When average house price is €150k

OMD

mrgaa1 wrote: »

are we not looking at equations that can't work? Is there any country in the world where a ratio such as x times the median/average wage equals average house price? Are there countries that have similar equations?
I don't think there is any equation that could work? if there was would that not be a touch of communism?:rolleyes:
I don't think any government would set such an equation so speculation about this equation or that equation is like asking how long is a piece of string as you look through the smoke?
Supply and demand dictates costs of most commodities? If a gallon of petrol is €5 in Ireland why isn't it €5 in USA, Canada, France, Germany etc... different circumstances in all areas.
So to say that a commodity is worth x based on a calculation using y times a certain number doesn't work and can't work.

UK average house price is here - http://www.rightmove.co.uk/news/house-price-index/november-2009 £226k or approx €250,000
So based on a previous post its 10 times the median salary. So in our case using the same calculation based on the same info it would mean €350,000 for average house price which is not sustainable.

In the north average house price is £164k - http://news.bbc.co.uk/1/hi/northern_ireland/8362940.stm average wage is £26k http://www.payscale.com/research/UK/State=Northern_Ireland:_Belfast/Salary which is 6 times the average wage

The north is probably a closer template to work to given that the north and south is heavily weighted towards public servants - particularly the north.

Then you have to take account of the different tax rates between UK and Ireland. Property tax in UK. All of which should make their prices lower (as a multiple of gross income) than Ireland.

gurramok

OMD wrote: »

Obviously if you are using median wage you also have to use median house price. I don't know what the median price of property is in Ireland, but I would imagine that no more than wages, it is lower than the average.

What is the average(or median) wage then?

If its 35k, going by that assumption at 4 times wage gives 140k for that house.

I gave a generous 35k but I just wouldn't say thats the case for Drogheda if you know what i mean

stepbar

OMD wrote: »

Absolutely. Statistics based on averages over an entire area can never be as useful as some info you get down the pub. :rolleyes:

Eh, so you're saying my friend is lying? :rolleyes

jhegarty

stepbar wrote: »

Eh, so you're saying my friend is lying? :rolleyes

He/She is just saying that one house does not make an average house price.

stepbar

jhegarty wrote: »

He/She is just saying that one house does not make an average house price.

That's not what was said.

OMD

stepbar wrote: »

That's not what was said.

Then what point were you trying to make?

OMD

gurramok wrote: »

What is the average(or median) wage then?

I don't know. What is the median house price?

stepbar

OMD wrote: »

Then what point were you trying to make?

I think it's fairly clear. Would you trust an auctioneer to hand over "correct" stats?

jhegarty

stepbar wrote: »

I think it's fairly clear. Would you trust an auctioneer to hand over "correct" stats?

English/Scottish stats can be got from the land registry for actual sales. So price surveys (unlike Ireland) are accurate.

OMD

stepbar wrote: »

I think it's fairly clear. Would you trust an auctioneer to hand over "correct" stats?

I am sorry it is not clear at all. So stats re house prices are wrong. Are stats on wages also wrong. The quoted stats say an average house in Northern Ireland is £156,857 (based on research by University of Ulster. Prices for rest of UK come from Land Registry). You then say an average 3 bed house in NI is £150,000. You add in some stuff about your friend paying 130K , So I am sorry I have no idea what point you are trying to make

stepbar

OMD wrote: »

I am sorry it is not clear at all. So stats re house prices are wrong. Are stats on wages also wrong. The quoted stats say an average house in Northern Ireland is £156,857 (based on research by University of Ulster. Prices for rest of UK come from Land Registry). You then say an average 3 bed house in NI is £150,000. You add in some stuff about your friend paying 130K , So I am sorry I have no idea what point you are trying to make

There's a link a number of posts back from the BBC website which gives an average breakdown per house type from across the regions (NI inc). I also have the University of Ulster research (got it this morning). I haven't had time to look at it yet, but based on the average you quoted it seems that there's a significant difference. And finally, I wouldn't consider my friend to be talking sh1te. That's the price he's paying.

I wouldn't place all your faith in a bunch of stats.

ntlbell

jetski wrote: »

It averages 7 years from peak to peak prices. so it may well take 4 years to get there.

Here is a nice 3 bed semi for 4 times the average wage?

has the avg wage had a big increase recently?

surely it's dropped massively?

OMD

stepbar wrote: »

There's a link a number of posts back from the BBC website which gives an average breakdown per house type from across the regions (NI inc). I also have the University of Ulster research (got it this morning).
I haven't had time to look at it yet, but based on the average you quoted it seems that there's a significant difference.

Why bother looking at it. That is the stats quoted already. The figures on the BBC website are the figures from the University and are the ones I quoted

stepbar wrote: »

And finally, I wouldn't consider my friend to be talking sh1te. That's the price he's paying.

I wouldn't place all your faith in a bunch of stats.

I never said your friend was talking sh1te.

_Kooli_

There are so many variables its impossible.
Might be a better idea to take average or median household income instead of single income.
You could remove anyone who has a house already from the pool.

Or anyone who earns too little to afford a house at all even if they fell to €100k.

You could probably also remove anyone who are multi millionaires and wont be bidding on the average house ever.

Just too many variables to even think about pegging the average house price to the average wage.

jhegarty

_Kooli_ wrote: »

There are so many variables its impossible.
Might be a better idea to take average or median household income instead of single income.
You could remove anyone who has a house already from the pool.

Or anyone who earns too little to afford a house at all even if they fell to €100k.

You could probably also remove anyone who are multi millionaires and wont be bidding on the average house ever.

Just too many variables to even think about pegging the average house price to the average wage.

In the same line an average house won't have one income. It will be closer to 1.5 incomes

_Kooli_

jhegarty wrote: »

In the same line an average house won't have one income. It will be closer to 1.5 incomes

True. Just another variable.
Savings, car loans etc all need to be factored in.
Its just completely impossible to peg average wages to average house prices.

useurename

the average house will never sell for 150k in the next few years.a site within 20 miles of galway maybe 150k.a nice house for 150k i wish.i am bitter with both banks and housing market.yeah id like to buy a house and no i cant get a mortgage.how can i afford to save when my wages have decreased,taxes have gone up, and creches dont get any cheaper.aargh.......

Senna

useurename wrote: »

yeah id like to buy a house and no i cant get a mortgage.

There are a huge amount of people like you.
What do you think will happen, house prices will always stay high and the house will just sit on the market without future reductions??
Prices have to/will drop to a level were houses will sell, there will always be a market and there will always be sellers willing to drop the price further to get a sale. These sellers set the market price, not the seller who "wont sell for less than its worth".:rolleyes:
But more important that wage multiples and examples from other countries, its the sear amount of empty properties we have in Ireland that will result in a sub 150k national average house price. If you dont own property now, then your in good shape, wait till the house that meets your needs is affordable to you, whither that be next week, month, or year.

professore

uberwolf wrote: »

I don't have the answer, so I'm not trying to be as smart as I sound but why is that not true of the UK for example?

Avrg House price £224K

Avrg Salary c.£25K

Because the UK are just as stupid as we are when it comes to property. Look at the amount of property programmes on TV FFS. Also the average includes London where prices are astronomical. We would do better to compare to Wales or Scotland. Also 224K is too high - see here www.housepricecrash.co.uk, varies from £158,377 to £226,440, the former from the Land Registry Monthly report and the latter from (surprise surprise !) an estate agent.

The median is a much better measure than the average for house prices anyway as a few multimillion houses will make the average much larger. Junior Cert Mathematics.

irishguy

The average house price could quite easily fall back to €150,000 that would bring us back to early 2000 prices. There are quite a few houses that are back to 2000 prices already (in dublin city).

Also the argument about working out house prices based on a multiple of the average salary will never work as financial institutions do not lend on this basis anymore. Best of luck trying to come up with a formula to work this out as there are so many variables.
Another thing that will have a big influence in the future is that people will be living a lot longer and working longer too. So GDP will increase and mortgage terms of 35/40 years will be standard.

Good idea for a PHD if you have a few spare years

_Kooli_

I think its obvious anyone trying to peg average wages to average house prices is on a loser. Its impossible.

gurramok

_Kooli_ wrote: »

I think its obvious anyone trying to peg average wages to average house prices is on a loser. Its impossible.

Yeh median is what we need. We know that 50% of the workforce do not pay income tax so thats 50% who cannot afford present house prices as offered.

The sheer numbers of houses/apts for offer means the numbers out there to take them up at the prices offered are non-existent, that oversupply problem comes in.

The 'average house price' or 'median' will come down to reflect the numbers of demand out there where national GNP is decreasing year on year.

Throw in the highest private sector debt in the EU and you have a serious problem where a significant portion across all earning groups wouldn't even qualify for a mortgage in the first place unlike pre-bubble times.

Blackjack

I think people will still be able to rent houses though. Throughout the craziness, anyojne on the average wage would have been unable to afford a house on normal multiples. While we should get closer to normality, I'm not convinced that we'll reach a stage where average wages will allow someone to afford a 3 bedroom semi D.

mrgaa1

the issue I have with your anology is that there are 260million in USA - there are 4.5million in ireland. Different country, different situation.

It won't happen here in Ireland unless there is an utter collapse of government, IMF are in and the people are out on the streets looking through bins for food.

Oops looks like we're not far of it

apolo

In the US, analysts claim that, in the long run, house prices should be equal to between 12 and 14 times earnings. This means that if a house is generating a rent of $10,000 a year, it must be worth between $120,000 and $140,000 a year.

Apply this test to Ireland. A quick search of Daft.ie will reveal, for example, that a three-bedroom house in Co Wicklow - advertised as an investment property - is on sale for €289,000.

The same website tells us that the average rent for a three-bed in Arklow is €850. So let us say that, in the best possible case, this place is rented for 11 profitable months a year - the final month's rent goes on various costs. The implication from the American model is that the house is worth about €122,000.

The implication from this, compared to the advertised price of €289,000, is that the house is still wildly overvalued. The Irish calculation means that the house is trading at 31 times its annual yield. This clearly needs to fall dramatically by close to 60 per cent for it to make any financial sense to buy.

in the old days one could get 3 times your wages plus 50% of your wifes wages as a mortgage
the average industrial vage is 38,000 therefore one should get 38,000x3.5=133,000 quite close to the above.

the top 3 pargraphs are from david mcwilliams.

asdasd

Then you have to take account of the different tax rates between UK and Ireland. Property tax in UK. All of which should make their prices lower (as a multiple of gross income) than Ireland.

The big problem in the UK is supply, there is a forecast shortage of 1M houses by 2020 due to immigration, and changes in household formation.

Now thats a disgrace, but there it is.

( So few houses are built in the UK that Ireland nearly built as many houses in the latter stage of the boom as the entire UK - i.e. about 100K to their 130K. If the population ratios were reflected in UK house building they would have built 1.5 million houses. That tells us that Ireland is on a hiding to continued price drops, but not the UK).

Sigma Force

There are perfectly good houses available for €150 and much less, but it's a matter of location. I don't think the average house price will go down to €150 but then it's hard to say because no 2 houses are the same even on estates two houses next door to each other on an estate can be €20k in the difference.

There are new build semi ds available for €152 in Co Tipp the average 2 bed terrace is around 180k in some towns and have been for a long time. I don't think in larger cities the prices are going to go down to 150 though perhaps 1 bed apartments.

asdasd

My Feeling is that Ireland's recession might well become a depresssion. I was reading the Economist today, the European Commission is forcing all European countries to reduce the deficit. In irelands case that would take 2% out of the economy every year for up to ten years in tax rises, spending cuts, or both. That could turn into a depression. And then an increase in interest rates would exacerbate the whole shebang.

dotsman

A couple questions (some of which were touched on above):

Where are people getting this multiplier of 4? Is it a proven number for modern western countries or is it just some figure that someone came up with for no good reason and just been bandied around since?

Secondly, why would average industrial wage matter? Average industrial wage is kept very low by the number of people who won't be buying a house anyway (such as those in council housing, renting, or just starting out in their careers). Would a better figure be the average household income of homeowners? I'd imagine that's much higher, but how much? Are there any figures for this? Why aren't people talking about this rationally?

At our current salary levels, there is no way that €150K will ever be the average house price. I mean that's approx €700 per month, based on 30 year mortgage 5-year fixed interest (only €600 on a variable!). Are we saying that the average home-owner/potential buyer can only afford that much to put towards a mortgage?

asdasd

Secondly, why would average industrial wage matter? Average industrial wage is kept very low by the number of people who won't be buying a house anyway (such as those in council housing, renting, or just starting out in their careers). Would a better figure be the average household income of homeowners? I'd imagine that's much higher, but how much? Are there any figures for this? Why aren't people talking about this rationally?

I think the accurate measure is median house price to median wage. not average. the median is not affected by high or low earners.

At our current salary levels, there is no way that €150K will ever be the average house price. I mean that's approx €700 per month, based on 30 year mortgage 5-year fixed interest (only €600 on a variable!). Are we saying that the average home-owner/potential buyer can only afford that much to put towards a mortgage?

The future may bring higher interest rates. Just saying. Ireland's property will reach it's nadir when interest rates go high, and the government has dried the marrow from the bone in tax increases.


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