# House Prices



## Mary (30 Sep 2003)

In the building industry, why shouldn't Ukrainians, Latvians etc be allowed to set up their own businesses or work as self employed persons so they can bring much welcome competition to the building industry. 

They work for a third of the cost of a paddy Irish man. Let them out there and let them undercut the greedy Irish.

At the moment these poor unfortunates are working on sites for developers and contractors who are simply making huge profits at their and our expense.

Houses are just not worth their asking price. Tot it up for yourself.

Next time you visit a showhouse try and calculate the true profit these contractors and developers are making.

They are not putting any of these profits back into the community. No money back for infrastructure. Bord Pleanala how are you?

Money that they flaunt by driving around in even bigger now becoming quite vulgar 03, 4x4's that can barely fit on the width of the road not to mention in a parking space with fog lights illuminated at all corners making them look more like a christmas tree. 

Can't anyone see this simple fact. When it comes to property are we all gone stark raving mad in this country?  We are just accepting it. The prices will never fall because those whose livelihood depends on it says so.

I say let the government introduce much needed competition in this field. Bring in the Latvians, the Ukranians, the N Irish....


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## capaill (30 Sep 2003)

Mary

Not sure what your issue is.  What is stopping latvians, Ukranians and indeed anyone from setting themselves up as a builder, buying some land, seeking planning permission and building houses on that land?

C


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## Tommy (30 Sep 2003)

The law. Immigrant workers or non-refugee status asylum seekers are generally prohibited from becoming self-employed or operating businesses on their own account


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## darag (30 Sep 2003)

it's great isn't it.  we don't want any enterprising immigrants
coming to the country.


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## DOBBER22 (1 Oct 2003)

If most first time buyers stopped and actually thought about the level of debt they were undertaking and factored in interest rate rises most would actually think twice about buying, the problem is there is an artificial stigma of "buy now or you will never be able to buy" the banks and builders have advertising campains running in local papers trying to pull the wool over the poor first time buyer and thus creating the first time buyer to panic buy, this keeps prices increasing :\


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## Red (1 Oct 2003)

"we don't want any enterprising immigrants
coming to the country."
Enterprising or not, I would like to know where they are all coming from. The country is awash with non nationals.
Every town and village has changed drastically,( maybe for the best) but I am worried about the numbers. Are there any controls in place??
Red


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## CouldntGetAUsername (1 Oct 2003)

*Enterprising Immigrants*

Personally I've no problem with immigration so long as it's properly handled and we're not just seen as a soft touch for dole, council housing (or BnBs) etc.

Having said that I think we'd have to be careful that criminal money (foreign money that is) wasn't being to fund such enterprises.

My 2C,

CGAN.


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## Su (1 Oct 2003)

*Building*

I bet if you used legitimite non national labour when building your house you could save at least 40% on construction costs.


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## Reality (2 Oct 2003)

*bang !*


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## Peter (2 Oct 2003)

*Great to see we are not all mad*

For my brother and his partners sake I hope the great crash happens soon so they can afford a home of their own and get out of renting.  

Thank you reality for that reality check.


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## Reality (2 Oct 2003)

*Bang, bang ..*

Its gonna happen this time, the property boom is just a slow motion dot-com boom, only the hangover last 30 years... luckily I'm not hampered with a mortgage, and I can have a (good) life, and lots of fun ! Rents are creep down and the smart ones rent, its too late to get into brick and debt now.


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## XXXAnother PersonXXX (3 Oct 2003)

*.*

Well my mortgage is now much cheaper than what my rent was. Plus I get to keep the house at the end of it.

I can also have a good life.


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## SUE (4 Oct 2003)

So you want to see the entire country in ruins so your relations can get a cheap house?  HMMM making alot of sense.  A colapse invisaged by peter and reality will affect everyone in the country, because I think unemployment will be the ultimate cause of such a crash.  So peter if your relations are unemployed then they won't get a house either.  I too am substantialy better off with a mortgage in place of rent, if interest rates go up then I can handle it, if my property value goes down I wont care because its my familly home but if I loose my job I'm in trouble because I can't repay my mortgage (well after a year, but I'd work at anything to pay the bills).  The smart people don't buy property now with a view to making quick, large profit, they buy because it suits them and they are well advised as to the risks.  We are adults after all.  You should not be wasting your time wishing for house crashes and subsequently a national crisis, you should be wishing for house prices to stay the same, interest rates to stay the same, inflation to drop and for job prospescts to improve (well miracles do happen).


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## DOBBER22 (4 Oct 2003)

Nice one Sue heres to a perfect Ireland :lol


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## Peter (4 Oct 2003)

So how much is a new house presently selling for €265000 really worth. You tell me.


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## SUE (4 Oct 2003)

*ask and thy shall recieve*

So it appears miracles do happen, well in installments anyway. The amount of people on the dole has dropped by 15,000.  Its largest drop in 3 years.

That aside, peter what your brother needs to do is approach a broker or lending institute and ask them what is needed from him to get a mortgage.  In my experience mortgage advisors or bank managers are only to happy to help, after all its how they earn their bread and water  .  If a deposit is the problem then they need to look at a way of saving, again the lending broker or manager will give advice (I know of plenty of friends and colleagues who lived on one wage and saved the other, hard yes, but how badly do they want to buy a house?). 

I have only just moved into a house and it was a long, tedious, nerve racking experience from the initial 2k deposit to the switching on of electricity (more exciting than getting keys in my opinion  ).  Only the very few fortunate people find it easy to buy a house (presuming your brother wants to buy a home and not an investment) and that goes back to our parents and our grandparents (most of grandparents never owned their own homes). Moving/buying a house is not known as the most stressful of times in a persons life for noting.

  Owning a home sadly is not a right.  Should it be? Well only putting pressure on your local TD can change that.  Is it good value to spend so much on a house?  This is a very personal issue.  What are you paying in rent?  Do you have a family? And finaly, location, location, location.  Where do you want to live?  Would you sacrafice on standard of home or location of home?


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## rainyday (5 Oct 2003)

*Re: ask and thy shall recieve*



> So how much is a new house presently selling for €265000 really worth. You tell me.


Hi Peter- It is worth as much as a buyer is prepared to pay for it!


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## Peter (5 Oct 2003)

*Re: ask and thy shall recieve*

Thank you SUE for a very informative piece. 

Rainyday, I thought the buyer doesn't actually own the property until they have paid back their loan in full? But we all know its not the lender who is taking the risk. 

I dont believe lenders can successfully stress test a persons ability to maintain comfortable repayments when they cant accurately predict whats going to happen next week let alone the 25, 30 or even 40 year term of the loan. 

Madam Zing clairvoyant down at Bray amusements concurs with this stress test and predicts that over the next 40 years the interest rates are going to remain as low as they are now. She also said over the next 25 years the tec employment bubble by which this country is held by the short and curlies wont burst, there will be no stock market crashes, the EU certainly wont fall out with the US on any issues ensuring continued employment. She predicted house prices will continue to rise. A drunk on the street later told me Madam Zing's husband is a bank manager. I went back for a refund but she was closed due to unforseen circumstances.

Are we all this blind or have some of us woken up.

The developers are making huge profits fueled by fear from unfortunates who think they will never get on the ladder unless they move quickly. 

I think I'll go with the doom mongering Economist side of the argument. Its more plausible.


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## rainyday (5 Oct 2003)

*Re: ask and thy shall recieve*



> But we all know its not the lender who is taking the risk.


Actually, no - they don't. Why do you think the banks limit themselves to 90% or 92% of the loan? So that they have a nice comfortable margin of error that protects themselves.


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## stobear (6 Oct 2003)

*Re: ask and thy shall recieve*

Quote "And finaly,
                            location, location, location. Where do you want to live? Would you sacrafice on standard of home or location of home? "

My 2c on this. We moved into a bigger house a few years ago for the same money we had a small house for in Dublin, we needed the bigger house and moved 20 miles outside the M50 belt. All very well when the mortgage is small and you have what you need, but do take it in the longer term context of things, the commute is a pain and does grind people down, into a decision to move back and trade up in mortgage and well as down in house size. If we had stayed where we were the mortgage would have paid nearly 2 years ago and started to save for that all important music room (not allowed into the living room, ball'n'chain rules)

I do appreciaite that  a FTB has no option but to go further out (than even we did), but as long as they realise this and make it a 2 or 3 year plan. Some of us just done settle well....

Stobear


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## joxerdaly (7 Oct 2003)

*Developers*

_They are not putting any of these profits back into the community. No money back for infrastructure. Bord Pleanala how are you?_

That is not the case at my estate. The developers made considerable contributions to the cost of upgrading the roads nearby in exchange for planning permission. 

I thought that would be common practice?


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## Michael (8 Oct 2003)

*Developers*

Joxer, look at the mess about to happen out in Greystones. Thousands of houses, little provision, winding country roads, objections overturned by Planala, I could go on. 

Joxer you can bet the road improvements mean cycle lanes that end in a ditch, wide roads that suddenly turn into unlit country lanes. No shops, no transport, no recreational facilities, houses where you don't have room to swing a cat, poor sound insulation, poor materials and shoddy workmanship lets you hear the sound of your neighbours making love, where visitors can't park infront of your home because there is no room etc etc etc..


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## Tomas (9 Oct 2003)

*Neighbours*



> lets you hear the sound of your neighbours making love



Sounds like an ideal place to live for me !

Fnaar ! Fnaaar !


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## Barry (13 Oct 2003)

I showed a house to a French guy that I knew (he works in the home letting industry over there and was over for a few days with his family) and for pig iron we stopped by a house for sale and I asked him to guess the asking price. €200k was his first guess. 'non' was my reply. Try again. Raisuing his eyebrows €250k was his next guess? he went on €300k? At this stage I could see complete disbelief in his eyes. By €600k he gave up thinking I was having him on. The asking price was actually €1.2m. This left him in a complete state of stupefacation. 

There is a great piece in the Sunday Times each week which shows you a house on the continent and a similar house in Ireland and you've to guess the asking price of each.

Lets face it. The property crisis here has us the laughing stock of Europe.


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## DOBBER22 (17 Oct 2003)

If first time buyers pulled together and refused to buy then the market has nowhere to go but down but cleverly placed adverts in local and national papers even the radio are conning people into thinking "qiuck quick buy now before it's too late!" this is simply not the case these builders and lending institutions are creating first time buyers to panic buy by fooling them into thinking that prices will never fall.
Its a simple rule folks what goes up must come down....sometime :\


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## N0elC (17 Oct 2003)

> Its a simple rule folks what goes up must come down....sometime



I've been praying for that to happen to the price of a pint for years now, to no avail !!!


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## Delboy (18 Oct 2003)

Very good article IMHO, in today's Irish Times by Dan McLaughlin. He analyses the UK property crash in the 80's in the context of whether the same thing will happen here. Basically he says it won't happen here and that it was'nt really as bad as they say in the UK when the crash occurred. It was mostly those with mortgages of over 100% loan-to-value ratio who lost their properties.????

Anyone with a bit more savy than myself read this today?? Any thoughts on the points he made.


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## CyberPaddy (18 Oct 2003)

Hi Delboy,

Dan McLaughlin is chief economist with Bank of Ireland, an organisation that has a vested interest in house prices being maintained or even increasing from the present level.

So in my view his comments should be taken with this fact in mind (I was quite surprised this was not mentioned in the article).

I find David McWilliam's viewpoint on this (Prime Time last night) very convincing and would tend generally to listen more to commentators who do not have such a direct interest in the market.

Regards,


CyberPaddy


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## daltonr (20 Oct 2003)

We have a difficult situation in this country (I don't know if it existed in the UK) where people who may like to trade down to a cheaper house, can't afford to do so, because of Stamp Duty.

I wonder if this is helping to keep the bubble inflated.

I wonder what the impact of this will be if interest rates increase, and people can't keep up mortgage repayments, and can't afford to trade down.

-Rd


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## Brendan Burgess (20 Oct 2003)

I am just catching up on Friday's paper today. I was impressed by the article and I too was surprised that they didn't mention who Dan McLaughlin was. I have paraphrased the article here:

There was no property crash in the UK in the late 80's early 90's.

 Average UK house prices. 
1986 £ 36,290
1987  not given
1988 £49,355
1989  54848
1990  59785
1991            62455
1992            61366
1993            62333

So the only falling year was 1992. The decline in London in 1992 was 10%. 

Interest rates: mid 1988:  7.5% rose to 15% by year end
Back to 7.5% by 1992

We think that there was a crash, because repossessions rose. But this was due to 100% mortgages and rising unemployment.

Share bubbles cannot be compared with house bubbles because:
Houses turnover once every 20 years, while shares turnover 3 or 4 times a year. 
Houses cannot be sold short the way shares can
Panic selling doesn't happen much in the housing market
Most home owners don't cash in their homes just to take advantage of a boom.

House prices are more "sticky" downward in nominal terms.


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## Delboy (20 Oct 2003)

CyberPaddy,

I'm well aware who Dan McLaughlin is and whom he works for, as I think most people are who have an interest in housing in Ireland. He contributes a lot to the various discussions/forecasts.

Brendan - I don't have the article in front of me but I too would be surprised if the Times had'nt mentioned whom he works for. They usually do at the end of an article which has been penned by a 'guest'.

I just thought he made some interesting points on the way things were in the uk. McLaughlin's predictions on the market have being the closest to the mark over the last few years, so while I know he has vested interests, he also seems to know his stuff.

But I agree with you on McWillaims, cyberpaddy. He makes a lot of sense and his empasis on the current transfer of wealth in this country from the younger to the older generations, is needed in the current climate


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## Droxol (20 Oct 2003)

*More pain..*

I fear Benchmarking will fuel house prices over the next few years..


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## tyoung (21 Oct 2003)

How do Irish house prices as a multiple of average earnings compare with other markets and with the historical norm?
  I think that Irish house prices have entered unchartered waters and therefore relaying soothing statistics from the British market is of little relevance.
  This does not mean there has to be a sharp fall in prices, just that historical data and trends are of little value right now.
 The market is on stilts and vunerable to any kind of shock.


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## Smiler (21 Oct 2003)

*Huh?*

No property crash in the UK in the 80's??

What cr@p!! I was there. I bought a house at the peak. I had my fingers burnt. FACT: THERE WAS A PROPERTY CRASH!!


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## darag (21 Oct 2003)

*Re: Huh?*

tyoung, 
i think most studies show house prices are related to
affordability and not to peoples' earnings.  in other
words, people work out what mortgage they can
afford to pay and then are willing to spend that amount
on a house.  so obviously in a country like ours or the
uk where most mortgages are variable rate (or are
only fixed for short periods), interest rates have a huge
effect on house prices.  however tax rates, etc. also have
an effect.


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## CyberPaddy (21 Oct 2003)

*Lies, damned lies...*

Hi Guys,

This article (www.economist.com/display...d=1794913) appears to contradict the figures quoted in McLaughlin's article.

In particular:

"London House Prices soared by 120% in the five years to 1989, then fell by 30% over the following four years"

So the question is: who are we to believe?


Regards,


CyberPaddy


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## daltonr (21 Oct 2003)

*Re: Lies, damned lies...*

Actually re-reading Brendans summary above, I'm not even sure what Dan McLaughlin was trying to say.

Was he saying "Relax, there's wasn't a crash in the UK, so everything will probably be ok here".

or 

Was he saying "There wasn't a crash in the UK, but it felt like there was, so even if we don't have a crash here, it could still fell like we do".

As for whose figures to believe.  This seems to be becoming a trend lately.  We get shocking headlines about research done by The Economist or whoever, and a week later we get corrections, or contradictory figures that are much less shocking.

I don't know who to believe.

-Rd


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## Su (21 Oct 2003)

*Re: Lies, damned lies...*

In accordance with reason and logic, it is easier for me to disbelieve Irish commentators than believe.

We are an island people the laughingstock of many our  neighbous, but we still don't get it and are happy to excel in this our unique charade.


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## Delboy (21 Oct 2003)

well, the Economist has made some big gaffs lately on their stats in relation to this country.

I'm not defending McLaughlin, by the way, and saying he is 100% correct. I just wanted to get the views of the board on his article.

Brendan - you wrote down his main points - what do you think of it all?????


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## Elcato (21 Oct 2003)

I have to totally agree with smiler above. I was there (London) also. House prices at the time were about £200k - £300k. These houses fell by at least 50%. I know of many who threw the keys into the building society' letterbox. The figures from above that Brendan has shown from the article ( I haven't read it) are for the UK in general and therefor distort what happened down south.


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## Sarah Wellband (22 Oct 2003)

As someone who was also in London during the house price boom and crash I'd like to point out four factors, three of which are unlikely to happen in Ireland;

1. Interest rates went from 7.5% to 11% and then to 15% in a very short space of time whilst the Govt were trying to defend Sterling (I recall the day 15% was announced as it coincided with my moving into a new flat!)

2. Nigel Lawson repealed multiple tax relief on properties and limited it to £30,000 per property not per person. This was in the April 1988 budget but there was a "window" until the August. The result? Buyers completing mortgage applications at 10pm on a Friday evening with 3 buddies/colleagues/almost complete strangers to beat the deadline.

3. House builder (Wimpey/Barratt, etc) and lenders offering 100% packages with no legal fees - young couples found it very easy to buy a house with no commitment either financial or to each other (no moral highground here - that's just the way it was).

And finally - people were panicked into buying one bed and studio flats which were quickly outgrown once children came along but due to high mortgages, reduced incomes and falling prices they could not move. In a lot of these examples they justed handed the keys back and started again. I guess conceivably this could happen here but i think it's inlikely.

House prices, IMHO, will only fall if there is a big increase in unemployment - say a couple of the US employers pulled out - and people simply could not pay their mortgage. Interest rate rises, whilst painful, can be absorbed as long as they are slow (as ECB moves have been to date) by adjusting lifestyles as long as the income is still there....

Regards,

Sarah

www.rea.ie


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## Charles (22 Oct 2003)

"Interest rate rises, whilst painful, can be absorbed as long as they are slow"

You mean a slow road to a property crash?

People are having to take out loans of 40 years these days. 

Experts, convince me nothing untoward will happen interest rates or the economy in that time period.

If these persons could afford even a slight interest rate increase don't you think they would be going for 25 or 30 year loans instead?  But is this too obvious?

To most people when Interest rates go down they simply borrow more and you know what that does to prices. Just look at the trash you get in your letter box every day. In addition to mortgages the money is there yours for the asking, have it for whatever you want. 

I've heard people comment pacifying regulators stating people are stress tested is a load of boloney. Wheres my umbrella ...


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## mollser (22 Oct 2003)

Sarah,

All valid points, but the situation of Ire vs UK is radically different.

The first 3 are unlikely to happen. The fourth has a more than probable chance of happening as Ireland is way to expensive to run a business in. We gained all that investment because we were a cheap economy, we are now an expensive one. Does anyone really believe that those big cos have loyalty to one particular country? Not on you nelly. Dollars, and how to save them, is what counts. Ireland costs dollars, not saves them.

Although interest rates are unlikely to rise, taxes, be it direct or indirect, will. And just because Bertie say's they won't, well anyone who believe's that has obviously not learnt much about FF. This directly impacts affordability of houses.

The banks are practicing very liberal terms of credit of late. They have already received a slap on the wrists for this, with no effect. We all know the boom has been created by cheap and affordable credit. There is more debt out there than there has ever been.

If the banks are forced to tighten their lending policies, less money available for property, correction happens.

While i'm on this, how many more avenues of credit can be exploited? Lets look at this for a moment:

20 years ago, the norm was for one income families to really really stretch to buy a house.

For the last number of years, it has 2 incomes (in the case of young couples, mates whatever) which need to really really stretch to afford a house.

Nowadays, its 2 incomes + renting out rooms to afford to buy a home, while also borrowing the deposit from the CU or another financial arm, and committing to a 40 yr mortgage.

Borrowing deposits seems rather more commonplace these days than i would ever have believed.

What further lines of credit are available??? It looks like we are at the absolute limit as to what desparation tactics people have to exploit to make a house in any way affordable. This is not sustainable, and nor should it really be tolerated.

Maybe I'll get me mother to go back into the workplace!:rolleyes 

On the flip side, a bit bitter I know, but if the benchmarking goes ahead, probably expect to see another nice surge in the $%#*&# house prices.:mad


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## Joanne (22 Oct 2003)

When you purchase a house these days when can you expect to replace the wiring, plumbing, heating, windows, roof?

Surely most of these items will need replacing before the 30 or 40 year loan has been repaid? Is this factor included in the liberal terms of credit and so called stress test? Inflated house prices, 30 and 40 year loans coupled with other factors doesnt sound too healthy to me.


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## Sarah Wellband (22 Oct 2003)

Hi All,

I deal with house buyers and lenders day in, day out. The vast majority of borrowers are taking 30 or 25 year terms, not 40 (I have  *never* arranged a mortgage in excess of 30 years in Ireland). In reality these mortgages will last 5-7 years before the borrowers trade up or change the mortgage provider to extend or upgrade their homes. The days of remaining in the first house you buy for life are gone, the housing market is far more fluid than for previous generations.

The mortgage payments are normally equal to or below the rent FTB's are paying. Lenders are NOT relaxing criteria - of late they are not taking irregular or non guaranteed income (overtime, bonuses, etc) into account in their calculations. All lenders are stress testing mortgage repayments at between 1-2% over current rates. People are saving for at least part of the deposit, most are getting some parental assistance but, in my experience this is coming from the parents savings rather than the parents having to borrow themselves. 

The downside is the easy availibility of unsecured credit - car loans, personal loans, credit cards. Again in my experience it's not the FTB who is loaded with debt but newish homeowners who "have" to have the plasma TV, landscaped garden, new car, etc and are lulled into believing they can afford it based on the increase in their house value. In some cases borrowers are remortgaging short term debt where the total unsecured repayments exceed the mortgage repayment. 

I make no comment about the rights and wrongs of the above or whether house prices will go up, down or sideways. 

Just a view from the front line......

Sarah

www.rea.ie


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## daltonr (22 Oct 2003)

> Experts, convince me nothing untoward will happen interest rates or the economy in that time period.



Don't forget that from the day you take out your mortgage inflation is hard at work effectively reducing the amount you pay each month.

So, in 10 years time if interest rates have doubled or even tripled, the chances are that you will still be better off than you are today.

Take the example of people who bought houses 25-30 years ago, whose mortgages are ending around now.  At the time they pushed themselves to the limits of what they could afford.  But today their monthly mortgage payments sound tiny.  Inflation is a homeowners best friend.

Having said that, looking at what you can get for 700K to 1m in Dublin, I don't think they are worth it.  But as long as there are people who do, the prices will stay up, and keep increasing.

-Rd


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## adrian (23 Oct 2003)

"So, in 10 years time if interest rates have doubled or even tripled, the chances are that you will still be better off than you are today."

I don't know, I think it's different now. If interest rates trebled, then affordability would obviously be affected. This in itself would probably keep houses prices down, at least lower than inflation.

"At the time they pushed themselves to the limits of what they could afford. "

Again the key word here is afford. Inflation and interest rates were higher back then. So house prices needed to be a smaller multiple of average salary, to keep houses affordable, i.e. to afford the high interest payments. But I think house prices are too much of a multiple of salary at the moment to really benefit from any increase in inflation.

Trying to illustrate my point, let's say I'm the average FTB on an average salary of €50K and qualify for a €200K mortgage today, so bank thinks I can afford it. I decide not to buy until next year. Next year inflation increases to 10%, interest rates treble, now at 8%. Well, I'm now on €55K (wage increase in line with inflation) but the bank will only lend me 170K (just a guess). I can no longer afford the house I wanted to buy for 220K. Well Actually neither can the other average FTB's. The banks would lend less to everyone in a higher interest rate environment, now what effect would that have on house prices? An adjustment closer to historic house price / salary ratio perhaps?


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