should i buy now

[Wiggles]

RE: "I think people are now just full of doom and gloom about the property market and are mad at themselves for not seeing it coming!!! We all have a part to play in getting out of this mess and the best way is to remain positve and continue spending the pennies or cents!! House prices will stop dropping once the banks start lending and that will come around quicker than you think. "


Having seen the graph on this page I would beg to disagree. I think prices still have a long way to go before they reach their natural equilibrium.
http://www.thepropertypin.com/viewtopic.php?f=4&t=18457&start=120

Could you explain that graph? It makes no sense to me. It shows the average price of a house in 1980 was £125k.

I understand that people see house prices falling, but the idea that sellers have to drop their prices doesn't really make sense. I'd imagine most will just take their house off the market. You have to live somewhere!

In the past someone would buy a property to get on the ladder. After a few years most people's job position would improve and they have some equity for a deposit to trade up. Now those people are in negative equity and can't trade up so those house's further up the ladder are now not selling.

So is the market not in a complete jam? People don't want apartments because they can't sell them on to trade up and people selling houses that families would trade up to just take their house off the market because the prices has plummted and they reckon that sooner or later it will pick up again.

 

[charliemacck]

Could you explain that graph? It makes no sense to me. It shows the average price of a house in 1980 was £125k.

The prices are adjusted for inflation - hence the title.

I understand that people see house prices falling, but the idea that sellers have to drop their prices doesn't really make sense. I'd imagine most will just take their house off the market. You have to live somewhere!

Unless the seller is forced to sell as their mortgage is too high. Or unless it's a property investment they're selling, as the rent doesn't cover the mortgage and the price isn't appreciating. In that case, if they can't sell, they're putting it on the rental market, which inflates _that_ market and drops rent even more.

 

[MrMan]

I could spend 40k on my house in the morning to have it more like what I would like. new kitchen and ensuite, update the flooring etc.
Fit out can cost what you want. Typical budget for a showhouse is well over 40k.

I promise you that the typical budget for a showhouse is under 40k. You were talking about a new house, so why would you rip out the kitchen and ensuite? Of course you can make the figures stack up by adding jobs but that wasn't what you originally spoke about.

 

[MrMan]

Keep renting. If the government fully removes the offset of interest against rent in calculating taxable income (it's already gone 25% of the way as of yesterday), then there will be a rush of investors getting out of property over the next couple of years further driving down prices.

We are fast approaching a situation where pre tax rental yields will need to rise to 10%, meaning house prices should fall to 10 times their annual rent

There may not be quite the rush you expect if the properties are in negative equity. It is too simplistic to suggest that one event will result in house prices collapsing to 10 times their annual rent.

 

[Wiggles]

The prices are adjusted for inflation - hence the title.

Great explanation!

Any chance that you could let me know how the graph was generated? Who created it and maybe a link to the original report from a website other than an internet forum?

 

[DerKaiser]

There may not be quite the rush you expect if the properties are in negative equity. It is too simplistic to suggest that one event will result in house prices collapsing to 10 times their annual rent.

After expenses you could expect maybe €12k rent per annum on a typical dublin apartment, this could justify a €250k valuation if none of it was taxable. If it's all taxable at a marginal rate of 50% (as will be the case if the interest offset is removed) then €125k would be the appropriate valuation for an investor.

If the government continue down this path they will ultimately remove investors from the market further reducing demand and hence prices.

 

[Brendan Burgess]

Folks

This thread fully justifies the ban on house price discussion.

All heat, no light.

The offer still stands, if someone wants to do a balanced view of the direction of property prices, send it to me and if it's balanced we will put it up on Askaboutmoney.

Other than that, the ban still stands. Continue your discussion on the Property Pin.

Brendan