Sell now and buy again when rates go up?

[rainyday]

Re: response to D7

It is not correct to say that: ‘the same person can still only afford to pay 1100 pm’. They can afford to increase their repayment if their salary increases at the same or greater rate than the rate of increase in mortgage repayments.

Don't forget that FTB's will typically be thinking about wedding and/or kids within a few years of getting their house, so there are lots and lots of other things that will soak up their salary increases.

 

[funkdoggz]

Prospects for FTBs

I guess I am in the same boat as a lot of hopeful FTB's out there - in my late 20's, making a good bit over the average industrial wage, no chance of ever owning a house the way things stand! Even if I could get a mortgage, I just wouldn't pay x8 times my salary for a 2-bed apartment, I couldn't justify it. I actually have a good deal saved in bonds and stocks (maybe 20% of the price of a nice starter home) but by myself could never get a mortage for the other 80%!
I have decided that unless there is a price crash - not a slowdown or 'soft landing', but a crash of 20% or more - I am going to emigrate in a year or two with 50% of the current asking price of a 2-bed apartment in Canada in my back pocket. I know a few more in my situation - even couples who could scrape together the price of a home, planning to leave unless there is a crash. We see our friends with houses not being able to do ANYTHING, go on holidays, save for the future, whatever, because of their massive mortgages. Not a way to live, is it? It is fairly galling to see other countries in the Western world with starter home prices x3 or x4 times average salaries, then look at the situation here in Ireland!

 

[N0elC]

Re: Prospects for FTBs

It is fairly galling to see other countries in the Western world with starter home prices x3 or x4 times average salaries, then look at the situation here in Ireland!

Is this really true ? You mention Canada as an example. I've got a good friend working in Vancouver who tells me that the mortgage multiples out there are very high too.

Don't forget that, in most Western countries, interest rates, and income tax levels are much lower than they were in the eighties, for example, so there is not really a like for like comparison.

 

[funkdoggz]

Prospects

Well, Vancouver is the most desirable place in Canada to live, with house prices to match! 2-bed downtown apartments run around $220,000 Canadian. Not sure about average salaries, but I would expect about $50k based in salaries that my friends over there are pulling down. In 2 years (when I would move) I would hope to have between $90k-$100k Canadian in liquid assets I could put towards a house there.
I know I could never buy anything in Dublin without getting someone else involved in the purchase, not the way things are right now. Since interest rates will remain historically low for the near future, I don't expect prices to come down either. I also strongly feel that stocks will remain generally flat for another few years, they are still historically over-priced and history does not like being mocked like that! So for a nation without a tradition of investment in the stock market and an irrational love of property, I think Irish house prices will rise in the near future as people with money to invest with put it into property.
Though the fact that fear is now a large element in FTBs minds when they buy, makes me think that there could be a bubble in place - I beleive fear of being left out while others are making fortunes/fear of being priced out of the market for ever is one of the final stages of a market bubble. Please correct me if wrong.

 

[adrian]

Prospects

"I beleive fear of being left out while others are making fortunes/fear of being priced out of the market for ever is one of the final stages of a market bubble."

You might be right... There is a double fear of missing the boat and buying in an overpriced market. Personally I've just had a property purchase fall through and have decided not to look (well maybe with one eye!) anymore. I can rent a new 3 bed semi in Galway for €750 and am happy with that, and the flexibility that goes with it. Also, I don't think a lot of house buyers understand the link between interest rates and inflation, i.e. the erosion of real value of mortgage debt over time with inflation.

If I miss the boat here by not buying now, I'm with you funkdoggs, I'm taking the boat out of here! BTW what's a typical square footage of one of those apartments in Vancouver, any web links?