Why do people think 35-40 year mortgages are not realistic or sustainable? They're standard practice in Japan for example.
Certainly a lot of people in Ireland will shorten their terms and clear mortgages in a far shorter time than they were set up with.
We are in danger of talking ourselves into a recession and property crash. It happened in Thatcher's Britain but it does not have to happen here. This time it CAN be different. Properties are not overvalued by 50%. As we reach equilibrium, which is happening right now, price growth will slow in Dublin's affluent areas, stagnate in its less affluent areas and prices will fall outside Dublin where property is a touch overvalued.
Only my opinion!
35-40 year mortgages are generally sold on the basis that no one will actually have to go the whole way through them; that they will re-mortgage at some point within a couple of years on "better" terms. And that's fine in a rising market, it's fine in a falling interest rate market, it's fine in a rising-wage market.
But if you're taking out a 35 year mortgage, you really should also look at a worse case scenario of "what if we can't remortgage?" There have been more than a couple of people looking for advice falling "Bank says we can't remortgage/release equity..." which suggests that you can't actually take it for granted.
Not only that, you have to be relatively young taking out out a 35-40 year mortgage. That means locking down your life at a relatively young age which is fine if you know you're not going to want to travel or doing anything. Interestingly enough I emigrated when I was 21 and came back when I was 27 at which time I was ready to settle down, and most of my friends were bemoaning the fact that they were slightly locked down, couldn't really make any free decisions because of boyfriends/pension considerations/career prospect considerations.
The fact that 35-40 year mortgages may be standard somewhere else (and choosing a property imploded market like Japan is not a good example) does not make them, per se, a good thing. Personally speaking I think it should be feasible to pay back a mortgage on an average salary in 25 years - and we wouldn't have a bubble if in fact, mortgage lending criteria hadn't been eroded in two key ways - salary multiples and mortgage terms. Mostly, people who are going 30-35 years are right on the limit of their affordability. We did this at a stage when interest rates were historically low, and currently they are travelling up. This makes the position of people on the limit of their affordability very...precarious.
You seem to give me the impression that a property crash is undesirable. The problem - as I see it - is that an irrationally exuberant property market is equally undesirable and a crash is an undivorceable partner of that. This is really a statement of the obvious but if property values hadn't skyrocketed the way the did over the past 5 years, then we wouldn't be looking at any sort of correction. The property market, as it has behaved over recent years has highlighted planning issues, exacerbated traffic problems and in general, is an example of a lack of joined up thinking in terms of how we want to plan the country going forward. Rocketing growth is not desirable either but I don't see the beneficiaries of that complaining too much, do you
I'm interested to know why you have reached the opinion you did, namely that:
1) property is not overvalued by 50%. Every single person who claims it is backs up their view with some supporting argument. I'd like to see yours.
2) why can it be different here?
3) There are examples of prices falling across the more salubrious parts of Dublin which you reckon will see slowing growth (but not falls, from what I can understand). It is falling in less salubrious parts of Dublin. It's also falling outside Dublin.
I'm generally mistrustful of those who try to localise falls and rises in a slowing market. The truth is the rising tide raised a lot of boats and some of those boats got raised a lot further. I'm of the opinion that the higher a property went - proportionally - the greater its scope for falling. There seems to be this mantra that rich parts of Dublin will somehow escape the worst of a housing correction.
I assume, normally, that rich people don't get rich by being stupid. I'd be willing to bet that most of them will be happy that they don't have to sell because if properties are not being sold, then you can't assess their market value.