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

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....
 
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.
...
Click to expand...

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.
 
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....
Click to expand...

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.
 
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.
Click to expand...
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.
 
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...:(
Click to expand...
 
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.
Click to expand...
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.
 
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.
 
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.
 
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
Click to expand...
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 ...
 
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)
 
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)
Click to expand...
 
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
 
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.
Click to expand...
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.
 
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.
Click to expand...

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............:)
 
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...
Click to expand...
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).
 
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.
Click to expand...

What industry do you know? I need to change job!
 
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)
 
30 euros ph equates to 60k pa.
Click to expand...
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?
 
You must log in or register to reply here.
Back
Top