Sound fundamentals?

Ok I hear you (I read you) bang on about sound fundamentals, 2.5 times value of first salary and 1.5 times value of second salary etc. So, let’s say for arguments sake I know these people: he makes 70k gross a year (75k including bonus), she works part-time and makes 35k a year gross, they look after the kids between them and have no child-care expenses, and are lucky enough that their jobs are more or less recession proof. In my book, and I think in anyone’s book, they’re VERY good salaries, I’d say among the top 20% of workers these days? So according to your 2.5 + 1.5 times salary these people who earn quite hefty salaries (I mean they pull over 6k a month net between them) would be reasonably aspiring to a house worth what, 240k. If these people are looking for what people in their position would be looking, that is 4-bed house in South Dublin with a bit of a garden, these houses right now are going for about 800k+, so these houses are supposed to go down to around 250k? I don’t have the statistics of Dublin salaries but I’d say these salaries are among the 20% top (she pulls 35k gross a year working only part-time) so if people among the 20% top earners can not afford these houses who’s going to buy them?

I personally don’t see the 2.5 + 1.5 rule working to be honest, way too low IMHO.

The price of the houses will have to fall until an average man on an average income can afford to buy an average house in an average area while the banks are lending prudently, anything else is unsubstainable madness.

Your thought process is running backwards.

2.5 times principal salary and 1.5 times second salary has held true over long time periods of time in many places. If house prices are higher than this then it’s a strong indication that they’ll fall to those levels, not that we have to change the salary multipliers.

Why 2.5 times? The higher the multiplier the more the person has to pay back and the harder it is to get a 10-20% deposit together. The Irish market compensated for this by reducing LTV (giving people 90% and then 100% mortgages) and by increasing mortgage lengths to make the monthly repayments affordable (35 year mortgages). This is not a sustainable way to lend money and has led directly to our current crisis.

So the issue is that the “sound fundamentals” are the only way the market can actually work, anything else unstable and prone to failure as we’ve seen.

Your maths is ok and the arguement is ok too. But I don’t think this couple deserve a place in south Dublin. Not going in to details of our crap infrastructure south dublin is still top address for this country. Although your couple is in top 20% earner (and not among top 20% assest holder e.g. parental property ect.) what they deserve is a nice area that is suitable for middle class people like clonsilla or castleknock and i can bet, prices will keep falling until your couple can afford a decent house in these areas.

Now what we miss here is average earner deserves an average area. When you say average earner you mean average among whole population but when you say average house you are taking average in Dublin. You just have to put average 4 bed house with bit garden in this country that includes other cities and towns and not only Dublin and here we go I JUST APPROVED MORTGAGE FOR YOUR IMAGINARY COUPLE. 8DD XD

South Dublin will always be above average :smiley:

Maybe the €800k asking price is too high and needs to drop by half. Problem solved.

This South Dublin assumptive madness has to stop. South Dublin is a huge area, with all sorts of flats, houses, estates, one offs, country roads, city streets, etc. There is a huge variation from some of the most deprived areas in the entire country to some of the most affluent areas, all within the area of South Dublin.

As things stand in the market, and based on the historical salary multiples, if this imaginary couple want to live in South Dublin, they can just about afford to live in Jobstown as things stand. They could not even afford to buy in a decent area of Tallaght!

When people on the pin mention South Dublin, bulls jump in and kick off as if someone has had the gumption to suggest that someone on 35k a year should be able to buy a 5 bed house in Dalkey.

As I said in another thread, there are loads of relatively ordinary (by international standsrds) areas littering South Dublin with an abundant supply of 3/4 bed semis, that based on the asking price of them you would think you are moving to Monte Carlo.

That’s probably the answer alright. I can see them dropping by half… then my imaginary couple and us will both be able to buy in Dublin South… although i’ll be using more than 2.5 times salary, that’s for sure!

If you have your own cash for a bigger deposit than fire away.

Once normal lending have been reestablished though the bank won’t be giving you a jumbo mortgage and “but it’s worth it!” won’t convince them.

We’ll be looking for about four to five times combined salary… I don’t think that’s a jumbo mortgage!

5 times combined salary? You don’t plan on ever having kids?

Let’s say both you and your partner are on €50k. Combined that’s €100k and 5 times that is €500k. A 30 year mortgage at 4% gives you a monthly repayment of €2366 or over 50% one of your gross salaries.

Tell me that doesn’t sound like a good plan.

We have two kids already. My line of work allows me to work without having to get the children into childcare so we save that money. Monthly outgoings of 2.5k and over are more than perfectly manageable for us. They’re not even 40% of our combined take-home income. We have stress-tested it in case interest rates go up a lot. Personally I don’t think you can get the house of your dreams without a little bit of effort. It depends on what’s important to you, we’re happy to spend a little more in the house and a little less n other luxuries. that doesn’t mean we live in the breadline or anything.

That is most unusual puesyo and not comparable .

An average family will be looking at minimum €800 x 2 = €1600 childcare a month anywhere in Dublin , bit less in the wesht mind .

Oh I know that and I don’t advocate those multiples nor do I advocate over-stretching yourself or making a big effort to get a roof over your heads. I do not think that people should go through loads of hardship to get a house, we realize our situ is pretty unique plus our jobs, like those in the example of my couple, are “recession proof”, which is pretty unusual too.

There’ll always be people with certain advantages but I don’t see how that invalidates the 2.5/1.5 times salary guideline.

The country needs to stop using the word “average” when dealing with house prices or salaries, its meaningless.

“Median” should be the new average!

Working with “medians” will tell you an awful lot of information very quickly! :nin

Take an extreme example for illustrative purposes!!!
There are four small farmers and one Seanie Lodsamoney in an economy.
Lets say each farmer earns EUR 15K pa and Seanie Lodsamoney earns EUR 1.5m pa.
The average salary in this economy would be EUR 312K pa while the median would be EUR 15K pa.

A house that might cost EUR 440,000 would be less than 2 times the average salary,
but would actually be 29 times the median salary.

Therein my friends lies the problem when dealing with salaries averages!

Averages do obscure some things. For example I believe the highest ratio of salary to house prices was actually in Galway rather than Dublin and it’s probably there that we’ll see a lot of problems.

Ummmhhh… aside from the couple in my example, what was the average, or the median salary mentioned by someone else before in this forum? Around 30k per year? That means that the average house now costing, what is it, 330k or so, is to come down to about 85k? Sorry I am just quoting figures that I remember reading before, not that my memory is particularly good… anyways not to sure I see the average house whether in Dublin or outside coming down to under 100kto be honest… as a few people said before if they do, I’ll take 3, thanks :slight_smile:

Everytime someone says “average” you seem to immediately think of somewhere in south Dublin and then decide it can’t possibly happen ergo the figures must be wrong.

I would guess the average salary in Dublin is a bit higher but yes you’re still talking about average properties in the Dublin area being in the 150k range and average properties outside Dublin being in the 100k range.

You haven’t presented a thing to dispute this besides your personal incredulity and marginal cases where people are probably a bit better off than the norm.

Well no, I have no arguments to “present” and was only stating an opinion. 150k in Dublin, that’s about a 50% drop from current levels, or what DMW predicted. Yes, that, I believe it could happen alright…