Hypothetical question around AH & non AH in same housing estate

R

Red

Registered User
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A thought that has occurred to me.

Given that some developers are unable to sell existing units in new housing estates and therefore are now making these house available in greater numbers to county councils under the affordable housing scheme.......

I know it is a hypothetical question and only is relevant if & when X & Y sell their houses and have buyers willing to buy them......

X has bought a house in the estate for €400k with 92% mortgage etc (€368,000) prior to current property situation.
Y has now bought same house in the estate under AH for €300k with 92% mortgage. (€276,000)

A few years on, both X & Y are hoping to sell up & move on.

Due to the size of his remaining mortgage Y can afford to put his house on the market at a price much lower than X. X will now have to sell his house at a similiar price to Y if he wants to move on.

Due to his outstanding mortgage X cannot afford to sell his house at "Y's" selling price and cannot afford to move.

Y sells house and moves on.

Why would anyone now buy a new house when there is still such huge price disparity with AH ? X would have been better buying the house as AH
 
Don't forget that Y will have a clawback if they sell within 20 years which will lessen the amount they will receive.

In your example Y got a 25% reduction in price of house so in Dublin City they would lose 25 % of the new sales price

[broken link removed]
 
FKH, does clawback still apply if Y sells house for €300,000 or less than that ?

I thought clawback was only applied if house values were rising?
 
Take away the AH issue, and buyers X & Y still have the same issues. It's a question of timing, not AH.
 
There are fundamental flaws in Red's scenario:
1. Every seller seeks to maximise selling price.
2. The price is effectively determined by buyers.

The belief that property prices are set by sellers is surprisingly persistent.
 
Complainer, you are right in that it is a question is also around timing.

X is in a worse off position than Y, as house prices have dropped and now he can only sell at the price Y sells his house for

Given now that we have a scenario now falling house prices do we really need to have AH in the marketplace ?
 
I'd agree with your synopsis Red.

Under AH the Owner only cares about the selling price being above their mortgage - even 1 Euro above is sufficient for them to walk away with no liabilities (bar transaction costs).

Yes every seller would ideally seak to maximise their selling price, however in the current environment anyone who bought a home since 2006 (5,4?) is probably in negative equity. The owner of the AH home has the advantage of not really caring until such time as the price falls below that of their mortgage. They therefore have freedom of movement within the market, exactly as Red describes, which ordinary buyers in the same development do not.
 
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