Irish Property Market chat II - *read mod note post #1 before posting*

Check out this interview with Julian Brigden starts 12 minutes in. We can talk for 400 pages about supply and demand but I feel this will have the biggest impact on house/asset prices in the future.

Need to brush up on financial terminology

Cpi is general inflation

Ppi is the rise in costs for producers (which may be passed on to consumers)

GFC great financial crash

Ireland’s planning history is simply abysmal. To use a terrible phrase there is no joined up thinking, so you get areas with loads of new houses but overcrowded schools and no amenities. Still the people who make submissions routinely get dismissed as cranks.

So have no doubt the wrong sort of homes will be built. It’s crazy, but the system is very largely developer led, and I say that as someone who has done very well from Irish construction.

I don’t think things will slow for a few years either, but inward migration is the wild card. If it continues the market gets even hotter but when it goes into reverse, as it will, there’ll be a problem. If it doesn’t happen for a few years the problem will be serious.

It all depends on your personal circumstances and what you think will happen to house prices in the near to mid term.

• If you are renting for say 2,000 Euro a month that is 24k a year.
• Your age... If you be able to get a 30 year mortgage or will this be restricted by your age if you wait a few years.
• If you think house prices will become cheaper in 3 years time then you need to work out how much cheaper and whether it is worth waiting or better off buying now. (24k x 3 years = 72k) Will houses prices drop from their current price by 72k or more over a 3 year period.
• If houses prices increase by say 8% in year 1 then you will need prices to drop by 80% etc...

Personally I don't see houses prices dropping in value for the next 3 years because of lack of supply and the fact that we are seeing wage increases in the economy which will mean that people will be able to borrow more as the LTI rules are based on gross salary. But as I said this is my personal view and others will have different views and no-one will know for sure what will happen.

If you intend on staying in the home in the long term 10+ years, then dont concern yourself with potential price jumps/drops.

Once you buy, the value of the house is largely irrelevant as you dont realise any losses or gains until you sell. (*LTV impact on interest rates aside)

Yeah I'm not sure. There are certainly some sectors who've done extremely well of late. The wages issue seems similar to the housing one, just so many jobs and not enough people to fill them. How long the boom will last and whether it's all going to come crashing down - I have no idea. Personally, I've never felt as bullish about the Irish job market as I do right now and I can't see it suddenly turning anytime soon. Sadly, as is always the case, there will be many who get left behind.

Bank of Mum and Dad is completely insane & unfair but as the recent change to Finance Bill showed - there is manic opposition to stopping it (Paschal Donohoe warned to stay away from Bank of Mum and Dad (irishtimes.com)) so it will continue to be a major factor in the years ahead. Fairly safe to say the whole thing would implode (and very fast) were it stopped though.

I do agree though €850 a month is fine. It's the same amount of "dead money" as a €400k mortgage @2.5%. And even the EA's seem to be reluctantly admitting that the heat is gone from the market so taking a breath may not be worst move!

Honestly think this is one of the most common misunderstanding of Finances in Ireland (and perhaps worldwide). Gains/Losses whether realised or unrealised are still gains or losses. If you buy a house for €500k and two years later someone buys the identical one next door for €250k, you can put your head in the sand and choose to ignore it...but every single month for the next 35 years you're paying an addition €900 a month that you wouldn't have to have paid if you waited and that your neighbour isn't paying.

The loss is very real, it's just hidden from sight due to poor accounting!

I think the pressure to stop renting and buy is down to the fact that rents have gotten so expensive when compared to what you would pay on a mortgage and this is leading to the high demand and as a result higher house prices.

I would agree but it depends on the extent of how much over the asking price the couple have gone, 50k over a realistic 300k asking price could be justified if it gets them out of paying 1200 a month of rent for a few years but 100k over an already high asking price is asking for trouble.

Generally I do see people getting themselves into a lot of negative equity these days through desperation and they don't want to think of the worst case of what happens if they have to sell the house in a couple of years because someone dies, a relationship breaks up, they end up surrounded by neighbours from hell or whatever, if they go to the market and the house is now worth 50k less (maybe even more if its neighbours trouble!) then that is years of mortgage payments down the hole if they are even lucky enough to break even because that 50k is circa 70k of mortgage debt.

Are you trying to buy in Dublin or your wife's town?

If its your wife's town I would say in parallel to doing all the normal property searches ye need to get all her family and friends on the lookout also, everyone she knows needs to know ye are looking in case they hear of something before it comes to market.

Secondly you should use your construction experience to be on the hunt for refurbishment properties, abandoned properties etc, a lot of buyers aren't prepared to take on a project like that so it narrows your competition.

Maybe the two of those will come together and your wife's friend's grandmother dies leaving behind an old house ye can buy up off the market.

Not disagreeing with your sentiment - I agree and I just bought! Just correcting the assertion that because you can afford interest repayments mean house prices falling doesn't matter isn't true. It's still a loss. I said that I don't think that's likely to happen in the next few years at all but just correcting the widely held notion that capital losses only count when you realise them - that's factually not true.

Other bit on the starter homes which I think is another very common misconception. Given 20% deposit requirements in many cases and the fact that you're paying down equity all the time. Negative equity (which would block upgrading altogther) going forward is highly unlikely I'd say. So in that regard, if you buy a starter home with the intention of upgrading, you should actually be rooting for house prices to fall! Makes the gap between your starter home and forever home smaller.

It's a weird one but have had to explain to a few friends that the €50k gain they've made on their 3 bed semi starter home is no good because the 4 bed detached they want has gone up by €100k. Feels intuitively wrong to want your asset to fall in value, but for those hoping to upgrade that's the reality. The only people who benefit from rising prices are those with multiple homes and those who want to downsize (and estate agents of course!)

The utility value of owning the home is perfectly calculable. It's the difference between the rent yield (typically c.6%) and mortgage interest your paying (c2.5%) per annum. So roughly you need house prices to drop by 3.5% a year in the current climate for renting to be better than buying. Seems unlikely to me in the next few years!