Affordability for first time buyers soars.

:laughing:

Propose title change to Affordability Sores.

This would indeed seem to be a whole load of balls. A quick gander at the local area on daft shows 25 4 beds (which is an average house I suppose), only 7 of which are under 300k. 300k - 4.2 times a 70k salary - which is far from average. And these are the smallest and pokiest of the 4 beds, none of which are particularly enticing, or require significant work.

But isn’t that the problem - they have specifically worded it so that they don’t say the average single tax payer, or tax-paying couple, they purposely refer to FTB, that is, people that HAVE BEEN approved because they earn a sufficient salary - they are ONLY taking the average of an UPPER decile group - and allowing people to assume they refer to the average working person.

Take the Dublin Area (new houses) figures from “Range of Income of Borrowers” worksheet in the DOE survey(environ.ie/en/Publications/S … 295,en.XLS)

Year 	 <€40K	<€50K	   <€60K	   <€70K	   <€80K	 >€80K
2004	    2%   	10%	     23%	    24%	    16%	   25%
2005	    2%  	  9%        20%	    24%	    18%	   28%
2006	    1%	    7%	     14%	    24%       19%	   35%
2007	    1%	    7%	     16%	    20%       19%	   38%
2008	    2%	    7%	     19%	    23%       17%	   32%

Over 72% of couples earn OVER €70,000
so 4.2 times €70,000 might get you the average house in Dublin.
But EBS/DKM slyly do not say that 72% of couples in their survey are assumed to earn over €70,000.
neither do ESB/DKM do not say that their survey is applicable to only 9% of couples that earn less than €60,000.

Excellent analysis, IrelandisDifferent

Are you sure it’s not only 49% earning over €70,000 and not 72%. Which would make them even more sly.

Also, 28% earning less than €60,000 and not 9%. Or have I got my inequality operators all muggled up?

Wouldn’t this be because you need 50% LTV or something crazy like that? Plus these are the people who saved during the splurge. They’re atypical, the typical can’t buy.

:blush: my bad, its 72% earning over €60,000

“this has more than halved to monthly repayments of €639 or 12.6% of a couple’s net income”

12.6% average monthly income at €639 infers €5,071 total net monthly income and net €60,857 annual income. This is for a first time buying couple. Although there may be some tax variations between couples, a net annual income of €60,857 (that is after tax, PRSI and Universal Social Charge) would imply gross annual income of €82,000. (using PwC’s tax calculator for 2011 – recommended, see link below).

I’d tend to agree that housing has rarely been this affordable but with prices still set to fall (my own hunch plus the bookies at Paddy Power) and an anaemic economic outlook for 2011, I’d wonder if it is the best time to buy. What difference does it make if the % of income required to service a mortgage drops from 12.6% to 10% even, when the average property might lose 10% or €19,000 off its value this year?

download.pwc.com/ie/2011_budget_ … index.html

businessworld.ie/livenews.htm?a=2754281

the cynic in me says that removing mortgage interest rate relief will shift the demand curve to the left for first time buyers.
This will bring down prices further, saving buyers even more than 30,000 euro initially foregone, over the life of the mortgage in principal and interest payments.

Surely the conclusion of the article should be, it wasn’t long ago since mortgages were twice as expensive than they are now. With SVR hikes, the cost of mortgages will reach and exceed that level in the near term. Stress your affordability on that basis, as your bank couldn’t be bothered as they are playing with someone else’s money.

:angry:

They should check out the definition of lose… if you don’t borrow it and don’t spend it, you can’t lose it!

What they don’t mention is that in Ireland Inc when the government gives you a €30k incentive the seller adds €40k to the price. Then you get to pay it back to the bank with interest.

Someone on Newstalk Lunchtime earlier today with Jonathon Healy saying that Mortgage interest relief won’t be abolished until December now!

Managing Director of Myhome pointed out some of the downsides to the proposed changes in Mortgage Interest Relief, in yesterdays Business Post.

thepost.ie/news-features/mor … 55318.html

Announced on newstalk at. 11 the abolition is to be postponed

sounds like the big push is on before the cycle of interest rates rising begins!
Once it starts, it will mean each quarter houses will become less affordable (on paper)… and we’ll likely face years of this as interest rates return to normal. I wonder how affordable any property in Ireland would be at todays prices with a mortgage interest rate of 6-8%? Not many (any) I would say.

If Ireland Inc. needs to pay 10% money (zerohedge.com/article/irish- … me-history) and banks can’t borrow at any price on the open market, then what is the value/cost of any mortgage with a introduction price of 3%? The banks obviously will need to charge a WHOLE LOT more than this introduction rate at some point. Maybe it’s the 15 years I spent in European countries in which all mortgages were fixed, but the ubiquitous variable rate mortgage here just seems like a crazy (bad) deal for the consumer… the biggest financial transaction in most people’s lives and we don’t even agree a price upfront!? I cannot think of any other transaction were we’d be happy not knowing the price before we buy!

Thats because its not a…oh wait…I see what you did there :wink:

COme on, everyone knows rocketing house prices are good for the soul. Bring back 2006 XX

Absolutely and not just with SVR hikes. The ECB are on the hard stuff again.

As you say, work out for yourself what you can afford. Mortgage rates north of 7% and maybe 9% for a while - at least until the mortgage market becomes hugely attractive for foreign entrants looking for low hanging fruits…