Potential window  in the market for first timers to purchase?

Potential window in the market for first timers to purchase?

Potential window  in the market for first timers to purchase?Affordability continues to improve for first time buyers in the residential market the latest edition of the EBS/DKM Affordability Index shows. By the end of this year mortgage repayments, as a percentage of disposable income, will have fallen by 43%.

Only 13% of a first time buyer couples’ disposable income is required to … meet their mortgage repayments (16% in Dublin). This is down from 26.4% (32.5%) and the end of 2006.

In addition developers in Ireland are now reporting that prices in the new homes sector are at, or are at least close to the bottom and many units are being sold below cost.

With low prices, a surplus of available stock, low interest rates and the best affordability for years, is there now a potential window opening up in the market for first timers to consider purchasing in?

Or is there simply too much uncertainty around for people to commit just yet?

Where does the balance between uncertainty and opportunity really lie?

With economic recovery now establishing itself in the euro zone we can be sure that the ECB will eventually have to consider raising interest rates and potentially sooner than many would think, and almost certainly sooner than is likely to suit the domestic Irish economy, and that will lead to the window of opportunity starting to close.

There are 7 comments for this article
  1. Mr.B at 4:36 pm

    I don’t think anyone should buy a house right now, not with interest rates about to rise, too risky

  2. donny at 3:51 pm

    A) Ireland’s credit rating was downgraded from AA+ to AA- last week
    B) The €4billion cuts to be achieved from Public sector paybills/reverse benchmarking is only the start. There is a further €5billion scheduled for 2011 and a further €4billion scheduled for 2012
    C) The lastest OECD report is suggesting that:
    (i) Mortgage interest tax relief should be reduced, beginning with future borrowers, while a property tax should be used to fund local services, the OECD said, echoing recent recommendations of the Commission on Taxation. This is a double whammy for anyone trying to buy a house. It looks like it will be damn near impossible to buy a house in the next 5 years.
    (ii) The Government should consider introducing full individualisation in the tax system, which would entail the abolition of higher standard rate bands for single-income married couples, in order to encourage the participation of women in the labour force.
    (iii) On tax, the OECD said personal allowances should be cut in order to widen the tax base.Tax reliefs should be limited to the standard rate of tax and capped, while some reliefs should be eliminated.

    [b]Taking all of these forthcoming adjustments into account, houses prices are going to drop significantly more than the 40% originally predicted from 2007. Price of Land will continue to decrease & Cost to build will continue to fall[/b]

    Properly Explosion Vs. Property Implosion
    A) Real Wage growth & tax reduction until 2008-> Vs. Real Wage contraction & tax levies/increases until 2012 onward
    B) Increased demand/Immigration -> Vs. Reduced Demand/Emigration
    C) Greed/Equity/High inflation/zero deflation -> Vs. Fear/Debt/growing deflation
    D) Historically Low Interest Rates (on a booming economy) -> Vs. Increasing Interest Rates (on a devastated economy)
    E) Grants/Tax Relief -> Vs. No Grants/Tax Relief & New Property Taxes/Water Charges etc.
    F) Gov Incentives for married couples etc. Vs. Removal of incentives to encourage women to enter workforce

    All circumstances seem to have transitioned from the optimal scenario for growth pre-2007 Vs. The optimal scenario for complete meltdown from 2008 to 2016 at least.

    We are not yet seeing this reflected in national property prices (even by half).

    Be sensible folks. If you sat out the Boom, then you can sit out the crash for another while. I personally will not be buying before mid 2011 at the earliest.
    We should see an immediate 5 to 10% drop after the December 2009 alone.

  3. Aodhanc at 12:27 pm

    ECB will start to raise interest rates in 6 – 9 months time, this will further drive down house prices here in Ireland.
    Apartments, in particular, are going to be hardest hit.
    The construction and layout of many of them is so poor, they will become almost worthless.
    Nobody wants to live in a 50 square metre piece of concrete jungle, with noisy neighbours or traffic on either side.
    That’s the reality of apartment living in Dublin.

  4. Kieran at 9:01 pm

    It’s probably not a bad time to buy if you want a new 2 bed apartment in the city or house out in commuterville if that’s what you are really looking for. It should not be viewed as an investment. If it suits your particular needs, fine, but how long will it suit your needs? Second hand houses in the bracket for fist time buyers are still inflated and unrealistic. House prices in the main, outside of new builds in places most people don’t really ewant to live, are still too high. Ireland as a country has thrived in the last 10 years but it is now uncompetitive and I believe it will remain uncompetitive and recovery of our economy will be a long long process. I am waiting to buy a second hand house in a decent area in Dublin, I’ll probably continue to wait. I cannot see house prices going anywhere but down or flattenning at best for the next year at least. Instead of “get on the ladder asap” it is now “don’t board a sinking ship”. Be smart, wait, unless you find a house that is perfect for your needs and, to the best of your ability to predict the future, your needs for the next 10 years. Anyway, I’m risk averse so I would say that.

  5. Steve at 3:35 pm

    Now that prices have fallen so significantly I would say that now would be a good time to consider buying as a first time buyer.The Irish Home Builders Association made the comment last week that they would stop putting supply onto the market as prices had fallen so much that it barely covered their costs of building the property in the first place.Supply will start shrinking pretty soon thereby pushing up property prices.Dr Dan McLaughlin,chief economist at Bank Of Ireland,also used his affordability index to gauge how high property prices could go.As the affordabilty index peaked so did the property values.At 13% of disposable income,there is not much lower it can go.Added to the fact that Minister Brian Lenihan is determined to get to grips with the national debt,this can only foster confidence in our economy and attract inward investment creating jobs and so boosting the housing market.

  6. An Tarbh at 1:44 pm

    This article seems like a very one dimensional view of the story. Interest rates can only go one way from here. Up ! What is affordable now may not be in the very near future. I have been told from a number of sources that it is highly likely that bank Interest Rates will be 6% by 2012.

    People have to think about the long term and would be buyers should never believe what “the experts” who have a vested interest tell you ! The developers are scared. They’ve been creaming it for years and should feel the pinch for years to come !

  7. Cuchulliann at 1:29 pm

    I firstly need to correct one piece in this article – [i]In addition developers in Ireland are now reporting that prices in the new SHOEBOXES sector are at, or are at least close to the bottom and many units are being sold below cost. [/i]
    The prices of real homes in this country are not dropping as quick as the shoeboxes & who with all the reports about the poor standards of these shoeboxes on the market now want one?
    a) I feel that the country has only started to the fell the pain of what the 3 Amigos (Government /Banks/Devolpers) have dealt us.
    b) EU is recovering so ECB Interest rates will raise!

    So for me, Sit on my hands for another 2 years & hammer landlord to reduce rent!

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