Collapsing house prices? We ain't seen nothing yet

Merch

Damie wrote: »

PersonsA rents for 5 years at 8000* per year, therefore 40,000 down.
PersonsB buys for 300,000* after 5 years is 50% less therefore 150000 down.

PersonsA then can buy for 150000, so therefore after 5 years, has a total of 190000 spent on rent and mortgage.
PersonsB after 5 years has a mortgage of 300000, but its worth 150000.

Add in that PersonsA is 'free' for 5 years while PersonsB has a pretty heavy noose around the auld neck...

Is this what you mean?:D

*figures are taken at random from my head - but still not far off!

I see what you mean,maybe I shouldnt have used my comparison of 5 years, in that case in the short term a renter is better off, that is if they intend to buy and are fortunate to have the money at the same time as the market is down (or are able to get a mortgage at all). I was meaning that if person B bought and ultimately paid their mortgage and compared it to someone that rented for the same time, the renter would have nothing after 25 years and the homeowner would have the value of the property.

the_syco

whippet wrote: »

I will take out a mortgage based on what I want to spend on my home and then make the builders fight over who can provide me with the best possible house for that price.

Have lots of fun getting a mortgage without a house - if you stop paying, the bank may just get a useless half-built shell, thus most banks won't give you a mortgage. A loan, yes, and maybe at the same rate, but I doubt a mortgage.

As for the cheapest house: cheap never equals quality. It just means you'll be spending more in later years. Ensure you get a full time engineer who isn't mates with the builder to look at the site every day to ensure that nothing is getting done wrongly: have read often enough about it here, in regards to self builds.

Damie

A bit tongue in cheek with that last example but i think it has a point....

Think about it tho, after 25 years, although someone who rents for say, 10 of those years, thats a lot of wasted money......but the personB who takes the mortgage of 300000 out will have to pay back over 500000 by the end of the 25 years.

If the personA, who is renting, is lucky enough to buy the same property at 150000 then they will be able to pay it off quicker, for less and still be in the same position as personA....my head hurts, im off to bed

iPlop

I bought a house back in April for 240k.The house was a second hand house and 9 years old.I know the area very well as my family live there.The house went on the market in July '08 for 400k and has just dropped ever since ,I think I snapped up a bargin knowing what most people paid for there's in the area;)

oflahero

Merch wrote: »

I was meaning that if person B bought and ultimately paid their mortgage and compared it to someone that rented for the same time, the renter would have nothing after 25 years and the homeowner would have the value of the property.

It's easy to view the choice as simply as a) pay a mortgage or b) pay rent. In this context it looks like a no-brainer - pay a mortgage and in 25 years you'll have a gaff.

But of course it's not that simple. If you're paying a mortgage, you're paying the price of the gaff PLUS rent. The rent is the mortgage interest which you're paying to the landlord, the bank. I never fail to be amazed at how much money this actually amounts to over the lifetime of the typical mortgage - the first time I played around with Karl Jeacle's mortgage calculator it was an eyeopener. 175k interest on a 300k mortgage @ 4% over 25yrs, 475k in total! Cripes.

The reason the choice looks like a stark 'rent OR mortgage' is that currently and for the last few years interest rates have meant that mortgage interest repayments have been historically low. This is why people can get away with saying 'Sure why would I rent, and pay some other fella's mortgage for him?'

This can only change as mortgage interest relief is phased out and interest rates inevitably rise (SVRs going up already, and the Germans will need to have a look at inflation soon.) Then the choice won't look so simple anymore...

Zamboni

Septic Leper wrote: »

I bought a house back in April for 240k.The house was a second hand house and 9 years old.I know the area very well as my family live there.The house went on the market in July '08 for 400k and has just dropped ever since ,I think I snapped up a bargin knowing what most people paid for there's in the area;)

How much do you think this bargain has dropped in value since April?

whippet

the_syco wrote: »

Have lots of fun getting a mortgage without a house - if you stop paying, the bank may just get a useless half-built shell, thus most banks won't give you a mortgage. A loan, yes, and maybe at the same rate, but I doubt a mortgage.

shouldn't be a problem as I intend to paying for the site with savings, I am not mortgaging that part of it. Both of us in very much secure full time employments on a combined income in excess of 140k per annum and a healthy savinging account.

the_syco wrote: »

As for the cheapest house: cheap never equals quality. It just means you'll be spending more in later years. Ensure you get a full time engineer who isn't mates with the builder to look at the site every day to ensure that nothing is getting done wrongly: have read often enough about it here, in regards to self builds.

its all about context. You can get quality a cheap pricing depending on how you go about it. I source high end equipment & services for a living, I understand how to get the best value. Believe me I will not be looking at cutting corners and as this will be a house for life it will be built the way I want it to be.

iPlop

Zamboni wrote: »

How much do you think this bargain has dropped in value since April?

That's a good question and impossible to answer at the moment because there are similar houses to mine in the area for 350K and smaller ones for 270k ,then one identical to mine for 285k and then some new ones for 240k.I think at the moment it's no body really knows what house prices are really supposed to be.I'll give you an example...There is a girl I know that is selling her house up here for 400K ,she will never get somebody to buy this but her attitude is "well that what I paid for it":rolleyes:

Snakeblood

Damie wrote: »

A bit tongue in cheek with that last example but i think it has a point....

Think about it tho, after 25 years, although someone who rents for say, 10 of those years, thats a lot of wasted money......but the personB who takes the mortgage of 300000 out will have to pay back over 500000 by the end of the 25 years.

If the personA, who is renting, is lucky enough to buy the same property at 150000 then they will be able to pay it off quicker, for less and still be in the same position as personA....my head hurts, im off to bed

You're still getting something for renting. It's not wasted unless you rent a place but decided to live under a bridge instead of living there

gbee

whippet wrote: »

Stay debt free for a couple of years and hoard a bit more cash.

WOW! you have CASH?
I thought that was just a myth?
You say where is CASH?

cgarrad

You would want to think carefully about buying a house.

Prices are nowhere near the level they should be at historically or in terms of how many ounces of gold (the only true wealth) it would take to buy one.

Also when the euro comes apart thanks to greece spain and possibly ourselves you will be left with a €300,000 which you will have to pay off in punts.

Yo might get a euro for 2-3 punts if that happens.

The timeline for buying a house is after 2014, catching the bottom will prove difficult due to these (as well as several others) variables.

Damie

Snakeblood wrote: »

You're still getting something for renting. It's not wasted unless you rent a place but decided to live under a bridge instead of living there

Im renting at the mo, I dont see it as a waste, as my previous posts have shown but to the 'investor' type, it probably looks like a waste to be 'paying someone else's mortgage'....

Blackjack

cgarrad wrote: »

You would want to think carefully about buying a house.

Prices are nowhere near the level they should be at historically

Agree with this bit

cgarrad wrote: »

or in terms of how many ounces of gold (the only true wealth) it would take to buy one.

Also when the euro comes apart thanks to greece spain and possibly ourselves you will be left with a €300,000 which you will have to pay off in punts.

Yo might get a euro for 2-3 punts if that happens.

This is not going to happen.

cgarrad wrote: »

The timeline for buying a house is after 2014, catching the bottom will prove difficult due to these (as well as several others) variables.

Somewhat agree with this bit, but it won't be as a result if Ireland leaving the Euro. Its not in our Economic interest, in any way shape or form, to do so.

Variables will be Public Spending, Rate of Employment, Interest rates and general state of World Economy, amonst many others.

cgarrad

Our leaving the euro will not be our decision.

Greece is going to default, its just a matter of when.

Some areas are reporting 80% unemployment.

If spain follows suit there is no way the euro in its current form can survive and if they let greece and spain fall we will be next in line.

If the ECB dont actually pull the trigger (it wont be too palatable to let others fail while saving little old ireland) then the bond market will.

The euro is a great idea in principle but the mechanisms it runs by are flawed.

Sothern europe are a bunch of layabouts and cant be equated to northern europe, which is exactly what the euro did.

Mind you it was worse here, people including friends of mine throwing multiples of their salaries at investments they really did not understand.

Merch

oflahero wrote: »

It's easy to view the choice as simply as a) pay a mortgage or b) pay rent. In this context it looks like a no-brainer - pay a mortgage and in 25 years you'll have a gaff.

But of course it's not that simple. If you're paying a mortgage, you're paying the price of the gaff PLUS rent. The rent is the mortgage interest which you're paying to the landlord, the bank. I never fail to be amazed at how much money this actually amounts to over the lifetime of the typical mortgage - the first time I played around with Karl Jeacle's mortgage calculator it was an eyeopener. 175k interest on a 300k mortgage @ 4% over 25yrs, 475k in total! Cripes.

The reason the choice looks like a stark 'rent OR mortgage' is that currently and for the last few years interest rates have meant that mortgage interest repayments have been historically low. This is why people can get away with saying 'Sure why would I rent, and pay some other fella's mortgage for him?'

This can only change as mortgage interest relief is phased out and interest rates inevitably rise (SVRs going up already, and the Germans will need to have a look at inflation soon.) Then the choice won't look so simple anymore...

I agree with the first paragraph, but not the second as at times rents have been higher than an actual mortgage and you are paying towards something you will own.
I've seen that calculator before, its good, I think I saw it first on the business pages/tab of an Irish newspaper (cant recal which) but it was removed/or I couldn't find it there when I looked last AND yes it is shocking when you actually see the amount of interest that is being paid in front of your eyes like that, even though I was already aware that it works out so much.
So maybe paying rent isn't such a bad prospect, except there seem to be few rules or little regulation regarding how landlords treat tenants and keep properties (I know there are part 4 tenancies and the PRTB) but you still have less say and security over how you run your life, good if you have a landlord that will look after things but bad if they dont.
Just thinking about it now, I understand on the Continent that rented properties are mostly unfurnished and people simply bring their own beds,suites of furniture and washing machines etc, that might make for a better scenario for renters here too. No worries or concerns about who slept in the bed and what they might have, washing machine is tenants own responsibility to sort out ie no waiting on landlord AND make people feel they are making a place for themselves with their own possessions and not having some grotty living room suite! ?

Damie wrote: »

Im renting at the mo, I dont see it as a waste, as my previous posts have shown but to the 'investor' type, it probably looks like a waste to be 'paying someone else's mortgage'....

I'm not saying it's a waste, its a situation that suits many people, some may want and like to rent and may end up being better off for it, I think that if there were rules regarding maximum rents possible for size property for area (rent control? so rents cant get out of hand in the future again, not fixed figures per se, more fixed percent allowable increases or something to do with being fixed to an amount of inflation). Proper facilities for tenants to do things officially so that registering for council bin,tax is one process A so landlords cant get away with paying their liability B so tenants feel (and act) like a responsible part of the community with a vested interest and not looked/treated or feel like some sub class of habitants.

cgarrad

One major flaw of that calculator is that while it does account for inflation the headline rate of inflation given is massaged to say the least.

If your paying the tail end of a 30 year mortgage off now your paying peanuts, not only due to the comparable appreciation but also due to massive inflation over the years.

Take a pint of milk or a loaf of bread in 1980 and compare it now and you get an idea.

Still buying property at the moment for investment or even so as not to rent is a bad idea.

There are way better investments out there.

Blackjack

cgarrad wrote: »

Our leaving the euro will not be our decision.

Greece is going to default, its just a matter of when.

Some areas are reporting 80% unemployment.

If spain follows suit there is no way the euro in its current form can survive and if they let greece and spain fall we will be next in line.

If the ECB dont actually pull the trigger (it wont be too palatable to let others fail while saving little old ireland) then the bond market will.

The euro is a great idea in principle but the mechanisms it runs by are flawed.

Sothern europe are a bunch of layabouts and cant be equated to northern europe, which is exactly what the euro did.

Mind you it was worse here, people including friends of mine throwing multiples of their salaries at investments they really did not understand.

Its not going to happen - we're not leaving the Euro, and we're not going to get kicked out of it either.

amacca

cgarrad wrote: »

Our leaving the euro will not be our decision.


If spain follows suit there is no way the euro in its current form can survive and if they let greece and spain fall we will be next in line.

If the ECB dont actually pull the trigger (it wont be too palatable to let others fail while saving little old ireland) then the bond market will.

How can you be so sure?

Is the above just your opinion?

Are you basing it on evidence?

Are you basing it on rumour?

Do you work in ECB or are you hearing this from people that might have an inside track of some sort?

Do you really believe its just a matter of when?


Not really challenging you, just would like more of a justification for the certainty......it seems like you think its a slam dunk.

amacca

Blackjack wrote: »

Its not going to happen - we're not leaving the Euro, and we're not going to get kicked out of it either.

well Blackjack I suppose Ill have to ask you how you can be so sure also ..... for forms sake

Interested to hear peoples reasoning...cgarrad gave some (scant I thought but I'm by no means an expert) justification for his convictions

Blackjack

amacca wrote: »

well Blackjack I suppose Ill have to ask you how you can be so sure also ..... for forms sake

Interested to hear peoples reasoning...cgarrad gave some (scant I thought but I'm by no means an expert) justification for his convictions

Everything you need to know is here.

cgarrad

I am not saying that we will leave the euro, nor am i saying we will get kicked out.

What im saying is the euro will fail ;-(

http://moneynews.com/StreetTalk/Jim-Rogers-Euro-Oblivion/2010/03/22/id/353445

http://www.ritholtz.com/blog/2010/05/europes-web-of-debt/

http://www.zerohedge.com/article/john-taylor-says-despite-everything-greece-and-spain-will-default

http://globaleconomicanalysis.blogspot.com/2010/08/greece-enters-death-spiral.html

Blackjack

cgarrad wrote: »

I am not saying that we will leave the euro, nor am i saying we will get kicked out.

What im saying is the euro will fail ;-(

http://moneynews.com/StreetTalk/Jim-Rogers-Euro-Oblivion/2010/03/22/id/353445

http://www.ritholtz.com/blog/2010/05/europes-web-of-debt/

http://www.zerohedge.com/article/john-taylor-says-despite-everything-greece-and-spain-will-default

http://globaleconomicanalysis.blogspot.com/2010/08/greece-enters-death-spiral.html

OK - perhaps I misunderstood what you were originally trying to say.

Being honest - there's a lot of wishful thinking out there that the Euro will fail.

I'd question the Debt figures given for Ireland in the second link, as to exactly how a figure of 867 Billion is reached, our Sovereign debt is certainly nowhere near this amount and even the amounts Bank Guarantee by the Government isn't anywhere close when added to this.
The 3rd and 4th link focus entirely on Greece and Spain, and suggest Default.

The first article suggests this might happen in the next 15 or 20 years - there's an awful lot that can happen in the meantime.

also - the below taken from the Article:
Quote:
Indeed, the entire developed world has currencies that are in danger of falling, Rogers says.

"Most Western currencies, most currencies everywhere are very suspect."
Unquote

Sure we're all f**ked so, there's nowhere we can go to avoid this.

nadir

I can't understand why people are buying now while prices are falling.
Is it to avoid paying rent? and hope that the saved rent will make up for any loss?

I'm 31 now and never bought a place, didn't think paying more than five times my salary was sane for an apartment. I'm going to move country soon, go somewhere with lower tax and hopefully better standard of living etc, especially since tax is going to rise here, and I don't see why I should pay for other peoples mistakes.
However I think I may try to get a mortgage on a place when prices have leveled out(hopefully next year after the EU reigns in it's debts), and rent.

gurramok

nadir wrote: »

I'm 31 now and never bought a place, didn't think paying more than five times my salary was sane for an apartment. I'm going to move country soon, go somewhere with lower tax and hopefully better standard of living etc, especially since tax is going to rise here, and I don't see why I should pay for other peoples mistakes.

Ireland and the UK are among the lowest income tax countries in the EU, beware (indirect taxes are amongst the highest though)

oceanclub

gurramok wrote: »

Ireland and the UK are among the lowest income tax countries in the EU, beware (indirect taxes are amongst the highest though)

Exactly; in some ways, we get the worst of both worlds. We're fooled into paying high rates of tax, and then we receive nothing for it (not even a dental checkup once a year any more).

And since a third of our tax bill will be going to prop up Anglo, NAMA et all, it's going to get even worse.

P.

nadir

Aye, at least in the UK they have the NHS, and VAT is lower.
I almost feel like here I get discriminated against for having a Job.