Houses to nose dive to appropriate levels.

desertcircus

There's a very basic determinant of how far prices are likely to fall: how much people are able to offer for a place. Figure out how much people can spend and you'll find out how much sellers will sell for.

At this stage, the best anyone can hope for in terms of mortgage is four times their salary (and that spread over an extremely long term), with at least 8% of the purchase price saved up already. That means that a single person in their late twenties earning about thirty thousand a year can get a mortgage for about 110,000 quid - as long as they have ten thousand saved up already.

Sooner or later sellers are going to realise that there's literally nobody in the market for what they're offering at the price they're offering it for. One of two things is going to happen; either there's going to be another boom, the banks are going to forget what happened, and the IMF will fall asleep while mortgage terms are drastically eased, or prices are going to keep falling until the average price of a house is about four and a half times the average salary.

That's the bald truth of it - we haven't hit the bottom until the average salary is at least 20% of the average house price.

EricPraline

bladebrew wrote: »

http://breakingnews.ie/ireland/house-prices-may-be-bottoming-out--survey-492268.html

an article from this week, saying house prices may be bottoming out, it seems like an insane thing to report,
as people have mentioned, an increase in stamp duty (for some) and interest rates, the banks not lending as much and with stricter terms, not to mention high unemployment and emigration,

how the hell could house prices bottom out now

The article is referring to the Sunday Times Property Guide. It's an annual PR stunt from estate agents facilitated by Murdoch's newspaper. It has a history of being notoriously wrong it's it predictions. For example in it's 2009 edition it forecast that prices were starting to stabilise, with even modest price increases in some urban areas :rolleyes:

Anybody who believes the promotional spam printed in property supplements needs their head examined.

Fighting Irish

musharra wrote: »

It is mainly referred to as house 'prices', but in todays market an asking 'price' is about as accurate as a
drunk surgeon with a rusty blade.

The value of a house is only what someone is willing to pay for it and in the irish property market the indications are that the value of houses are set to decrease significantly below current levels in the coming year.

The country's largest mortgage provider TSB is abolishing fixed rate homeloans which leaves any potentially new customers with no option but to go variable and be exposed to future interest rate increases.
This change will without doubt spread to other mortgage providers and depress any potential borrowings.

Who are the potential customers. With un-employment at 13.4% and a generation of educated Irish leaving the country its is hard to see any buyers in today market.

The surge in purchasing in the boom years drew in younger first time buyers who were talked into a now difficult situation.
Families hoping of trading up to a larger home will only sell their existing home by reducing their expectations.

Similarly for those wishing to trade down to smaller homes.

Another reason why house values will drop is they are still hugely overvalued. A search of daft will prove that the majority of sellers are still living in 2007 cuckoo-land.
Also NAMA feeds into the mix as indications are that it will be forced to a fire sell of blocks of houses which
will quickly draw the market down to appropriate levels.

Irelands forfeiting on the bailout will also be another
factor as the external investors who were despised for ramping up prices in the boom years will remain away from the market.

Down they must come and down they will come. Anyone considering buying now needs to consider the future value which could be a 50% reduction in 6 months! Anyone selling should drop their price and get out now.

Please stop blaming other people for grown adults and their wrong decisions

Chipboard

I just scanned over the house price survey in the Sunday Times. Their assertion that the Market is at the bottom is the craziest prediction I have seen in a while.

It is an indisputable fact that there are thousands of homeowners and investirs in arrears and that the banks have not moved against hardly any of these due to the hands off approach they are adopting due to Nama and also because they are prevented from moving against them by the Code of Conduct on Mortgage Arrears. This code came into force in Feb 10 so the first defaulters which were protected by it lose that protection this month. The likely result of this is an increase in possessions and forced sales.

If the Sunday Times is correct rather than being one of the worst recessions ever, it will have been relatively benign.

amacca

Chipboard wrote: »

I just scanned over the house price survey in the Sunday Times. Their assertion that the Market is at the bottom is the craziest prediction I have seen in a while.

It is an indisputable fact that there are thousands of homeowners and investirs in arrears and that the banks have not moved against hardly any of these due to the hands off approach they are adopting due to Nama and also because they are prevented from moving against them by the Code of Conduct on Mortgage Arrears. This code came into force in Feb 10 so the first defaulters which were protected by it lose that protection this month. The likely result of this is an increase in possessions and forced sales.

If the Sunday Times is correct rather than being one of the worst recessions ever, it will have been relatively benign.

The source (written in small print) for their property prices for my area was one of the local auctioneers

If I was of a sunnier disposition this afternoon I would have laughed till the tears rolled from my eyes

robd

Looks like you got your letter published.

Congrats.


http://www.independent.ie/opinion/letters/buyerrsquos-market-as-house-prices-crash-2528239.html

deadduck

robd wrote: »

Looks like you got your letter published.

Congrats.


http://www.independent.ie/opinion/letters/buyerrsquos-market-as-house-prices-crash-2528239.html

+1, well done OP

musharra

musharra wrote: »

Anyone considering buying now needs to consider the future value which could be a 50% reduction in 6 months! Anyone selling should drop their price and get out now.

robd wrote: »

Looks like you got your letter published.

Congrats.


http://www.independent.ie/opinion/letters/buyerrsquos-market-as-house-prices-crash-2528239.html

Well done indeed
Will we all come back in 6 months and see is it drivel or not.......

musharra

RoverJames wrote: »

Well done indeed
Will we all come back in 6 months and see is it drivel or not.......

Great to get the letter published in todays Independent.

It will indeed be interesting to see how the next 6 months go as we sift through the drizzle and "drivel".

Only time will tell I suppose. As Warren Buffett said "Only when the tide goes out do you discover who's been swimming naked":)

BobbyD10

For some time I have been pondering entering the market and this point the wait continues.

A number of reasons outlined already:
Stamp Duty for FTB's of 1%
Increased Income Tax
Stricter Lending policies

There are indirect costs that have influenced my decision wait further:
Petrol prices are rocketing.
Food prices are on the rise.
Gas and Electricity seem to be looking for raises in the Autumn.
UPC price increase.
Dublin Bus price increase.
Home, health and car insurance all going up.
Possible property charges and water charges.

This is not to mention the most important part, the interest rate, which as the months pass by seems to be going up and up.
And as my bottom line on the salary slip is reducing also the approval for a mortgage is also reducing.

What is key, is a deposit and a chunky one at that which will show a healthy savings history which will help greatly when I do make the purchase.

fred252

BobbyD10 wrote: »

For some time I have been pondering entering the market and this point the wait continues.

A number of reasons outlined already:
Stamp Duty for FTB's of 1%
Increased Income Tax
Stricter Lending policies

There are indirect costs that have influenced my decision wait further:
Petrol prices are rocketing.
Food prices are on the rise.
Gas and Electricity seem to be looking for raises in the Autumn.
UPC price increase.
Dublin Bus price increase.
Home, health and car insurance all going up.
Possible property charges and water charges.

This is not to mention the most important part, the interest rate, which as the months pass by seems to be going up and up.
And as my bottom line on the salary slip is reducing also the approval for a mortgage is also reducing.

What is key, is a deposit and a chunky one at that which will show a healthy savings history which will help greatly when I do make the purchase.

same boat as myself bobby.

what will it take for you to start seriously looking to buy?

i have zero confidence at the moment and contemplating renting indefinitely. i know some germans (reasonably well off) who's parents have rented all their lives. of course the regulations are stacked in the favour of tenants in germany.

quad_red

BobbyD10 wrote: »

For some time I have been pondering entering the market and this point the wait continues.

A number of reasons outlined already:
Stamp Duty for FTB's of 1%
Increased Income Tax
Stricter Lending policies

There are indirect costs that have influenced my decision wait further:
Petrol prices are rocketing.
Food prices are on the rise.
Gas and Electricity seem to be looking for raises in the Autumn.
UPC price increase.
Dublin Bus price increase.
Home, health and car insurance all going up.
Possible property charges and water charges.

This is not to mention the most important part, the interest rate, which as the months pass by seems to be going up and up.
And as my bottom line on the salary slip is reducing also the approval for a mortgage is also reducing.

What is key, is a deposit and a chunky one at that which will show a healthy savings history which will help greatly when I do make the purchase.

+2

In the same situation. We've zero debt and have a decent deposit saved up. We've our first child coming this summer which upped the ante in looking at houses but seeing the state of the market (so much delusion still out there) and taking into account the factors you've outlined, we're gonna wait at least another 12/15 months.

We're moving from our two bed city centre apt to a 3 bed house further out which is costing us less in terms of rent.

We did have the concern over whether we would get a mortgage again. We are already approved for a pretty massive mortgage. But if prices don't come down to a level which we can safely afford to pay back then what's the point of that?

After seeing what's happened, we've all been warned. Managing to get the money off the bank does not mean it's sustainable or affordable.

gurramok

Thats 4 people including myself who are FTB on this thread (plus countless others on other threads) who will not buy now for the various factors outlined. The only way is down for prices.

D1stant

You're all wrong apparently

"By Charlie Weston
Thursday February 03 2011
House prices have fallen like a stone in the past three years. This means it now takes just over a tenth of the average income of a first-time buyer couple to pay the mortgage."

http://www.independent.ie/lifestyle/smart-consumer/smart-consumer-as-house-prices-plummet-should-firsttime-buyers-pounce-2523012.html

Is Charlie Weston an Estate agent?

gurramok

Discussed here already http://www.boards.ie/vbulletin/showthread.php?t=2056169231

Apparently, lots of generalisations came into play for them to make that statement.

iguana

gurramok wrote: »

Thats 4 people including myself who are FTB on this thread (plus countless others on other threads) who will not buy now for the various factors outlined. The only way is down for prices.

I'll be a second time buyer when I buy again, but I'm all sold up and waiting with a decent bank balance. I won't be buying again until prices make sense and a 7-10% yield is when I think prices will make sense. Both my husband and I are now freelance workers, (he always was) I doubt we'll get any mortgage by the time we are ready to buy, no matter how good our income might be. At this point I think we'll rent for the next 5+ years and then buy with cash. We'll only be in our late 30s by then. It's easy to keep renting when you have a positive end goal.

Blackjack

I'll be a second time buyer, but will be a First time buyer in this country.
We're saving for a Deposit, pretty much there but will continue to put it away so that there is less needed to borrow.
Reckon we need to see Yields of 7% before it bottoms out, possibly a little more.

Qwerty27

Seemingly Fine Gael want to phase out morrtgage interest tax relief from the end of June for first time buyers and divert the savings made to interest relief towards people who bought between 2004-08. Surley this would depress the first time market completely. There seems to be a sentiment out there, particular by Fine Gael, who keep harping on about people who bought at the peak and is just another gimmick view to gain votes?

Would it not be in their interest(presuming they're in power) to continue to offer this relief to FTB's or indeed offer some other type of incentive to maybe incentivise potential buyers who are happy enough to keep waiting, even though they might have savings in mortgage approval in place?

Chipboard

We're waiting in the wings for a house too.

Would be happy to purchase now but the vast majority of vendors are in denial so we can't find any value.

iguana

Blackjack wrote: »

Reckon we need to see Yields of 7% before it bottoms out, possibly a little more.

I know she's often considered to be the poster girl of the boom (in the UK anyway) but even Sarah Beeney has repeatedly said that potential landlords shouldn't ever bother with a property where they expect a less than 10% yield and that almost any property's value should be calculated based on that yield.

iguana

Qwerty27 wrote: »

Would it not be in their interest(presuming they're in power) to continue to offer this relief to FTB's or indeed offer some other type of incentive to maybe incentivise potential buyers who are happy enough to keep waiting, even though they might have savings in mortgage approval in place?

Nothing will incentivise me other than reasonable prices. Just because I have some money doesn't mean I want to waste it.

Chipboard

Blackjack wrote: »

I'll be a second time buyer, but will be a First time buyer in this country.
We're saving for a Deposit, pretty much there but will continue to put it away so that there is less needed to borrow.
Reckon we need to see Yields of 7% before it bottoms out, possibly a little more.

Can you do that? I thought you could only be a FTB once. Sssshhh...

Blackjack

Chipboard wrote: »

Can you do that? I thought you could only be a FTB once. Sssshhh...

Fairly irrelevant now, given there's no reduction in Stamp for FTB...

bmarley

Qwerty27 wrote: »

Seemingly Fine Gael want to phase out morrtgage interest tax relief from the end of June for first time buyers and divert the savings made to interest relief towards people who bought between 2004-08. Surley this would depress the first time market completely. There seems to be a sentiment out there, particular by Fine Gael, who keep harping on about people who bought at the peak and is just another gimmick view to gain votes?

Would it not be in their interest(presuming they're in power) to continue to offer this relief to FTB's or indeed offer some other type of incentive to maybe incentivise potential buyers who are happy enough to keep waiting, even though they might have savings in mortgage approval in place?

It makes perfect sense that Fine Gael wish to help all those families who are in danger of loosing their homes. In addition to this, they plan to stablise interest rates. We don't need a repetition of what happened in England in the early 90's when interest rates reached 18 percent and so many people had no alternative but to leave their homes. For the first time buyer or those waiting to buy, now is the time...people waiting and waiting while incentives were in place will be complaining when they're gone. You can please some people sometimes but you can't please all the people all the time.

gurramok

bmarley wrote: »

It makes perfect sense that Fine Gael wish to help all those families who are in danger of loosing their homes. In addition to this, they plan to stablise interest rates. We don't need a repetition of what happened in England in the early 90's when interest rates reached 18 percent and so many people had no alternative but to leave their homes. For the first time buyer or those waiting to buy, now is the time...people waiting and waiting while incentives were in place will be complaining when they're gone. You can please some people sometimes but you can't please all the people all the time.

Where did you get this gem of controlling our own interest rates from?

Yes, incentives for FTB's are supposed to be removed, it will mean reduced prices as it will be harder to afford that house. Waiting is actually a plus now.

housetypeb

How can they stabilise interest rates -isn't that up to the eu?

Blackjack

iguana wrote: »

I know she's often considered to be the poster girl of the boom (in the UK anyway) but even Sarah Beeney has repeatedly said that potential landlords shouldn't ever bother with a property where they expect a less than 10% yield and that almost any property's value should be calculated based on that yield.

Fair point, but I think the Investors are scared well away from here.

Although, 10% Yield would be fantastic - I'd nearly be a cash buyer.

iguana

Blackjack wrote: »

Fair point, but I think the Investors are scared well away from here.

That's for two reasons,

1., you can't rely on current yields. The rental market is being propped up by rental allowance. Eventually the arse will fall out of it and today's 6% yield will barely be 4%.

2. I pay €1150pm rent on a street where the last house on the market was asking for €629k. Even with a third off the asking you wouldn't even get a 3.5% gross yield. Even if there was anyone silly enough to think it was a good investment they would have a damn hard time getting a loan.

fred252

fred252 wrote: »

i have zero confidence at the moment and contemplating renting indefinitely..

Something I'm curious about, if you rent long term and never intend to buy what do people do when they retire? As in how do they afford rent when they have retired?

Blackjack

RoverJames wrote: »

Something I'm curious about, if you rent long term and never intend to buy what do people do when they retire? As in how do they afford rent when they have retired?

Well if you save the difference between rent and Mortgage, this may help.