Prices keep on Falling...

pawnacide

daltonmd wrote: »

Price is only one factor, it;s cost of servicing, income, rising taxes and so on.

minus the cost of renting. Mortgage repayments over 25/30 years are more or less on a par with rental rates for similar properties in this area at least. I get your point about income, taxes etc but this isn't going to improve over the next 10 years. Thats 60 - 120k in rental payments, depending on location, if you were to wait that long.

CiaranC

pawnacide wrote: »

When all's said and done the Irish like to own their own properties. We don't have a rental culture like in France and Germany

We do now my friend.

strandroad

pawnacide wrote: »

minus the cost of renting. Mortgage repayments over 25/30 years are more or less on a par with rental rates for similar properties in this area at least. I get your point about income, taxes etc but this isn't going to improve over the next 10 years. Thats 60 - 120k in rental payments, depending on location, if you were to wait that long.

The difference on a house in Dublin has already been €240k or so, will be more - now add interest over the life of the mortgage.
I agree with you that I would like to own a house to retire to, but there's no need to rush yet.

daltonmd

pawnacide wrote: »

minus the cost of renting. Mortgage repayments over 25/30 years are more or less on a par with rental rates for similar properties in this area at least. I get your point about income, taxes etc but this isn't going to improve over the next 10 years. Thats 60 - 120k in rental payments, depending on location, if you were to wait that long.

As I said in another post - a mortgage of 230k has an interest payment of over 9k in the first year.

Your example is really only valid (at a stretch for the purpose of agreeing with home ownership at this time) if we, like the states, had 30 year fixed interest rates - we don't.

I also think that using an example of 10 years is a stretching for people who want to buy now.

I would look 3 years down the line. 1k in rental per month. 36k rental.

Now let's look at buying a property for 250k now.

Interest alone is over 36k in 3 years (check out amortization calculators for 230k @4%).

Simply put, if the property market simply stays still for the next 3 years then people who rent lose NOTHING.


They would in all reality gain from not buying, they won't have maintenance costs or the household charge or indeed a property tax to contend with, I mean in all honesty, no matter how positive you are about the property market can you see it increasing in the next 3 years?

And if someone decides in 3 years that they should buy at today's rate (assuming no more falls and I really don't buy that) then they will not have wasted one cent in DEAD RENT - because they would have paid the same and more in interest and other costs of home ownership.

Edit to add - In 3 years however we will have a better insight into how we are - are we still in a downturn or heading into growth? Stability is what we could hope for.

pawnacide

surely by that logic, there's never a good time to buy unless you actually want to own your own home before you die ?

daltonmd

pawnacide wrote: »

surely by that logic, there's never a good time to buy unless you actually want to own your own home before you die ?

you must of missed where I wrote "I would look 3 years down the line"


Historically, when people bought property they did so because they could afford the repayments, these were almost always less than the rental amounts.

Historically, first time buyers stayed in that first home for 7 years (pre-boom), historically they could trade up easily, indeed making money on their property to enable them to so so,

Historically, the cost of servicing the mortgage decreased, what with interest rate falls, rising income, high employment levels, stable employment, rising income- all this is gone. There is no argument for buying for the next 3 years or so against renting.

The cost of ownership should not stifle you as the years profress - it should ease.

Property is just bricks and mortar - this is the way it's viewed in other countries - it should pay to buy not cost you - after all that's the reason people chose to do it - remember the "rent is dead money " mantra?

The more people who enter the property market without doing their sums, well then to me it's people down the line who will get into trouble.
Just my opinion of course...

daltonmd

Duplicate

StillWaters

You are assuming rent stays static over the course of a mortgage. That is highly unlikely. And will rise in line with inflation at least.

daltonmd

StillWaters wrote: »

You are assuming rent stays static over the course of a mortgage. That is highly unlikely. And will rise in line with inflation at least.

Actually if you read my posts I am not assuming anything of the kind - I haven't looked more than 3 years from now.

I agree that at the end of the term of a mortgage that you own a property - the issue is getting there and how much this will actually cost you in the long run.

Renting for another 3 years, getting a property a a lower price, having a better indication of where interest rates are (with the banks more so than the ECB) having more stability in your job, when the austerity cuts have ended and we are hopefully (although I am not convinced yet) coming through this phase - I simply would not buy unless I could be sure of my future - each to their own of course. But I wager that a lot pf people buying now, much like those who bought in 2008/09/10 and 2011 are struggling and in situations that they could not imagine 12 months ago.

Again, just my 2cents....

The_Conductor

Not sure if this has been posted yet:

http://www.irishtimes.com/newspaper/breaking/2012/0228/breaking24.html?via=mr

Irish price falls in the month of January were the largest falls ever recorded- falling 4.1% in certain areas of Dublin in January alone (with total falls in Dublin over the past 12 months of just under 22%). The national price fall in the month of January was 1.9% and nationally prices have 18% in the past 12 months.

With the falls apparently accelerating- we've got a hell of a time ahead of us........

pawnacide

daltonmd wrote: »

Historically, when people bought property they did so because they could afford the repayments, these were almost always less than the rental amounts.

Historically, first time buyers stayed in that first home for 7 years (pre-boom), historically they could trade up easily, indeed making money on their property to enable them to so so,

Historically, the cost of servicing the mortgage decreased, what with interest rate falls, rising income, high employment levels, stable employment, rising income- all this is gone. There is no argument for buying for the next 3 years or so against renting.

By Historically I assume you don't mean the 40's 50's 60's 70's 80' and half of the 90's

I think perhaps we agree more than you realize. People should be buying houses coz they want a home and not as a speculative head long dive into the ethereal world of property investment. I agree houses should be sensibly priced and buyers should not over extend themselves. This idea that there was easy money to be made through 'property investment' is what got us here in the first place. There are still those out there waiting for the next big deal, some will make money .. some won't, I don't really care if they do or not. But I get a tad annoyed at all this talk on boards about rising this, falling that when people are asking for genuine advise on buying what they are comfortable with. If you like a house .. try and buy it for your price.

Rabidlamb

smccarrick wrote: »

Not sure if this has been posted yet:

http://www.irishtimes.com/newspaper/breaking/2012/0228/breaking24.html?via=mr

Irish price falls in the month of January were the largest falls ever recorded- falling 4.1% in certain areas of Dublin in January alone (with total falls in Dublin over the past 12 months of just under 22%). The national price fall in the month of January was 1.9% and nationally prices have 18% in the past 12 months.

With the falls apparently accelerating- we've got a hell of a time ahead of us........

Well this wont do at all.
The government may need to resort to Hypnotoad Advertising with flashy slogans

Buy Property Now
Never Been a Better Time to Buy

The_Conductor

Rabidlamb wrote: »

Well this wont do at all.
The government may need to resort to Hypnotoad Advertising with flashy slogans

Hynotoad- lol, got to love it.

No matter how you dress it up- the fundamentals for the Irish property market (and the Irish economy in general) are pretty appalling for the foreseeable future.

The big positive legacy of the boom that we have is a good road network- which is a hell of a lot more than we had in the past- and it is an asset we can leverage into the future. We also unfortunately have tens of thousands of properties in the arse-ends of no-where, without any services/facilities/amenities- where no-one wants live- alongside severe lack of property in places where people do in actual fact want to live- and we don't have two red pennies to rub against one another- irrespective of what wonderful plans anyone comes up with........

Buy-buy-buy? Lol...... As long as I can feed and cloth my two children and keep my creditors away from the door- thats as good as its going to get for a long long time to come..........

Ritchi

daltonmd wrote: »

As I said in another post - a mortgage of 230k has an interest payment of over 9k in the first year.

Your example is really only valid (at a stretch for the purpose of agreeing with home ownership at this time) if we, like the states, had 30 year fixed interest rates - we don't.

I also think that using an example of 10 years is a stretching for people who want to buy now.

I would look 3 years down the line. 1k in rental per month. 36k rental.

Now let's look at buying a property for 250k now.

Interest alone is over 36k in 3 years (check out amortization calculators for 230k @4%).

Simply put, if the property market simply stays still for the next 3 years then people who rent lose NOTHING.


They would in all reality gain from not buying, they won't have maintenance costs or the household charge or indeed a property tax to contend with, I mean in all honesty, no matter how positive you are about the property market can you see it increasing in the next 3 years?

And if someone decides in 3 years that they should buy at today's rate (assuming no more falls and I really don't buy that) then they will not have wasted one cent in DEAD RENT - because they would have paid the same and more in interest and other costs of home ownership.

Edit to add - In 3 years however we will have a better insight into how we are - are we still in a downturn or heading into growth? Stability is what we could hope for.

The difference is that the quality of the place you have for 1k rent and 250k mortgage is different, in my sitation anyway. I currently pay 1k a month for a one bed house, and for that amount in mortgage in a similar area I can have a three bed house.

It's not all about the money, it's also about the quality of life.

daltonmd

pawnacide wrote: »

By Historically I assume you don't mean the 40's 50's 60's 70's 80' and half of the 90's

I mean pre-boom.

pawnacide wrote: »

I think perhaps we agree more than you realize. People should be buying houses coz they want a home and not as a speculative head long dive into the ethereal world of property investment. I agree houses should be sensibly priced and buyers should not over extend themselves.

It doesn't have to be X or Y- it can be both, why can't people buy a reasonably priced home that they can afford and make a little money while doing so?

Again I refer back to pre - boom, people bought a house that they could afford, stayed in it a couple of years, paid some of the mortgage off, had little increases in their incomes and were able to expand, trade up, whatever you want to call it.

pawnacide wrote: »

This idea that there was easy money to be made through 'property investment' is what got us here in the first place. There are still those out there waiting for the next big deal, some will make money .. some won't, I don't really care if they do or not.

Agree with most of this - except the last part - I really would prefer if people did know what they were doing, I also care if they don't make money, because it;s the losses that the taxpayer are on the hook for!

pawnacide wrote: »

But I get a tad annoyed at all this talk on boards about rising this, falling that when people are asking for genuine advise on buying what they are comfortable with. If you like a house .. try and buy it for your price.

And to be honest I get a tad annoyed when I see this try and buy it for your price..

This is the most important, biggest financial decision of a persons life. It's the one thing that you shouldn't gamble with - it can ruin your future, indeed as people have found, it can destroy your life if you get this decision wrong.

Ritchi wrote: »

The difference is that the quality of the place you have for 1k rent and 250k mortgage is different, in my sitation anyway. I currently pay 1k a month for a one bed house, and for that amount in mortgage in a similar area I can have a three bed house.
It's not all about the money, it's also about the quality of life.

The difference is about choice. Yours is to rent a one bed house, others would buy the house. Your quality of life is not the same as mine, it's individual.

happyman81

pawnacide wrote: »

djimi wrote: »

Of course its a bad time to buy when in all likelyhood you will get the same house in 1-2 years for quite a bit cheaper than it is now. Noone absolutely needs to buy a house; rent for now, keep saving, bigger deposit + smaller mortgage = win win!

minus monthly rental payments

Sure renting is dead money.

Or so I kept hearing over the last decade.

kennyb3

Ritchi wrote: »

The difference is that the quality of the place you have for 1k rent and 250k mortgage is different, in my sitation anyway. I currently pay 1k a month for a one bed house, and for that amount in mortgage in a similar area I can have a three bed house.

It's not all about the money, it's also about the quality of life.

So you cant win on the basis of calculations so you make it about something subjective like quality of life.

I think you need to look again at your rent. I pay 1.1k for a 3 bed house in a nice area of NCD (malahide). I reckon thats pretty much in line with the cost of a mortgage of a 3 bed house in the area (the house mortagage may actually work out more but again that depends on each individuals level of deposit)

Ritchi

kennyb3 wrote: »

So you cant win on the basis of calculations so you make it about something subjective like quality of life.

I think you need to look again at your rent. I pay 1.1k for a 3 bed house in a nice area of NCD (malahide). I reckon thats pretty much in line with the cost of a mortgage of a 3 bed house in the area (the house mortagage may actually work out more but again that depends on each individuals level of deposit)

I meant to say 1 bed appartment.

We've looked for places to rent, but we've actually got a good deal, considering it's size and that it's in Rathmines. We now want to live in a house. To get a 3 bed house, moving out a bit, is at the very minimum 1200, and that's for somewhere we wouldn't really fancy living. In the same area we can buy a house for about 250k, which is about 765 on current rates including FTB interest relief. If we went for a house about 300k, it's 917 per month on a variable rate. So we could actually save more money per month(depending on what all the other extras come to), as well as being in a place where we're much happier.

I do realise if we waited a few years, our mortgage repayments would be lower, and we'd probably end u ppaying off the mortgage at the same time as we would if we bought now, but sometimes that's not all that matters.

daltonmd

Ritchi wrote: »

I meant to say 1 bed appartment.

We've looked for places to rent, but we've actually got a good deal, considering it's size and that it's in Rathmines. We now want to live in a house. To get a 3 bed house, moving out a bit, is at the very minimum 1200, and that's for somewhere we wouldn't really fancy living. In the same area we can buy a house for about 250k, which is about 765 on current rates including FTB interest relief. If we went for a house about 300k, it's 917 per month on a variable rate. So we could actually save more money per month(depending on what all the other extras come to), as well as being in a place where we're much happier.

I do realise if we waited a few years, our mortgage repayments would be lower, and we'd probably end u ppaying off the mortgage at the same time as we would if we bought now, but sometimes that's not all that matters.

Cheapest 225k (presuming 25k deposit) variable inc Mortgage interest relief is 830pm.
Cheapest 270k (30k deposit) variable inc mortgage interest relief is 995pm.

http://www.mortgages.ie/index.cfm/spKey/first_time_buyers.mortgage_payments_calculator.html?mode=basic&go=go&buyer_type=First+Time+Buyer&house_price=300000&product=-1&amt=270000&lender=-1&status=Married&comparison=loc&term=30&x=29&y=5


I have to say here though that you are making the classic mistake - you are looking at the lowest monthly amount, are you thinking of one year down the line at all, would you seriously take out a variable rate mortgage?

Staying with the 270k mortgage for this example. See the interest relief monthly payment chart below.

http://www.mortgages.ie/index.cfm/spKey/first_time_buyers.tax_relief_calculator.html?mode=basic&buyer_type=First%20Time%20Buyer&term=30&amt=270000&status=Married&interest_rate=3.38&buyers=1&go=go

Before the relief the repayment is 1194.41, if the bank increase interest rates by 1% the repayment is €1,326.66, so your 995pm could be 1100pm.
2% it increases to 1489pm.

Before you think that this won't happen look at the difference between the variable and the 3 year fixed, if you look for fixed in a year then I reckon you will pay dearly for it.

There is a difference between paying for a better quality of life (not my words) and not being able to afford your mortgage.

Stating that "money" isn't the only reason is valid. ads long as you always have the money - if you don't then you owe it to yourself and your family to make informed financial decisions, something which a lot of people have proved to be completely incapable of doing.

Refusing to look a little down the line, refusing to stress their payments, refusing to look at what would happen if one or both lost their jobs.got sick etc, it's buy a house that "appears" cheap and the repayments "appear" cheaper than renting and hope and pray that everything works out and that nothing goes wrong...

gigino

smccarrick wrote: »

No matter how you dress it up- the fundamentals for the Irish property market (and the Irish economy in general) are pretty appalling for the foreseeable future.

The big positive legacy of the boom that we have is a good road network- which is a hell of a lot more than we had in the past- and it is an asset we can leverage into the future.

agreed

smccarrick wrote: »

We also unfortunately have tens of thousands of properties in the arse-ends of no-where, without any services/facilities/amenities- where no-one wants live- alongside severe lack of property in places where people do in actual fact want to live

A big part of the problem, which is seldom mentioned , is the abandoned policy of decentralisation. About 10 years ago the government promised that tens of thousands of civil servants would be decentralised so they can be beside their families and enjoy a better quality of life ( outdoor sports + pursuits, less time stuck in big city traffic etc). The government promised there would be 7 new gateway cities around the country, and these would double in size etc. No wonder developers went crazy building accomodation for all these new people who were coming. The decentralisation policy is slowly abandoned over the years...
There is still an imbalance between too many people stuck in the traffic of Dublin / too high property prices in Dublin compared to the rest of the country.

jmayo

gigino wrote: »

agreed
A big part of the problem, which is seldom mentioned , is the abandoned policy of decentralisation. About 10 years ago the government promised that tens of thousands of civil servants would be decentralised so they can be beside their families and enjoy a better quality of life ( outdoor sports + pursuits, less time stuck in big city traffic etc). The government promised there would be 7 new gateway cities around the country, and these would double in size etc. No wonder developers went crazy building accomodation for all these new people who were coming. The decentralisation policy is slowly abandoned over the years...
There is still an imbalance between too many people stuck in the traffic of Dublin / too high property prices in Dublin compared to the rest of the country.

Ah please don't drag decentralisation into this.
That was always a joke.
It might have some merit if they were decentralising to the major cities but they were decentralising to the likes of Tubbercurry and Birr.
These are not major urban areas, but small towns off the beaten track.
Developers cashed in and funnily enough they were also supporters of the party that pushed decentralisation.

Oh and one of the architects of decentralisation got a cushy number as head of the construction federation after he left politics. :rolleyes:

gigino

jmayo wrote: »

Ah please don't drag decentralisation into this.
That was always a joke.
It might have some merit if they were decentralising to the major cities but they were decentralising to the likes of Tubbercurry and Birr.
These are not major urban areas, but small towns off the beaten track.
Developers cashed in and funnily enough they were also supporters of the party that pushed decentralisation.

Oh and one of the architects of decentralisation got a cushy number as head of the construction federation after he left politics. :rolleyes:

I am not going in to the politics of decentralisation. I merely mention the fact the government had promised decentralisation and had transfered already some government offices to small cities and towns. I am not saying if that was right or wrong, thats a different argument. The reality is though the government has promised a necklace of "gateway cities"c around the country and promised some towns / cities would double in population size within 10 years. It also gave tax incentive status to encourage population growth and building development in some areas. Some developers bought land / developed property on the expectation that the government promises were true. Maybe they were wrong to do so, but some people thought decentralisation and immigration ( in the space of a few years many eastern europeans / Polish workers flooded in to the country once the barriers came down ) would create demand for housing in some places. That is a fact. Otherwise why did they build so much? The local population in certain areas were never going to fill all those properties.

The_Conductor

Hi Gigino-

I'm going to reply once re: decentralisation- and if you want to continue talking about decentralisation- you will have to bring it to the Politics forum- this is not an appropriate venue.

1. Gateway cities- these were identified for development purposes and an undertaking was given to focus regional development on them in order to create a cluster of centres with sufficient critical mass and infrastructure to be of interest to potential employers. These cities (and towns) were to receive additional funds to assist in their development (note Cork and Dublin are also on the list- contrary to what many people like to think even Dublin is tiny when compared to a majority of international cities.

2. The government had promised decentralisation and had transferred already some government offices to small cities and towns. Yes- you're right they had. However- the scatter gun approach of promising government jobs to over 200 random towns and villages- had nothing whatsoever to do with (1) the national spatial strategy or (2) decentralisation as a concept other than the spreading of political largess in hope of buying future votes.

3. Decentralisation was (and is) old hat. Ireland has had 3 prior decentralisation programmes- going all the way back to 1979- and prior to the latest mess, had one of the most decentralised civil services in the OECD. The media reports of 30,000 odd jobs moving from Dublin to 200 random locations- was poppycock- it was probably fewer than 7 or 8000 with the remainder of the jobs already having been decentralised, and merely moved from one location to another (ala the prison service moving to Longford (the prison service is also part of the civil service)). So- it wasn't moving 30k jobs out of Dublin- the vast majority of the jobs concerned were merely being reshuffled from one rural location to another.

4. The govenment and a necklace of gateway cities? Have a look at the national spatial strategy here. There were 5 existing gateways identified- Dublin, Cork, Limerick/Shannon, Galway and Waterford and these were to be augmented by four new national level gateways - the towns of Dundalk and Sligo and the linked gateways of Letterkenny/(Derry) and the Midland towns of Athlone/Tullamore/Mullingar. Please- tell me what tenuous links these hubs had with decentralisation- because they certainly didn't.

5. Tax incentives to encourage population growth? Really? Our national rate of replacement (that is the number of births less the number of deaths) fell significantly over the 3 phases of the plan (2002 onwards)). As early as 1995 Peter Bacon identified serious issues with Ireland's housing policies but was ignored, and his series of infamous reports was going to be shelved starting 3 years hence. People believed what they wanted to believe- and woe betide anyone who suggested it was an unsustainable party.

6. Developers bought land and developed property on the expectation that government promises were true. Please. Any actions they took were on the back of expectations that they could coin a quick buck- plain and simple- nothing more, nothing less. We Irish have an excellent blame culture- someone else is always to blame. I didn't win the lottery last- boohooo- I bet that presenter in RTE didn't press the button on the draw machine just on time...........

7. Immigration has nothing to do with decentralisation- and decentralisation had only tenuous links with moving jobs from Dublin elsewhere. No-one wanted to know is the short and simple. Polish and other Eastern Europeans coming here once the barriers came down? They came here to work in construction by and large- while some have stayed, and become very valuable members of our communities- many more have returned home- where employment prospects are considerably better than they are here. I don't understand why people imagined they were here to stay longterm- in the main those who emigrated here were economic migrants- and its only natural for economic migrants to follow jobs and money- happily in this instance for many- back home again. Meanwhile the Irish employed in the same industry have also had to leave- and indeed are lucky to find employment in Poland/Canada/Australia and elsewhere.

8. You seeem so sure that all these people employed in construction were somehow going to create sustainable demand for housing- your comment 'otherwise why did they build so much' is very telling. You don't seem to understand the bubble mentality of the last 17 years. So what that the local population would never fill the houses- sure wouldn't they make excellent holiday homes? Lol.....

We have signed up to make another 14 billion of cuts (based on current actual growth rates) to bring our deficit down to 3% of GDP. The cuts we've made thus far are peanuts compared to whats comming down the track. Hopefully the headache we all have will educate people a little better.

We're not unique of course- ask the Dutch about their magical tulip trade and even now horticulturalists will wince.........

gigino

smccarrick wrote: »

6. Developers bought land and developed property on the expectation that government promises were true. Please. Any actions they took were on the back of expectations that they could coin a quick buck- plain and simple- nothing more, nothing less.

I agree with most of what you say, inc the above. Making a profit is what capitalism is all about. By "quick buck", some business people done well by renting property to the government and the people in them, in decentralised locations. If you were a business person in a town which got a few hundred well paid government jobs, which created a few hundred more spin off jobs and if accomodation was hard to find, and if the government told you the town was going to double in size in the next ten years according to their development plan, and if the government was giving section 23 and section 27 tax incentives to encourage development in such places, its not difficult to see how that added to the bubble. http://www.decentralisation.gov.ie/News/GD_GovtDecision%20011203.html

Anyway, I do not want to bring the thread off track. The point is "prices keep on falling". I agree they will continue to fall for another year or 2 at least. They will go lowest in places like Tubbercurry, where the government will soon be closing its relocated government offices ( owned and leased by a local businessman) , Longford, Carrick-on-Shannon ( where decentralisation was expected/promised etc).