People have replaced the question “What can I afford to pay?” with “What am I willing to pay?”
We have a very different mindset nowadays. Yes, banks criteria are stricter, but prices are also lower. The real issue though is that no-one wants to get “stung” with a 250k paper loss, even if they can afford it. Sure there are 100s of people who would have jumped on that place 18months ago, people who would still have no problem buying it now etc. So why dont they?!?
The thing is that most people at this stage have sat back and had a re-think about property. They no longer want a significant portion of their hard earned EUROs in something that could fall another 50% in value.
I think we are going to gradually migrate to a society where people will only be willing to have a certain % of their assets in one asset class, more in line with Japan / Germany etc. We will eventually save more and enjoy ourselves with better holidays etc. The days of throwing as much as one can at the family home are over for alot of people.
People on similar incomes in Canada / parts of US / Germany etc live happily in very nice homes that are worth 3x their salary. They could buy a bigger home, but they dont need / want it. Then because they all think like that, the house prices stay sane and they all have more disposable income to spend on other thing in life.
We in Ireland on the other hand have been happy enough max-ing oursleves out on property. There is no reason we should be paying more. All the ballony about how there is not enough land in Ireland / Zoning etc is ballony. The UK is about 4 times as densely populated and in many ways has stricter planning laws, yet you dont hear people making that argument over there. Our demographic structure is a bit more conducive to housing, but after years of building 5 times as many homes per head of populayion as the US we dont have that issue anymore. If a 25yr old dentist wants to buy an apt, there is definately no issue with supply!
Since 2000, all that has happened in Ireland is that a few people got very rich selling off land, second/third homes they bought 25 years ago…& a much larger generation of 25-35 year olds will now work their whole lives paying that bill off.
One feels for people who got conned into believing it was a wise thing to do and are now stuck to an apartment that wont suit their lifestyle needs beyond 5 years max. However, one gets the feeling the next generation, a generation who have seen its not a one way bet, will be less foolish. They will pay what they think is reasonable and leave them in a very comfortable position to take 2 years off work if they want to tour the world when they are 5 yrs into their mortgage etc…They have the ability to wait a very long time and waiting is what they are doing.
The days of “this place is worth X” just because people can afford to pay it are over!