Tell me why she shouldnt buy

Hi Folks, long-time lurker, first-time to post other than on the introductions. My sister is about to bid (at auction) on a house and has come to my brother and me for advice. He’s very much a VI, and is convinced that this is not a crash, it’s a skid, whereas I have become (partly through reading this site every day) a devout bear.

The house is one of a terrace, and is being advertised at 30k less than other houses on the same road because it has been rented for a good while and needs a good bit of tidying up. She can afford the mortgage, and afford an increased mortgage when rates go up again.

She has been renting since she left college, in Dublin and the US, but is now back in Ireland about a year, and never intends leaving. She is frustrated at not having her own place and sees this as a bargain-basement purchase that will protect her from everything bar a total collapse in prices.

I am not convinced she should buy in this market, and have suggested she should wait until the next ESRI/TSB report is out and the next quarterly reports come out, but the house is being sold next week so she has to settle on a bid this week.

It suits her perfectly, a walk to work, two mins to the shops, a blank slate inside so she can make it her own, affordable in every way, yet I’m still wary.

My concern is that if she buys and then in 24 months has to move on, will prices have fallen to such a degree that she wont be able to do that ? Or is the fact that she may get this house at a substantial discount insulation against the risk of all but the worst collapses ?

For the record, the house is advertised at 250k, against 280k for similar houses on the street/in the area. She is considering setting an absolute limit of 230k for herself.

What are the different scenarios she is up against ? My instincts are to advise her to not bid, wait 12 months, and buy the same house (or better) for less money. Hers tell her to buy now.

Why shouldnt she buy (assuming she gets it at 230k) ?

Where is this house?

Giving advice to relatives is a nightmare, I’d firstly try and avoid it :slight_smile: If she doesn’t buy and prices go up, you’ll never hear the end of it.

Personally I’d want to know if she was planning on living there long term. If she sees this as a short term thing and she wanted to sell up in 2 years time, if she’s in a negative equity situation she would be in big trouble and may be unable to sell. This is less of an issue if she plans to stay there long term - she may lose money, but it’ll be less painful.

My advice to her would be the same as I gave to this guy:

If it’s a “home” she’s buying, then to hell with the market!

If it is a long term (10 year) purchase and she would be able to comfortably pay the mortgage with ECB rates of 5% then perhaps she should go with it.

As it is an auction make sure to give her some auction bidding advice. Remember that if the place gets no bids (like most auction these days) then she could possibly negotiate an ever cheaper price after the auction. IE don’t bid first!

Also ask her would she mind if she buys the place for 230k and then sees it for 180k in 3 years time. If she doesn’t care then fine, but if this would get to her then perhaps she should hold off.

The house is in Kilkenny, where she works. She loves the place and while she has no intentions to leave, she has a permanent fear of permanence and cant even say the words “I will live here for two years” out loud (its a family trait I think). She REALLY feels the need to live in her own space, and in fairness is taking a lot of time over this, really trying to think it through.

Kilkenny could be hit hard. it is a lovely town but I get the feeling a lot of people are commuting to Dublin from it. This is just the sort of place that could be hit hard as people move back towards Dublin as prices go down.

it’s really up to her.

if she is willing to pretty much accept that her house will drop in value over the next few years, and is ok with that and has a steady safe job that will easily cover the mortage.

Most likely, the price in the future will be less than the price she pays today, over the next 10 years. If she can accept this and is ok with it then she should buy.

She should not expect any increase and she should fully expect to be living there over the next 10 years or so, paying over the odds. Nobody likes paying more than they should but if she can handle it and the decrease then there is no reason for her not to buy

It wouldn’t hurt for her to think about what she plans to do if she met a partner, I have the impression she is buying by herself, and things changed in her life. Does she plan on having children? What if she had them anyway?

Is this a house which is suitable for raising a family in if she finds herself in a situation where she can’t trade up? And would her earning potential change if she had a baby, her outgoings certainly would?

Marriage and babies may not be on the agenda right now, but they may be over the next few years.

I’d advise her to wait a few months.

Other houses will become available that suit her but she could save herself a couple of years salary by waiting.
That would be a huge saving regardless of whether she intends to stay where she is or move on in the future.

I spent a few days in Kilkenny recently and the amount of construction thats going on there is phenomenal.
There are estates going up on all the approach roads and the centre piece is the re development of the railway station.One of the builders informed me that there are going to be 100 apartments on the top floor of this structure alone :open_mouth: Just across the street there is a big block of apartments as you go towards the mart and I don’t think all these are sold.
The impression I got was that kilkenny is heading in to a rapid over supply situation and when you consider the low level of indigenous industry in the city you just have to wonder how sustainable that level of house building is.