.

Ps- what do you consider to be a 'modest paycut'? Are you looking at gross salaries- or takehome pay. If its the latter- both the public sector and the private sector are already experiencing a cut of between 20 and 30% on average in take-home-pay (not gross salaries). If you whack another 20-30% on this- its not that you'd have people striking- its that you'd have them in sleeping bags outside the local church.

People made plans on the basis of assurances made to them by the government and the media- who deserted them for greener pastures. The Irish people have the highest private debt per capita- in the whole world. People are at breaking point. When interest rates return to 'normality' (taken by the ECB to be between 4 and 5%) this will be sufficient to put a large portion of the Irish public over the edge- before any other factors at all are taken into account.

We have a mess....... You're not going to solve it with your proposals. Some elements of them will have to be implemented- but its simplistic to suggest- fire the public sector and country will be out of the doldrums. Make effigies of the bankers and burn them outside Dail Eireann...... It might not achieve anything- but it would make people feel a little better for a while.......

johnnyskeleton wrote: »

As for cuts in the minimum wage, I don't think it's realistic to cut the minimum wage further than by the level of inflation and/or by increasing it less than inflation if/when inflation comes back. Over 5 years or so, we should try to get back in line. Anything more drastic would be disasterous, as I don't think it will yield any increase in jobs in the short term.

Why not? We have the highest minimum wage in the world. Contrary to people's widespread beliefs, we do not have the highest cost of living in the world. Studies (by the ESRI, Alan Matthews in Trinity and the Smurfit Business School) have shown the manner in which reducing the minimum wage increases economic activity. Its accepted as fact.

johnnyskeleton wrote: »

As for social welfare, this does need to be cut (i.e. everything needs to be cut) but I can see merit in cutting the long term recipients by more than the recently unemployed (especially as they have contributed so much by way of PRSI stamps).

Those who are recently unemployed are claiming an allowance they have paid for with PRSI contributions- rather than an unfunded benefit. Those on longterm unemployment *need* to be pressurised into retraining themselves- by making further benefits contingent on attending and successfully completing prescribed courses in areas seen as crucial for the Irish economy- such as IT and the sciences. If necessary- pay them to get their leaving certs and college qualifications. Do it though.

We need to totally restructure the social welfare system- and move away from the 'cash based system' towards a defined benefit system (it could be voucher based or whatever). It would make it less lucrative for benefit tourists- perhaps unemployed non-nationals might decide it was more worth their while to return to good jobs in their own countries? Lots of Irish will be following them before long........ (speaking of which- have you seen the posters in Warsaw aimed at the Irish recently? I think Poland has been taken to ECJ over it- but it was really ridiculous).

johnnyskeleton wrote: »

These are the things that need to be done for the good of the country, but these are also the reasons why skeleton will never be elected to public office.

Run for public office- go for it. I'll vote for you. I don't think you'll get in- but we need people thinking outside the box and willing to say the hard things that need to be said. The current shower haven't the guts to say boo to a goat.......

TaxiManMartin · 17-05-2009 12:33pm

Daragh101 wrote: »

then again david mc really doesnt no that much, where does he get his figures?

by the way i have no dought property will fall futher, but this really is very random by him.

Hes a random kinda guy though

Keep yourself in the news David. Thats all you have to do to bring in the wads.

Shambo · 17-05-2009 4:15pm

smccarrick wrote: »

People- even those in employment, are in big trouble now, and its only going to get worse before it gets better....... Ignoring cuts in take-home-pay- what will happen as soon as interest rates return to 'normality' (defined by the ECB as long term rates averaging between 4 and 5%). ..

An excellent post, the extract above made me think iof all these advertisements "Cheaper to buy than rent"

Only in the very fine print do they admit
35 year (!!!) mortgage
Reduced initial rate to attract FTBs
Rates CAN go up, they will you can be sure of that, and what then for those who are unfortunate enough to buy in to this crock of s**t?

TaxiManMartin · 17-05-2009 5:02pm

Shambo wrote: »

An excellent post, the extract above made me think iof all these advertisements "Cheaper to buy than rent"

Only in the very fine print do they admit
35 year (!!!) mortgage
Reduced initial rate to attract FTBs
Rates CAN go up, they will you can be sure of that, and what then for those who are unfortunate enough to buy in to this crock of s**t?

Ive been looking at the figures. 25 years mortgage for the house im you a cheaper mortgage than the rent i pay. Then add both our interest reliefs and we would be several hundreds better off a month. Thats on AIBs 10 year fixed.

Use a combination of these websites to get the house, rate and payments. Then add interest relief. Very enlightening.

www.daft.ie

http://www.drcalculator.com/mortgage/

www.aib.ie

The_Conductor · 17-05-2009 5:28pm

TaxiManMartin wrote: »

Ive been looking at the figures. 25 years mortgage for the house im you a cheaper mortgage than the rent i pay. Then add both our interest reliefs and we would be several hundreds better off a month. Thats on AIBs 10 year fixed.

Use a combination of these websites to get the house, rate and payments. Then add interest relief. Very enlightening.

www.daft.ie

http://www.drcalculator.com/mortgage/

www.aib.ie

Current 10 year fixed rate from AIB on a First Time Buyer Mortgage with a LTV of 80% or less is 4.41%

I have precisely no idea what property you have in mind- you linked to Daft.ie without specifying which property you had in mind. I have no idea where you are renting or where you might like to buy?

Mortgage payments are only one element of property ownership- you are ignoring all other factors other than the headline rent versus mortgage payment- it is quite simply not valid to do this.

The cost of ownership of a rental property along with a risk factor- implies an ownership cost of around 6% of the value of the property, and an implied ROI of approx 25% higher than this- aka rent should be roughly 7.5% of the market value of the property.

You really need to look at far more than the headline rent-versus-mortgage debate........

TaxiManMartin · 17-05-2009 5:54pm

smccarrick wrote: »

Current 10 year fixed rate from AIB on a First Time Buyer Mortgage with a LTV of 80% or less is 4.41%

I have precisely no idea what property you have in mind- you linked to Daft.ie without specifying which property you had in mind. I have no idea where you are renting or where you might like to buy?

Mortgage payments are only one element of property ownership- you are ignoring all other factors other than the headline rent versus mortgage payment- it is quite simply not valid to do this.

The cost of ownership of a rental property along with a risk factor- implies an ownership cost of around 6% of the value of the property, and an implied ROI of approx 25% higher than this- aka rent should be roughly 7.5% of the market value of the property.

You really need to look at far more than the headline rent-versus-mortgage debate........

Im looking at several different 2 and 3 bed properties in different areas in Dublin, houses and apartments.
Obviously you wont be looking at the same ones as i am, so pick your own that you are interested in.

Daft will tell you the rent for these ones you pick.

Then plug in the values, add your tax relief. Its easy isnt it.

Compare the cost of renting to the cost of buying and you're done.

And i dont know where you're getting a 7.5% cost of ownership from. My families houses cost nothing like that to maintain and that is for several different sized properties. I've checked. You are a long way off there with that guess.

its an easy calculation really. Use the 3 sites i gave you and work it out.

Pick a house for eg €250,000 or 300,000 - Expect to knock another 10% or 20% off this price when buying it too (you shouldnt be buying if you dont have savings anyway). Knock your 10% deposit off it too to see what you will need a mortgage for. Take interest relief for 1 or 2 people (depending how many are buying it) off this.

Take whatever AIBs fixed rate that you feel like.

Look up the rent for similar property on daft.ie (take 10% off the rent too).

Take one from the other and you're done.

Now you can paint and renovate the place or do up the garden whatever way you want.

Garauntee you end up with a hell of a lot less in mortgage than rent.

Play with some different firgures and areas too for the fun of it.

Mr Benevolent · 17-05-2009 6:00pm

Garauntee you end up with a hell of a lot less in mortgage than rent.

For now. Look five years down the road and you'll be in a very different world.

TaxiManMartin · 17-05-2009 6:04pm

Confab wrote: »

For now. Look five years down the road and you'll be in a very different world.

Im trying to look 5 years dwn the road and i just cant see what it will be like.

Im so glad you can. So what kind of world will it be?

Since you know and all id love a headsup.

The_Conductor · 17-05-2009 6:18pm

TaxiManMartin wrote: »

Im trying to look 5 years dwn the road and i just cant see what it will be like.

Im so glad you can. So what kind of world will it be?

Since you know and all id love a headsup.

Its a safe bet mortgage relief will be abolished for all (as oppossed to the current Year 7 cut-off, and for investors- mortgage interest will no longer be an allowable as a tax deductable cost....

As to the kind of world- hold on- I've run out of crystal cleaning spray- come back to me on it......

Re: rents on DAFT- under no circumstances should you take these as 'market rates'. The norm is now that a landlord asks for 'X' with the expectation that they will be bartered down to 'Y'- the actual market rate....... Its rare that a landlord will not reduce the rent these days.

TaxiManMartin · 17-05-2009 6:28pm

smccarrick wrote: »

Its a safe bet mortgage relief will be abolished for all (as oppossed to the current Year 7 cut-off, and for investors- mortgage interest will no longer be an allowable as a tax deductable cost....

smccarrick wrote: »

As to the kind of world- hold on- I've run out of crystal cleaning spray- come back to me on it......

So you say mortgage interest relief will be abolished for all, but you admit you dont really know what will happen too

We cant really speculate here. I've said to use current prices and rents on daft and use current interest rates (that can be fixed for 10 years). Im not speculating here. But you are.

smccarrick wrote: »

Re: rents on DAFT- under no circumstances should you take these as 'market rates'. The norm is now that a landlord asks for 'X' with the expectation that they will be bartered down to 'Y'- the actual market rate....... Its rare that a landlord will not reduce the rent these days.

Didnt i say to knock off 10% off both rents and house prices on daft.

So, using the figures i gave you, or some realistic figures of your own, would you agree that the people who say buying is cheaper than renting are not wrong?

Note: Im not advising people to buy. Just pointing out that thats the situation with rent amounts and mortgage amounts right now. I cant tell the future, but neither can anyone else.

The_Conductor · 17-05-2009 6:40pm

TaxiManMartin wrote: »

So you say mortgage interest relief will be abolished for all, but you admit you dont really know what will happen too

We cant really speculate here. I've said to use current prices and rents on daft and use current interest rates (that can be fixed for 10 years). Im not speculating here. But you are.

The proposal was to abolish it immediately- but it was agreed with the social partners that it would be done on a phased basis. Its not idle speculation- its simply a matter of timing......

TaxiManMartin wrote: »

Didnt i say to knock off 10% off both rents and house prices on daft.

So, using the figures i gave you, or some realistic figures of your own, would you agree that the people who say buying is cheaper than renting are not wrong?

Note: Im not advising people to buy. Just pointing out that thats the situation with rent amounts and mortgage amounts right now. I cant tell the future, but neither can anyone else.

Allowing for knocking 10% off asking prices (which to be honest is very conservative- predictions are for far higher reductions in both rents and house prices)- and in a current market predicted to fall somewhere between 30 and 50% in the next 3 years- at the end of Year 10- when you would be coming out of your fixed period- your mortgage would be ~10% higher than the then market price for housing- allowing for price rises to increase again at the average rate of inflation.

What I was actually saying- is the headline purchase price of property- masks a myriad of other ongoing ownership costs- that one would not incur when renting. You need to factor these into the equation too.

At the moment- the big argument is *not* whether apartment x could be rented for more or less than it would cost to buy apartment x. Its- how much is apartment x going to fall in value over the next few years- and is the fall more or less than the difference in renting versus buying compounded. Inevitably- unless you are using incredibly generous predictions- the potential downside to property ownership is simply too high- to offset against whatever rent you might be paying......

TaxiManMartin · 17-05-2009 7:01pm

smccarrick wrote: »

The proposal was to abolish it immediately- but it was agreed with the social partners that it would be done on a phased basis. Its not idle speculation- its simply a matter of timing......

Allowing for knocking 10% off asking prices (which to be honest is very conservative- predictions are for far higher reductions in both rents and house prices)- and in a current market predicted to fall somewhere between 30 and 50% in the next 3 years- at the end of Year 10- when you would be coming out of your fixed period- your mortgage would be ~10% higher than the then market price for housing- allowing for price rises to increase again at the average rate of inflation.

What I was actually saying- is the headline purchase price of property- masks a myriad of other ongoing ownership costs- that one would not incur when renting. You need to factor these into the equation too.

At the moment- the big argument is *not* whether apartment x could be rented for more or less than it would cost to buy apartment x. Its- how much is apartment x going to fall in value over the next few years- and is the fall more or less than the difference in renting versus buying compounded. Inevitably- unless you are using incredibly generous predictions- the potential downside to property ownership is simply too high- to offset against whatever rent you might be paying......

All of your arguments here are speculation.

My point :
People who say mortgage payments are cheaper than rental payments on the same property are actually not talking through there arses.

You are flying in arguments about ifs and buts that may or may never happen. Keep going by all means.
You're actually coming out worse than the idiots who pulled down any possible argument they could find for property prices rising.

Theboinkmaster · 17-05-2009 7:02pm

TaxiManMartin wrote: »

So you say mortgage interest relief will be abolished for all, but you admit you dont really know what will happen too

We cant really speculate here. I've said to use current prices and rents on daft and use current interest rates (that can be fixed for 10 years). Im not speculating here. But you are.

Didnt i say to knock off 10% off both rents and house prices on daft.

So, using the figures i gave you, or some realistic figures of your own, would you agree that the people who say buying is cheaper than renting are not wrong?

Note: Im not advising people to buy. Just pointing out that thats the situation with rent amounts and mortgage amounts right now. I cant tell the future, but neither can anyone else.

You are wrong - interest rates are at a historical low and once the EU economy recovers which it WILL do interest rates will increase back up to normal levels of 4-5% - my guess if 3-5 years time. So yes at present it may be cheaper to buy than rent however making any decision on current rates is a complete error as we are in exceptional circumstances. Also you have to factor in the capital depreciation which you will suffer - 30 to 50% still to go IMO.

So technically it may be currently cheaper to rent than buy but over your 30 year mortgage or whatever it certainly will not.

Theboinkmaster · 17-05-2009 7:06pm

TaxiManMartin wrote: »

All of your arguments here are speculation.

My point :
People who say mortgage payments are cheaper than rental payments on the same property are actually not talking through there arses.

You are flying in arguments about ifs and buts that may or may never happen. Keep going by all means.
You're actually coming out worse than the idiots who pulled down any possible argument they could find for property prices rising.

No he isn't - he's using 2 finite arguements:

- interest rates WILL increase
- property value WILL fall

no ifs or buts about it -> these are facts

Current mortgage payments may be cheaper than current rent but certainly not over the life of your mortgage which certainly you must examine

People who say mortgage payments are cheaper than rental payments on the same property are idiots as that is only due to the extreme current economic climate which the world has never seen before and is only a very miopic view - this WILL not be the case in 3-5 years time that is certain, especially noce you factor in certain capital depreciation into your sums

Theboinkmaster · 17-05-2009 7:08pm

smccarrick wrote: »

The proposal was to abolish it immediately- but it was agreed with the social partners that it would be done on a phased basis. Its not idle speculation- its simply a matter of timing......

Allowing for knocking 10% off asking prices (which to be honest is very conservative- predictions are for far higher reductions in both rents and house prices)- and in a current market predicted to fall somewhere between 30 and 50% in the next 3 years- at the end of Year 10- when you would be coming out of your fixed period- your mortgage would be ~10% higher than the then market price for housing- allowing for price rises to increase again at the average rate of inflation.

What I was actually saying- is the headline purchase price of property- masks a myriad of other ongoing ownership costs- that one would not incur when renting. You need to factor these into the equation too.

At the moment- the big argument is *not* whether apartment x could be rented for more or less than it would cost to buy apartment x. Its- how much is apartment x going to fall in value over the next few years- and is the fall more or less than the difference in renting versus buying compounded. Inevitably- unless you are using incredibly generous predictions- the potential downside to property ownership is simply too high- to offset against whatever rent you might be paying......

By the way smccarrick I've been a long-term lurker, ocassional poster, but I always 99% agree with your posts on property and greatly appreciate the information you post, and you spending the time posting them.

Cheers and keep it up

The_Conductor · 17-05-2009 7:23pm

TaxiManMartin wrote: »

All of your arguments here are speculation.

My point :
People who say mortgage payments are cheaper than rental payments on the same property are actually not talking through there arses.

You are flying in arguments about ifs and buts that may or may never happen. Keep going by all means.
You're actually coming out worse than the idiots who pulled down any possible argument they could find for property prices rising.

Its not speculation.

You are stating you can find x number of properties to rent on Daft and can purchase similar properties for cheaper.

I am pointing out-

1. You are looking at headline prices and ignoring any other costs of ownership
2. You are looking at today- if you look down the road, to when your fixed term is up- the situation you will probably find yourself in is that you have made x amount of payments, mostly interest- and are now in a negative equity situation

I am not denying you can find examples- I am stating that even if you can (and yes, you can), there is a good reason the vast majority of sane people are not doing what you suggest.

Yes- you can find lots of examples- however you're not looking at the full picture. If you *do* want to buy at the moment- by all means go ahead- but you owe it to yourself to educate yourself as to the possible implications of your decision.

I've taken a 20% cut in my net pay year todate and expect to end up a lot worse off after the next budget. Yes- you can call it speculation- but surely its better to speculate about things that have a significant likelyhood of coming to pass- than it is to be caught on the hop without ever having contemplated the 'what ifs' when they come and bite us.

Normalisation of interest rates is between 4 and 5% (according to the ECB). Normally there is a 1% margin built-in on top of this bringing it up to a possible 6%. Based on coming off your 10 year fixed onto this- it would be a possible 33% increase in your interest payments. What are the sums? Do they add up?

If its an apartment- its got an annual managment charge. An example of this is the charge at Hueston South Quarter- its 3,200 this year. This is a hell of a lot of ofter-tax, non-tax-deductable income...... If its not a managed complex- you have insurance, upkeep, etc (which could well add up to this)..... The charge in the different complexes on Cunningham road is 3,800 this year. The charge in the Old Distillery in Smithfield is 2,800. The charge in The Village Weir in Lucan Village is 2,200......

These are the reason I will never ever buy an apartment or a townhouse or any other sort of a leasehold property- ever again.........

You seem peeved at me for trying to be devils advocate. I'm not denying that there are plenty of examples where the mortgage payment would be less than rent currently being sought. I am suggesting you need to do more research on this.

md23040 · 17-05-2009 7:50pm

smccarrick wrote: »

annual management charge. Hueston South Quarter 3,200 this year. Cunningham road is 3,800 this year. Old Distillery in Smithfield is 2,800. The Village Weir in Lucan Village is 2,200.....

Irish property is scary and apartment living is even scarier. On the rent versus buying argument (in the current climate) are the banks still offering trackers, or like the UK is it SVR’s for new mortgages with base plus a couple of points on top.

Also trackers could be in for an arse kicking. www.timesonline.co.uk/tol/money/property_and_mortgages/article6300876.ece

Ireland is in deep denial. Some haven't realised the credit party has ended that will kill property. Average homes will cost 4.0-4.5 times average income. The credit bust has affected stock markets; it will affect property the same way. The only difference is that property may die from a thousand cuts and will suffer more as a result.

TaxiManMartin · 17-05-2009 8:53pm

smccarrick wrote: »

Its not speculation.

You are stating you can find x number of properties to rent on Daft and can purchase similar properties for cheaper.

I am pointing out-

1. You are looking at headline prices and ignoring any other costs of ownership
2. You are looking at today- if you look down the road, to when your fixed term is up- the situation you will probably find yourself in is that you have made x amount of payments, mostly interest- and are now in a negative equity situation

I am not denying you can find examples- I am stating that even if you can (and yes, you can), there is a good reason the vast majority of sane people are not doing what you suggest.

Yes- you can find lots of examples- however you're not looking at the full picture. If you *do* want to buy at the moment- by all means go ahead- but you owe it to yourself to educate yourself as to the possible implications of your decision.

I've taken a 20% cut in my net pay year todate and expect to end up a lot worse off after the next budget. Yes- you can call it speculation- but surely its better to speculate about things that have a significant likelyhood of coming to pass- than it is to be caught on the hop without ever having contemplated the 'what ifs' when they come and bite us.

Normalisation of interest rates is between 4 and 5% (according to the ECB). Normally there is a 1% margin built-in on top of this bringing it up to a possible 6%. Based on coming off your 10 year fixed onto this- it would be a possible 33% increase in your interest payments. What are the sums? Do they add up?

If its an apartment- its got an annual managment charge. An example of this is the charge at Hueston South Quarter- its 3,200 this year. This is a hell of a lot of ofter-tax, non-tax-deductable income...... If its not a managed complex- you have insurance, upkeep, etc (which could well add up to this)..... The charge in the different complexes on Cunningham road is 3,800 this year. The charge in the Old Distillery in Smithfield is 2,800. The charge in The Village Weir in Lucan Village is 2,200......

These are the reason I will never ever buy an apartment or a townhouse or any other sort of a leasehold property- ever again.........

You seem peeved at me for trying to be devils advocate. I'm not denying that there are plenty of examples where the mortgage payment would be less than rent currently being sought. I am suggesting you need to do more research on this.

Im not peeved at you.
I can just see what you are at.
You are leaving out half of the equations just to suit your arguement

For example:

You talk about coming off a 10 year fixed rate in 10 years and repayments increasing by 33% and yet ignore 10 years of wage inflation at the same time.

And if you work it out, you might find that after 10 years on a 25 year mortgage the principal, and so, the interest part of the mortgage is lower. And the difference between what you pay on 4.5% now and 6% in 10 year is actually very big. You will be paying a hell of a lot less in interest in 10 years at 6% on the remaining principal for the remaining 15 years than you are now at 4.5% on the full principal.

You pick the worst example of service charges you can find. What about an average. Nobody who i know of pays that kind of service charge for an apartment - nowhere near it.

If its a house it wont have a service charge.

Insurance + upkeep does not add up to anywhere near €3000 a year on an average house either.

TaxiManMartin · 17-05-2009 8:55pm

md23040 wrote: »

Average homes will cost 4.0-4.5 times average income.

Put a price on that assumption and tell us how much a couple would pay each month for a 25 year mortgage on that.

And whats your average house?

And then based on your price structure, what is the cost per month on houses a few steps down from the average house?

The_Conductor · 17-05-2009 9:20pm

TaxiManMartin wrote: »

Im not peeved at you.
I can just see what you are at.
You are leaving out half of the equations just to suit your arguement

For example:

You talk about coming off a 10 year fixed rate in 10 years and repayments increasing by 33% and yet ignore 10 years of wage inflation at the same time.

You are assuming there will be wage inflation. The probability is a significant fall in average salaries. In 2008 we had the 5th highest GDP per head of population- in the world. There is no justification for this. It optimistic in the extreme to even consider the possibility of wage inflation.......

TaxiManMartin wrote: »

And if you work it out, you might find that after 10 years on a 25 year mortgage the principal, and so, the interest part of the mortgage is lower. And the difference between what you pay on 4.5% now and 6% in 10 year is actually very big. You will be paying a hell of a lot less in interest in 10 years at 6% on the remaining principal for the remaining 15 years than you are now at 4.5% on the full principal.

And the outstanding principle on your mortgage may be significantly higher than the market value of the property......... Have you considered this? Also- very few First Time Buyers are taking out 25 year mortgages- the norm is 35 year mortgages. I am guessing you're a taxi driver from your username- but you'd need another fulltime job- or a second income from a partner- to make the income requirements work....... It just won't work for the average person.

TaxiManMartin wrote: »

You pick the worst example of service charges you can find. What about an average. Nobody who i know of pays that kind of service charge for an apartment - nowhere near it.

Those are the ones I know at the top of my head- and relate to two recent threads on this forum (relating to Heuston South and the Old Distillery), I am paying in Lucan Village myself- and I have siblings who are owner occuppiers on Cunningham Road. I did not pick out worst examples at all- I picked the couple I know off the top of my head. I'm sure I could both significantly higher and significantly lower- were I to go hunting......

TaxiManMartin wrote: »

If its a house it wont have a service charge.

If its a freehold property it won't. There are houses in managed complexes- there are 2 different complexes like this on Main Street Lucan Village alone. Just being a 'house' rather than an apartment or a duplex- does not exclude it from the possibility of a management charge. You have to make sure its Freehold.

TaxiManMartin wrote: »

Insurance + upkeep does not add up to anywhere near €3000 a year on an average house either.

Painting a house periodically (say every 4-5 years), wear and tear on furniture and fixtures and fittings (normally 5 years for furniture and ~10 for fixtures and fittings), periodic renovations, inevitable gardening and other house purchases- do add up- significantly. Even bed linen can be pricey as hell- its the little things that add up before you know whats happened.........

md23040 · 17-05-2009 9:48pm

TaxiManMartin wrote: »

Put a price on that assumption

Have you a modicum of intelligence on the subject. Did you not know that many house surveys track the costs of houses with average sole income (not dual). That is to name a few - Nationwide, Rightmove, RICS UK, Shiller Index (USA). According to UK Nationwide the long term trends of average income to average house priced is 3.5x's so with average salary @ €35,000 thereabouts (Feb 2009-payscale.com), then

€35,000 x 4 = €140,000 to 4.5 times @ €157,500

The average price paid for a house nationally in March 2009 was EUR 253,546. Therefore houses will deflate another 44.4% @ 4’s times income to 37.8% @ 4.5 times income. But now that government withdrew TRS and net incomes are reduced more by tax for the foreseeable future, another 10% can be added to this or

€140,000 x .9 = €126,000 or €157,500 x .9 = 141,750

www.esri.ie/irish_economy/permanent_tsbesri_house_p

The €126,000 gets near to the magic 3.5 income norm. Overall IMO many people mistook credit and debt for wealth and with the wipe-out in deleveraging amongst paper millionaires of 2007 is bringing a great dose of reality back to expectations

TaxiManMartin wrote: »

and tell us how much a couple would pay each month for a 25 year mortgage on that.And then based on your price structure, what is the cost per month on houses a few steps down from the average house?

Sorry that you disagree for some reason that house prices will somehow stabilise by interest rate intervention, even though the employment market will deteriorate further for a long time. That will be a first anywhere - a bit of a myth like the soft landing originally predicted. Again Ireland is still in UBER denial of reality.

oflahero · 17-05-2009 10:43pm

smcarrick & TaxiManMartin - it's rare (and gratifying) on a forum to see two people actually have an intelligent argument without descending into a flame war. Keep it up!

Might I suggest you pick three or so representative properties off Daft and debate the pros/cons of renting versus buying on each? (e.g. 2-bed apt in Carpenterstown, 3-bed semi-d in Clonskeagh, detached 4-bed house in an estate in Naas...) Pick prices off Daft, knock 10% off renting ask price & 15% off buying ask price and go from there. Can't avoid speculation and pure opinion, but without as many actual figures as possible there's just too much speculation and opinion in the mix.

Freddie59 · 17-05-2009 11:20pm

Gurgle wrote: »

I think you misunderstood my post.
50 'property developers' does not refer to 50 people.

Does it really matter? They've screwed Ireland, inc.:mad:

blast05 · 17-05-2009 11:26pm

Good debate.
Smccarrick - as already commented by others, i pretty much always agree with your comments. However, your comment i have pasted below is that 1 in 100 i have to disagree with. Not of course that it is impossible that wages will stagnate but if they do then it will be like Japan and thus interest rates will have to stay low for the 10 years ..... i.e.: if you argue that wages will stagnate for a decade then i would argue you have to accept that interest rates will also remain very low for a decade ...... you are using both points to support your argument.

You are assuming there will be wage inflation. The probability is a significant fall in average salaries. In 2008 we had the 5th highest GDP per head of population- in the world. There is no justification for this. It optimistic in the extreme to even consider the possibility of wage inflation.......

David McWilliams predicts further 50% fall in house prices

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