Signed Contract on New House but now price has dropped

[Afuera]

It is a clear indisputable fact that the OP would be financially better off subject to my warnings.

It's neither clear nor indisputable. Making NO other assumptions, you have presented a situation where the buyer will need to obtain a 94.5% LTV mortage due to the loss of the equity in their first property. If they had not lost equity in that property they would only need to request a 90% LTV mortage to trade up. One of these will clearly be easier to obtain than the other. That is an undisputable fact.
Besides that, your results are totally invalid if you take a more typical mortgage term of 30 years or more (I'm not going to debate whether those long terms are a good or bad thing; they are the reality in Ireland at the moment).

Cheaper houses mean you pay less if you are buying.

The point is moot if you are unable to get a mortgage in the first place. The chance of hitting negative equity or requiring a high LTV mortgage to trade up increases greatly as the price of your starter house goes down.

I don't think you or I agree on anything. The reality of the Irish market is that it is seriously perverted and balanced on a mountain of debt. It serves noones interest to pretend that the extreme gearing as practiced in recent years is nothing more than abnormal and courting disaster.

You're going way off topic here. Did I say anything to contradict this?

 

[xb_deai]

A 25 year term would be considered the industry standard eveywhere in the world (except Ireland). Not in Japan where there are 100 year mortages also in Switzerland and these are only countries where I know people who have purchased with such mortages so Im sure there are many similar examples in the world.

 

[Afuera]

Not in Japan where there are 100 year mortages also in Switzerland and these are only countries where I know people who have purchased with such mortages so Im sure there are many similar examples in the world.

You're absolutely right xb_deai. I know that 40 year mortgages are common in Spain and it's even possible to get a 50 year one, if you're young enough. I'm guessing that Camry 'chose' the 25 year term to be the industry standard as they thought it would back up the argument they were making.

 

[Bronte]

Some of us think that 25 years is a very long mortgage term.

 

[ang1170]

that's pretty inconsistent logic. In the same way the OP is €10k worse off by not delaying his purchase, the person in your example is €100k worse off than last year for not selling.

The alternative arguement is that at the point of purchase the OP paid €310k to live in a house. The OPs position has not changed in that regard. When you're talking about buying a house to live in rather than as a tradeable asset then you should not worry about any gains/losses on paper. Selling may not occur for years and who knows what way prices will go in the future

I think you're missing the point.

Some figures are entirely notional, as there's no transaction. Your house may be "worth" €100k less than it was a year ago, but it's totally immaterial, as no transaction happened, no cash changed hands. I've no real way or knowing whether or not I'd have been better or worse off for having traded last year at a higher sell price (and buy price, don't forget) than leaving it till this year.

On the other hand, if I buy a place today for €310k and then find out I could have bought it for €300k, I am worse off, regardless of what happens in the future.

What I really can't understand are those who get upset over the notional figures ("my house has dropped €100k in twelve months") and those who seem to think the amount they actually pay for a house is somehow immaterial (it's not: it's real, hard earned or interest bearing cash).

 

[Marie]

Is the house you paid deposit on in the same development as the houses now selling for a lower price? My understanding is that if the developer drops the price having sold some houses at a higher price the first buyers are entitled to a refund of the difference. ask the agent who sold the houses or a solicitor.

As an earlier poster pointed out, this 'magical thinking' completely misses the nature of 'markets'.

If someone buys a kilo of apples in Moore Street at 10.00am on Saturday for 5 euro and days later discovers that at 6.00pm the trader offered 2 kilos for the same price in an effort to rid himself of produce which would deteriorate in his warehouse and lose him money is the early shopper entitled to demand a 'free' kilo? Of course not!

It isn't called 'the housing market' by accident. As a number of posters have already said, rising or falling property-prices are irrelevant unless you are a speculator or unless speculation is part of the reason for purchasing. If individuals, couples or families need/want a house to live in ('a home') then they look at what's available, choose one, get financing for it and get on with it. Comparison with other purchases makes no sense whatever.

 

[ang1170]

Comparison with other purchases makes no sense whatever.

Now you really have me baffled. Why is buying a house any different from buying anything else?

You are of course correct about the irrelevance of what the price was six months ago (or at 6:00 p.m. as opposed to 10:00 a.m in your Moore St. example). It matters a huge amount though the price of other houses/apples when you purchase (i.e. the competition) and whether or not you can negotiate the price down at all.

To use the example I gave, am I upset my house has lost €100k in value in the last year? Don't think so. Even I sold last year, I'd have probably had to pay at least that extra in any new purchase. If on the other hand I purchased a new house at €310,000 when, at the same time, identical houses are being sold for €300,000, would I be upset? Not sure about you, but I would be. It would be a different matter entirely if the purchase was made some time ago at the higher price, but that's not the case.

 

[Trish2006]

The purchase was made some time ago, at the time the contract was signed. The fact that they haven't received the product yet is irrelevant. It's like booking a flight to the states, you pay €800 in May to go in Oct and then in June they have a sale and you could have got it for €500. It's hard luck, pure and simple, you can't get on to the airline and say you want a refund of the difference. As one other poster said, can you imagine your reaction if the market went the other way and the builder reckoned he was entitled to another €20k cos the local price went up...

 

[ang1170]

OK, my mistake. Not very pleasant, though.

 

[Meathman99]

If you are looking to get a reduction or some thing back the developer will most likely insist that you close the deal immediately. Are you (Is the developer) in a position to do this?