The property Ladder - I think we need to start using it again

JimmyVik

For many years now I have heard of people talking about the property ladder.
First people working their way up rung by rung until they have their dream house.

But then we had a big crash.
People starting waiting to buy their forever home. Skipped all the rungs on the property ladder. This was great while people could do it.

So now we are back to a point that I believe people should be doing what is right for them at that point in time.
The property ladder is going to have to make a comeback. You can no longer expect to go straight in at the top rung.
People have to make the decision to buy what they can afford and what suits them at a point in their lives. Then look at trading up when they are in a better position.
Waiting for the forever home and everyone trying to jump straight in at their top rung has resulted in people living at home and renting for years.


I believe that if you feel the time is right to buy then buy a 1 bed apartment if thats all you can afford. Stretch to the 2 bed if you can. Then at least you are moving with the price tide that sitting paying rent as all the ships keep getting further and further out of your reach.

This comes from someone who waited over 15 years to buy a house.

If i had have bought the cheapest apartment i could afford back in 2005 I would have the mortgage half paid off now, but I would also have no rent to pay, whether the property price went up or down in the meantime.

I know it hurts, but people have to think of it as a ladder again.

ted1

JimmyVik wrote: »

For many years now I have heard of people talking about the property ladder.
First people working their way up rung by rung until they have their dream house.

But then we had a big crash.
People starting waiting to buy their forever home. Skipped all the rungs on the property ladder. This was great while people could do it.

So now we are back to a point that I believe people should be doing what is right for them at that point in time.
The property ladder is going to have to make a comeback. You can no longer expect to go straight in at the top rung.
People have to make the decision to buy what they can afford and what suits them at a point in their lives. Then look at trading up when they are in a better position.
Waiting for the forever home and everyone trying to jump straight in at their top rung has resulted in people living at home and renting for years.


I believe that if you feel the time is right to buy then buy a 1 bed apartment if thats all you can afford. Stretch to the 2 bed if you can. Then at least you are moving with the price tide that sitting paying rent as all the ships keep getting further and further out of your reach.

This comes from someone who waited over 15 years to buy a house.

If i had have bought the cheapest apartment i could afford back in 2005 I would have the mortgage half paid off now, but I would also have no rent to pay, whether the property price went up or down in the meantime.

I know it hurts, but people have to think of it as a ladder again.

It’s easier to do it in one jump.
1.) FTB need smaller deposit
2.) H2B grant
3.) not in a chain so more attractive to a seller
4.) you more than likely have more dependents so stress test is stricter and you’ll struggle to get a mortgage.

Connavar

ted1 wrote: »

It’s easier to do it in one jump.
1.) FTB need smaller deposit
2.) H2B grant
3.) not in a chain so more attractive to a seller
4.) you more than likely have more dependents so stress test is stricter and you’ll struggle to get a mortgage.

For the deposit, I think it depends on persons situation. Some people will be able to build a deposit through equity/savings in comparison to paying rent much faster in the "starter" home.

JimmyVik

ted1 wrote: »

It’s easier to do it in one jump.
1.) FTB need smaller deposit
2.) H2B grant
3.) not in a chain so more attractive to a seller
4.) you more than likely have more dependents so stress test is stricter and you’ll struggle to get a mortgage.

I dont think its easier to do in one jump for most people.
Certainly, if they can do it in one jump, it would be much better for them of course. But people are waiting and the jump is getting bigger as they wait.

The worst thing you can do is buy a home you KNOW that you will have to sell, in future.

Any home you buy should be one that you can live in for most future scenarios, even if not ideal.
How many people were massively stung by buying 1bed apartments, which were unsellable for years, while at family starting ages?

So, yeah, buy with a view to purchasing up all you want. Don't buy with a need to do so.

JimmyVik

Deleted User wrote: »

The worst thing you can do is buy a home you KNOW that you will have to sell, in future.

Any home you buy should be one that you can live in for most future scenarios, even if not ideal.
How many people were massively stung by buying 1bed apartments, which were unsellable for years, while at family starting ages?

So, yeah, buy with a view to purchasing up all you want. Don't buy with a need to do so.

I actually know quite few people who even bought 1 bed apartments before the crash. yes some of them struggled. The vast majority came out the opther side fine. All were glad they bought when they did. (They werent for about 5 years or so after the crash. They thought they had made the mistake of their lives. But now they think they were lucky they bought when they did).
People have been doing it all over the world for many decades now. Its only since 2008 or so that people are jumping straight to their dream home. but that is not possible for most people now.
So should they wait and watch property prices rise while they pay rent, in the hope that prices come down?
Or should they be in a property where they dont pay rent, but also the value moves in the same direction as what they eventually want to be able to afford.

johnnyskeleton

JimmyVik wrote: »

For many years now I have heard of people talking about the property ladder.
First people working their way up rung by rung until they have their dream house.

But then we had a big crash.

This is the problem with the concept of the property ladder i.e. the assumption of ever increasing prices means that you climb the ranks like a hierarchy. A more accurate analogy is a game of snakes and ladders; sometimes you go up massively, other times you come sliding back down.

Or even better - people should assess any property purchase on its own merits and don't buy into the idea that you can only buy a suitable property after several smaller investments work out for you.

People starting waiting to buy their forever home. Skipped all the rungs on the property ladder. This was great while people could do it.

I look at things very differently - property is a commodity that meets an essential need. If you buy a house that suits your needs without having to go through several "rungs", that is how it should be, rather than somehow it being that you skipped the queue or the like.

So now we are back to a point that I believe people should be doing what is right for them at that point in time.

Exactly, do what is right for you at any given time. This kinda contradicts your main point though, namely:

The property ladder is going to have to make a comeback. You can no longer expect to go straight in at the top rung.

Surely if people are to do what is right for them at any given time, that is inconsistent with us all getting back onto this property ladder? Either you assess each purchase on its own merits, or you believe in the property ladder.

I believe that if you feel the time is right to buy then buy a 1 bed apartment if thats all you can afford. Stretch to the 2 bed if you can. Then at least you are moving with the price tide that sitting paying rent as all the ships keep getting further and further out of your reach.

If you believe that the time is right to buy a 1 bed, then by all means do that. But do it because you think that transaction is justified in itself. Don't do it as a stop gap in the hope that you can sell it at a profit and then buy the next house on your rung.

If i had have bought the cheapest apartment i could afford back in 2005 I would have the mortgage half paid off now, but I would also have no rent to pay, whether the property price went up or down in the meantime.

What does that tell you though? I don't think anyone doubts anymore that prices in 2005 were part of an unsustainable market bubble, driven by cheap credit. The fact that credit is still cheap and prices are getting back to, or arguably exceeding, 2005 levels, should be a massive warning sign.

I know it hurts, but people have to think of it as a ladder again.

If you work out all the factors and decide that buying property X is the right thing for you right now, with the possibility that if it goes up in price you will be able to trade up at a future point for property Y, but if that doesn't happen you can still live happily in property X, then by all means do it.

If you are saying that we should all collectively buy into the idea that we all must get on the property ladder again, I don't agree with that.

The property ladder is dead. People can’t afford a house in their twenties, or on their own in many cases. So they buy a “forever” home - or at least one that might work forever. One bedroom apartments were a disaster during the last crash.

spaceHopper

We've all heard the horror stories if badly built apartments that can't be sold on or if a crash comes you end up not being able to sell but now have two kids and not enough space. During the pandemic our garden has been a big help.

I'd be looking at 1960's homes with the potential to extend before any apartment or new build.

JimmyVik

JimmyVik wrote: »

People have been doing it all over the world for many decades now. Its only since 2008 or so that people are jumping straight to their dream home. but that is not possible for most people now.
So should they wait and watch property prices rise while they pay rent, in the hope that prices come down?
Or should they be in a property where they dont pay rent, but also the value moves in the same direction as what they eventually want to be able to afford.

I didn't say jump to dream home but not "get on the ladder, at all costs"

Any home you buy needs to be suitable for near to mid term needs.

The drive, in Ireland, is to get anything (no matter what) to get on "the ladder"

intellectual dosser

A friend up mine recently 'moved up a rung'.

Between the fees and duties in selling one house and buying another he barely had change of €15k. Hardly an incentive for a ladder approach.

I see sheep

Nah no way, not for me.
Was close to buying last year, on hold for now, but I'm only interested in buying somewhere I'd be happy til retirement anyway.

JimmyVik

Deleted User wrote: »

The property ladder is dead. People can’t afford a house in their twenties, or on their own in many cases. So they buy a “forever” home - or at least one that might work forever. One bedroom apartments were a disaster during the last crash.

True, and a sad fact they cant afford a house until they couple up these days.


But imagine one, when single, managed to get on the ladder and bought a 1 or 2 bed apartment. A few years later they meet the partner.
Now the partner moves in with them. Thats a saving of lets say €1300 pm straight away. Not even counting the rent the owner is saving.
Now they get their deposit together from the savings on rent.
Apartment has probably gone up in value too. Or down, but if its gone down probably their next house has gone down too.

Now you sell the apartment, put it together with your deposit and its a nice rung to launch off to buy the home they both want.


Its a myth that one bedroom apartments were a disaster. Ask people who bought anything, be it 1, 2 bed apts or houses how they feel now 90% of them will tell you they are better off for having bought just before the crash.
Ask them how they felt in 2011 and they would all have thought their world had ended.

Gives me an idea for another thread - "Did you buy a property in the years bfore the crash? How to you feel about that decision today? How did you feel about that decision 10 years ago"

fliball123

Deleted User wrote: »

The worst thing you can do is buy a home you KNOW that you will have to sell, in future.

Any home you buy should be one that you can live in for most future scenarios, even if not ideal.
How many people were massively stung by buying 1bed apartments, which were unsellable for years, while at family starting ages?

So, yeah, buy with a view to purchasing up all you want. Don't buy with a need to do so.

Well I would get one you can afford first off. If prices go up or down isnt it relative as you will have to buy and sell something so if your property goes up so does the one your looking at and vice versa. But I do agree I would buy something that you can live in long term if you can afford it of course

Browney7

The property ladder concept is appearing to make sense again because rents for the properties that are needed by people in their 20s are too expensive. A rent on a one bed worth 250k is approx 1500 per month so a gross annual yield of 7.2%. 2 beds are similar at 320k and 1800 per month. Considering the "risk free" rate so to speak is 0% if not negative (10 year sovereign debt) the returns on paper look great but landlords aren't up for the hassle or the risk of delinquent tenants. This creates a "rent is dead money argument" fuelling people into thinking buying something, anything, is their only option.

If the state decided to roll out affordable rental, say 1000 per month for a one bed for a couple/individual it would take significant pressure off, but the state has no desire to do this. Even if the construction cost was 400k a unit, the state would generate a 3% gross yield which should wash it's face and would be providing housing for young workers (nurses, teachers, graduates etc).

Instead it chooses to rent luxury apartments for at least double this on long leases for 20 years (off pension funds or foreign investors who are tax exempt) to give to people on low wages/income (who pay a token rent) with guaranteed CPI increases with no ownership after paying for the unit for 25 years.

Meanwhile the people who earn too much but not enough get hammered on rent or live at home or play house share roulette or choose to buy a one bed and cross the fingers they'll be able to sell in 5 years and hope that property doesn't drop and they then have access to a 20% deposit at the time. Considering our recent history of pump and dump, boom and bust, it's hard to blame people not taking the bet and having to raise their family in a one bed.

JustAThought

Peoples life circumstances change from when they get a mortgage. although you might be lucky enough to get eg a 10k payrise this will be quickly absorbed in the higher deposit needed for a second time home (thanks government), the 3k solicitors fees, the 1k or so needed to move and aurveyors fees /BER cert check etc.

Most people move on and may want to move to get married, buy a bigger home to replace one that was a mistake from the start, or now have a child or partner or both that their bedsit/one bed appt no longer suits . The banks have a scale they gague the amount they will loan other than the basis of salary. This includes your age - they will loan less for less long as you get older reducing your leverage to borrow, they look at if and whether you have or plan to have children Nd dedudt a % for the child and further amount for each subsequent child, (they don’t take SW benefits like child allowance into account for your loan), the look at the value and age of your car - if you have a car loan and whether they think your old car will survive - and deduct a % accordingly, they also look if your account is with them at your patterns of spending monthly and at things like if you have things you are trying to hide from them like large bills being paid for ongoing medical costs (eg cancer treatment) - and weigh your risk accordingly. If you have online gambling accounts set up as direct debits from your account they will also weigh that up - your predictability and risk as a gambler.

So all in all, if you grew up, got a car loan, had a child, got sick, had a break from work and a time not working - ALL of these are used against you in the evaluation of your second mortgage - plus a reduced term of loan due to the risk involved with your age . It might be necessary to get a second mortgage but it certainly isn’t the prudent way IMO to go - you are taking far less financial risk and leveraging your bets to maxamise your loan and stretch yourself when you are younger and have less debt and responsibility - than taking a gamble of things going only upwards and hoping you will have a second bite of the cherry a decade or 6 years later.

There is also - property sales tax, the % the real estate agent takes, capital gains tax on the house sold and the ever increasing threat in appartments of something serious going wrong and the homeowners having to pay through the nose for it in the endless unrestricted unregulated cycle of ‘management fee’ exploitation. That’s before you get into the area of the appartment block being shabby and run down 10 years later and harder to sell, or the area being less appealing for various reasons, or a motorway or light blocking 10 storey complex being built next door that now dominates your area and ruins your light/view - and now you cannot sell your asset or are in negative equity or can’t sell for enough ‘profit’ to cover all the taxes and charges and additional deposit - and so are left trying to sell, trying to find the 30k deposit AND to get a higher mortgage approved. Total black hole nightmare.

so - as you might imagine - I’d be firmly on the side of stretch yourself as much as you can. When you are young /single you can still do the rent a room scheme and earn 14k a year to put towards your living/saving expenses - you can’t do this from a studio or bedsit or one bed appartment - its firmly IMO in your favour to go that extra sacrifice and make that small upgrade to work for your future or keep you in a bit of space and so called luxury if something goes wrong and you cannot trade up or sell.

Eric Cartman

its the cost of housing needs to be tackled, not anything to do with HTB's , LTV rates, Deposits etc.. the physical asset cost of a house needs to be lower, the only way to solve that is scrap social requirements, development contribs, vat on PPR's and change zoning rules so housing can be built almost anywhere which will topple the insane cost of land.

JohnnyChimpo

intellectual dosser wrote: »

A friend up mine recently 'moved up a rung'.

Between the fees and duties in selling one house and buying another he barely had change of €15k. Hardly an incentive for a ladder approach.

the point of moving up the ladder isn't to make a profit, it's to have a nicer house

intellectual dosser

JohnnyChimpo wrote: »

the point of moving up the ladder isn't to make a profit, it's to have a nicer house

My point wasn't about profits, but costs.

How many rungs does one climb at €15k a pop?

JimmyVik

intellectual dosser wrote: »

My point wasn't about profits, but costs.

How many rungs does one climb at €15k a pop?

Thats not that much at the end of the day. People used to pay double or triple that in stamp duty alone.

How much rent are you going to pay while you wait for property prices to come down? And if they dont come down while you waited what will you be able to afford if you decide to only buy 5 years from now?



Peoples life circumstances get better over time (most of the time). Sometimes its better to work your way up, than to wait in hope.

jelly&icecream

One thing that's makes the property ladder concept more feasible is the availability of bridging finance.

It doesn't seem to be available anymore (that I can see anyway, I'm open to correction). Without it you are in a chain and are a significantly less attractive buyer to many sellers.

Claw Hammer

Rent is dead money!
Get on the ladder.
Mortages have never been cheaper!
When have we heard this before?
What happened next?

Graham

Claw Hammer wrote: »

Rent is dead money!
Get on the ladder.
Mortages have never been cheaper!
When have we heard this before?
What happened next?

I've heard the first three items on your list said throughout my life.

Only for a narrow period of time has that thinking proved to be the wrong option for some.