Although I am a long term member of the pin I would like to see what others would advise my friend.
He is a from the Uk and together with his wife have not purchased a property.
Their rent is currently 12000 a year.
They have a deposit of 160,000 as they have saved for the last 15 years. This is every thing they have saved between them.
She wants a property as it is about time to start making a family.
They can afford mortgage repayments however he thinks it would be better to buy an appartment in Galway and be completely mortgage free. he will continue to save and maybe buy some where else in a few years when they have decided where they will permantly end up. The appartment could then be used as an income and they can keep saving for a deposit on the main house.
I think they should not worry about the possibility of further house price falls and buy the house they want for a family NOW with a mortgage. and then they can save up for the investment. He is quite financially literate and is very worried about what will happen to the value of money post QE3. He thinks a tangible asset such as property is the only way to protect himself. What do ye people think
If someone is purchasing a property as their principle primary residence and it is their intention to remain there raising a family, then issues such as negative equity or price appreciation are moot, as the purchase is for the service the property will provide within the area it exists.
If they are well funded, then they must keep in mind their position of power in the current market and when entering a negotiation with a vendor or their agent should pay hard ball, set a fixed upper limit for each property they view and be ready, willing and able to walk away if they are being dragged into a blind auction.
It is likely that prices will continue to fall, all be it at a shower pace, for the foreseeable future, time, demographics and the market supply is on their side.
Irish apartments are generally not worth purchasing and are best avoided due to poor quality of construction, issues with management companies and their unsuitability for families.
€160k is very close to the price of a 3 bed semi in Knocknacarra …currently c.€190-200kk down from over €300k 4 years ago.
By the end of the year they will have saved a tad more and can can look at furnishing it as well as buy it. Tell them Galway apartments are rubbish shoeboxes built for students …in the main…and are to be avoided. They are not for families at all.
Your friend’s plan makes little sense. Even if house prices remained static when he went to rent the apt in a few years time he’d have completely messed things up from a taxation point of view.
Firstly, he would not qualify for first time buyer mortgage interest relief.
Secondly, all the income from the apt would be liable for tax as he’d have no mortgage interest to write off against it.
If he’s dreaming of becoming a Canny McSavvy he’ll need to follow a pretty basic rule: pay off the mortgage on your own residence at the expense of keeping a higher amount of debt on the rental property. He won’t be able to remortgage the apt onto his house - or at least if he can that debt won’t be able to be offset against his rental income.
They are around a year away from a cash purchase, a year and a half including furniture paid in cash. That is 1.5 years on top of 15 years saving, 10% extra.
The can always bid at auction as long as they set a ceiling and refuse to budge over it. I did hear of a Moyola Park ( unmodernised/executor sale) going for €179k some weeks back ( see below) Very Good area for that price.
Tell them to stay far away from Irish apartments. The value for money is terrible, build quality generally awful. Ireland is sparsely populated by all accounts and it often baffles me why people want to live in apartments especially is the West of Ireland where theres such beautiful country side within 15mins drive of the city centre.
160k is a huge amount for an apartment in Galway. The place has been hit badly by the recession. There just isn’t the money or the demand for apartments in that price bracket.
Tell your friend to buy himself a nice house outside of town on a bit of land instead.
Here’s a novel idea. Keep renting for a while longer and start work on the family anyway. As (a) it could take them a lot longer to have a baby than they think it might, and (b) there is absolutely no law that says they can’t have children while renting.
The 18k they’ll are spend on rent in the next 18 months will most likely be a lot less than the amount they’ll save on the property they buy in the future.
I cant give you advice because as a broker I would not be deemed to have gathered enough info to do so (plus Im not getting paid) but if it were me with that decision to make I would not be buying now.
I would not now or any time in the next generation buy an Irish apartment because a lot of them are cheap shoddy small crazy expensive rabbit hutches with exorbitant management fees.
I would be hanging on for grim death to my savings and watching the market AND as some else in the thread said I would be considering renting as there are deals out there to beat the band i.e. I would not have to give what the landlord asks but rather should do my homework on the pin and elsewhere and then negotiate the rent downward.
Buy an apartment now, thats like playing Russian Roulette with 6 bullets in the gun.
My kids aren’t expensive, I make sure they have low expectations and second hand clothes.
Has your friend ever lived in a flat? I would go mad now even in a semi-d, with the size of his deposit in this market he should be able to buy something he would be happy to live in and invest in for the rest of his life (I have no idea what would be the best time to buy and would defer to the other pinsters for that advice). I would also make sure that it is cheap to heat and it has a lot of space around it for the kids to play.
+1 to everything that everyone has written on this thread.
If anyone is thinking of buying an apartment anywhere in Ireland right now, they either (a) don’t know anything about the country or (b) have been in a coma for the last 5 years. Why do so many people think that they have to buy a property when they start having children? Sorry to ask, but are these people a bit thick?