# Is Affordable Housing still a good way to go in the current market?



## zombie (14 Mar 2007)

(you could argue is it a good time to buy full stop but just from Affordable Housing perspective)
I just have to wonder if Affordable Housing is now such a good idea in a market that is very possibly at a peak and can at best stay level and at worst go down.
The council will give you a market value right now that will determine the clawback, since current values are so inflated the market value is likely to be high and so will the clawback. 
It might be fine to buy a place you can live for 10 or 15 years but the reality is a lot of AH units selling right now are apartments or pretty small houses and they will quite likely need to be traded up in 5 or 6 years time.
In a 5 to 6 year timeframe the likelihood of a big equity gain, if any, is small and under the rules you will only be looking at a percentage cut of this anyway. On top of this you will have lost your FTB status.
Build into this the drawbacks of AH, you can't rent the property(only a room), you can't really pick exactly where its going to be, you can't take advantage of the best mortgages deals etc.
Sounds to me like continuing to rent could potentially be a better option for some people and save with some good interest rate returns.


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## shanegl (15 Mar 2007)

Affordable housing is great for someone who is going to live there for 10 years+, or who will expect a large wage increase within 10 years. It isn't suitable for someone who wants to trade up in 3-5 years, they would be better off spending those 5 years renting and saving.

If you purchase an affordable home with shared ownership, you buy the council's share out at current market rates, so a crash could work to your advantage here.


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## room305 (15 Mar 2007)

I would have thought that Affordable Housing provides a measure of protection against any downturn since you are purchasing at a discount to market.

How does the clawback operate? Surely they can only clawback from any potential gains? So if you buy for €200k and sell for €200k, there is no clawback. Or do they simply say that they will take a percentage of sale price irregardless of what that sale price is?


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## Welfarite (15 Mar 2007)

I think affordable housing is meant to help people buy homes and is not meant to be an investment vehicle.


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## shanegl (15 Mar 2007)

room305 said:


> I would have thought that Affordable Housing provides a measure of protection against any downturn since you are purchasing at a discount to market.
> 
> How does the clawback operate? Surely they can only clawback from any potential gains? So if you buy for €200k and sell for €200k, there is no clawback. Or do they simply say that they will take a percentage of sale price irregardless of what that sale price is?


 
The clawback is determined by the percentage discount at time of purchase. If you get a 50% discount you must pay the council 50% of sale proceeds when you sell up if within 10 years.

If the value of the house drops 10%, you will lose 10% on the discounted value.


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## zombie (15 Mar 2007)

The buyers money is safe once the sale price does not dip below the actual price they paid for the property, in the event of a price crash the council are the ones who forgo their portion. 
The buyer will see the same return on the sale if the house market stays flat, if it drops by 10% or if it drops by the full clawhback percentage.
The problem is most AH units being offered are what most would consider starter homes and will have to be traded up.


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## shanegl (15 Mar 2007)

zombie said:


> The buyers money is safe once the sale price does not dip below the actual price they paid for the property, in the event of a price crash the council are the ones who forgo their portion.
> The buyer will see the same return on the sale if the house market stays flat, if it drops by 10% or if it drops by the full clawhback percentage.
> The problem is most AH units being offered are what most would consider starter homes and will have to be traded up.


 
I didn't realise this was the case. I don't see mention of it in any of the literature. Although the examples they give are all in rising markets.


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## room305 (15 Mar 2007)

Welfarite said:


> I think affordable housing is meant to help people buy homes and is not meant to be an investment vehicle.



I don't think anyone considers it an "investment vehicle" but it is reasonable to consider what might happen if price falls erode the discount since all the literature seems to focus on rising prices.

Even if you buy with the intention of living somewhere for ten years circumstances change and nobody can be certain of what will happen.


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## long_boy (15 Mar 2007)

Zombie - I agree entirely with your point of view and yes you are right that you will lose out in a declining market (I suppose you will lose out less than if you had purchased the property outright though). It is because of the clawback and the type of housing provided that I recently decided not to proceed with AH. I would only go for it if I got a *house* that met my future needs and therefore didn't need to worry about clawback as I would keep it for 20+years.

In my opinion AH is a con as it does not meet the social needs of the majority of people that it is targeted at. In fact I can't see the benefit of it at all except for people that get what they need in the long term. Since most people are offered small appartments I don't know how they will fair in, say, 10years time if they need more space. As you say you lose your FTB status, will probably have to pay stamp and all the associated costs of relocating. In addition to that you would need a far greater salary even to buy a similar property to your AH since you will be buying a market rates so what chance have you of affording a larger one? I'd love to hear from some people that availed of AH, their motivation for doing so and their medium to long term plans for it. If their was a scheme to move up an "AH ladder" as people's needs changed I would go for it, otherwise I see it as digging a deeper hole for myself.


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## shanegl (15 Mar 2007)

I am in the process of buying an apartment under AH and my most important motivation for buying was the fact that I was single at the time. If in the future I will be looking to buy a house as part of a couple, I won't have much trouble with affordability.

But for a couple to buy with AH, I see many negatives, as you mentioned.


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## scatriona (15 Mar 2007)

Hi

You made me doubt but.... I bought a 2 bed AH in Oct 05. Apartment cost me approx. 147k (market value at the time was about 205k). Market value now (based on similar in same area) is between 260-300k on myhome.ie etc. (you never know till you actually sell though, right!?)
I am single & did not have deposit to buy a place from regular market 18 mths ago. My place has appreciated and if I was to sell now (say at 250k) even after clawback paid to council, i will have about 45k (e.g. for a deposit for a 'trade up'). I couldn't have saved that in this timeframe. I will also have a good credit history of mortgage repayments which should help when applying for a new mortgage... 
But yes, whan the market turns its hard to know if in the long run, AH is the 'great saviour' but I do know that I'd still be renting/living at home if I hadn't done it this way and I'm not sure how happy I'd have been about that!

S


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## sammieh (15 Mar 2007)

For me it is the way to go. I was looking into buying an apt last year and no matter how many offers i put on apts somebody was always bidding higher than i could afford to go. Then just as i had an offer accepted I got (after nearly five years) a call offering me AH. I am purchasing the house (two bed) for app 100k less resulting in me paying the mortgage ten years quicker than with the apt and not costing me loads per month with the apt it was always going to be tight as i am on my own with a six year old. Yes life can change, i could meet somebody in the morning and have another kid but lets be honest, AH meets the needs of the here and now. Worry about the future in the future.


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## bradfield (15 Mar 2007)

Hey,

I too bought a two bed house in 2002 with AH. I am single and was paying top rent at the time. The house was valued at 190000 at the time I paid 127000 (6000 deposit 133000). As it stands I have no plans to sell the house but if I did at current market values (which I know are only valid if someone is willing to pay) the house is worth 310000-320000. If I was to sell at the top value then even after paying back the clawback and outstanding balance I would clear approx 110000. There is no way that I would have saved that amount of money in 4.5 years not paying current rents in Dublin! So for me the system worked! I understand that since then there have been a number of changes and it may not be as attractive as it once was but I agree with the previous poster it suits people in a time and a place and when you need/want to own your own property in that time and place if AH is the only way then I would recommend going for it!

D


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## mlouisa (15 Mar 2007)

Hi,

WEll i am in the process of buying a 2 bed apartment. I asked myself the same thing: if i am to get married or have kids in the next few years I will need a bigger place and will sell hence giving a claw back to Fingal CC. If prices dropped i could be in troublw. But then again if i pay full price now, bankrput myself with a mortgage at least 10 years longer than my AH one, the prices could still drop and i'd be worse off!
Its a risk but so is buying any property!


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## Tony (15 Mar 2007)

ok so lets say you get an AH and the market value is 250 you buy it for 170ish i would much rather be in that position if the market were to drop than be in the position where i was paying back a mortgage for more than what the house was worth if i was to go the traditional way of purchasing a house.


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## theBatMan (15 Mar 2007)

If you buy a house valued at 315,000 and received a discount of 40%, then you would pay 189,000 for the property. 

If the price is static, and after five years you sell the property for 315,000, then you would have to pay back 126,000.

If prices rise and you sell the house for 340,000, you would have to pay back 136,000.

If there is a crash and you had to sell the house for 200,000, you would be normally expected to pay back 80,000. 

However, the way the affordable housing scheme works, you would not have to pay back the full 80,000. You would be liable for the full amount of the mortgage, and also the remainder of the amount achieved from the sale. So as long as the mortgage amount is covered you will be able to walk away without going into negative equity.


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## Cheeus (18 Apr 2007)

Hello Batman

Are you sure that you can't make a loss as long as the loan is covered? Where in the literature did you read this? I'm just about to buy an AF apt and am concerned about this.

Thanks


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## shanegl (18 Apr 2007)

Yes its true. Its in the relevant legislation if you search for it online. Can't remember what its called, but I'm sure someone can point it out.


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## killerkearns (24 Apr 2007)

I'm in the process of buying a 2 bed apartment in Kilcock under the AH scheme.
The market value is 295,000 and I buying for 191,00, a 35% discount.
I am to worried about the current trend in the housing market.
Small apartments lose the most value in real estate downturns and I can see prices dropping sigificantly here.
Still going through with it as general house prices trend upwards in the longterm.
Must actually check with Kildare county council regarding the situation with the clawback if apartment drops below market value and the discount value.
will post back.


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