Am I mad to buy in 2012

cast_iron

Man007 wrote: »

I'm happy enough with our financials was just seeing what people thought re prices didn't expect so much response.

So you ask if people think you are mad to buy this year. Pretty much everyone (including yourself) say all indicators point "yes". Yet you don't really want to heed that.

You've not addressed the two fairly fundamentals alot of people have asked, namely what happens if you or your partner losses your job, and also what happens if interest rates hit the 10% region.

Any good mortgage broker should tell you what you can afford, and it's usually a nice bit less than what the bank is willing to lend.

Man007

Zamboni wrote: »

Man007 wrote: »

Just for the record im not on anything near 6 figures just an average salary in my opinion with scope to increase but we are sensible.

Shame on AIB for offering you a 92% of a 400k mortgage which is probably ten times your salary.
They have clearly learned nothing.

This is a ridiculous comment

1) I said I was on an average salary
2) I said me and my partner

Since when is an average salary for 2 people €36k a year or €18k each which is what it would need to be for your calculation.

This is off topic but Most banks are giving 4-4.5 times combined salary

The repayments on €365k are €1213 after interest relief obviously this will rise but it's less than we've been paying on rent for 5 years

Hardly irresponsible by the banks

RobAMerc

Op - I think you would be nuts to buy this year. The irish economy hasn't got anywhere near as bad as it will yet. We are doing ok simply because of exports, but with the global economy slowing this will take us down too.
Also - the government is doing it utmost ( at a serious cost ) to keep prices artifically inflated by a ) sitting on property ( Nama ), b) by setting an artificial floor on rent with rent supplement and c.) forcing the banks to sit on non performing loans rather than repossess.
They are dragging their feet on the Property price database also which hides the amount houses are really selling for leaving people clueless as to the real value of properties whether buying or selling.
water charges and property taxes are also going to have a big impact. lets see how keen people are to value their 3 bed semi at 500k when they have to pay a property tax proportionately.

With regard to rent being dead money. Your 400k house might drop by only 10% this year. That's 40k you'll have to borrow. Over the lifetime of the mortgage that is closer to 80k you'll pay back. Imagine what you could do for your family with that 80k compared to the 18k you'd pay in rent in that year.

MagicMarker

350k/4.5 is 78k combined salary, just under 40k each assuming you're earning the same as each other.

So what if one of you loses your job? Or even worse if you're not on equal pay, what if the main bread winner loses their job?

Sleepy

Unless you're both protected by the Croke Park agreement, it's likely that one, or both, of you will face unemployment at some point in the next 5 years and even then it's not guaranteed that a government might find some balls.

4 - 4.5 combined salary is insane. 3 times the larger earner's salary is an affordable mortgage tbh.

Zamboni

Man007 wrote: »

This is off topic but Most banks are giving 4-4.5 times combined salary

The repayments on €365k are €1213 after interest relief obviously this will rise but it's less than we've been paying on rent for 5 years

Hardly irresponsible by the banks

Fvck it. Buy.
The only person you listened to on the whole thread was the one who agreed with you.
If you think that factoring in affordabiltiy and allowing multiple of combined salary are the only important aspects of a mortgage than fire away.
You have ignored everyone that questioned if you had assessed the potential impact of interest rates and/or job losses.

Man007

Cheers Zamboni that's what I want to hear just cause you said I'm going to go for it haha.

The other option is to not spend a penny cause the recession is so terrible and sit in my rented house crying myself to sleep about how it's the end of the world tbh I'm sick of all the negativity.

Sleepy what are you basing your sweeping statement on that one of us will likely lose our job surely some sectors are more protected than others I've actually switched jobs during the recession and so has my partner and friends of mine in the same line of work.

Anyway I'll come back to you all in a year and let you know if I regret my decision or not.

Thanks Everyone

MagicMarker

Be sure to say hello when I buy the house next door for half the price in 5 years. :pac:

iguana

Man007 wrote: »

I'm not being flippant about 35k I just don't see it as a real loss if I sell the house in 20 years and it's worth less that's a real loss which I don't think will happen.

You aren't being flippant but you are being illogical and foolish. If you had bought the house for €40k and then it rose to €400k and then fell back to €150k then it's not a real loss. But if you buy it at €350k and it drops to €315k, then not only is it a real loss of €35k but in actuality it's a loss of twice that as you will be paying that money, + interest, back every month for years. That's money that could have been in your savings account, so is very, very much a loss.

As for prices having bottomed out now, prices are no where near bottom yet. How much they have fallen from peak is absolutely no indication of current value. When you start looking at house prices compared to traditional means of working out value the majority of houses on the market are still so far overpriced it's mind boggling. Especially considering the fact that many of the problems this economy is facing are still to come.

CiaranC

Man007 wrote: »

The other option is to not spend a penny cause the recession is so terrible and sit in my rented house crying myself to sleep about how it's the end of the world tbh I'm sick of all the negativity.

I dont get this.

You think living in some nondescript housing estate in SW Dublin, mortgaged up to your eyeballs with the threat of a debt nightmare if one of you loses your job (which is entirely likely in the face of our recession) is somehow a progressive lifestyle choice? That throwing away tens of thousands in cash you could spend on lifestyle or your kids is the smart thing to do? How would this improve your life exactly? Cos you could paint your door?

Seems we have learned nothing. There is obviously still a considerable infuence on people in their 20s/30s to buy a house, at any cost.

cast_iron

Man007 wrote: »

The other option is to not spend a penny cause the recession is so terrible and sit in my rented house crying myself to sleep about how it's the end of the world tbh I'm sick of all the negativity.

How will buying a house solve this?

Each to their own, but by holding off, it's effectively a €35 pay rise between ye this year. Plus no major commitments in a year that we may yet see then end of our currency.

I'm not saying no one should buy. In fact friends of mine are looking to buy and I'm behind them. But their position is not like yours. They are looking at 50% deposit (think of the repayment savings if you used the €35 price drop on top of the deposit) and mortgage repayments of €6-700pm. A job loss (unlikely as it is) is very bearable. And they get to pick and choose for the next year too.

That said, your situation is far from that sound, and you've still to say what provision you will make in the event of even one job loss. The logic of mortgage = €1213 is better than renting = €1300 is madness. If that's lost on you by the blinding lights of being a property owner, well it's dismaying really. That logic is exactly what has people (and the country) financially ruined.
Who was it that said the definition of madness is doing the same thing over and over and expecting different results every time?

Lantus

I wouldn't buy a house today for that money unless it was or could be modified to be: -

1/ Could be made non dependant on a traditional heating system through super-insulation etc.
2/ Have solar heating and PV retrofitted.
3/ Have lots of land. (for growing food and ideally your own well.)


My own personal predictions for the future are that we have seen the end of the cheap oil era as we know it. fossil fuel prices are about to go upwards in the short to medium term (1 to 5 years give or take) It's highly likley we will see petrol at 1.70 or even 1.80 by the summer. This will be mitigated only for a shortwhile by government intervention as they slash tax. However it is a worrying indication of whats to come as no gov can make oil.

Think along the lines of the good life when you buy and you'll be getting something for the future that is not just a house but a survival lifeboat for whats to come.

Donegal123

OP me and my wife in similar scenario to youz but not in Dublin so currently renting for 550pm. We are both debt free with good savings and are lucky to have good jobs. The way I see it, we both would obviously prefer owning rather than renting. Right now you can buy a lot of house for half of it's peak price and there is an argument that buying in 2012 and getting mortgage interest relief at 25% will offset any house price decrease between 2012-13 if they do go ahead and end mortgage interest relief from 2013 on.

However, I want to buy. I could afford taking out a mortgage but equally why bother. We are stress free renting. As an earlier post said, renting ain't dead money if you are able to save enough each month to go towards buying a house such that the reduced price it may cost to buy a few years down the line coupled with the shorter term mortgage (due to savings thus less interest paid). If I lost my job in the morning, I have savings and no large mortgage noose around my neck. Each year you save you are taking years off a mortgage length. If our circumstances dont change, and if we stay with renting for 3 or 5 years we could get a savage house with a minimal mortgage. While we are saving during that time, we are not stressed (worth a lot in this country at the moment) and the end result is the same house possibly cheaper to buy with an affordable mortgage. It's a win win and it's that that is stopping us buying and continuing our savings. It's the longer term plan that I see having the most longterm benefits.

The other reason I'd be apprehensive is that it's far from clear whether or not the euro as we know it will be the same in the next few years. Any of a number of countries could default including us. There could be a million different scenarios unfold. We might leave or be kicked out or the euro currency might become two tiers of the same currency. One strong for the likes of Germany etc. The other no doubt for us and the other problem children etc. If this were to happen and we changed to some sort of punt nua etc savings would be hit no doubt if in Ireland. But equally important, it's more than likely mortgage debt would be negatively affected to the same extent due to the fact they originated from strong euro banks and will be required to be repaid in the stronger euro currency. This would make this country unbearable but until I know for sure what's going to happen, I think it's just too risky with too any what ifs. You have done well not to be in negative equity thus far, why risk ending up in it 5 years after this mess unfolded. Would that not be even worse?

Marcanthony

Twiki wrote: »

That isn't a reliable indicator - both building costs and site values are subject to the same downward pressures as the property market in general.

understanable. however to build a property there are other additional fees that have to be amalgimated with the cost of land / build price.

council fees, professional fees enginneer ect, service charges (esb , water , gas supplies)

I have worked out figures constantly and to build an average 1000 sq ft detatched property including fees. regardless of area. can not be possibly done for less than 150k either now or in the future with out free labour, materials ect.

So if a 1000 sq ft property is on sale for less than that. that is a real bargain to me.thats selling at a loss in any business.

the property buisness is in bad shape at present. however one thing is certain going forth and that is population will increase. meaning supply is greater than demand at present. but this will have to swing in the demand equalls/ outbeats supply at some stage.Meaning property that is selling at its cost price or less . is one great future investment.

desertcircus

Marcanthony wrote: »

Twiki wrote: »

That isn't a reliable indicator - both building costs and site values are subject to the same downward pressures as the property market in general.

understanable. however to build a property there are other additional fees that have to be amalgimated with the cost of land / build price.

council fees, professional fees enginneer ect, service charges (esb , water , gas supplies)

I have worked out figures constantly and to build an average 1000 sq ft detatched property including fees. regardless of area. can not be possibly done for less than 150k either now or in the future with out free labour, materials ect.

So if a 1000 sq ft property is on sale for less than that. that is a real bargain to me.thats selling at a loss in any business.

the property buisness is in bad shape at present. however one thing is certain going forth and that is population will increase. meaning supply is greater than demand at present. but this will have to swing in the demand equalls/ outbeats supply at some stage.Meaning property that is selling at its cost price or less . is one great future investment.

This is madness. Why on earth would you fixate on a rising population as being the one determinant of whether a house is a good investment? The currency may not survive, banks are furiously deleveraging, there's a massive overhang of unsold housing, and the segment of the population most likely to have children is busily emigrating as fast as possible. And houses losing 10% of their value in the next year is a conservative investment. No property in this country is a great investment at the moment; you might be lucky enough to find a decent investment, but that's it.

OP: buying now is a terrible idea. You don't know whether you and your partner will both have jobs in two years, or even whether you'll both want to keep working. You know full well prices are expected to drop by at least 10% this year. Yet you're fixated on this idea that buying will make you happy in a way that renting won't.

I'm going to make it as clear as I can for you: given the expected drops, you want to burn six twenty euro notes every single month for the next three decades for the sake of doing a bit of DIY this year instead of waiting till next year. Think about how ridiculous that sounds.

strik

I would say go with your feeling... a lot of the experts on here would have been in the same brigade that thought it was a great time to buy in 2007...... Markets will rise and fall and personally I feel by 2018 property prices will be back above 2007 levels.... many will argue against this but history tends to repeat itself and you are getting a property for probably less than 1/2 the price your neighbour paid........go for it and congrats on not getting screwed like most of us!

desertcircus

strik wrote: »

I would say go with your feeling... a lot of the experts on here would have been in the same brigade that thought it was a great time to buy in 2007...... Markets will rise and fall and personally I feel by 2018 property prices will be back above 2007 levels.... many will argue against this but history tends to repeat itself and you are getting a property for probably less than 1/2 the price your neighbour paid........go for it and congrats on not getting screwed like most of us!

This is just objectively wrong. Most of us were calling the bubble for what it was. And for the market to return to 2007 levels in six years would require every single factor in house prices to go into reverse immediately (no more emigration, banks not ruined but instead reckless, and various other things) and prices to rise even faster than they did in the middle of a ludicrous property bubble. Do you have any reason whatsoever to back up the claim you're making?

endabob1

Man007 wrote: »

This is a ridiculous comment

1) I said I was on an average salary
2) I said me and my partner

Since when is an average salary for 2 people €36k a year or €18k each which is what it would need to be for your calculation.

This is off topic but Most banks are giving 4-4.5 times combined salary

The repayments on €365k are €1213 after interest relief obviously this will rise but it's less than we've been paying on rent for 5 years

Hardly irresponsible by the banks

MagicMarker wrote: »

350k/4.5 is 78k combined salary, just under 40k each assuming you're earning the same as each other.

So what if one of you loses your job? Or even worse if you're not on equal pay, what if the main bread winner loses their job?

Whether it's the right or wrong time to buy a house is a personal choice, there are many more factors than cold economics behind it; But, the value of the house you buy is all about numbers.
If you & your OH are on a joint income of +/- 80k buying for 400k is insanity
If I was in your shoes I would be looking at half that amount tops & that would still be with a 50k deposit.
When I first bought (1997) the rule was 3 times your salary or in a joint application 3 times the main salary plus 1.5 times the second and I've stuck to that ever since. It's served me pretty well, al things considered.

You don't know what interest rates will do in the future, you don't know if you will want kids or if you will lose your job in the recession, because despite your confidence, statistically there's a very good chance that one of you will. You also don't know what new taxes will be dreamed up to relieve you of your hard earned cash if you do hold on to your job.

What you do know is that borrowing 350k will put you in a position where you both need to work to fund the mortgage because a salary of 40k will not cover it. I guesstimate a take home pay of about 2.5 a month and half of that is gone on mortgage, that is not a pleasant scenario especially if interest rates rise, which they will do at some point and if & when interest relief is scrapped.

Marcanthony

desertcircus wrote: »

This is madness. Why on earth would you fixate on a rising population as being the one determinant of whether a house is a good investment? The currency may not survive, banks are furiously deleveraging, there's a massive overhang of unsold housing, and the segment of the population most likely to have children is busily emigrating as fast as possible. And houses losing 10% of their value in the next year is a conservative investment. No property in this country is a great investment at the moment; you might be lucky enough to find a decent investment, but that's it.

OP: buying now is a terrible idea. You don't know whether you and your partner will both have jobs in two years, or even whether you'll both want to keep working. You know full well prices are expected to drop by at least 10% this year. Yet you're fixated on this idea that buying will make you happy in a way that renting won't.

I'm going to make it as clear as I can for you: given the expected drops, you want to burn six twenty euro notes every single month for the next three decades for the sake of doing a bit of DIY this year instead of waiting till next year. Think about how ridiculous that sounds.

The grass is not as green on the other side of the fence. There is world wide financial issues at present. Now you state prices will drop another 10% this year.10% of what price.I have seen similar properties in the same areas with a difference of 150k. So will it be 10% of the properties that are realistically priced at present or properties that are not reasonably priced. 10% of what figure.If its 10% of the figure including the percentage loss already from the price of the boom.

properties that are been sold at realistic prices are selling at present. The market is not stagment.

So can all the experts telling the op to hold out. What and when is the best price and time to buy a home or is it a case of monkey see , monkey do. Like what happened in the boom.However this time losing out on a bargain from the pick of the crop.Instead of over paying for the worst of the crop.

desertcircus

The grass is not as green on the other side of the fence. There is world wide financial issues at present. Now you state prices will drop another 10% this year.10% of what price.I have seen similar properties in the same areas with a difference of 150k. So will it be 10% of the properties that are realistically priced at present or properties that are not reasonably priced. 10% of what figure.If its 10% of the figure including the percentage loss already from the price of the boom.

properties that are been sold at realistic prices are selling at present. The market is not stagment.

So can all the experts telling the op to hold out. What and when is the best price and time to buy a home or is it a case of monkey see , monkey do. Like what happened in the boom.However this time losing out on a bargain from the pick of the crop.Instead of over paying for the worst of the crop.[/Quote]

The market absolutely is stagnant. About fifteen thousand mortgages were approved last year: if every single one of those was an FTB, it'll take seven years to clear the backlog of what's for sale. That's before you consider the numbers trading up out of the 15,000, or the NAMA properties.

Prices will eventually level out, but they won't go straight back up again; there are too many limiting factors.

Marcanthony

The market absolutely is stagnant. About fifteen thousand mortgages were approved last year: if every single one of those was an FTB, it'll take seven years to clear the backlog of what's for sale. That's before you consider the numbers trading up out of the 15,000, or the NAMA properties.

Prices will eventually level out, but they won't go straight back up again; there are too many limiting factors.[/QUOTE]

If the market is stagment well why are people applying for mortgage approval.15,000 you state.

The amount of properties vacant. A lot of these can be refered as NEVER WILL BE SOLD. Due to the fact they are bad investments. example properties in the back of beyonds and apartments in rural villages.So whats the satistics on vacant houses within 40 to 50 miles of the c.b.d or in big cities.Where population and demand will always increase for a home to live in . So just using these properties as a good property buy.How long will it take at the rate of approvals you provide.will it be before they are sold and the op misses out on a bargain and pick of the crop.
Its also my opinion that apartments outside the cbd are bad investments and are classed as vacant units for sale in the statistics, but lets stick to houses in the right locations or apartments in the cbd as the issue for what is a good buy rather than the satistics been provided that include an apartment in rural ireland 100 miles away from a shop.

Apartments which make up the satistics for most of these vacant units. apartments are really only designed for city living where there is a lack of building space and demand for accomadation.Like close to the cbd.

theg81der

Op I kinda think your mad not to listen to some of the sensible comments people are making here. I asked were your incomes stable and I assumed with that size morgage they would be substantial not avaerage, you didn`t answer. Your just like everyone a few years ago don`t think don`t care just want to buy a house. What happens if you have a kid or one of you becomes ill or lose your jobs. Your putting a nooose around your neck - volunterily!!! so yes you mad and not in a good way.

Marcanthony

theg81der wrote: »

Op I kinda think your mad not to listen to some of the sensible comments people are making here. I asked were your incomes stable and I assumed with that size morgage they would be substantial not avaerage, you didn`t answer. Your just like everyone a few years ago don`t think don`t care just want to buy a house. What happens if you have a kid or one of you becomes ill or lose your jobs. Your putting a nooose around your neck - volunterily!!! so yes you mad and not in a good way.

That is a great point of View. Which is more of a financial stabilty issue.
But as for is it. the right time to buy.Maybe it is. He has to live some where and if hes renting . If he falls into these finanical issues. Will he still be able to pay his rent. Which most likly will be equall or more than his mortgage.

Spiritofthekop

Marcanthony wrote: »

The grass is not as green on the other side of the fence. There is world wide financial issues at present. Now you state prices will drop another 10% this year.10% of what price.I have seen similar properties in the same areas with a difference of 150k. So will it be 10% of the properties that are realistically priced at present or properties that are not reasonably priced. 10% of what figure.If its 10% of the figure including the percentage loss already from the price of the boom.

properties that are been sold at realistic prices are selling at present. The market is not stagment.

So can all the experts telling the op to hold out. What and when is the best price and time to buy a home or is it a case of monkey see , monkey do. Like what happened in the boom.However this time losing out on a bargain from the pick of the crop.Instead of over paying for the worst of the crop.

How many properties do you own in Cork & Dublin at present?

daltonmd

OP. You are getting a bit of flack here and on reading the thread it is clear that the issue is not about whether or not you should buy- but rather that you are making a reckless financial decision based on frustration and emotion rather than on cold hard figures. Please just give these figures a run through. You don't say what term the mortgage is, or indeed the teaser rate or duration so for the purpose of the exercise let's assume it's for 3 years at 3% interest and the house price is 400k If you stay renting for another 3 years you will save at least another 36k (on top of your existing 35k ). Your rent will cost you 47k (honestly i'd move somewhere smaller for half that and concentrate on saving like mad). If you buy now then even taking a mere 10% cut in house prices - your house is now worth 360k. You have lost your 35k deposit. But more worrying is that your mortgage repayments would shoot up from 1213 to maybe 1500 or more depending on what interests rates are in 3 years, and they won't be 3.%. In a healthy property market the cost of servicing your mortgage should go down while the value of the house should go up. This won't be the case and i understand your frustration with renting but if one or both of you lose your jobs, take paycuts, pay more taxes, leaving you with LESS disposable income ( and the reason i am using 3 years is because there are DEFINATELY 3 more austerity budgets on the way) to service a higher mortgage, then you won't be able to move to find employment. If you hold off then you could get this house for 360k at most and have close to 100k deposit, leaving you with a substantially smaller mortgage plus more certainty re. Property/water charges.

Marcanthony

Spiritofthekop wrote: »

How many properties do you own in Cork & Dublin at present?

I dont think my potfolio has anything to do with the ops question.

However I am looking at a property at the moment in a city in ireland and for its price will return a great rental and i wouldnt be able to buy a site with services and planning for the price been negotiated. So back to the ops question. its a great investment and probaly the right time to buy now.

kennyb3

Op, all i ask is that you come back here in 5 years - please!

You've made the decision already by sounds of it (if this isn't a wind up).

But let me say one thing as this comes up all the time:

- You talk about the €35k (and probably way more when you throw in interest) not being a real loss. It is - there is opportunity cost. Think of the extra €300-€400 extra you ll have every month if you buy at the lower price. You can use this to treat the wife, eat out, and just generally have a better lifestyle etc.

Also just to re-iterate mortgage interest relief will likely be gone in 8-10 yrs so you ll have 20 odd years paying the higher rate.

You seem to be ignoring every comment on possible salary cuts, job losses, rising interest rates once the EU situation plays out, children etc etc.

These threads always crack me up - people never learn.

zac8

Marcanthony wrote: »

I dont think my potfolio has anything to do with the ops question.

It has everything to do with it when you're giving out crap advise like this:

Marcanthony wrote: »

its a great investment and probaly the right time to buy now.

...and you know nothing about the house in question.

Marcanthony

kennyb3 wrote: »

Op, all i ask is that you come back here in 5 years - please!

You've made the decision already by sounds of it (if this isn't a wind up).

But let me say one thing as this comes up all the time:

- You talk about the €35k (and probably way more when you throw in interest) not being a real loss. It is - there is opportunity cost. Think of the extra €300-€400 extra you ll have every month if you buy at the lower price. You can use this to treat the wife, eat out, and just generally have a better lifestyle etc.

Also just to re-iterate mortgage interest relief will likely be gone in 8-10 yrs so you ll have 20 odd years paying the higher rate.

You seem to be ignoring every comment on possible salary cuts, job losses, rising interest rates once the EU situation plays out, children etc etc.

These threads always crack me up - people never learn.

What lower price. Can you give more detail.Buying a property at a lower now (less than his approval) or waiting for a lower price. Sorry probably just me. but I dont understand what you mean by a lower price.

Marcanthony

zac8 wrote: »

It has everything to do with it when you're giving out crap advise like this:



...and you know nothing about the house in question.

Stating an opinion that if a property is in the right area and fits the right criteria and is cheaper than renting and is probably 60 -70 % cheaper than your neighbours sale agreed price. Is crap advice.I dont know the house in question but if it does not match my opinion above then dont buy it.

buying his property. He should apply business terms and judge it as an investment as well as a home.

In relation to my portfolio has something to do with the ops question. My response is I did buy property during the boom. But also sold at the right time. There was tell tail signs. Estate agents and banks ect. for example why did sherry fitgerald (probably the biggest estate agent at the time) sell myhome.ie in 2006? why would they sell a big protential asset during their business boom. Turns out less than a year later property bubble was ready to burst . Also building projects i was working on where not selling at the same rate as previous years in 2006 (much, much slower). and if i provided you with that info back in 2006 you probably would have told me the advice i am giving is crap. Am i correct op?