What's the max house price I should consider

Mike_Hunt

My wife and I are currently looking to buy our first home. We have saved and scrimped for a good few years now and finally are close to the deposit. We have mortgage approval (perfect credit rating - completely debt free). To be comfortable with mortgage repayments we wouldn't like to take out a mortgage of much more than €460,000. So that means we could afford a house worth €500,000.

I'm looking for opinions here on what range of house prices we should be looking at. We are looking to buy in South East Dublin so decent houses we'd be interested in are varying from €475,000 - €750,000. I mean should we even look at houses at the €600k mark - realistically are offers that much lower than the asking being accepted (I know a lot depends on the buyers situation).

Anyway any advice much appreciated.

ArraMusha

Do you know what the repayments are on a mortgage of that amount?
I doubt you would get a mortgage of that amount without having an equivalent amount..? With rising interest rates I wouldnt like to be paying that back each month.

kennyb3

unless you give us salary levels, outgoing etc so we can compare your left over income to likely repayments we are pishing in the dark speculating.

also buy a house you want at a reasonable price not one that fits the amount you ve been approved for

Mike_Hunt

BOI quote that a €460,000 mortgage currently has a monthly repayment of €1796 (Variable rate). Thats approx 25% of our combined monthly salary. Like I said we are 100% debt free at the moment and no kids - usual monthly bills.

We were approved for more than €500k but €500k house price is a self imposed limit. I'm just trying to maximise the property we can get for that price and was looking for opinion on what offers are typically being accepted by sellers at the moment e.g. 10% below asking. So is it a waste of my time to look at houses over €550k say.

If you look at www.thepropertypin.com the house prices come down in sizeable chunks.

MaceFace

Mike_Hunt wrote: »

BOI quote that a €460,000 mortgage currently has a monthly repayment of €1796 (Variable rate). Thats approx 25% of our combined monthly salary. Like I said we are 100% debt free at the moment and no kids - usual monthly bills.

We were approved for more than €500k but €500k house price is a self imposed limit. I'm just trying to maximise the property we can get for that price and was looking for opinion on what offers are typically being accepted by sellers at the moment e.g. 10% below asking. So is it a waste of my time to look at houses over €550k say.

If you look at www.thepropertypin.com the house prices come down in sizeable chunks.

Well it looks like you are talking about a 35 year mortgage with an interest rate of 3.1%.
Let me start by asking "Are you crazy?"
Okay, so assume interest rates are a more realistic level (6%), this puts your monthly repayment at €2622.
Now, be sensible and take a 25 year mortgage, your repayments are: €2963.
Thats 41% of your monthly takehome which is a little on the high side but you can do it.

Did you read todays Indo?

kennyb3

+1 what maceface says plus knock alot more than 10% of asking at that price level. also why are you looking to spend 500k - what i mean is its blatantly obvious you want to get the best house you can for that level of money.

Your approaching it the wrong way around. find a few nice houses taht meet all your criteria, decide what they are worth and bid less.

plus spending 500k in these times is nuts do you really nedd that debt hanging over your head.

Mike_Hunt

Thanks for the advice guys. No, I hadn't seen the Indo article but it makes for interesting reading.

I just did a quick mortgage calculation there we will definitely do the math and consider all the options before we plunge in - its nice to see the figures though.

We are definitely looking for houses that tick the boxes its just that in the areas we are looking you don't get much change from €500k and anything decent is more like €600k. However I'm a little more confident now of making more reasonable offers. I'll be bold.

You know what I definitely don't want that debt hanging over my head but in our early thirties now we want to be thinking about buying a home - I don't want to be working late into life just to feed a mortgage. I've rented in Dublin now for 12 years and to be honest I've heard all the arguments but to me its dead money and I've buried enough of it at this stage!

Duckjob

Jesus. It's like the last 2 yrs never happened :eek:

- Can you say with certainty that both your jobs are rock solid?

- How would you cope if this is not the case and one of you lost your jobs?

- How will you cope with interest rates at least 5-6% higher than they are now.

- How will you cope WHEN the government starts squeezing all our tits purple with much higher tax rates to pay back all the NAMA and recap money?

- Will you be content if you buy a property for 500K and it's going for 300K in a couple of years with no hint of price inflation in sight?


I think you're absolutely nuts to be considering getting yourself into that much debt in the current climate.

Go for it if you want to. Just do us all a favour and promise you won't be coming looking for YOUR NAMA, in a couple of years time. All these bailouts are making me quite queasy at this stage...

kennyb3

early 30s = forget about 35 year mortgage. do you want to still be paying it off at 66 or so? when do you plan to retire. So the house you want to buy are asking 600k now (so maybe €850k in boom). Are you sure your looking hard enough? Are you really sure you want a fortune of a mortgage hanging over you. best of luck but dont risk the rest of your life for a house.

kennyb3

Duckjob wrote: »

Jesus. It's like the last 2 yrs never happened :eek:

+1, fairyland for some people.

quozl

Mike_Hunt wrote: »

You know what I definitely don't want that debt hanging over my head but in our early thirties now we want to be thinking about buying a home - I don't want to be working late into life just to feed a mortgage.

Mike, not trying to be mean, but that shows you haven't thought this through.

If you borrow now, over 35 years, and you are say 32 years old, then you'll be paying back until you're 67.

If you borrow in 3 years, to buy an equivalent house, but things have fallen enough that you can do it at the same monthly payment over 25 years, then you'll be paying back until you're 60.

I'm 32 in September, have twins on the way, and don't want to be 'working late into life just to feed a mortgage.', which is exactly why I'm not buying now.

So, you need to decide what you think the likelihood of that 2nd scenario is...

Not to flog a dead horse:
A) Tax rises in next budget - how else are we going to pay for our spiralling national debt
NAMA - 50 or so billion more borrowing, you know what the yearly interest payments on that is?
C) 13.5% unemployment, and the only reason it isn't still rising rapidly is emigration. Employment is a lagging indicator, and it will take years of growth for unemployment to drop significantly if previous recessions are anything to go by.
D) A falling population, particularly of working age people, thanks to net-emigration. Bye bye future tax payers. Hello lower tax-payer to national debt ratio
E) Credit crisis reducing the money banks CAN lend
F) Banks returning to more sensible multiples reducing the money banks WILL lend
G) Public sector pay cuts - either of you in there? Otherwise, private sector pay-cuts and job loss risks.

and special bonus option, H, the really worrying one imo (actually sorry, NAMA is pretty scary too, as is the unemployment rate)
H) HUGE personal mortgage default crisis coming down the line, and possibly commercial loan crisis (according to recent Indo article 33% of SME commercial loans are already in distress).
How big a bailout will the tax-payer be on the hook for these? Less money for all, means less money to spend on houses.

And on the other side of the coin, we have:
A) FF trying to prop up the property market. Attempting to do something nobody else has ever succeeded at and with their track record for epic success - they're pissing in the wind imo.

Mike_Hunt

Hey Duckjob for fear of starting a private/public sector debate I didnt mention it but here goes we are both Civil Servants. We've been through several rounds of pay cuts so we are painfully aware of what that's like. Jobs should more or less be rock solid, barring further crazy decisions from the inept at the top.

I mean we are ready to buy a house and thats what houses are marked for sale at in these areas - and I'm not talking Vico Road in Killiney either just your regular semi-d in a decent neighbourhood.

Jaysus KennyB I'm deffo looking hard enough - I think I know every house for sale within a 20 mile radius! Looks like I will have to play hard ball with the estate agents and just bid less than what I feel its worth like you said.

Ddad

Sold my house six months ago and have a large whack of cash sitting in the bank. I'm not buyiong unless I get a bargain because 12k on rent isn't a patch on what I'd lose on property depreciation in the next 12 months if I bought a property between the 400k-600k mark. The economy is in the toilet, world economies that will invigorate ours are weak and debt is becoming more expensive. Keep your powder dry.

Our combined income is considerably higher than yours and I wouldn't dream of taking on that level of debt unless you want to see your lifestyle hammered in the coming decade.

MaceFace

Mike_Hunt wrote: »

I mean we are ready to buy a house and thats what houses are marked for sale at in these areas - and I'm not talking Vico Road in Killiney either just your regular semi-d in a decent neighbourhood.

And you are planning on spending half a million quid on it? :eek:

quozl

Mike_Hunt wrote: »

Hey Duckjob for fear of starting a private/public sector debate I didnt mention it but here goes we are both Civil Servants. We've been through several rounds of pay cuts so we are painfully aware of what that's like. Jobs should more or less be rock solid, barring further crazy decisions from the inept at the top.

Jobs may be safe, I hope they are, but salary is definitely not.

More pay-cuts are imo fairly likely. Considering that public sector wage bills are about 20 billion a year, it will be hard for the goverment to make significant savings without touching them.

Also, look at Greece currently. We don't yet know the conditions that will be applied to the joint EU/IMF bail-out they will receive, but, it will likely involve some pretty harsh public sector number and pay cuts.

There is a fair chance(see the FT's opinion on it here, [URL="http:///av.r.ftdata.co.uk/files/2010/02/ScreenShot316.jpg"]http:///av.r.ftdata.co.uk/files/2010/02/ScreenShot316.jpg[/URL] note, slightly outdated as it's pre-NAMA size national debt!, we're actually significantly worse. Huzzah!) that we'll be involved in a similar deal ourselves soon enough.

I'm very happy to not be tied down to a large mortgage, and able to emigrate if I choose. It's a good spot to be in nowadays.

Mike_Hunt

quozl wrote: »

Jobs may be safe, I hope they are, but salary is definitely not.

More pay-cuts are imo fairly likely. Considering that public sector wage bills are about 20 billion a year, it will be hard for the goverment to make significant savings without touching them.

Also, look at Greece currently. We don't yet know the conditions that will be applied to the joint EU/IMF bail-out they will receive, but, it will likely involve some pretty harsh public sector number and pay cuts.

There is a fair chance(see the FT's opinion on it here, [URL="http:///av.r.ftdata.co.uk/files/2010/02/ScreenShot316.jpg"]http:///av.r.ftdata.co.uk/files/2010/02/ScreenShot316.jpg[/URL] note, slightly outdated as it's pre-NAMA size national debt!, we're actually significantly worse. Huzzah!) that we'll be involved in a similar deal ourselves soon enough.

I'm very happy to not be tied down to a large mortgage, and able to emigrate if I choose. It's a good spot to be in nowadays.

Thanks for the info quozl - if the public sector pay deal is accepted in some fashion in the coming months we will probably get a stay on further wage cuts for a number of years but I would be worried about PAYE tax increases and further stealth taxes. Then again like you say something like that could blow all deals out of the water with the governments get out clause.

Duckjob

Mike_Hunt wrote: »

Hey Duckjob for fear of starting a private/public sector debate I didnt mention it but here goes we are both Civil Servants. We've been through several rounds of pay cuts so we are painfully aware of what that's like. Jobs should more or less be rock solid, barring further crazy decisions from the inept at the top.

Mike, with respect, you may consider your jobs safe, but you are aware with so much debt hanging over us, this government are dangerously close to having economic terms and decisions dictated to them by Brussels?

Now, consider these 2 statements of yours:

We are looking to buy in South East Dublin so decent houses we'd be interested in are varying from €475,000 - €750,000.

just your regular semi-d in a decent neighbourhood.

does that not set alarm bells ringing for you? Take a look at what your 500,000 would buy you in other countries around Europe. When you do, it's hard not to see the asking prices even now in Ireland as ridiculous.

The last 10 yrs of boom was based on the notion that Ireland was "special", that basic rules of economics applied everywhere else but here.

Ireland is not "special", it's a small country that had a big property boom, and is now having a big property bust.

..and before anyone accuses me of anti-patriotism... I love my country. I'm heartbroken by the damage that has been done to it by the greed of vested interest groups and individuals and the collective naivety and foolishness of people.

The sooner we recognise the boom for what it was, say "NO" to anyone or anything attempting to perpetuate it (including our government), and concentrate on building REAL economic growth is the sooner we'll all benefit from a better life.

quozl

Mike_Hunt wrote: »

Thanks for the info quozl - if the public sector pay deal is accepted in some fashion in the coming months we will probably get a stay on further wage cuts for a number of years but I would be worried about PAYE tax increases and further stealth taxes. Then again like you say something like that could blow all deals out of the water with the governments get out clause.

I know about the proposed pay deal but honestly, I don't see how any elected government is going to be able to honour that.

As our interest repayments use up an increasing proportion of our available resources we would need to increase public sector pay as a percentage of our total out-going just to keep it where it is now.

That would have to come at the cost of social welfare, education, etc.

That is completely implausible to me.

I think it's just possible the government is trying to pull a fast one

Oh, and if the IMF do come in as is now a certainty for Greece, I think the least you can expect is a 1/3rd decrease in your salary. The very least.

kennyb3

MaceFace wrote: »

And you are planning on spending half a million quid on it? :eek:

regular semi D with 6 bedrooms and a swimming pool for that price me thinks. seriously the op you must be living in cloud cukoo land.

Mike_Hunt

Yeah it kills me to know what we could have for the average Irish house price down the country or abroad but we are based in Dublin - I don't see that changing anytime soon. I'm seeing houses going to Sale Agreed so someones obviously buying - its how much they're paying is what I'd like to know.

Money Shot

Mike_Hunt wrote: »

BOI quote that a €460,000 mortgage currently has a monthly repayment of €1796 (Variable rate). Thats approx 25% of our combined monthly salary.

Some people in the public sector are doing pretty well thank you very much. You must be on some gross to be coming out with that after the cuts, levy, tax etc. Not bad for someone in their early 30's.

I agree with most of the other posters, but if you are happy to buy something that will depreciate in value significantly and where you are willing to spend the next 10-20 years, then go for it.
I wouldn't pay too much attention to asking prices though - a lot of them are aspirational, at best.

Mike_Hunt

kennyb3 wrote: »

regular semi D with 6 bedrooms and a swimming pool for that price me thinks. seriously the op you must be living in cloud cukoo land.

Hey lads don't get carried away I was giving that as a sarcastic example of the inflated prices out there.

kennyb3

Mike_Hunt wrote: »

Hey lads don't get carried away I was giving that as a sarcastic example of the inflated prices out there.

We are looking to buy in South East Dublin so decent houses we'd be interested in are varying from €475,000 - €750,000.

just your regular semi-d in a decent neighbourhood.

well then tell us the truth and not the above. you said the above now your just using them as an example. anyway as said by all of teh above you are nuts im done trying to make you see the light

dblennon

I thought it would be interesting to check rentals in Killiney for 4 beds:

and for 1.5-1.7k a month you could rent a seriously nice pad for 2-3 years and save your self the following.

Minimum 50k in real value of properties at this price
+ presuming a mortgage at the value you are talking about is really 2.5k so you could save the difference and easily get another 15k to knock off the principle.

There is not going to be a 20% jump in prices from the bottom so there is no pressure to predict it

Now really is not the time to be buying a house
Sure even the most basic maths will tell you that since Rents are still falling property prices can only go one way

JuliusCaesar

Not to be personal, but are you thinking of having kids in the near future?
If your spouse goes part-time, how does that impact on your finances?
If the child goes to a creche, they are VERY expensive. By the time my youngster had been in a creche 2 years, I was thinking of school just in terms of free child-minding

Treehouse72

Money Shot wrote: »

Some people in the public sector are doing pretty well thank you very much. You must be on some gross to be coming out with that after the cuts, levy, tax etc. Not bad for someone in their early 30's.

Based on OP's numbers I calculate their joint income to be c. €150,000.

How a couple in their early 30's can be earning this amount in any part of the PS is beyond me by an order of magnitude.

billybigunz

Treehouse72 wrote: »

Based on OP's numbers I calculate their joint income to be c. €150,000.

How a couple in their early 30's can be earning this amount in any part of the PS is beyond me by an order of magnitude.

That is about 7K a month net between them so say €3500 each. That would work out as a 75K public service gross each.

Could both be at AP level which would be unusual at that age.

Tech3

Mike_Hunt wrote: »

We have saved and scrimped for a good few years now and finally are close to the deposit.

Anyway any advice much appreciated.

Well if ye have taken that long to save the deposit on the salaries you both are on then I think the repayments will be hard to come by every month.

Also I think buying houses at those prices without any massive amount of capital to go against the mortgage is a bad bad bad idea.

What if one or both of ye got unemployed, nearly 2 grand monthly repayments :eek:

Jesh1

Mike_Hunt wrote: »

Yeah it kills me to know what we could have for the average Irish house price down the country or abroad but we are based in Dublin - I don't see that changing anytime soon. I'm seeing houses going to Sale Agreed so someones obviously buying - its how much they're paying is what I'd like to know.

Mike, This is a tough call. My advice would be to bypass the EA's and offer the vendor what you think is a fair price. I know this is not best practise but some EA are useless and are living in the clouds.
Offer something considerable less with the current climate. You will be doing well to find out how much the sale agreed price is. Ea's will sell you alot of BS so be careful and dont believe their lies. If you feel it's the right time to buy so be it. Just be prepared to take the hit in the short term (Negative Equity) and make sure you stress test your income bigtime.

Idbatterim

Op if the price drops another 10% this year say on a 500k property, the potential 50k you could have saved by waiting will be atleast 100k by the time you pay it back over the term of the mortgage. How secure is your job really? Sure Im not denying compared to others it is secure. Turn on Vincent Browne now, they are talking about how screwed we are! There was a late late show a few Fridays ago, and one commentator in particular was saying how the country is finnished and anyone who think the gov can continue to pay the PS wage bill in out of their mind! You can rent for half or less than the cost to buy! Fellow posters, Its depressing but obviously the lessons of the past few years are already forgotten! It makes me sick!

Idbatterim

Good comment about bypassing the EA! The only people saying its a good time to buy is the sellers! hmmm.... :rolleyes: