# As a FTB how will you be affected by interest rate hikes?



## SteelBlue05

There is a lot of talk of First Time Buyers being badly affected by interest rate hikes. As a FTB myself I had factored in an increase of up to 2% to make sure I could afford repayments. 

If the base ECB rate goes beyond 5% I will be looking at renting out a room in my house and\or hoping I will be earning more by that time. If things went really bad I would consider using some of my SSIA to pay off some of the mortgage principal next year.

I am hoping some FTBs will reply here and let us know how things are looking for them, I would think the majority have things under control? At what base ECB rate would you start to have problems, or have a lot of FTBs opted for Fixed rates?


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## room305

FTB, bought about two years ago based on what I thought I could afford rather than what the banks were willing to lend me. Apart from an SSIA account I've also been saving what is roughly the difference between what my mortgage costs and what rental on an equivalent property would be.

Thus far I've resisted the urge to pay a chunk off my mortgage because my investment returns have been much higher than my mortgage rate.

If the base rate was 8%-9% I'd certainly feel the pinch a bit and in that situation it might be worth considering paying off a chunk of it.

I very much doubt I'll be forced into a situation where I will need to sell or be unable to meet my repayments. I'm also expecting a substantial (>50%) wage increase next year so this should be of help.

The only situation I can see myself selling in is if job opportunities become more attractive abroad and I wish to move.


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## nelly

same position as previous poster - 8-9% and i will be back on student meals & clothes for a while but i have been disciplined with myself to spend 500 per month so i won't be out on my ear i will just see my slush fund decreased! 
I am optimistic though - spend spend and God will send!


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## SteelBlue05

Can I ask do you have a small mortgage or have you rented out rooms or something? As I would have thought an increase to 8-9% would be difficult to handle for most FTB's, I suppose it depends on the size of the mortgage relative to income....what % of your net monthly income currently goes on mortgage repayments?


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## beetlebum

ftb, last year, bought a house where the mortgage repayments were equivalent to the rent i would of had to pay on it. (getting very rare now).
The latest rate rises have pushed my repayments over what the rent would be on a similar property, but still very managable. I cant forsee myself having any problems (unless of course i have no job and hence no regular income). I think i am lucky in that the house i bought was "good" value and i did not strech myself too much. I probably could have afforded a bigger mortgage, but whats the point i had a good lifestyle and didn't wnat to pay more than what rent i was payin.

i think the rates would have to increase to maybe near 10% before i would have to cahnge the way i live, but then if that or when that may happen I will hopefully be in a better fianicial position.


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## room305

SteelBlue05 said:
			
		

> Can I ask do you have a small mortgage or have you rented out rooms or something? As I would have thought an increase to 8-9% would be difficult to handle for most FTB's, I suppose it depends on the size of the mortgage relative to income....what % of your net monthly income currently goes on mortgage replayments?



Small mortgage, small 1 bedroom house, located in one of the less salubrious areas of this fair city. Still, the property bubble currently has people paying silly money even for houses here!

Percentage wise, currently I'm spending about 25% of my net monthly income on my mortgage. Though even with expected rate rises this percentage will fall considerably as I expect to be earning considerably more in 12-18 months time.

I'm sure if W2DW has a glance over this thread he'll tell you that rates of 8-9% are exactly what you should be preparing to handle ...


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## SteelBlue05

room305 said:
			
		

> I'm sure if W2DW has a glance over this thread he'll tell you that rates of 8-9% are exactly what you should be preparing to handle ...


 
Yeah but I think he will be surprised at peoples ability to cope with such a big increase. Although we have had only a few responses.


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## ivuernis

room305 said:
			
		

> I'm also expecting a substantial (>50%) wage increase next year so this should be of help.


 
Who do you work for?


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## room305

SteelBlue05 said:
			
		

> Yeah but I think he will be surprised at peoples ability to cope with such a big increase. Although we have had only a few responses.



Also the people who post here tend to be very smart and probably don't reflect the situation of the huddled masses ...


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## Howitzer

SteelBlue05 said:
			
		

> Yeah but I think he will be surprised as peoples ability to cope with such a big increase. Although we have had only a few responses.


 
It's not necessarily the increase in mortgage repayments that will affect many FTBs but rather the fact that increasing rates mean there won't be anymore FTBs out there who can afford to purchase off them what was supposed to be a starter home.

Once rates go up, in fact the point may already have been reached, whereby no more FTBs can get enough credit approval in order to buy at the presently inflated prices then anyone who's bought in the last couple of years will be stuck in a property that they can't sell at the current price.


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## room305

ivuernis said:
			
		

> Who do you work for?



It's easier to increase your wages substantially when you start from a low base!


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## Neffa

I don't think the issue is the FTB squeeze - it is much more likely to be the investors who are heavily geared on IO mortgages where the rent is already falling short of the mortgage. 

From my straw poll at work, the people who bought post-2003 would appear to be in this predicament and it is much worse for the canny investors who bought in 2005/06 . 

FTB's normally do not have IO loans so are not as exposed.


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## chihiro

FTB since May. Luckily got a good rate on a 2 year fixed mortgage from NIB and didn't max ourselves anyway (banks prepared to throw alot more money our way - could've got at least 70k extra). 

I don't think the interest rate increases are putting FTBs off buying as it's creeping up gradually.  Stamp duty is a bigger chain around your neck IMHO. I still haven't gotten over the pain of it!


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## Howitzer

Neffa said:
			
		

> FTB's normally do not have IO loans so are not as exposed.


 
A number of financial gurus started promoting the idea of FTBs using IO loans in the last year, say for the first few years in order to keep the whole life/home balance thing. So I wouldn't be so sure that FTBs won't be caught out by rate rises, though I think it'd be pretty rare.

But anyway I think the bigger issue is the fact that potential FTBs will see their purchasing power decrease substantially with each .25% increase. Whilst existing owners will have to make do with forking out an extra E50 or so a month with each increase, FTBs will simply not get the mortgages required to buy E500K apartments, or at least with each rise they'll potentially lose E20K of purchasing power.


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## Contrarian

This is the key point,the reduction in purchasing power by potential FTB's at the bottom of the pyramid will simply have to effect the overall market. There will be less money feeding the beast.


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## room305

It's been mentioned here before but the FTBs who will be most affected I think, are those who have bought in an area they don't actually want to live. Those who bought to "get on the ladder" hoping their house would appreciate sufficiently to provide a deposit for an even more outrageously priced house in an area they want to live in.

When those gain don't materialise, or indeed the house even depreciates in value, those FTBs will be stuck where they are.


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## fago76

room305 said:
			
		

> It's been mentioned here before but the FTBs who will be most affected I think, are those who have bought in an area they don't actually want to live. Those who bought to "get on the ladder" hoping their house would appreciate sufficiently to provide a deposit for an even more outrageously priced house in an area they want to live in.
> 
> When those gain don't materialise, or indeed the house even depreciates in value, those FTBs will be stuck where they are.


That's a key point. FTB just under a year ago, we bought in an area we'd be happy to live in for 10 years. I think it was worth it even with having to pay stamp duty, as opposed to a new house a further out of the city. I'm also able to cycle to work which balances out the greater expense by not having to run a 2nd car.
As for interest rate rises we're fixed at 2.75% for one year, and well aware of what kind of increase we'll get hit for once we come off this.


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## room305

fago76 said:
			
		

> As for interest rate rises we're fixed at 2.75% for one year, and well aware of what kind of increase we'll get hit for once we come off this.



The house you live in isn't necessarily an investment and it has a utility value. If you like where you live then negative equity isn't necessarily the end of the world.

Two pieces of advice:

- If you have any lump sums of money (SSIA etc.) it may be worth paying off a chunk of your mortgage before the new higher interest rates kick in.
- Start living as though you were paying the increased rate. Start saving the difference between what your mortgage repayment is now and what it will be. This way it will manifest as less of a shock.


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## Eurofan

room305 said:
			
		

> - If you have any lump sums of money (SSIA etc.) it may be worth paying off a chunk of your mortgage before the new higher interest rates kick in.
> - Start living as though you were paying the increased rate. Start saving the difference between what your mortgage repayment is now and what it will be. This way it will manifest as less of a shock.



Excellent advice and very timely given the direction of rates.


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## Butter

Although I'm actually a second time buyer I hope no-one objects to me posting here.  A lot of people I know who are making one move up the property ladder and buying their second house are now also keeping their first house/apartment to rent out.  I think this is very scary in the current climate because although they will have made money on their first purchase they are not cashing in this gain to buy their next house.  Instead they still have mortgage number 1 and are now borrowing hugely to buy their second house.  I can see these people experiencing more pain as interest rates rise than ftbs.


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## Eurofan

Marg said:
			
		

> I can see these people experiencing more pain as interest rates rise than ftbs.



Couldn't aggree more.

Of the three couples i know who have traded up in the last year only one (finalising the deal as i type this) have had sense enough to sell the previous property. Everyone else is attempting to play the landlord game though one is gradually realising it's not the easy money she thought it would be.

Bar from myself the former couple have received criticism from everyone else up to and including outright abuse from one of the parents that "they must like throwing away money"....


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## SidTheDweeb

Eurofan said:
			
		

> Bar from myself the former couple have received criticism from everyone else up to and including outright abuse from one of the parents that "they must like throwing away money"....


I know a young gay couple, and they're upgrading already. They've done a deal for the new house, which won't be built until sometime next year (they say it's a done deal - does this mean they can't back out???), and haven't decided yet if they are going to sell their current home. I mean, they certainly aren't in the megabucks category, but as usual the notion that property=dead cert. exists.


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## annR

I am in that situation . . . have an apartment but we have bought a house.  I think I will sell it soon but nobody else seems to think that's a good idea.


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## walk2dewater

annR said:
			
		

> but nobody else seems to think that's a good idea.


 
[Respectfully] what does it matter what other people think?  What do YOU think, it's your finances.


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## phoenix_n

Eurofan said:
			
		

> Couldn't aggree more.
> 
> Of the three couples i know who have traded up in the last year only one (finalising the deal as i type this) have had sense enough to sell the previous property. Everyone else is attempting to play the landlord game though one is gradually realising it's not the easy money she thought it would be.
> 
> Bar from myself the former couple have received criticism from everyone else up to and including outright abuse from one of the parents that "they must like throwing away money"....


 
It better to perhaps throw away a profit of say 50,000 than to lose 50,000 of your money !

You dont really notice not gaining 50K but you sure do notice if you lose it.


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## thewatcher

Sure everyone in ireland wants to be a landlord,it's hilarious stuff alltogether,i've two friends in the same senario i told them to sell first house and get a small mortgage on their new property and in a few years they will be mortgage free and laughing.
Everyone else told them they were mad and rolled out the usual irish property mantra.
As someone else said these are the people going to be in the worst position of all when the correction comes,a ftb while maybe in negative equity is not forced to sell in a falling market.
A price correction in this country will more that likely tip the economy into recession,a lot of foreigners will go home imho and unless you can guarantee that you can rent out the second property that's a serious weight around your neck.
You cannot jetision property overnight (as many irish people seem to think you can) i went sale agreed on a property in 1 week,it still took a further 12 weeks to complete the deal,they could havew pulled out at any stage up to week 9.
If people think the gasumping on the way up was bad,wait till you see the gazundering on the way down.


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## annR

walk2dewater said:
			
		

> [Respectfully] what does it matter what other people think? What do YOU think, it's your finances.


 
Just pointing out the sentiment out there.


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## miju

thewatcher said:
			
		

> If people think the gasumping on the way up was bad,wait till you see the gazundering on the way down.



will be a VERY bitter pill to swallow for alot of people i'd imagine , maybe then will they realise the stupidity of bidding on 4 or 5 houses at once


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## Duplex

After six years the Bank of Japan has raised interest rates from 0 (zero) to .25%.  A significant move.



http://today.reuters.com/investing/financeArticle.aspx?type=economicNews&storyID=2006-07-14T065225Z_01_T261258_RTRIDST_0_ECONOMY-JAPAN-UPDATE-5.XML


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## soma

Duplex said:
			
		

> After six years the Bank of Japan has raised interest rates from 0 (zero) to .25%.  A significant move.


Here's two words that are now gonna affect every FTB, yet none of them know it yet.. "carry trade".


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## Howitzer

soma said:
			
		

> Here's two words that are now gonna affect every FTB, yet none of them know it yet.. "carry trade".


 
I doubt there's been much carry trade into the Irish market. Care to elaborate?


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## Guest107

soma said:
			
		

> Here's two words that are now gonna affect every FTB, yet none of them know it yet.. "carry trade".


The carry trade can be explained this way.

The cheapest money on the planet was Japanese 0% interest loans.

You could borrow at 0% for 6 months and speculate elsewhere , say in Icelandic bonds, you would make 5% . Then you would pay back the Japanese loan.

The 'carry trade' , taken with the ECB emergency base rate of 2% between 2001 and 2005 m was a giant slosh of ultra cheap money into the global econiomy.

That is now drying up and will result in a series of bursting bubbles planet wide. Commodities, Housing, Bonds, Currency positions and hedges will all lose a bit of steam and froth.

The GOOD new as I see it in Ireland is that the FTB market was driven for the past 2 years by FEAR, the fear that if they did not buy for a ridiculous price of x in 2004 the price would be a more ridiculous x+10% in 2005 and so on.

Do any of you observers agree with me that a lot (not all) of this fear has gone out of the equation in Ireland in that past 2 months and that pure  rationality is returning to the FTB market   ???


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## soma

Howitzer said:
			
		

> I doubt there's been much carry trade into the Irish market.


*lol* 



			
				Howitzer said:
			
		

> Care to elaborate?


2Pack explained it well - it's essentially another nail in the coffin of the global liquidity bubble. It will further encourage global central banks participating in tightening monetary policy cycles, and will eventual filter down to Irish FTBs by eating into the amount they can borrow from the mortgage banks. (as well as hurting recent buyers with increased payments, particularly those whose teaser/introductory rates are coming to an end and resetting).


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## bearishbull

irish property investors were/re borrowing money at ultra cheap real rates, im sure there was some currency risk with borrowing yen so euro would be more relevant here,when interest rates dropped to 2% it made total sense to buy a second or third property with real negative/zero interest rates and house prices rising by 10% a year,but now the cost of finance is rising and i think a lot of these amateur prperty investors will seek to cash in.


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## ivuernis

2Pack said:
			
		

> The carry trade can be explained this way.


 
Another good description about it here & possible ramifications:
[broken link removed]




			
				2Pack said:
			
		

> Do any of you observers agree with me that a lot (not all) of this fear has gone out of the equation in Ireland in that past 2 months and that pure rationality is returning to the FTB market ???


 
No, not quite yet. I know of 2 recent FTBs and they're both still going on about "rent is dead money", "prices will never fall", "need to get on the ladder now",  blah, blah, blah, I don't even try to argue the point anymore for fear of bursting the fantasy bubble they are living in. Let them at least enjoy the initial high of "owning your own home" before reality bites.


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## miju

vbmenu_register("postmenu_242573", true);  
Frequent Poster
 have to agree with you ivuernis , i myself have actually given up discussing this issue with friends for three reasons:

1: when it comes i wont be able to resist saying "i told you so"
2: they still quote demographics , prices going up , up , up and rent is dead money etc
3: the one's that do listen and partake in the discussion rationally begin to get a slightly bitter taste in their mouths as they realise reality could come crashing down around them badly


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## Eurofan

miju said:
			
		

> i myself have actually given up discussing this issue with friends for three reasons:
> 
> 1: when it comes i wont be able to resist saying "i told you so"
> 2: they still quote demographics , prices going up , up , up and rent is dead money etc
> 3: the one's that do listen and partake in the discussion rationally begin to get a slightly bitter taste in their mouths as they realise reality could come crashing down around them badly



Ditto all of the above. I've long given up on discussing these matters with friends they are all aware of my position at this stage.

Interestingly though there is an almost daily appearance in the general media of articles questioning the bubble.

Anecdotal it may be but i have definately noticed an increased sentiment amongst my own peers that are finally beginning to recognise the potential for problems even if they still refuse to believe it.


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## annR

A lot of people listened years ago when they were told that the market would fall and .. . . .they missed out big time.  I think that regret is driving the current sentiment, they don't want to lose out completely if it keeps going up, and also fear that if it does keep going up, they will be priced out altogether.

If you are telling FTBs (for instance couples who may want to start a family) not to buy, are you also willing to tell them how long it will be before the market goes up a bit more and then falls back to a level they can afford.  Because they will be waiting until then to have a family home.


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## Duplex

annR said:
			
		

> A lot of people listened years ago when they were told that the market would fall and .. . . .they missed out big time. I think that regret is driving the current sentiment, they don't want to lose out completely if it keeps going up, and also fear that if it does keep going up, they will be priced out altogether.
> 
> If you are telling FTBs (for instance couples who may want to start a family) not to buy, are you also willing to tell them how long it will be before the market goes up a bit more and then falls back to a level they can afford. Because they will be waiting until then to have a family home.


 
I would never advise anyone to not buy.  If they have reached maturity they should be able to make their own reasoned decision.


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## shnaek

annR said:
			
		

> A lot of people listened years ago when they were told that the market would fall



The fundamentals were still wrong back then. The only reason the market didn't level off was government intervention. The market should have levelled off and in a well (responsibly) managed economy it would have levelled off. Alas instead the goverment (and the banks) provided stimulus to the market. Now IMHO the market has been over-skewed and will drop rather than level off. This has happened all over the world in similar circumstances. It will happen here. If anyone wishes to bet with me on the matter I am willing to engage


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## delboy159

shnaek - I do agree that things are set for an adjustment, but you state that the governement intervention has kept that market boyant...  Yes, the government could have done things differently, but I maintain the fact stamp duty is soo high is an example of how the government remained politically disciplined.  They could have guaranteed tens of thousand of votes by making dramatic changes to stamp duty..
(I know the tax revenue is massive from stamp., but a govt wants votes not money in the bank...)

The future ability to remove/reduce stamp could very well be a tactic to keep the market steady in the future.

Also, we are reaching a correction phase with interest rate increases - and about time...  Our base rate should be at 4% (i.e. mort rates at over 5%) and the base rate should have been over 3% 2 years ago.  The property market has overheated based on low rates - this was something out of our economies control.  We are going to have to suffer a little, while the rate correction kicks in - lets not over hype anything either way on this......

- Economy is still buying and producing
- Employment is high
- Inflation is okay - not good but okay
- no major pulling out of multinationals

Only one of the negative boxes is currently ticked (interest rates rising) - and my only complaint is that it didn't happen 2/3 years ago...

First Time buyers, investors taking risks to name just a few property owners exposed have a few other areas to look at before house prices take a big hit - 
- Less nights out
- Lidl/Aldi instead of marks and Sparks/Superquinn
- A 1 year old car instead of a new car
- 2 holidays instead of 3 in a year
- 15k wedding instead of a 30k wedding.

Bigger picture here folks - when some of the other economic indicators start flashing bright red then we should worry....


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## SteelBlue05

There is another thread called "Current public sentiment towards the housing market? " for all this kind of discussion about whether the market for housing is going to slump or not etc.


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## SteelBlue05

delboy159 said:
			
		

> First Time buyers, investors taking risks to name just a few property owners exposed have a few other areas to look at before house prices take a big hit -
> - Less nights out
> - Lidl/Aldi instead of marks and Sparks/Superquinn
> - A 1 year old car instead of a new car
> - 2 holidays instead of 3 in a year
> - 15k wedding instead of a 30k wedding.
> ...


 
They are very good points. The majority of people have plenty of room to tighten the belt on costs. Back in the 80's the estates out in Salthill in Galway used to be known as the Porridge Estates as that is all the people living there in their new houses could afford following Digitials leaving and the bad economy.

Today we are far from that and really over spend, there is plenty of room to tighten the belts and I wonder will that negate the impact of rising rates on house prices.

Even myself, I have just changed my car to a diesel one (4 years old) and I am saving 200 euro a month on fuel. I drive 20k miles a year and my old car was becomming very fuel inefficient (135k miles on the clock). Was spending 85 euro a week on petrol before this, now just under 40 euro a week on diesel.


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## darex

delboy159 said:
			
		

> First Time buyers, investors taking risks to name just a few property owners exposed have a few other areas to look at before house prices take a big hit -
> - Less nights out
> - Lidl/Aldi instead of marks and Sparks/Superquinn
> - A 1 year old car instead of a new car
> - 2 holidays instead of 3 in a year
> - 15k wedding instead of a 30k wedding.
> 
> Bigger picture here folks - when some of the other economic indicators start flashing bright red then we should worry....



I think you are missing the point here. The downturn will be a cyclic process. All these cutbacks you mention above will mean less servcies being bought which will mean lower profits and fewer jobs which means higher unemployment which means lower govt. revenue which means fewer jobs etc. etc.

The virtuous circle that we had up until recently will turn into a viscous circle.


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## Eurofan

annR said:
			
		

> If you are telling FTBs (for instance couples who may want to start a family) not to buy, are you also willing to tell them how long it will be before the market goes up a bit more and then falls back to a level they can afford.  Because they will be waiting until then to have a family home.


I must admit i know of precisely _zero_ ftbs in the last few years who are buying a 'family' home. To a man and woman they bought because it's the thing to do, if they don't now they'll never get on 'the ladder', they'll make a fortune when it comes time to sell etc. etc.

As far as interest rates affecting them only today i spoke with someone i see infrequently. He put signed contracts on a townhouse in the This post will be deleted if not edited to remove bad language end of Dublin (don't ask) because it was the only place he could afford on a 100% mortgage. He bought interest only and intends to let it out and sell on again in a few years and pocket the profit towards a house for himself at that point.

Now last March when he signed (with completion due end of this year) he was rosy as anything about this. I urged caution but there was no telling him. It was going to be tight enough as it was even with full occupancy at going rates and i won't even go into the tax/stamp duty issues (or rather his lack of concern for either).

Today was a different picture. With the last rate increase he's _already_ at the point where he'll have to subsidise the rent each month albeit a small amount.

The conversation today was along the lines of "why are they saying rates are going up?", "why are they saying they'll keep going up next year?","why are they saying there's going to be a bloody soft landing i need this place to increase in value?" and most tellingly "why are there loads of articles about bloody property bubbles?".

He's still in complete denial about the potential for the latter but talk about a soft landing is worrying him because he won't "make any money" and rates going up is definately having an effect on him. I suspect there's a lot more in his shoes.


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## beattie

Eurofan said:
			
		

> Today was a different picture. With the last rate increase he's _already_ at the point where he'll have to subsidise the rent each month albeit a small amount.
> 
> The conversation today was along the lines of "why are they saying rates are going up?", "why are they saying they'll keep going up next year?","why are they saying there's going to be a bloody soft landing i need this place to increase in value?" and most tellingly "why are there loads of articles about bloody property bubbles?".
> 
> Does he know that they are going up on Aug 3 again? I can't believe the greed that the banks are giving this type of loan to people who are not very saavy financially. What will happen when the property goes vacant for a few months, will the credit card be used to manage cashflow issues...


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## CelloPoint

Eurofan said:
			
		

> I must admit i know of precisely _zero_ ftbs in the last few years who are buying a 'family' home. To a man and woman they bought because it's the thing to do, if they don't now they'll never get on 'the ladder', they'll make a fortune when it comes time to sell etc. etc.
> 
> As far as interest rates affecting them only today i spoke with someone i see infrequently. He put signed contracts on a townhouse in the This post will be deleted if not edited to remove bad language end of Dublin (don't ask) because it was the only place he could afford on a 100% mortgage. He bought interest only and intends to let it out and sell on again in a few years and pocket the profit towards a house for himself at that point.
> 
> Now last March when he signed (with completion due end of this year) he was rosy as anything about this. I urged caution but there was no telling him. It was going to be tight enough as it was even with full occupancy at going rates and i won't even go into the tax/stamp duty issues (or rather his lack of concern for either).
> 
> Today was a different picture. With the last rate increase he's _already_ at the point where he'll have to subsidise the rent each month albeit a small amount.
> 
> The conversation today was along the lines of "why are they saying rates are going up?", "why are they saying they'll keep going up next year?","why are they saying there's going to be a bloody soft landing i need this place to increase in value?" and most tellingly "why are there loads of articles about bloody property bubbles?".
> 
> He's still in complete denial about the potential for the latter but talk about a soft landing is worrying him because he won't "make any money" and rates going up is definately having an effect on him. I suspect there's a lot more in his shoes.


I'd say we're going to hear more and more of this kind of story. Then again, maybe we won't - the gambler only ever tells his pub buddies about his winnings... Nobody wants to be a failure.

I've been over on boards.ie a bit, and the negative sentiment being expressed on some of the polls is quite alarming really.

I'm 25, and there is no way on this earth that I would consider forking out 300k for a flat on the outer edge of commuterland. I'm quite happy renting just 5 mins from work (in prime location south dublin), with the difference ploughing into tax efficient pensions and equities. There are loads of rooms for rent, and there's lots of clout these days as a tenant (unlike the recent past).

i.e.:
Choice has improved dramatically.
Quality has improved dramatically.
Prices have generally stabilised/decreased by 10%.
Attitude of landlords has improved dramatically.
Time to rent has improved dramatically (from a tenant point of view).
Ability to negotiate lease in terms of money/bills/duration has improved dramatically.


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## thefisherman

hi,
i know an investor who just sold his property.he bought in 1996 for 60k and sold for 370k last month.
he says he is locking in profit now-that its better to get out now while the road is clear -and not in rush hour with the rest of the herd when they get spooked by the sound of rising interest rates.
figures that the property market is in the last upward push before stalling/falling. 
dont know if he's right or wrong-but he sure can mix metaphors.

sorry, just noticed i put this in the wrong thread
meant this post for the other thread about sentiment in the property market , 
ah well.


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## macbri

Guys,
        Another point in housing market is the dramatic increase in housing stock over the last 4 years.
Ireland has gone from 1.28 million units to over 1.6 million households in 2006.This is an increase of 30% in 4 years whilst population has increased by just over 5%.
This has caused housing density to decrease from 3.1 in 2002 to 2.5 at end of 2006.
This begs the question-where is the future demand going to come from at current building output rate?

I have been advising friends recently to sell their house and rent equivalent house at half cost of mortgage.
Have got the usual replies-property never goes down,rent is dead money etc etc.


They don't seem to understand that house prices are like any asset-they will go up or down depending on demand/supply and current environment are all leading to reduced demand and increased supply.

I can only see a massive correction in Irish market but hope I am wrong.


----------



## room305

delboy159 said:
			
		

> First Time buyers, investors taking risks to name just a few property owners exposed have a few other areas to look at before house prices take a big hit


Suppose you were an investor who owned a house which had increased in value by about 60% in the past four years, that you were currently letting lie idle or had a tenant that barely covered your mortgage. In the years ahead the house is barely going to increase in value in nominal terms, possibly lose value in real terms (best case scenario). Much talk of rates going up and your IO mortgage will probably double in the next few years. At the same time it is unlikely you can pass any of this mortgage increase onto your tenant because of stiffling competition in the market.

Do you?

a) Explain to your family that things will be a lot tougher over the next few years but if they all cut down on the luxuries they enjoy they will get by.

b) Sell to some poor sucker and lodge an unbelievably massive wedge of cash in the bank/investment vehicle of your choice.

How many investors will be selecting option a in the coming years do you think?

But hey, it's not like they're a significant section of the housing market or anything ...


----------



## macbri

This is pretty much scenario I am facing now.

I migrated to Australia a couple of years ago and am renting an apartment with my girlfriend in sydney(swimming pool,sauna,gym,security,car park etc) for $380 pw.

To buy this apartment would cost us just over double in mortgage/strata fees.

Its' the same with 4/5 bedroom detached houses in sydney where rental costs can be 30% cost of owning the property.

To me its' a no brainer,rent until property prices comes down to some sort of equilibrium.
My current rent is 17% of net salary which gives me nice choices on remainder of disposable income(this year took 7 weeks off 4 holiday in Ireland/France)

I would be happy renting the rest of my life(accomodation is 1st class,market is well regulated over here and u can move when u want)


----------



## phoenix_n

Not to detract from the 'irish' part of this thread but I came back from Sydney last year. They had a simmilar property boom as in ireland but it has had a recent soft landing. I noticed from Australia property sites (equiv to myhome.ie) some recent advertisements of apartments with 'Must sell', 'Massively reduced'.

Macbri : Has the market soft landed or crashed in sydney.

(p.s. i noticed banks are now offering 6% interest deposit accounts. If you had enought dosh you could nearly survive on bank interest out there these days)




			
				macbri said:
			
		

> This is pretty much scenario I am facing now.
> 
> I migrated to Australia a couple of years ago and am renting an apartment with my girlfriend in sydney(swimming pool,sauna,gym,security,car park etc) for $380 pw.
> 
> To buy this apartment would cost us just over double in mortgage/strata fees.
> 
> Its' the same with 4/5 bedroom detached houses in sydney where rental costs can be 30% cost of owning the property.
> 
> To me its' a no brainer,rent until property prices comes down to some sort of equilibrium.
> My current rent is 17% of net salary which gives me nice choices on remainder of disposable income(this year took 7 weeks off 4 holiday in Ireland/France)
> 
> I would be happy renting the rest of my life(accomodation is 1st class,market is well regulated over here and u can move when u want)


----------



## macbri

Market hasn't crashed-gone down about 10-15 % in last couple years after a few years of double digit growth.

Interest rates here are 5.75% but big difference here is that prices are so much cheaper than Dublin.

To give u an idea,we are renting a new 2 bedroom apartment just off surrey hills(15 min walk to cbd) with underground car park,pool & gym and full security.

This apartment would cost $470kAUD(300k Euro) as well as strata fee of $5kAUD.however,its' still madness to buy as rent is half mortgage and don't have to worry about strata fee(many arguments with girlfriend on this 1)

As far as I can see in Dublin market from daft website,we would be paying at least double for equivalent apartment in Dublin.

Wages in sydney are about same as Dublin.I'm earning 30 euros ph as contract accountant in sydney which from talking to friends in Ireland is what I would expect to earn in Dublin market.

I suppose what I'm trying to say is that sydney had less to fall due to property more closely aligned to disposable income and interest rates coming off a higher base.

Theres' talk of an interest rate rise to 6% here next week,I think sydney has more to fall but it won't be as dramatic as Ireland.

The other 2 things supporting sydney market is as u know,Australia has a skilled migration programme,these migrants usual have financial muscle when they come to sydney and hence support demand-secondly house starts in Australia currently running at 150k pa-this is 50% higher than Ireland but population 500% higher.

Statistics don't lie.

I'm off to bed now-nearly 10pm here now


----------



## Glenbhoy

> Wages in sydney are about same as Dublin.I'm earning 30 euros ph as contract accountant in sydney which from talking to friends in Ireland is what I would expect to earn in Dublin market.


That's not bad, but wages seem to have taken a bit of leap here in the past 9 months, most people qualified in the past 2/3 years that I know seem to be hitting 60K p.a.  The other thing to consider is tax, I know that the aussies i contracted with in the past few years, have found themselves slightly better off overall in Dublin as opposed to oz, not much in it though.


----------



## phoenix_n

Glenbhoy said:
			
		

> I know that the aussies i contracted with in the past few years, have found themselves slightly better off overall in Dublin as opposed to oz, not much in it though.


 
But 10bucks gets you alot more in OZ than 10euros here. I used to go to a Thai with mates, bring our own beer and spend 15-20 bucks. 
I'm spending 40euros here on the equivalent...

Sorry back to the thread............


----------



## Glenbhoy

> But 10bucks gets you alot more in OZ than 10euros here. I used to go to a Thai with mates, bring our own beer and spend 15-20 bucks.
> I'm spending 40euros here on the equivalent...


Yeah, but they were taking everything into consideraton, bar house purchase prices - i don't know myself, just passing on what they said (in fairness, they had a nice loophole, since closed off I believe, wherein they were paid via the isle of man, virtually tax free).


----------



## whizzbang

Glenbhoy said:
			
		

> That's not bad, but wages seem to have taken a bit of leap here in the past 9 months, most people qualified in the past 2/3 years that I know seem to be hitting 60K p.a.



What industry do you know? I need to change job!


----------



## Glenbhoy

> What industry do you know? I need to change job!


You're not the only one!!  Just talking to macbri about current wages levels in his profession.


----------



## macbri

30 euros ph equates to 60k pa.

Wages in sydney are now starting to take off as well,apparently there is a shortage of accountants which is great news.

Generation Y are now pursuing 'sexy' industry-web design,it,marketing etc which is contributing to this shortfall(maybe same thing happening in Ireland)


----------



## Glenbhoy

> 30 euros ph equates to 60k pa.


Yeah, that's what the recruitment agents like to say - but it's a bit short. I've been on €33 an hour and still averaging just 52.5k p.a, govt agencies only allowing 32 odd chargeable hours per week. If you forgo holidays and work plenty of hours, it'll work out the same. That's not to say that the people i know in big 4 here don't have to work ridiculous hours, but they do get a substantial bonus on top of the basic 57K. I imagine though that re income multiples etc, there aren't many places worse than ireland, so i'm not arguing with your basic point macbri. Incidentally, would you reckon you will stay there or come home at some point?


----------



## macbri

I'm based it on 40 hour week and your right 52 week year but I find with contract positions that u earn a little bit more due to workload(having said that I have only contracted in private industry not government agency.

My girlfriend has just started a full time position earning 
$105k aud which works out at approx $60k-$65k.

Current financial accountants here can now earn $60AUD ph(market has really moved in last 3 months partly due to no backpackers)

Last year,I only worked 35 weeks earning about $65k AUD,main reason I could do this is cost of living is really cheap.

I couldn't go back to Ireland on full time basis,great country but its' just too expensive at the moment not just house prices.
Another reason is I like the lifestyle in sydney

Drink,transport,restaurants etc are double the price of sydney but wages are closely aligned to sydney-in fact it amazes me how people survive at home because everybody seems to be going on a couple of holidays a year


----------



## room305

macbri said:
			
		

> ... it amazes me how people survive at home because everybody seems to be going on a couple of holidays a year



Cheap credit backed by spiralling house price inflation.


----------



## whizzbang

room305 said:
			
		

> Cheap credit backed by spiralling house price inflation.


also "we're all rich now"


----------



## CelloPoint

macbri said:
			
		

> I'm based it on 40 hour week and your right 52 week year but I find with contract positions that u earn a little bit more due to workload(having said that I have only contracted in private industry not government agency.
> 
> My girlfriend has just started a full time position earning
> $105k aud which works out at approx $60k-$65k.
> 
> Current financial accountants here can now earn $60AUD ph(market has really moved in last 3 months partly due to no backpackers)
> 
> Last year,I only worked 35 weeks earning about $65k AUD,main reason I could do this is cost of living is really cheap.
> 
> I couldn't go back to Ireland on full time basis,great country but its' just too expensive at the moment not just house prices.
> Another reason is I like the lifestyle in sydney
> 
> Drink,transport,restaurants etc are double the price of sydney but wages are closely aligned to sydney-in fact it amazes me how people survive at home because everybody seems to be going on a couple of holidays a year



I spoke to a very wealthy self-made businessman, who advised me that you'd want to be earning twice as much working for yourself as you would in normal job to make it worth your while. I would have to agree with him on this especially when it comes to things like health insurance, sick leave, pension provision, BIKs, childcare costs, being able to get a mortgage, life assurance, stress levels, holidays, being able to go home at 5, etc.


----------



## macbri

Agree but my situation is slightly different.

I went out into the contract market for the last 5 years in Ireland & Australia to lower my stress levels,have flexibility and have a better quality of life.

Financially and carreer wise,its' not as rewarding as permanent position but I can make $60k-$70k AUD here and have 3-4 months off every year.
After tax,theres' not much difference

As well,each contract brings with it new challenges but theres' light at the end of the tunnel as usually last 4 only 3 months.

I found when in pernament emloyment, that I rarely finished at 5pm more like 6-7pm,stress levels were high due to deadlines/new expectations(in fact 1 guy went on sick leave because of this) and holidays restricted to only 4-5 weeks per year.

As well,office politics were part of the game which I have no interest in.

As for being a problem with housing finance,don't think its' a problem given that financial institutions are literally throwing money at people as evidenced by previous posts(personally I'm happy to rent at current prices in sydney).

Pension wise,I'm still contributing to Irish contributory pension as well as putting my own funds into a private fund same as health fund etc.

To summarise,if u are looking for carreer path and security permanent is the way to go.

However,these don't interest me and flexibility and lower stress is the key


----------



## phoenix_n

macbri said:
			
		

> Pension wise,I'm still contributing to Irish contributory pension as well as putting my own funds into a private fund same as health fund etc.
> 
> To summarise,if u are looking for carreer path and security permanent is the way to go.
> 
> However,these don't interest me and flexibility and lower stress is the key


 
Totally agree with you. I am toying with the idea of heading back to Oz and will go contracting again as it really is stress free. Office politics can be the most stressful part of being permanent.

Can I inquire how you are still contributing to your Irish pension ?


----------



## macbri

I worked in Ireland for over 10 years so have more than 520 prsi contributions.I make voluntary contributions once a year which entitles me to a full Irish contributory pension provided continue until I'm 65.Last year this cost me just over 350 euros.

The beauty of this is that Irish pension will go a lot further in Australia due to as u know difference in cost of living.

They also changed the superannuation rules here where proceeds from your super will be tax free so I'm topping that up as well.

Demand for contract accountants is sky high at the moment especially from a UK/Ireland background(this is what agency told me anyway??)
This will probably ease when backpacker market comes in during September/October.

Good website to go on is www.seek.com.au

Rates I quoted before is sydney market which in fairness is higher than rest of Australia..

Australia is a great place to migrate if u have funds to bring into the country like me as I sold my house in Ireland in 2002.
The only warning I would give u is that u will find relocating back to Ireland very expensive if u live here a few years.


----------



## phoenix_n

macbri said:
			
		

> I worked in Ireland for over 10 years so have more than 520 prsi contributions.I make voluntary contributions once a year which entitles me to a full Irish contributory pension provided continue until I'm 65.Last year this cost me just over 350 euros.
> 
> The beauty of this is that Irish pension will go a lot further in Australia due to as u know difference in cost of living.
> 
> Australia is a great place to migrate if u have funds to bring into the country like me as I sold my house in Ireland in 2002.
> The only warning I would give u is that u will find relocating back to Ireland very expensive if u live here a few years.


 
Thanks for the info. If i decide to head back i'll do the same. Receiving an Irish pension whilst in australia is a clever idea. 
I've dumped my property and have invested in a long term german property fund company. Buy low, sell high. Hoping proceeds in 7 years will mean that i wont have to work in oz.

Can you contribute to a personal pension if you are working in australia?

(p.s. heard howard is going up for election again. will he ever go?)


----------



## macbri

You can salary sacrifice into superannuation-maximum $50,000 AUD a year if u want to.

They change the rules where u can access your superannuation at 60 and the beauty of it is,its' all tax free.
As well at 60,the 1st $25k aud of other income is tax free which currently is 80% of Irish pension.

I'm looking at $50k -$60k tax free without having to put too much into my super.

Thats' primarily why I'm in the contract market.I'm going to live off my savings 4 the next 20 years and work 30-40 weeks a year.

I like working the contract market as its' good 4 social  reasons  plus theres' no harm having a little stress in your life now and then.

Its' funny what funds I brought into Australia would pay half of average house price in Dublin.

I  find it funny when people tell me 'rent is dead money'
We have a pool,sauna,jacuzi,numerous restaurants and 15 minute walk to city.

Maybe asset rich,high mortgage is the way to go 4 security but quality of life has to come into it somewhere?


----------



## phoenix_n

macbri said:
			
		

> I'm going to live off my savings 4 the next 20 years and work 30-40 weeks a year.


 
Do you mean that you are using up your cash as of now so as to avail of tax advantages of paying into a pension.

(so besides maxing out your australian pension and contributing to irish any other smart ideas ?)

That 25% tax free....i assume that is only in reference to pensions and not any other income.

I have maxed out my pension here as i have a little saying 

...whats worse than being poor, is been old and poor...


----------



## SteelBlue05

This discussion has gone way off topic!


----------



## phoenix_n

SteelBlue05 said:
			
		

> This discussion has gone way off topic!


 
Thought so aswell  Macbri i have pm'd you if you want to continue discussion off-line.


----------



## macbri

This is my last line on pensions-apologise for going off topic

All super income drawn down from age 60 onwards is tax free(basically not included in your  income calculation)

All other income is taxed although 1st $25k is tax free if your over 60(this will basically be my Irish pension hopefully).

Yes,I am going to draw down my savings over the next 20 years but will still work and put most of it into super.

To go back to topic,if I bought a house in Australia,I wouldn't be able to do this as funds would be tied up in deposit/paying back mortgage for 25 years.


----------



## phoenix_n

macbri said:
			
		

> Yes,I am going to draw down my savings over the next 20 years but will still work and put most of it into super.


 
Good plan however to use a cash deposit as 'income' negates any real advantage of having that lump reserve. Its akin, if you like, to eating your seeds rather than planting them.


----------



## macbri

OK and this is really my last word on this.

With my lump sum,50% is in cash which I'm getting 6.5% on,the remainder is in shares(mostly Australian who are paying a minimum 7.5% dividend yield) also have some non Australian shares which I hold 4 growth potential.This is currently giving me income of $30k pa.

I need $1000 aud a week to cover the luxeries in life so salary/cash make up the rest.

If shares go down,will put less in super-super is very tax efficient and I have saved enough and confident in my share strategy(been investing successfully for over 10 years).

I'm not worried about life after 60 based on what I said before.

I suppose have changed from generation X to Y.

We all have different strategies and mine is based on enjoying the luxeries of life whilst maintaining income stream in the future(don't want to be asset rich,cash poor-rather cash rich,asset poor)

If I bought a house as a ftb in Ireland/Australia would turn straight away into asset rich,cash poor


----------



## macbri

Just announced today a .25 % increase in interest rates by Australian Reserve bank,based on the average mortgage in Australia of $220 k Aud will increase repayments by $35 pm.

FTB in the last 2 years are finding it increasingly hard to survive in Australia as rates have gone up by over 1%-the same will happen in Ireland if rates rise accordingly


----------



## phoenix_n

Good strategy. Low risk and highly flexible. And in keeping with the 'no worries' lifestyle of oz. Am planning to follow similar strategy but am sacrificing for the short term quality of life in order to max my contributions in pensions here and avail of some sound investment schemes. 

Then i go back to snorkeling in gordons bay. 



			
				macbri said:
			
		

> OK and this is really my last word on this.
> 
> With my lump sum,50% is in cash.......
> If I bought a house as a ftb in Ireland/Australia would turn straight away into asset rich,cash poor


----------



## macbri

Reserve bank of Australia announced another rate rise to 6%
Average bank variable rates here now 7.8%.

If I buy current apartment we're renting,it would cost $450k,assuming a 50k desposit,this would leave us with a mortgage of $400k.

At 7.8% over 25 years,this would equate to $3200 pm which works out at $40k a year(equates to $65k gross salary)
-in other words buy the apartment but have no life afterwards.

Theres' talk in the papers here of repossessions,people not using their car,restaurants,hairdresser retail sales all down.

Interest rates have only increased by no more than 2% in the last 3 years maybe even a little less but it has a profound effect on the market especially on the ftb.

Interestingly as well,financial institutions are starting to offer 40/50 year mortgages and interest only mortgages,theres' even talk of banks taking some equity in the property -this is obviously geared towards 1st FTB market


----------



## phoenix_n

macbri said:
			
		

> Theres' talk in the papers here of repossessions,people not using their car,restaurants,hairdresser retail sales all down.


 
What is the general opinion (co-workers) of the forecasted slump (10% i read) in property. Do you know of home-owners (purchased in last 3 years) who are regretting their purchase.


----------



## macbri

Funnily enough had a discussion about house prices with workmates yesterday(all accountants). It was mixed with half currently owning and half renting

They all argued that house ownership was the way to go and rent is dead money-I was the only 1 with the opposite view.
1 guy even argued that it didn't matter what the mortgage was

I still can't understand their logic-I can easily make 7-10% with very little risk and pay 30% of mortgage as rent.

As well,I don't see the security/point of having a $m house when my mortgage is paid off ie 60/70(maybe I'm missing something?)


----------



## phoenix_n

macbri said:
			
		

> They all argued that house ownership was the way to go and rent is dead money-I was the only 1 with the opposite view.
> 1 guy even argued that it didn't matter what the mortgage was
> 
> I still can't understand their logic-I can easily make 7-10% with very little risk and pay 30% of mortgage as rent.


 
Not caring what the mortgage was was indeed correct in a market where prices were increasing each week. Prices in dublin for example at the beginnig of this year were increasing like something like 1,00euros a week. But in a depressed market his analysis is incorrect.
 


			
				macbri said:
			
		

> As well,I don't see the security/point of having a $m house when my mortgage is paid off ie 60/70(maybe I'm missing something?)


 
I think any prospective kids that you may have will disagree


----------



## macbri

Why would u want to leave a house 4 the kids?


----------



## room305

I'm sure the kids would be happier with the money, if you want to leave them something. They're probably only going to sell the house anyway so as a store of wealth Swiss bonds would be infinitely safer and much easier to convert to cash when required.


----------



## Mouldy

I’m an FTB. Along with my girlfriend I bought a house 3 months ago. My interest rate is fixed at 3.84% for the next 2 years, which is turning out to be a good deal. 
            Throughout the various tangents which this thread has taken, I’ve noticed that the topics basically go back to one issue – whether or not we should be buying property at all.
            Be you Bear or Bull, you may at some stage want to own your own home. Life usually gets in the way of sentiment. If home ownership is not for you, then fine. There is no law against renting and if you’ve allowed for the payment of rent during your retirement that that’s that. Good for you. 
But for those of us that do want to won our own home, its down to affordability based on the amount you can borrow vs. the amount you comfortably pay back. This has been done to death on other threads so I won’t go into it here.

As interest rates go up, loan offer amounts come down. Any drop in prices will be correlated by decreased loan amounts so the “affordability index” will remain static. 

The potential FTBS who are waiting for some kind of crash to somehow bail them out of the current bubble will be bitterly disappointed, not to mention find themselves in a situation where the economy is so fragile that banks will not look at anyone who hasn’t got a very stable income backup with savings. People seem to think that if there is a crash, then banks will be still firing money at FTBs. Nothing could be further form the truth.


----------



## SLAPPY

If this thing does blow up in our face, it will be the Banks fault for their loose lending policies.    This property spike never would have happened if banks required a 20% down payment on a house purchase.


----------



## whathome

Mouldy said:
			
		

> As interest rates go up, loan offer amounts come down. Any drop in prices will be correlated by decreased loan amounts so the “affordability index” will remain


 
You are correct, offer amounts will come down.  Don't forget though as prices come down, your deposit will buy a bigger chunk of house.  Another big factor to consider is that you would owe less money which has to be a good thing!  So an FTB who waits will end up with the same house and a smaller mortgage.

If I was you however, I would enjoy my home and don't worry about the market until it's time to move.


----------



## Superman

Mouldy:
Also of consideration is that it would be better to be refused a mortgage at a future stage in a bad economy due to lack of stability of employment, than getting a large mortgage now, going into negative equity and then being unable to make mortgage payments due to loss of employment.


----------



## tiger

Mouldy said:
			
		

> But for those of us that do want to *won* our own home,


Freudian slip?


----------



## room305

Mouldy said:
			
		

> The potential FTBS who are waiting for some kind of crash to somehow bail them out of the current bubble will be bitterly disappointed, not to mention find themselves in a situation where the economy is so fragile that banks will not look at anyone who hasn’t got a very stable income backup with savings. People seem to think that if there is a crash, then banks will be still firing money at FTBs. Nothing could be further form the truth.



Why would a potential FTB need to be _bailed_ out of the current bubble? They are the ones currently saving and will be in a far more secure position should they wish to own a home in the future. It is rare that a FTB purchases the home in which they wish to live for the foreseeable future, so if anyone should be worried it is the likes of you and me, stuck with a large mortgage and the prospect of prices coming down.


----------



## Mouldy

That’s certainly an interesting way of looking at it. We have bought our home with a plan of staying there for minimum 5 years and possibly forever. We really like the area, we deliberately sought out a property that had room for extending the house (large side entrance, long back garden etc.) so you’re point of FTBs rarely purchasing homes in which they want to remain would not apply to us.

The FTBs whom I regard as wanting to be “bailed out” are the FTBs who honestly believe, and are banking on, the certainty of a house price crash. I have met and know plenty of these. While everyone one is entitled to their opinion, FTBs who are banking on this event taking place are forgetting that such a correction would not occour as an isolated economic incident, especially in a country this size. The accompanying economic downturn would affect the whole country. 

Note that I am not counselling that everyone go buy a house right now, I am merely pointing out that it won’t be as easy as some FTBs seem to think to grab a bargain in a downturn. There will be plenty of monied investors also waiting to “buy when there is blood on the streets”. FTBs might not get a look in.

Finally if an FTB buys a house without any intention remain in it long, then it is pretty obvious that they are doing so not to own a house, but to make an investment. And in any market, investment will rise as well as fall. My observations in this Great financial debate are based on being an FTB who has bought a property with a view to staying there long term.


----------



## kellyiom

fwiw, I'm with mouldy on this one. The market can remain irrational longer than you can tolerate (or whatever the quote is..) and all that. And this 'event' has been seen through almost messianic eyes in some people I know and always fails to happen. When it does happen, it won't be exactly as expected and will carry a host of unpredicted side-effects which will surprise all. Being an FTB won't be any protection and I sincerely doubt any of these people will 'get a bargain' at least on a net basis, i.e you might buy a property for 20% less but you'll forego that in wage growth, bonuses etc.


----------



## whathome

kellyiom said:
			
		

> you might buy a property for 20% less but you'll forego that in wage growth, bonuses etc.


 
this doesn't make sense - do you think that buying now will result in you having higher wage growth and bigger bonuses?

In a downturn, everyone will suffer but it's better to suffer with a small mortgage than a big one. With interest rates rising and the market slowing, FTB's are wise to think twice before jumping in.


----------



## liteweight

Hi Mouldy,

Well put. I've been trying to get this point across but was unable to put it in a nutshell, as you have done. I already know some of these 'monied investors' waiting  for a crash so that they can jump in at a cheap rate and buy for the long term (pension). I truly believe FTB don't stand a chance against  them. They have the money, time, patience and are willing to take a  punt. Granted,  they won't take a punt on a house/apartment in the back of beyonds but they  certainly will in the  cities, particularly Dublin.


----------



## whathome

liteweight said:
			
		

> I already know some of these 'monied investors' waiting for a crash so that they can jump in at a cheap rate and buy for the long term (pension).


 
So if monied investors can take advantage of a crash, why can't FTB's?
Their deposit will go further and they will have a smaller mortgage!


----------



## whizzbang

whathome said:
			
		

> So if monied investors can take advantage of a crash, why can't FTB's?
> Their deposit will go further and they will have a smaller mortgage!



Banks will be hurting from bad debts so they won't be falling over themselves to give FTBs mortgages like they are today.


----------



## kellyiom

no, I was meaning that if the crash happened, although a buyer (any buyer) would get a cheaper price on the house, it would probably mean that something bad elsewhere happens in the economy (as someone else was alluding to) so in terms of their overall net worth, they'd be flat as probably wage growth etc would be constrained. perhaps as in Japan, investors/consumers would clam up and so on. Getting a cheaper house in Japan after the crash was little consolation. And anyway how does the FTB know when it's a good deal. 10%? 20%?. How do they know that after a 20% fall, it doesn't drop another 20%?  regarding monied investors, I just meant that they would have greater resources to withstand financial shocks to the system compared to FTBs.


----------



## room305

Mouldy said:
			
		

> The FTBs whom I regard as wanting to be “bailed out” are the FTBs who honestly believe, and are banking on, the certainty of a house price crash. I have met and know plenty of these. While everyone one is entitled to their opinion, FTBs who are banking on this event taking place are forgetting that such a correction would not occour as an isolated economic incident, especially in a country this size. The accompanying economic downturn would affect the whole country.




I have posted on a couple of occasions here that a housing crash will not provide an opportunity to "snap up" a cheap property. Housing markets are illiquid and as such any correction will be played out over a 5-10 year timeframe rather than anything more short-term. This kind of thinking is profundly bullish I think, despite proporting to be bearish. Essentially, they want prices to drop low enough for them to buy in and after that they would like prices to return to a never-ending upward trend.

However, I fail to see why this should encourage people to buy now. If, say, a FTB holds off and buys in three years time rather than now, in what way will they have lost out? Provided they have continued to save, they should be in a better position to buy than they were three years previously, crash or no crash.

If there is a housing crash (which I firmly believe there will be) with an accompanying recession, the best possible position to be in would be to be debt-free rather than stuck with a 35 year jumbo mortgage. Someone with no debts and significant savings will have a far more comfortable recession than someone who is worried about having their house repossessed.


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## whathome

whizzbang said:
			
		

> Banks will be hurting from bad debts so they won't be falling over themselves to give FTBs mortgages like they are today.


 
Agreed, but that includes "investors" so everybody will be affected.  Without the speculative element in the market, FTB's will have a much better chance even with lower mortgage approval and competition from 'monied investors'.


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## whathome

kellyiom said:
			
		

> Getting a cheaper house in Japan after the crash was little consolation


 
...but it was much better than getting an overpriced house before the crash.

Edit : To get this thread back on topic, I think FTB's who have not purchased yet should welcome rising interest rates as it will remove the speculative element from the market. It will also allow them to make more interest on their savings for a deposit.  FTB's that have already purchased and have stress tested their repayments should have nothing to worry about.


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## whizzbang

whathome said:
			
		

> Agreed, but that includes "investors" so everybody will be affected.  Without the speculative element in the market, FTB's will have a much better chance even with lower mortgage approval and competition from 'monied investors'.



True in so far that any savings they have will go further.

Essentially if there is a crash, cash will be king for years afterwards.


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## liteweight

whathome said:
			
		

> So if monied investors can take advantage of a crash, why can't FTB's?
> Their deposit will go further and they will have a smaller mortgage!



'Monied investors' can always offer slightly more if the need arises and they think its worth it. FTB usually have a finite amount to play with. "Monied investors' have readily accessible cash/draw down cash quickly, which is always an bonus for the vendor. FTB have to wait on mortgage.

I understand what you're saying but 'monied investors' always have the upper hand. It might not be right, but it is usually the way. Also, a FTB who holds off better make sure that they can save at a rate higher than house increases, otherwise they'll be left high and dry.

We lived in London during the crash. Thankfully we were on contract there and were renting. We had friends who lost everything. In the following months, years, it was investors who bought up negative equity properties, not FTBs.

I suppose I think that FTBs should make up their mind, what do they want, a home, or an investment. If it's the former, and you can afford it, then dive in. If it's the latter or you want the best of both worlds, tread carefully, unless you're in it for the long term.


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## whathome

liteweight said:
			
		

> We lived in London during the crash. Thankfully we were on contract there and were renting. We had friends who lost everything. In the following months, years, it was investors who bought up negative equity properties, not FTBs


 
Fair point - FTB's were intimidated by the price drops so they probably didn't get in at the very bottom.  By waiting however they still paid less and had smaller mortgages.


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## thewatcher

liteweight said:
			
		

> 'Monied investors' can always offer slightly more if the need arises and they think its worth it. FTB usually have a finite amount to play with. "Monied investors' have readily accessible cash/draw down cash quickly, which is always an bonus for the vendor. FTB have to wait on mortgage.
> 
> I understand what you're saying but 'monied investors' always have the upper hand. It might not be right, but it is usually the way. Also, a FTB who holds off better make sure that they can save at a rate higher than house increases, otherwise they'll be left high and dry.
> 
> We lived in London during the crash. Thankfully we were on contract there and were renting. We had friends who lost everything. In the following months, years, it was investors who bought up negative equity properties, not FTBs.
> 
> I suppose I think that FTBs should make up their mind, what do they want, a home, or an investment. If it's the former, and you can afford it, then dive in. If it's the latter or you want the best of both worlds, tread carefully, unless you're in it for the long term.


 
When this all bottoms out and if there really is 275,000 empty properties sitting out there then the only people who will be buying property are the ones who are going to live in them.Real investors(and i'm not talking about the speculators who think their investors) are not going to touch residential property because the rental market is going to go into freefall.
It will take years for the market to recover,there will be far better investment opportunities than irish residential property for real investors !


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## liteweight

thewatcher said:
			
		

> When this all bottoms out and if there really is 275,000 empty properties sitting out there then the only people who will be buying property are the ones who are going to live in them.Real investors(and i'm not talking about the speculators who think their investors) are not going to touch residential property because the rental market is going to go into freefall.
> It will take years for the market to recover,there will be far better investment opportunities than irish residential property for real investors !




It doesn't matter whether you, I, the fly on the wall or the dog in the corner think they are 'real' investors or not, they will still be out there.

As for the 275,000 empty properties; presumably figures from the census, I don't know how reliable this is as a statistical analysis. It's probably the best we have though. Do you think this figure is high in relation to our population? How many empty apartment blocks were sold but not yet occupied for various reasons? An example of this  is in Sandymount, where  built apartments remained empty. I was interested in these (easily 100)  and so rang  to enquire. The answer I  got was that he was  keeping them to rent at a later date. He has since advertised them  for rent.  The  point is that a  figure  not based on correct statistical analysis  is just a figure. The census is concerned with population not occupancy and so their figures aren't an accurate measure of what's occupied or not. 

I would have thought that the basic plan for any 'real' investor is to buy low, sell high.


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## thewatcher

liteweight said:
			
		

> It doesn't matter whether you, I, the fly on the wall or the dog in the corner think they are 'real' investors or not, they will still be out there.


 
Anyone with a bit of equity in their house and a reasonable wage can walk into a bank today and get an investment mortgage,they might think their investors but really their speculators there is no yield out there any more.
People on this thread saying that FTB's are wrong to think they will just be able to snap up a house when the bust comes,are correct.Lending will severly contract when the bust comes,but a bank will be far more likely to lend to someone with a cash deposit who plans to live there than a speculator,i would go as far to say that residential investment mortgages will be virtually non existent for the first few years after a bust.



			
				liteweight said:
			
		

> As for the 275,000 empty properties; presumably figures from the census, I don't know how reliable this is as a statistical analysis. It's probably the best we have though. Do you think this figure is high in relation to our population? How many empty apartment blocks were sold but not yet occupied for various reasons? An example of this is in Sandymount, where built apartments remained empty. I was interested in these (easily 100) and so rang to enquire. The answer I got was that he was keeping them to rent at a later date. He has since advertised them for rent. The point is that a figure not based on correct statistical analysis is just a figure. The census is concerned with population not occupancy and so their figures aren't an accurate measure of what's occupied or not.


 
I actually find this figure incredible to believe,i mean that's *3 years* worth of building,then on the other hand a friend of mine bought a house in an estate not so long ago where the builder built a load of 4 and 5 beds in a horse shoe shape sold them off and then proceeded to build a load of terrace houses in the centre and kept every one of them.Other people here fight the corner for the census figures,so i'm not going to bother.




			
				liteweight said:
			
		

> I would have thought that the basic plan for any 'real' investor is to buy low, sell high.


 
Surely it's yield when it comes to property,something that is non existent in the irish market at present and as for capital appreciation after a bust this will be non-existent for a number of years.


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## whathome

I heard some guest (didn't catch his name) on Newstalk this evening calling for stamp duty to be abolished for FTB's to ease the burden of higher rates.  I think this is a good idea - the ever increasing limits (targets) were a joke.


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## jammacjam

whathome said:
			
		

> I heard some guest (didn't catch his name) on Newstalk this evening calling for stamp duty to be abolished for FTB's to ease the burden of higher rates. I think this is a good idea - the ever increasing limits (targets) were a joke.


 
It's not a good idea as all that will happen is that house prices will just jump again, the last time they changed the limits it just increased to this limit. The stamp duty that would have gone to the government will now go to the seller.


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## bearishbull

thewatcher said:
			
		

> Surely it's yield when it comes to property,something that is non existent in the irish market at present and as for capital appreciation after a bust this will be non-existent for a number of years.


It should be yield, Donald Trump, one of the richest and most succesfull property investors says you should only buy residential property investments if rental yield is very good, I've heard many other property investors (not specualtors) say the same. Back in 80's and early and even late 90's many friends of my father who are now in their late 50's bought properties in Dublin(unfortunately he didnt!) as the rental yield covered the mortgage and it paid for itself. Now its rampant speculation and FTB's suffer because of it and will continue to suffer. Rental yields of less than 3% in most of dublin indicates a disconnect between price and real value. Rents must double or house prices halve to make investment look slightly attractive in Dublin on a yield basis


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## whathome

jammacjam said:
			
		

> the last time they changed the limits it just increased to this limit.


 
If they abolish stamp duty for FTB's - there will be no target limits, that has to be a good thing. FTB's need all the help they can get to compete with speculators. Rising interest rates and a weakening market should also help to remove speculators.


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## liteweight

thewatcher said:
			
		

> Surely it yield...



Yes it is yield but there are also a lot of other factors to be taken into account, such as tax and inheritance. Most of the investors I know, who were fortunate enough to be able to buy in the 70s, sold in 2001/2 when rents fell. They should have waited a little longer but that's the way it is, no one knows for sure, so you take a judgement.

Horrified by what happened to your friend (terraced houses built later..). Any buyer should look for plans of the whole site. This went on wholescale in the 70s and 80s with builders swearing this will always be a green space!

The stamp duty situation in Ireland is a disgrace IMO. Ok for investors, they've made a decision to go into that business and I can only assume they've looked into their situation properly. But for people trying to buy a home, particularly for the first time it's extortionate. I don't know what the solution is. The Gov. reduces it and builders up prices.  Maybe builders should be given some kind of tax incentive to sell to FTB (as if they're not rich enough). Seeing as how the Gov. is making an absolute fortune in stamp duty, I doubt it'll be abolished but perhaps they should half the rates for a family home.


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## macbri

Agree that yield is the number 1 criteria for buying an investment property(who am I to argue with Donald Trump)

Thats' what makes the Irish property situation so scary-On daft website yields are averaging 2-3% with a few places like Limerick only 1.8%
Investors who bought property in the last couple of years are seeing negative returns especially in an increasing interest rate environment

Minimum yield on any property should be 5% which would indicate either rents need to double/treble or house prices will half in the future.

If your prospective ftb-rent 4 2/3 years and save majority of savings on mortgage as deposit.Prices will come down in the future,theres' no doubt about that.

The other scary thing is that theres' 275000 empty properties(15% of current housing stock).This is a massive figure coupled with the fact that projected housing starts in 2006 is 100k


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## Raskolnikov

macbri said:


> Thats' what makes the Irish property situation so scary-On daft website yields are averaging 2-3% with a few places like Limerick only 1.8%


Scaremongering nonsense, the rental yield in Limerick was over 4% according to the daft report.

[broken link removed]


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## macbri

Afraid not mate just log in www.daft.ie 

Go into q2 2006 report on left handside of website-buy to let Limerick is 2.5%,got it mixed up with south east leinster which is a lofty 1.7%.

Facts don't lie


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