McWilliams' latest rant, and to buy or not to buy?

papsita

What do people think of this?

http://www.independent.ie/opinion/analysis/david-mcwilliams-the-great-property-scam-is-back-to-rip-us-off-again-2145197.html

I'm a first-time buyer about to buy a 2-bed terrace in D8 that is in a great spot and needs very little work. It came on last year at 365 and I went sale agreed for 255 last Jan. I love it to bits, but could outgrow it in five to ten years time if my partner and I were to have kids, although we could manage with a bit of creative storage. With the way things are at the moment, would I be silly to go ahead with this purchase? Should I wait and hold out for a bigger place with a garden in the same/better area (we want southside city living) that I would never have to leave (if of course I could find such a place within my budget - no more than 255 - so far I haven't come close). My head is beyond melted about what to do so any advice would be incredibly appreciated. I am sick to death of renting, have mortgage approval and feel ready to buy (I held off before because I knew it was heading for disaster), but I'm just not sure. Maybe it's just nerves. As you can see, my head really is melted. Please help!:eek::(

By the way, it's a 37-year mortgage on a fixed rate for the first three years, with monthly repayments of 740, which my partner and I can cover comfortably - both of us are on an average industrial wage and our jobs seem fairly stable, mind you in this economy you just never know.

SoupyNorman

papsita wrote: »

What do people think of this?

http://www.independent.ie/opinion/analysis/david-mcwilliams-the-great-property-scam-is-back-to-rip-us-off-again-2145197.html

I think it's spot on.

OP, the property you are interested in dropped by €110,000 in one year. I think I could safely stop there and have a pretty solid argument for you to not buy that apartment. Think about it, the property loses 1/3 of it's 'value' and then the handbrake goes on? That €110k is just the cream off the top, subsequent price drops are going to happen over a longer period (this is good as it will avoid a total deflation in the property sector).

If you were planning to purchase a house at €255k I'd still be wary but at least a house is a much more viable home for life. Apartments were always supposed to be the 'first step' onto the property ladder, then you scale up as your circumstance dictates.

Your post conveys many doubts about your potential purchase, and without taking it personally, if you need validation from boards.ie posters on making the biggest financial commitment of your life then you should really know the answer!

ronanlyons

At the risk of being a one-trick pony in this forum, give this calculator a try:
http://www.ronanlyons.com/2010/04/20/your-very-own-rent-or-buy-calculator/
Might clarify some of the sums of money involved - plus it also calculates what the house price would be if the yield (i.e. relationship between rents and house prices) were normal (which it unfortunately isn't at the moment).

ricman

Well everything will probably go down in price by ten to 20 per cent in the next 2 years,so you have to think is that ok .Does it matter to you ,is there room at the back to add on another bedroom,extension.IT seems like a good price to me.
IS it not possible to buy a 3bed house older,for 250k on the southside .
IN most areas theres older houses ,estate sale, ie the owner has passed away ,with old style kitchens which tend to be cheaper.
I dont think it would be a financial disaster to buy it, ie i dont think you,ll ever be able
to buy a 2bed on the southside dublin 8 for 140k.
IF you are on a 35 year mortgage, if the value drops by 40k, does it matter.
No one knows what houses will be worth in 2040.
And you have to take into account what rent are you paying now.
IF you live there 4 ten years the chances are you,ll sell it for 260 ,if you want to move to a 3bed.
SAY you are earning total 60k,salary i certainly think you can afford the mortgage.

MaceFace

Ok. Hold on there a minute. OP: a 37 year mortgage? Are you serious? 37 years?

That's over half your life (assuming your a man).

I'm flabergasted!

Cavehill Red

papsita wrote: »

What do people think of this?

http://www.independent.ie/opinion/analysis/david-mcwilliams-the-great-property-scam-is-back-to-rip-us-off-again-2145197.html

I'm a first-time buyer about to buy a 2-bed terrace in D8 that is in a great spot and needs very little work. It came on last year at 365 and I went sale agreed for 255 last Jan. I love it to bits, but could outgrow it in five to ten years time if my partner and I were to have kids, although we could manage with a bit of creative storage. With the way things are at the moment, would I be silly to go ahead with this purchase? Should I wait and hold out for a bigger place with a garden in the same/better area (we want southside city living) that I would never have to leave (if of course I could find such a place within my budget - no more than 255 - so far I haven't come close). My head is beyond melted about what to do so any advice would be incredibly appreciated. I am sick to death of renting, have mortgage approval and feel ready to buy (I held off before because I knew it was heading for disaster), but I'm just not sure. Maybe it's just nerves. As you can see, my head really is melted. Please help!:eek::(

By the way, it's a 37-year mortgage on a fixed rate for the first three years, with monthly repayments of 740, which my partner and I can cover comfortably - both of us are on an average industrial wage and our jobs seem fairly stable, mind you in this economy you just never know.

:eek:
One born every minute.
37 year mortgage? Why? Get your term as short as you can afford, while still leaving room for interest rate increases (which are coming.)
As for value, as others have said, expect any purchases now to come down in value by at least another 20% in the next couple of years.
And bear in mind that you can already get a four bed period house (requiring internal updating) on the NCR for 200 grand.
In short, I think you're overpaying, at the wrong time, on the wrong mortgage.
But if you're happy...

quozl

I'd be very careful about the possibility of having kids, and then finding yourself unable to sell the property in order to buy a larger one.

If you're in negative equity at the time you may be stuck with it.

I'm having to change rental accomodation because current one, while lovely for a couple, is unsuitable in our minds for a family.

If children are a plausible possibility then really do take care with the purchase, and things that are supposedly 5 or 10 years away have in my experience the ability of rapidly moving forwards in time

Tech3

What amount of savings do you have to cover the mortgage after the deposit? Also it's worth including other yearly expenses like house insurance,the new property tax to come along and with the interest rates to rise. Also the upkeep as well I would wait for another few years to save yourself a few bob.

Treehouse72

papsita wrote: »

What do people think of this?

http://www.independent.ie/opinion/analysis/david-mcwilliams-the-great-property-scam-is-back-to-rip-us-off-again-2145197.html

I'm a first-time buyer about to buy a 2-bed terrace in D8 that is in a great spot and needs very little work. It came on last year at 365 and I went sale agreed for 255 last Jan. I love it to bits, but could outgrow it in five to ten years time if my partner and I were to have kids, although we could manage with a bit of creative storage. With the way things are at the moment, would I be silly to go ahead with this purchase? Should I wait and hold out for a bigger place with a garden in the same/better area (we want southside city living) that I would never have to leave (if of course I could find such a place within my budget - no more than 255 - so far I haven't come close). My head is beyond melted about what to do so any advice would be incredibly appreciated. I am sick to death of renting, have mortgage approval and feel ready to buy (I held off before because I knew it was heading for disaster), but I'm just not sure. Maybe it's just nerves. As you can see, my head really is melted. Please help!:eek::(

By the way, it's a 37-year mortgage on a fixed rate for the first three years, with monthly repayments of 740, which my partner and I can cover comfortably - both of us are on an average industrial wage and our jobs seem fairly stable, mind you in this economy you just never know.

37 years? My God. This is proof positive that you cannot afford this property....My advice is to walk away. You'll get better for the same money or the same property for less money in 12 months. I would bet my life on it.

And McWilliams is clearly correct. Again.


Ed: By the way, Ronan Lyons (who posted above) has a wonderful website and if you read through his articles there it should help you understand the market better. Also try thepropertypin.com.
Ed 2: I am an amateur on the internet by the way - I would not take my advice as professional or anything like it! Just IMO.

the_syco

papsita wrote: »

I love it to bits

...and all reason goes out the window. You know it's a bad idea, but you're looking for someone... anyone... to reinforce your "great idea", no?

ricman

Well how much are the payments after 3 years?

who_ru

the_syco wrote: »

...and all reason goes out the window. You know it's a bad idea, but you're looking for someone... anyone... to reinforce your "great idea", no?

exactly - just looking for someone, indeed anyone, to say 'yeah go for it, sounds like a great deal'.

nothing has been learned from the downturn and craziness of the property bubble here, and depressingly by the sounds of it nothing will be learned either. anyway off you go OP.....it's your life after all, if an internet forum is a basis for your deciding to plum for a 37 year mortgage then time to pop that champagne bottle.

gurramok

Yeh, 740 a month for the first 3 years. God knows how much that will skyrocket after 3yrs once the low teaser rate is up. Interest rates will go up alot, its not an if but a when.

tenchi-fan

op, 740 is not a lot but for the repayment but consider an increase of 2% in interest rates.. your repayment will be over a grand. I'm also guessing your 3 year fixed rate is an introductory rate and not representative of the banks normal rate?

here is a good site for tricking around with terms and rates:
http://www.mortgagecalculator.org/ (ignore the $ signs)

houses with bedrooms generally aren't as popular as 3 bedroom houses.
i'd be careful if i were you!

having said that I bought my house 8 months ago and haven't had any major regrets yet. It's held it's value pretty well and the asking price of houses in the area is still higher than what I paid (although few are selling.. the houses traditionally have a good demand but people just can't get mortgages). I like the security of not having a landlord snooping around.

My loan is 40 years.. I'm going travelling next year so the low repayments suit me at the moment although i'm definitely going to pay more when I can afford to. I'll have the loan paid off before I retire.

kennyb3

the funniest part of the op's post is the title - why is economic analysis a rant? because it doesnt suit your beliefs. i presume you an economics degree or better OP?

AARRRGH

SoupyNorman wrote: »

I think it's spot on.

I agree.

He explains the situation so clearly but for some reason many people just don't get it. Which I don't get.

Why do people want to keep believing sales people and those with a blindingly obvious vested interest? Really it makes my brain hurt.

The world is so mental.

silverharp

anyone that take out more then a 25 year mortgage deserves to have their head handed to them on a platter. The other considerations are potential rise in income taxes and interest rate. Assume that at some point in the next 10 years interest rates may hit 6%-8%

still good value now?????

papsita

who_ru wrote: »

exactly - just looking for someone, indeed anyone, to say 'yeah go for it, sounds like a great deal'.

nothing has been learned from the downturn and craziness of the property bubble here, and depressingly by the sounds of it nothing will be learned either. anyway off you go OP.....it's your life after all, if an internet forum is a basis for your deciding to plum for a 37 year mortgage then time to pop that champagne bottle.

who_ru, less of the tone please. I'm not jumping into a 37-year mortgage. I would have thought that obvious from my original post. And I have learnt from the property bubble, but I'm not an expert either. I'm new to all this and think I am being rather sensible so far by consulting as many avenues for advice as possible before I commit to anything. And you know, I'm no spring chicken, have worked hard for years and am really just looking for a home after a lifetime of renting, which for the first time ever is in my grasp - so cut me some slack! Furthermore, I'm not basing my decision on an internet forum either. I have also discussed this at great length with my partner, friends and family, as well as reading as much as I can and watching the news/listening to the radio all the time too. I simply came on here for more opinions (whether they are the kind I want to hear or not), not sarcasm. I don't mind if you think a 37-year mortgage is foolish. The more opinions the better to help me come to a sensible decision. But I could do without the snide tone of your post. There's just no need for it. Especially as you know nothing about me personally or how I have even got to a point in my life where I am ready, willing and able to buy. Why not just say what you think is logical without resorting to being nasty? Many thanks to all of you who did offer constructive advice by the way, it was extremely helpful.

And I'm not buying the gaff, so there, not such a dimwit after all.

Again, thanks to everyone who got back, even God himself, who_ru.

papsita

the_syco wrote: »

...and all reason goes out the window. You know it's a bad idea, but you're looking for someone... anyone... to reinforce your "great idea", no?

Guilty as charged the_syco, guilty as charged.

papsita

kennyb3 wrote: »

the funniest part of the op's post is the title - why is economic analysis a rant? because it doesnt suit your beliefs. i presume you an economics degree or better OP?

Fair enough, I take the word "rant" back. The man does make a lot of sense so that was a poor choice of word. But no, I don't have an economics degree, hence me picking the brains of anyone I can on all this. I do, however, have a first class honours degree in marine science, so kennyb3, if ever you want to know anything about fish or marine microbes or anything, do please give me a shout. You won't go wrong.

SoupyNorman

AARRRGH wrote: »

I agree.

He explains the situation so clearly but for some reason many people just don't get it. Which I don't get.

Why do people want to keep believing sales people and those with a blindingly obvious vested interest? Really it makes my brain hurt.

The world is so mental.

It's part of the human condition, the 'want' emotion over-rides the all others in many many instances.

I mean take credit facilities in shops, in the first instance the customer cant afford the item if they are purchasing on credit, then they are paying 20-30% interest (add in lashings of stipulations and penalties if you default), then the sales people kick things up a gear, getting you to go for the 50" LCD rather then the 32" you needed but rationalized by the fact that the monthly repayment is only €10 more per month, the rationalization is the kicker! In this scenario the property has gone from €365k - €255k and repayments are 'only' x per month however the world is experiencing an economic downturn, Ireland is getting a more concentrated dose of it's ill effects and one of those is a decrease (correction) in property prices.

papsita

SoupyNorman wrote: »

I think it's spot on.

Your post conveys many doubts about your potential purchase, and without taking it personally, if you need validation from boards.ie posters on making the biggest financial commitment of your life then you should really know the answer!

I hear you Soupy. And I do know the answer, I've known it for a while now. I just wanted to be wrong because I made the rookie mistake of getting emotionally involved with the house. But clearly I'm not wrong as pretty much everyone I know is telling me to hold off. Oh well, good things come to those who wait.:)

Also though, I am terrible with decisions at the best of times, and even need to consult people over the simplest of things like what to have for lunch, so you can imagine how much consulting I need to do with something as big as this.

Colonel Sanders

Lest we forget.....

SoupyNorman

papsita wrote: »

I hear you Soupy. And I do know the answer, I've known it for a while now. I just wanted to be wrong because I made the rookie mistake of getting emotionally involved with the house. But clearly I'm not wrong as pretty much everyone I know is telling me to hold off. Oh well, good things come to those who wait.:)

Also though, I am terrible with decisions at the best of times, and even need to consult people over the simplest of things like what to have for lunch, so you can imagine how much consulting I need to do with something as big as this.

Fair play for seeking advice, you must bare in mind that you're not going to hear what you want to hear...here!, you'll get objective advice(the only advice that holds water in my book) and in many instances thats not what your heart wants to hear but in terms of taking the sensible route then it's advice worth considering.

In terms of being emotionally attached to a property, call me old fashioned but I think it's essential that you are. I think buying a property is one of the most personal purchases you'll ever make however you must not pay more then it's worth unless you're the winner of the last lotto! No, there is probably a very long and complex mathematical equation that calculates emotional attachment, value, actual price etc and I'm no mathematician but I do know that you'll not get the value if you buy now and especially not if you buy an apartment.

If you want some clear advice the here it is (this is my plan):

-Rent for at least another year.

You're probably the same as me in that you want a place to call your own but do you want it that bad that you want to have a chunk of negative equity to call your own too?

who_ru

apologies Papsita - didn't mean to cause offence.

i appreciate that you have worked and saved hard to get into this position and i hope that you get the right place for you. it's just there are times that i read posts by others which seem to indicate that people are still tied into the bubble mentality, and that the propoganda of the VI's is still driving many people's decisions.

again apologies and all the best in your decisions.

Cavehill Red

papsita wrote: »

I'm new to all this and think I am being rather sensible so far by consulting as many avenues for advice as possible before I commit to anything. And you know, I'm no spring chicken, have worked hard for years and am really just looking for a home after a lifetime of renting, which for the first time ever is in my grasp - so cut me some slack!

...

And I'm not buying the gaff, so there, not such a dimwit after all.

Again, thanks to everyone who got back, even God himself, who_ru.

No, not such a dimwit at all.
I understand your desire to be a homeowner - the added security beyond renting and so on. I appreciate the frustration and desire to act that comes with FINALLY seeing house prices come within reach.
But there's no reason to panic-buy. They'll come further into reach, quite significantly further.
You've got your money in order - the market effectively is yours and will continue to be so for the foreseeable future.
I'd be much more concerned for that kid with the 40 year mortgage in Dundalk (on what? The mind boggles) who's off travelling (translation: spending all his savings) next year just in time for interest rates to start marching upwards.

papsita

who_ru wrote: »

apologies Papsita - didn't mean to cause offence.

i appreciate that you have worked and saved hard to get into this position and i hope that you get the right place for you. it's just there are times that i read posts by others which seem to indicate that people are still tied into the bubble mentality, and that the propoganda of the VI's is still driving many people's decisions.

again apologies and all the best in your decisions.

Apology accepted, thanks. Let this be the beginning of a beautiful relationship.

papsita

Thanks again folks. It's just such a pain in the H.O.L.E. You have plans, not even grand plans, just modest plans to put down some roots and get a few things moving. You're really not asking much at all. But you can't put these plans into action because your country has been run into the ground by a bunch of greedy s***e hawks, who all still have nice big fat pensions to look forward to. And it's not even that I am fixated on owning property. If renting was an attractive alternative I'd be fine with that. But renting in this kip is a total sh*tfest as well. Have you seen some of the dumps on Daft at the moment? Are these landlords having a laugh?

I want to kill someone now.

Highly Salami

Cavehill Red wrote: »

I'd be much more concerned for that kid with the 40 year mortgage in Dundalk (on what? The mind boggles) who's off travelling (translation: spending all his savings) next year just in time for interest rates to start marching upwards.

Maybe they fixed their interest rate, so it doesnt matter if they go up.

Shambo

papsita wrote: »

Thanks again folks. It's just such a pain in the H.O.L.E. You have plans, not even grand plans, just modest plans to put down some roots and get a few things moving. You're really not asking much at all. But you can't put these plans into action because your country has been run into the ground by a bunch of greedy s***e hawks, who all still have nice big fat pensions to look forward to. And it's not even that I am fixated on owning property. If renting was an attractive alternative I'd be fine with that. But renting in this kip is a total sh*tfest as well. Have you seen some of the dumps on Daft at the moment? Are these landlords having a laugh?

I want to kill someone now.

Hey Papista, I share your anguish, but just think with your head and not your heart- I nearly made a foolish decision to buy this week.

Here is my story, bought in 2000, sold in 2007, made 215000€, moved west hoping to buy a house, crash happened, I discovered www.thepropertypin.com and realised it was not going to be a quick crash. I have neen boring people since 2008 about the crash and how prices have loads to fall
Lost my job in Oct 2009, started my own small business in Jan 2010, saw a house last week that we viewed in 2007 for 350,000 open to offers from 150,000, will have to put 40,000 in to finish it...bidding will probably go to 190,000 and we were still seriously thinking of buying it- f**king nuts.
But that's what happens- emotions take over and you get caught up in the romance of owning your own house, you persuade yourself everything will be ok- that is what Estate agents etc are relying on.
But just think that you will be paying a mortgage for 37 years- that is a hell of a long time!

My reasons for thinking prices are still too expensive?
Unemployment rising
300,000 empty units
Interest rates going up
Emigration going up

Anyone think of any more?

SoupyNorman

papsita wrote: »

If renting was an attractive alternative I'd be fine with that. But renting in this kip is a total sh*tfest as well. Have you seen some of the dumps on Daft at the moment?

I dont understand, renting is an attractive alternative(the only alternative). In the last 3 years my rent has decreased and the size of the place I moved to increased. In 2007 I was paying 1200p/m for a one bed, I now pay 1000p/m for a spacious 2 bed (with views of the sea and Dublin mountains!). DAFT is full of the grubbiest crack dens known to man but in my view there are as many if not more nice places then the former.

Where do you refer to when you say "this kip", as if this implies that you only restrict your search to one area then of course your choice is going to be limited. If you're not willing to consider other areas then you dont really have a right to complain. Dublin is not a big place and you can give yourself a radius to work from then your choices open up!

Alls I know is that there is at least 15 properties that I would be pretty happy to rent tomorrow, I'm on DAFT every day and I have DAFT alerting me when new properties are posted in my specified areas. What I have noticed is that the number of properties has increased, properties of varying quality but the overall effect is that the supply is increasing with decreases the price.