Property Market in Waterford

barneystinson

reni10 wrote: »

Not at the bottom yet is my bet!

Give it another 12 - 18 months and you will have 3 bed semi prices on the Dunmore Road at about €75k and 4 bed detached going for about €90-€100k.
Everything else in the city will fall in unison so places like Johns Park etc. will fall to about €50k.

Anyone buying now must be mad!

That's your opinion and you may be right (or you may be wrong).

But what about someone in a relatively secure job, like a Garda, Nurse, Teacher etc...

In that 12-18 months you're talking about, if they are renting a house, they could be spending €500+ a month.

They could probably buy a house similar to one they'd be renting, and after mortgage interest relief, paying substantially less than they were paying in rent... and that money would be actually going towards purchasing an asset, rather than paying someone else's mortgage.

Also, negative equity only becomes relevant if / when you want to sell. If the buyer is intending on having the house in the medium- to long- term, then 20% - 30% (or any amount really) of negative equity is largely irrelevant.

letsbet

Also if you buy a house over the next few months and fix your interest rate then in ten years you'll probably have saved as much in interest payments as you might if you held on for a while and the house went down a few grand and in a year or two interest rates will be much higher (more than likely).

Birdfood

barneystinson wrote: »

That's your opinion and you may be right (or you may be wrong).

But what about someone in a relatively secure job, like a Garda, Nurse, Teacher etc...

In that 12-18 months you're talking about, if they are renting a house, they could be spending €500+ a month.

They could probably buy a house similar to one they'd be renting, and after mortgage interest relief, paying substantially less than they were paying in rent... and that money would be actually going towards purchasing an asset, rather than paying someone else's mortgage.

Also, negative equity only becomes relevant if / when you want to sell. If the buyer is intending on having the house in the medium- to long- term, then 20% - 30% (or any amount really) of negative equity is largely irrelevant.

letsbet wrote: »

Also if you buy a house over the next few months and fix your interest rate then in ten years you'll probably have saved as much in interest payments as you might if you held on for a while and the house went down a few grand and in a year or two interest rates will be much higher (more than likely).

Yes, Friends of mine bought on the Dunmore Rd. last year and don't really care that prices have slumped further, because it's a long term investment for them, and since they bought it they have been paying less on their mortgage every month than they were paying in rent every month in the same area, so they've no complaints...

Dan133269

barneystinson wrote: »

But what about someone in a relatively secure job, like a Garda, Nurse, Teacher etc...

In that 12-18 months you're talking about, if they are renting a house, they could be spending €500+ a month.

They could probably buy a house similar to one they'd be renting, and after mortgage interest relief, paying substantially less than they were paying in rent... and that money would be actually going towards purchasing an asset, rather than paying someone else's mortgage.

Birdfood wrote: »

Yes, Friends of mine bought on the Dunmore Rd. last year and don't really care that prices have slumped further, because it's a long term investment for them, and since they bought it they have been paying less on their mortgage every month than they were paying in rent every month in the same area, so they've no complaints...

The whole point of holding out on buying when a market is in a major decline is that while you will be paying "dead money" on rent for the time being, you will save money in the long run as the purchase price on the house and corresponding mortgage principal will be lower than if you bought the house at a higher price.

The points you're making are only valid if the reductions in the selling prices of property were minimal to the extent that mathematically it would be advantageous to buy compared with renting. Given the fact that property prices have fallen nationally roughly 15% in the last year, and face the almost certain likelihood that they will fall another 10 - 15% in the next year, I would be very interested if you could give a detailed mathematical explanation of how buying within the last year would have saved you money in the long run.

barneystinson

Dan133269 wrote: »

The whole point of holding out on buying when a market is in a major decline is that while you will be paying "dead money" on rent for the time being, you will save money in the long run as the purchase price on the house and corresponding mortgage principal will be lower than if you bought the house at a higher price.

The points you're making are only valid if the reductions in the selling prices of property were minimal to the extent that mathematically it would be advantageous to buy compared with renting. Given the fact that property prices have fallen nationally roughly 15% in the last year, and face the almost certain likelihood that they will fall another 10 - 15% in the next year, I would be very interested if you could give a detailed mathematical explanation of how buying within the last year would have saved you money in the long run.

Ummm, you want me to give you a detailed mathematical explanation? Why didn't you provide one to support your assertion? :rolleyes:

And also, if you read my post again you'll see I'm talking about people who buy now, not people who bought a year ago.

barneystinson

Dan133269 wrote: »

The whole point of holding out on buying when a market is in a major decline is that while you will be paying "dead money" on rent for the time being, you will save money in the long run as the purchase price on the house and corresponding mortgage principal will be lower than if you bought the house at a higher price.

The points you're making are only valid if the reductions in the selling prices of property were minimal to the extent that mathematically it would be advantageous to buy compared with renting. Given the fact that property prices have fallen nationally roughly 15% in the last year, and face the almost certain likelihood that they will fall another 10 - 15% in the next year, I would be very interested if you could give a detailed mathematical explanation of how buying within the last year would have saved you money in the long run.

OK, so I’ve been thinking about your request for detailed workings.

Before I get into that though I would make one non-financial point: In concentrating on this bottom line, whereby one absolutely has to buy at the bottom of the market or they’re some kind of lunatic, I think you’re overlooking a factor that’s hard to place a financial value on – the value of owning your own house; getting to decorate and furnish it however you like. I’ve been renting for several years, and HATE the 3-piece suite in our rented house, but as there’s nothing actually wrong with it I can’t very well ask my landlord to replace it – that’s part and parcel of being a tenant….

Anyway, I considered the figures, in a very rough way:

I’m assuming an interest rate of 3.3% until the end of 2012, 3.8% in 2013, and 4.3% from 2014 onwards, for ease of calculating.

I’m working with the case of a couple, and considering two options.

Option 1: They buy now, December 2011, and take out a mortgage of €150,000 over 35 years. They qualify for mortgage interest relief, reducing the mortgage repayment up to 2017.

Option 2: They wait until January 2014 to buy (renting at 650p.m. until then), and take out a mortgage of €135,000, (indicating a 10% fall in the market). They miss out on mortgage interest relief, so even though their principal is less, they’ll have paid €5,000 more, between mortgage and rent, up to the end of 2017.

After that, they’ll pay about €66p.m. less, over the remainder of the mortgage term, but they’ll be paying the mortgage for 2 years longer at the end.

The aggregate position is that Option 2 works out about €3,100 less, over the 37 year period up to 2048.

Now, nobody knows when / at what level the market will bottom out; will it fall another 5%, 10%, 20% or whatever. But if you were to tell me that I MIGHT save myself €10k - €20k over the next 37 years (i.e. a few hundred quid a year) by putting up with renting for an extra couple of years, I would say balls to renting for another couple of years if I can afford the price of a house that I’d be happy to keep for at least 10 - 15 years. Particularly if I’m going to have a cash flow benefit in the form of mortgage interest relief until 2017.

Birdfood

In the case of my friends it's a long term investment to the point that any current negative equity factor will be insignificant by the time their mortgage matures in 20 plus years time. They were fed up with renting and dying to make their own home and put their own stamp on a place, hard to quantify the value of that. Ireland is not conducive to anyone having a secure tenancy, how your home looks and how it is maintained is in the landlord's hands and you can be asked to leave at the drop of a hat. From the perspective of a person looking to set up their home or even somebody looking for a long term buy to Let investment, if you had the means to buy and found a property you really liked I don't think it would be an unwise investment at the moment. Bricks and morter will always hold some value in the long term despite the potential for massive fluctuations, unlike many other investments that can be wiped out in value altogether with no chance of recovery...

britespark

wellboytoo wrote: »

Finnbar01 wrote: »

The problem I have with buying a house now is the interest rates. I would not be surprised to see double digit interest rates coming down the road in the medium - long term.

You got it in one, that's everybody's problem, no confidence in the market, so no one wants to take a chance,

I still think house prices will drop by a further20% over the next two years, and potential buyers are holding out for this and also the banks are well aware of this and wont lend because there is enough negative equity loans on their books .

Dan133269

barneystinson wrote: »

OK, so I’ve been thinking about your request for detailed workings.

Before I get into that though I would make one non-financial point: In concentrating on this bottom line, whereby one absolutely has to buy at the bottom of the market or they’re some kind of lunatic, I think you’re overlooking a factor that’s hard to place a financial value on – the value of owning your own house; getting to decorate and furnish it however you like. I’ve been renting for several years, and HATE the 3-piece suite in our rented house, but as there’s nothing actually wrong with it I can’t very well ask my landlord to replace it – that’s part and parcel of being a tenant….

Anyway, I considered the figures, in a very rough way:

I’m assuming an interest rate of 3.3% until the end of 2012, 3.8% in 2013, and 4.3% from 2014 onwards, for ease of calculating.

I’m working with the case of a couple, and considering two options.

Option 1: They buy now, December 2011, and take out a mortgage of €150,000 over 35 years. They qualify for mortgage interest relief, reducing the mortgage repayment up to 2017.

Option 2: They wait until January 2014 to buy (renting at 650p.m. until then), and take out a mortgage of €135,000, (indicating a 10% fall in the market). They miss out on mortgage interest relief, so even though their principal is less, they’ll have paid €5,000 more, between mortgage and rent, up to the end of 2017.

After that, they’ll pay about €66p.m. less, over the remainder of the mortgage term, but they’ll be paying the mortgage for 2 years longer at the end.

The aggregate position is that Option 2 works out about €3,100 less, over the 37 year period up to 2048.

Now, nobody knows when / at what level the market will bottom out; will it fall another 5%, 10%, 20% or whatever. But if you were to tell me that I MIGHT save myself €10k - €20k over the next 37 years (i.e. a few hundred quid a year) by putting up with renting for an extra couple of years, I would say balls to renting for another couple of years if I can afford the price of a house that I’d be happy to keep for at least 10 - 15 years. Particularly if I’m going to have a cash flow benefit in the form of mortgage interest relief until 2017.

I can't say I'm an expert on the interest rates but regardless of that, even with your calculations, some money would be saved. If the interest rates don't increase by as much as you've outlined, more money will be saved. If house prices decline further than 10 % which is a very real possibility, more money will be saved. If the price of the house is more than the one in the example, more money will be saved.

This article published in the Indo last week is very relevant.

http://www.independent.ie/business/personal-finance/property-mortgages/young-couples-told-rent-dont-buy-as-prices-keep-falling-2949450.html

The housing analysis finds that, if house prices stabilise next year, potential first-time buyers would be better off going ahead with a purchase.

Dr Duffy said that if house prices decline by another 13pc, then renting would be a better option.

If house prices fall by another 4pc then there will be little difference in the cost to a family between renting and buying.

Dr Duffy believes "there is still significant adjustment to take place in house prices".

The research takes account of the fact that mortgage interest tax relief is due to be radically reduced for those who do not buy their first house by the end of this year.

The tax relief is due to drop from a maximum of €416 a month for a couple who buy before the end of the year to a maximum of €75 a month for couples buying from the start of next year.

EDIT: Regarding interest rates, here is a relevant article. If you have a tracker mortgage, doesn't look like interest rates will be increasing.

HOMEOWNERS can look forward to a series of mortgage rate cuts in the near future after the ECB yesterday came under pressure to kickstart flagging eurozone economies.

International thinktank the OECD said sharp interest rate reductions were urgently needed to boost economic activity in a region now near recession.

Earlier this month, the ECB reversed its previous policy and cut interest rates to 1.25pc.

Now the strong expectation is that there will be a series of cuts.

http://www.independent.ie/business/european/mortgage-cuts-on-way-in-bid-to-lift-euro-crisis-2947902.html

bilibob

I'm not an economist or even an agent, but I am looking for a house, and I have mortgage approval from two banks who people keep saying aren't lending.

Clover Meadows might not be finished, but the parts that are seem to be finished very well. I think 91,000 for a 4 bed detached house with a garage is an crazily low price. Maybe there is something wrong with them that I dont know, but they are close to everything, faster access to town than the dunmore road, and an asset that you own.
20 year mortgage 450 a month- There is nowhere you would rent a house like that for that money. These houses cannot be built for that money. I admit I am not convinced that the prices wont fall further, but if these houses sell to somebody else, I wont have the opportunity to buy houses of this size, with this standard of build (insulation, low running costs etc.) for this price!

Convince me to keep renting, paying 250 a month more than the cost of a mortgage for an asset that I wont own.

By the way- Obviously a 35 year mortgage costs far more because of 35 years of interest!

letsbet

I wonder what impact today's efforts in the budget to boost the property market next year will have.

Jambo

bilibob wrote: »

Clover Meadows might not be finished, but the parts that are seem to be finished very well. I think 91,000 for a 4 bed detached house with a garage is an crazily low price. Maybe there is something wrong with them that I dont know, but they are close to everything, faster access to town than the dunmore road, and an asset that you own.
2

I wouldnt take a house off you in there if you gave me €90k - I lived there for nearlly 3 years and its like hell - its an imigrants version of templars hall , lots of partying at the weekend - fights in the gardens , no person takes any pride in the place , a few fueds, break ins , tyre slashings , Irelands largest outdoor car repair and cleaning centre at the weekend - its just pure and utter hell , and most recently the "Professional Polish Painters" have taken to storing all their their rubbish and paint cans from their jobs in skips outside their house in the estate ususlly not emptied until its all over the place. To top it off numerous individuals use their scramblers in the unfinished sites plus the travellers keep their horses behind the houses on the same sites

spankmemunkey

I suppose a house is only worth what a person is willing to pay for it and at the moment theres not alot of willingness.

I hear people talk about negative equity, thats all well and good but if you were to buy a house and be happy to stay there then thats fine, like live there for the next 10 -20 years.

I was renting for about 3 years and it cost me 32k in rent that ill never get back, so i suppose you could say thats also negative equity?

dayshah

bilibob wrote: »

Clover Meadows might not be finished, but the parts that are seem to be finished very well. I think 91,000 for a 4 bed detached house with a garage is an crazily low price. Maybe there is something wrong with them that I dont know, but they are close to everything, faster access to town than the dunmore road, and an asset that you own.
20 year mortgage 450 a month- There is nowhere you would rent a house like that for that money. These houses cannot be built for that money. I admit I am not convinced that the prices wont fall further, but if these houses sell to somebody else, I wont have the opportunity to buy houses of this size, with this standard of build (insulation, low running costs etc.) for this price!

Which suggests to me zero incentive for the builder to finish it. If you like it as it is, then grand.

what recession?

bilibob wrote: »

Clover Meadows might not be finished, but the parts that are seem to be finished very well. I think 91,000 for a 4 bed detached house with a garage is an crazily low price. Maybe there is something wrong with them that I dont know, but they are close to everything, faster access to town than the dunmore road, and an asset that you own.

Is Clover meadows somewhere you (or whoever the buyers were) want to stay, somewhere you would actually like to live for a very long time - or does it just have preference because it is currently going cheaper than other estates/areas? I don't see what peoples' rush is. If you prefer a different estate, or a different area then just wait until one of them comes up at a reasonable price or negotiate. If you look back in a year or two having paid 91000 or whatever for a house in Clover Meadows, where the estate may never be finished, and you see a similar house in an estate you want for the same price, would you not regret it? The prices are only going one way, and it's not up. Also, I don't know what route you take but it probably takes me 5 minutes to get from the Dunmore Road to town 90% of the time, the other 10% is obviously morning/evening rush hour traffic, which Ferrybank has (or used to have) on a far greater scale especially since the bridge is the only possible route to town and it can get very blocked up.

bilibob wrote: »

20 year mortgage 450 a month- There is nowhere you would rent a house like that for that money. These houses cannot be built for that money. I admit I am not convinced that the prices wont fall further, but if these houses sell to somebody else, I wont have the opportunity to buy houses of this size, with this standard of build (insulation, low running costs etc.) for this price!

This doesn't include interest, which would bring it to closer to the current rent prices, albeit probably not as high. But the prices for rent currently are not going to rise with property prices falling. There are 485 unrented properties in 'Waterford City' on Daft currently and they'll all just have to keep competing and gradually lowering their prices over time to get the renters.

bilibob wrote: »

Convince me to keep renting, paying 250 a month more than the cost of a mortgage for an asset that I wont own.

Good luck finding a place that will only lose 250 a month off it's value, that's only €3000/year of a drop in price, and I would imagine that regular 3/4 bed semis will continue to lose a lot more than that for the foreseeable future.

bilibob

Thanks Jambo for the head up!

I have been over there a loads of times to see what its like- A beautiful house with lots of space. But I guess you have to live there to see the problems. I did notice all the cars outside one of the houses- I wasn't sure what was going on-

bilibob

sorry now, not sure how quotes work,

what recession? wrote: »

Is Clover meadows somewhere you (or whoever the buyers were) want to stay, somewhere you would actually like to live for a very long time - or does it just have preference because it is currently going cheaper than other estates/areas?

Im not going to lie to you, Its the price thats attractive.

If you look back in a year or two having paid 91000 or whatever for a house in Clover Meadows, where the estate may never be finished, and you see a similar house in an estate you want for the same price would you not regret it?

I quite like that the estates other phases wont be built- the size of places like collins avenue put me off, plus you are buying a house that is nearly 20 years old!

lol when the Dunmore Road is bad, Its very bad!


This doesn't include interest, which would bring it to closer to the current rent prices,

It does include interest, and life assurance and the other costs.


Good luck finding a place that will only lose 250 a month off it's value,

It would have to lose more than rent, no? Which is 700 a month for a 3 bed semi- Mortgage for 4bed detached.

What really puts me off Is what Jambo said about possible problems living there.

what recession?

bilibob wrote: »

lol when the Dunmore Road is bad, Its very bad!

Definitely true!

bilibob wrote: »

It would have to lose more than rent, no? Which is 700 a month for a 3 bed semi- Mortgage for 4bed detached.

Uh, I think it would have to lose less than the difference between the mortgage and the rent for it to be a worthwhile purchase (from a financial point of view).

For example if the mortgage is 450 a month, the rent you would have to pay for the house is 700, and the value of the houses falls 600 a month on average then...
Cost per year for rental: €8400
Cost per year for purchase: €5000 + €7200 = €12,200

Obviously you can't calculate the amount its dropped down to the euro, but you can have a pretty decent idea. And also I wouldn't think it is unrealistic to think that a €91,000 house could drop €7200 a year such as in the above example.

Eventually though houses will have to stop losing value as they can't be worthless, so depreciation won't always be a factor... but its common sense to try to wait and minimize the depreciation factor so that you make real savings by buying rather than renting. So I guess the above example is only relevant in the short term. If only we knew where the bottom is :P

dayshah

spankmemunkey wrote: »

I was renting for about 3 years and it cost me 32k in rent that ill never get back, so i suppose you could say thats also negative equity?

Mortgage interest and repairs are just as much dead money as rent.

bilibob

but sure the rent is dead money anyway- the mortgage is an asset at the end of the day.

bilibob

Mortgage interest decreaces as the years go on, 3.2 percent of 100000 is only 3200 a year interest, around 10000 for 3 years and even with maintenance would be nowhere near €32000

there is really only a saving made by waiting if prices drop by more than the rent- say 11,000 and I dont think that at current prices that can keep going.

By the way can anyone explain to me what is the story with mortgage tax relief? how does it work?

letsbet

Take away mortgage interest relief too (and add in property tax I, although some cheeky landlords may pass some of that on).

dayshah

bilibob wrote: »

but sure the rent is dead money anyway- the mortgage is an asset at the end of the day.

You mean the house is an asset (mortgage a liability).

I think if you find a house you like you may as well buy it. They probably don't have a whole lot further to fall, and there is risk in keeping money in the bank anyway. But if the house isn't special why not see if there is one that is. What do you mean by the estate is unfinished? Are there incomplete houses and roads? €91k is alright, but not great value.

So rent is 'dead' money, and so are repairs/maintenance, mortgage interest and capital depreciation.

Who is offering 3.2% for a mortgage?

Dan133269

bilibob wrote: »

but sure the rent is dead money anyway- the mortgage is an asset at the end of the day.

Read my post on the previous page

bilibob

Th rate Aib gave me was actually 3.08 percent- Bank of Ireland was a little higher cant remember exactly.

Dan133269

Coming back to the topic of overpriced property, look at this

http://www.daft.ie/searchsale.daft?id=629113

200k for a cramped 3 bed semi! :D

dayshah

bilibob wrote: »

Th rate Aib gave me was actually 3.08 percent- Bank of Ireland was a little higher cant remember exactly.

And do you think they'll actually lend at that? Just curious how the situation is now with the banks.

How much of a deposit have you? About 20%? Have you a permanent safe job?

what recession?

Dan133269 wrote: »

Coming back to the topic of overpriced property, look at this

http://www.daft.ie/searchsale.daft?id=629113

200k for a cramped 3 bed semi! :D

Haha yeah, good luck to them. They were only guiding around €120k or so for the 3 story, 2100sqft detached house in the same estate in the Allsops auction last week, weren't they? And it didn't sell...

Starscream25

hi, just wondering what peoples opinions are on the apartments in de bruin court in poleberry?, was thinking of getting my foot on the property ladder and maybe renting it out aswell, are they being filled with students does anyone know?
http://www.daft.ie/searchsale.daft?id=629109

bilibob

I know a few people living there, mainly 'students' in the WCFE. They have to be the most cramped apartments i ever seen. But for students they are cheap, and thats the main thing. Keep the rent low enough and it will be easy to let out.