Image by bill barber (back Sunday) via Flickr
Over the last few months there has been a lot of “doom and gloom” in the media about the Irish and global economies. There’s also been a lot of talk about the prices of housing dropping.
Last week I went looking at houses and appartments to see how good (or bad) things really were.
I don’t have a huge budget, as I’m single and I only started saving up for a house in the last few months.
So what is going on out there?
There are still quite a few new developments being built, though I gather from talking to an estate agent that a lot of them won’t be completed as quickly as planned.
One development I was looking at last week originally carried a price tag of 230k, but that has been slashed to 175k!
Of course the flipside is that the mortgage market has changed quite a lot. Whereas my younger sister and her boyfriend were able to get a 100% mortgage (or close to it) about 18 months ago the most you can hope for now is 92%.
On a purchase price of 200k the maximum you can expect to get is 184k, which means you’ll need to raise another 16k+ on your own.
While raising the 16k might not be impossible (depending on your circumstances) you’ll need to factor in another few thousand euro to render a new house or flat habitable.
But is now the time to buy or not?
If I buy something now will the prices drop again by January?
What about negative equity?
The negative equity argument is a very interesting one.
At present I’m paying out nearly 10k a year in rent. While I do have a roof over my head that 10k is not doing anything for me ie. it’s not paying off a mortgage or other loan, so it’s basically “dead money”.
If I were to buy a property for 200k now and it was to lose 20k in value over the next two years I wouldn’t have made any real loss, as I’d have had to pay the 20k for somewhere to live regardless.
So what’s on my todo list at present?
- Mortgage approval – if I can sort that out in the next few weeks I’ll be in a stronger position should I find somewhere that I like. While the higher price houses may not be selling the lower priced ones are, so delaying the paperwork wouldn’t be a good idea
- Shop around – I need to keep shopping around and see what’s available in the area. Daft.ie’s RSS and email alerts definitely help
- Price the extras – I need to work out how much extra it will cost to get a place ready to live in ie. white goods, flooring etc., Being able to budget accurately will save me headaches
- Reduce my credit card bills – it kind of links into the entire mortgage approval thing, though being perfectly honest my current CC bill is quite manageable (at least that’s what I keep telling myself!)
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Mortgage interest is also dead money.
Getting the place habitable will cost a little more than a few thousand….
Our place came with a fully fitted out kitchen, including appliances; built-in wardrobes and bathroom fittings, but we quickly dropped over 10k more just to make it habitable…
Decent bed & mattress – 2-3k
Spare bed –
Niall – true, but it’s still better than just paying rent 🙂
Michele
1. Rent money not dead. It pays for your accommodation. And if you own your house, you pay more.
2. “If I were to buy a property for 200k now and it was to lose 20k in value over the next two years I wouldn’t have made any real loss, as I’d have had to pay the 20k for somewhere to live regardless.” Er, you’re forgetting that you would also have “lost” the two years of mortgage payments.
3.Based on your figures – a house for 200k to replace rented accommodation for less than 10k p.a. – I’d wait for the price to fall further. Twenty years purchase is still top of the market territory (it’s only 20 years if the properties are comparable, of course)
@Fergus
I’ve been paying rent for about 17 years, so while I’ve always had a roof over my head I still don’t own anything. If I’d started paying off a mortgage ten or fifteen years ago I’d be a long way towards actually owning something (of course I wouldn’t have been able to do that ten or fifteen years ago…)
As far as property values are concerned the point I was trying to make is that unless the value decreased dramatically I wouldn’t really lose out. It’s not as if I’m planning on buying somewhere to resell it in two or three years time anyway.
Will the prices drop even more? While they may do I’m also hearing that quite a few of the developments that were in the pipeline won’t be finished, as the developers don’t want to sell at such low prices.
Michele
If you can (there may be situations where waiting is not an option, growing family for example), then wait, watch and save (e.g. save the difference between what you pay in rent compared to an old-fashioned 20/25year-term mortgage repayment).
Wait for the market to over-correct (it always does, and we’re nowhere near that point yet, the “fire sales” have yet to happen).
Watch, get to know the actual prices achieved (not those advertised) and time-on-market of houses in your area of interest.
When the market has finally turned (you’ll know it by a return to rising prices or a least a year or two of steady prices and most importantly a reduction of time-on-market, don’t worry about missing the true “bottom of the market”, only guesswork or luck will help you there).
With ready cash and no need to first dispose of another property, you would then be in a position to buy not just any old property but perhaps a “dream house” that would be beyond your means currently.
The other thing to remember is that buying a house has nearly always be difficult for first-time buyers. If it’s not, you’re either filthy rich or you’re buying at the over-corrected bottom after a property bubble.
Tom
You are of course assuming that you’ll be paying the say rent over the next two years. Which you might find is not the case if the arse is falling out of the market.
James
I can’t see my landlord dropping the rent.
Michele
Damn Typos / lack of rereading for mistakes 😀
Its an option though to move (though after the last move which is still a work in progress its a nightmare)
You have to add on all the extras for when you do buy though
– Water Charges
– Bin Charges
– House Insurance
– Upkeep Changes (usually in housing estates / flat complexes these days you’re charged anywhere for 500 – 2k a year)
– Upkeep of your own property repairs / painting and so on which of course you can get away without doing
But I find a LOT of people seem to forget about these. So while its fine to say your 10k is dead money you’ll probably find what I’ve just mentioned is 2k+ a year .. so really that should change your figures quite a bit.
I’m with Tom: I’d wait. Taking out a 92% is ridiculous. You’ll be paying the rest of your life. Plus, Irish prices are still vastly inflated. I calculated last week that they are metre-for-metre three times the prices in Brussels, which is comparable in terms of size. That’s not much comfort unless you want to commute by Aer Lingus, but within that 300% there is room for an “adjustment”.
Concerning renting vs owning. I’m just about to replaster the back of the house, replace the heating and rebuild a terrace – not things you have to do renting.
You look like you’re determined to buy. Do so – but at the right time. It took us two years to find a house at the right price, even with the finances largely in place, and it was well worth the wait.
Hi Michele,
Myself and my dad would have a very very high interest in the property market, and I do spend a lot of time researching property prices.
My opinion would be that the next three months will be crucial in the irish economy, and now’s the time to capitalize on a lack of confidence in the country. Property developers are flogging houses off on the cheap to keep the creditors happy. The European bank is still maintaining an ignorant posture, but if I was you, wait until Budget day before you put any bids on the table or show interest for anything.
Many economists, whilst they’re keeping quiet across the continent, yet they feel that the european bank are going to move to satisfy house buyers.
–> Therefore, just keep in tune until late October, early November. Then catch and make the killing.
At the same time, my dad has sold two houses recently enough, within the last year and a half, one was as late as a month ago. He got almost full asking price, without the need for an auctioneer, so the market still exists.
regarding furnishing a house, a trip to Ikea is well within order. Cheap, quality furniture. Then, when you have the mortgage paid off, hop on the boat to england and buy a few expensive antiques and paintings in Bristol 🙂
Nev
I’d completely forgotten that there was a budget just around the corner! (Well not exactly forgotten – I just hadn’t thought of the implications on house buying)
Michele
A visit to thepropertypin.com might be worth your while, along with irishpropertywatch.com – at least it will give you an alternative view to what you normally see/read….
It seems like an eternity, but it was only a month ago that this thread was started. I only hope that you didn’t rush into anything. How are prices and mortgages now?
Michael
I actually started posting on the topic months ago 🙂
In any case I’m still not settled on anything, so I haven’t rushed into anything as yet.
The current status is that prices for property are falling, but the lenders are way stricter, so it’s a bit of catch 22.
Michele