What I have learnt about property over the years

This is based on past, non-bubble experience using a Dublin-based middle management salary (which nowadays probably runs to around 80k) as its basis. When property prices are at a normal level i.e. on or near the long term curve the following have generally applied in the past -

  1. You can buy your first house for about twice your salary. It won’t be in an ideal location, it won’t have a garden, you wouldn’t raise a family in it but you will probably live there for three or your years. In the 80’s it was a two-up-two down in the Liberties, in the 90’s it was a TUTD in Ringsend, in the 00’s it was a TUTD in Stoneybatter, now its probably a 2-bed apartment near the river.

  2. Your second house usually costs about 3.5 times your salary, it will have three or four bedrooms, a garden, on-street parking and will be located in an area populated by your peers. These areas haven’t changed much - the cheaper areas of Sandymount, Ranelagh, Rathmines on the South side, Clontarf, Drumcondra, Sutton on the North side.

  3. You can buy a house in Dublin for less than your salary but you probably won’t want to live in the area that its in

  4. You can buy a bolt-hole down the country for less than half your salary. It won’t be pretty, it probably won’t be beside the sea, it will need lots of work. Thirty years ago these were half-wrecked cottages with outside toilets recently vacated by an elderly person. Nowadays they are probably 3 bed detached houses in a field in the middle of nowhere.

5.You can buy a nice holiday home in the likes of Connemara, Sligo, West Cork or Clare for twice your salary. It will have four bedrooms, a nice view and a town with nice pubs/restaurants nearby.

  1. A trophy house is detached, in its own grounds with trees, has sufficient parking for all your friends when you throw a party, cannot be seen from a main road and should make you feel scared to be alone in it on a dark windy night. There are no trophy houses in Ranelagh, possible one or two off Palmerstown Park or Temple road - most of them are in Dalkey or Foxrock. A trophy house is unachieveable on a 90% mortgage - you need to have at least half the money up front, a trophy house costs at least 12 times a middle management salary.

  2. You will always know when you are at the bottom of the property market - prices will not have changed in either direction for 6 months, it will be virtually impossible for anybody to get a mortgage, the press will be talking about ‘a permanent era of low prices’ and advising against property as an investment as 'no capital appreciation can be assumed for the foreseeable future/

I’ve lived through three property busts (2 here, 1 in the UK) and bought two houses, both in a rising market (by coincidence rather than design). In both cases I reckon I bought pretty much on the long term curve and in both cases I was constrained by the 2.5 + 1 times salary rule imposed by the lenders. I don’t have any particular expertise, I’m mainly going on memory of my salary, the prices we paid for houses and the prices of the houses that we couldn’t afford.I also have the memory of what friends and relatives paid for their houses, country boltholes and holiday houses.

So where are we on 1 to 6 above. This is going to be a kind of ‘Location,Location, Location’ deal for pinsters. By the way I wrote the text above before I did the research so I didn’t set out with in any preconceived notions that don’t exist in the above.

  1. A starter home in Dublin for 160k. You can argue that you are unlikely to be middle management or on 80k when you are buying a starter home but I suspect that you can’t manage this on anything less. In reality you will probably be looking for a starter home when you are on 50k (if you are on the middle class, middle management track) - this should really mean a budget of 100k but I think any sane person on 50k will be renting.

Liberties - 170k TUTD myhome.ie/residential/brochu … lin/305851
Ringsend - 240k TUTD daft.ie/searchsale.daft?id=550942
Stoneybatter - 130k cottage daft.ie/searchsale.daft?id=458424
180k TUTD daft.ie/searchsale.daft?id=556508

Dockland flats - Fishermans Wharf, Ringsend - cheapest docklands apartment at 195k daft.ie/searchsale.daft?id=512985

Where else?
Rialto - 160k daft.ie/searchsale.daft?id=406084
Crumlin - numerous around 160k

So it looks as if things are close to normal in this market, apart from the SCD reality distortion field. This didn’t always exist - the Liberties was the first ‘Yuppieland’ in the early 80s when the TUTDs sold for around 25k when your typical middle management salary was also around 25k - that was admittedly a bottom in the market but I remember looking at TUTDs in Ringsend for around 40k in 1992/3. Watch out for Crumlin suddenly getting fashionable! I was also surprised at the price of 2 bed apartments in the city. I really did think that they would have been cheaper than any of the 2 bedroom house stock.

  1. So now we come to family homes. For your middle management type this needs to be 3 bedrooms, preferably 4. And we have a budget of 280k. I already have a sinking feeling on this. I have gone for the cheapest house in each case ignoring sites, townhouses, council houses (I’m basing this on the likely prejudices of my prospective client - not mine) and apartments. I’ve also ignored extreme do-er-uppers and houses that aren’t really in the area.

Ranelagh - 390k - Mount Pleasant daft.ie/searchsale.daft?id=555835 (not really in the area and needs some refurbishment)
Rathmines - 495k - Semi-Detached, Maxwell Rd daft.ie/searchsale.daft?id=570466
Sandymount - 795k - Terraced daft.ie/searchsale.daft?id=551977. This was the cheapest house I could find in the ‘real’ Sandymount that wasn’t some thrown-up townhouse where your SUV blocks all the sunlight coming in to your lounge.

Clontarf - 450k - Clontarf Rd daft.ie/searchsale.daft?id=551847
Drumcondra - 495k - Griffith Ave daft.ie/searchsale.daft?id=571898
Sutton - 485k - daft.ie/searchsale.daft?id=555654

Still some way to go here then. I would expect prices in these areas to come down to around 300k. Although these areas have now become aspirational there is no cash or accumulated equity in the pockets of potential buyers to make up anything more than a few grand extra.

  1. So - a house in Dublin for less than 80k. I’m going to include apartments in this as this is all about price - quality is completely irrelevant!

Here we are - East Wall €74950 - daft.ie/searchsale.daft?id=573714

There were actually 3 properties for 80k or less.

  1. Next a country bolthole for 40k

There were 54 candidates here varying from desperate to tolerable. Here’s a good example of the better ones within a reasonable drive of Dublin -

40k Bailieborough Co Cavan, daft.ie/searchsale.daft?id=555414

So I’m going to look for a nice 4 bed holiday house in a nice place for 160k

West Cork - CastleTownBereHaven 160k - myhome.ie/residential/brochu … ork/241962

Connemara - Best I could get here for the money (150k) was a pretty ugly 5 bed doer-upper in Carraroe - myhome.ie/residential/brochu … way/265874
I was looking for something like this (but this is 395k) myhome.ie/residential/brochu … way/356241

Sligo/Mayo Coast - 350k - This is at the posh end - Strandhill - myhome.ie/residential/brochu … igo/413445

Clare - Cree 145k 5 beds myhome.ie/residential/brochu … re/1243986 (not great but it hits the budget)

  1. What do houses over 960k look like? Are they all trophy houses?
    I set the bar at 1m and found 159 houses in Dublin over that price - of these only about 70 met my criteria. I went on the photographs and a knowledge of the areas - I didn’t have time to go in to too much detail. But it seems that even at over 1m there are a lot of very ordinary houses in very ordinary areas.
    Here is a selection that I think meet the criteria -

myhome.ie/residential/brochu … lin/124267
myhome.ie/residential/brochu … n-4/219196
myhome.ie/residential/brochu … lin/219380
myhome.ie/residential/brochu … -14/397522
myhome.ie/residential/brochu … lin/423236

And a further selection that don’t -

myhome.ie/residential/brochu … n-4/363841 (semi-detached, limited parking)
myhome.ie/residential/brochu … n-6/361639 (terraced, no parking)
myhome.ie/residential/brochu … n-6/422353 (terraced, no parking)
myhome.ie/residential/brochu … n-3/129817 (terraced, no parking)
myhome.ie/residential/brochu … n-4/435868 (a mews!)

Conclusions

I was kind of surprised that so many of my guesstimates had been fulfilled - I thought we were a lot further off the mark

On point 1 it looks like you can buy a starter home in a tolerable area in Dublin for 2X a good salary, the surprising thing to me is that it isn’t an apartment (one bed apartments might be a different story though)

On point 2 the aspirational middle class home for middle management in Dublin in one of the better areas (north or south of the river) is still a good way off - I would guess a fall of a further 30% is required here.

On point 3 - you can get a house in Dublin for less than a middle management salary - and yes, you probably wouldn’t want to live in it

On point 4 - country bolt holes for half your salary are a possibility

on point 5 - considerable variation here with West Cork and Clare seeming to offer better options than Sligo/Mayo and Connemara. This kind of surprises me - I thought there would be a big offload of holiday homes in the current climate as these were typical purchases of those most affected by the downturn. One possibility that occurred to me was that they may be living in them having sold/rented their Dublin pads - any one have any anecdotal information on this. Also very few of the newly built and unsaleable 3/4 beds that I imagined when I set out - they all seemed to be priced well over 200k.

On point 6 - This is a pretty trivial and subjective point so it shouldn’t be taken too seriously but the results show that there is still delusional pricing out there in Dublin.

On point 7 - prices are still falling even on a monthly basis so I don’t think we can even start thinking about a bottom - certainly in Dublin

Bolthole? Is this a place in the shite?

What I have learnt about property over the years

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Interesting and entertaining post Mike. Although I think you are underestimating how much an €80,000 salary is these days, and also the quality of property these folks would be prepared to live in at Step 1 in your programme. I don’t think those properties suit this profile.

I agree with Larry, nobody on 80k is going to buy either of these places (I’m a mere serf of an engineer on less than that, and not even on any sort of special management track and I wouldn’t :slight_smile:)

The Liberties one is on Pimlico, which is probably the roughest street in the Liberties. Going by that map it’s basically right beside or opposite the council flats and the local pub, name of which escapes me but suffice to say it’s very very rough indeed. The house itself also needs a new kitchen, bathroom, total redecoration, and that’s assuming wiring, plumbing and structure are sound. No thanks.

The first Stoneybatter one is on a nice enough road in and of itself but it backs on to O’Devaney Gardens, which are a war zone. Look at picture number 6 and the big spikey fence they’ve put up on the back wall. No thanks. Going to be a lot of disruption and noise from over there, and they might well knock these if there’s ever any money again (there was a regeneration project planned back in '09 but it got canned), so if that happened it’s a major construction project for years in your back garden. Plus, needs work. I wouldn’t buy it for fifty quid.

9 St Joseph Place I don’t have a great problem with area-wise, but parking is tight thereabouts and that house is super-pokey at 57sqm for a 2 bed (and with a shit layout to boot) and the decor is a bit grim. There’s nowhere to put a decent dining table either, and I don’t know how our hypothetical middle-manager is going to cope with that for dinner parties. If you spent a good bit of money on it you could make something small but pleasant of it, but it’s 180k already so we’ve blown our 160k 2x salary budget and then some before any refurb.

Rialto, a pleasant enough little street but not far from Dolphin House or from the development in the back of Herberton where they rehoused the Fatima residents. The main drawback here is the size of the place. 37m2!! The larger bedroom is still only 6’11" by 9’10", which just about big enough for a double bed, and a wardrobe and that is it, forget about a chest of drawers in your bedroom as well! The current building regs state that even 1 bed apartments should be 45sqm, and even the 1995 regs stated 38sqm. This should be very very cheap IMO.

Won’t comment on the rest of the properties as they’re not areas I have particular knowledge of, but I don’t believe any of the above represent value.

How about:

  1. 18-25 share a house/flat
  2. 25-30 rent your own flat
  3. 30-35 start a family in a small rented house
  4. 35-45 buy a small house
  5. 45-65 buy a bigger house for a bigger family (salary dependent)
  6. 65+ move to spain/florida/ while keeping a small place in Ireland or giving over your family home to your eldest child who might now be settling down.

What I have learned about property??

Two views- Investor view and owner view.

  1. If you know the rules of game and know how to play it, ONLY THAN be an investor. Look for location, look for yield, look for macroeconomics- jobs, interest rates, immigration- inward/outward movement, your resources and contingency plan if things go south.

  2. If you are a family man- Stay away from buying until you are stable socially and financially and buy a nice house where you can spend at least 8-10 years of your life. Buy it and stop worrying. Screw market, screw yield and screw finance. Pay your mortgage and enjoy your life.

The problem comes when owner view is mixed with investor view. Family men/ women were encouraged to play the game even though they knew nothing about the game. They played and burnt their hands. Now, I want to stress they were encouraged by media/ banks/ peers/ stupidity but they were NOT FORCED. The onus of decision lies upon the one who plays the game.

Very interesting - I agree with the 30% drop still to go in certain more desirable places in Dublin. It matches a couple of formulas I keep playing around with (yield over 20yrs, compared to similar in other EU capital).

Speaking of ‘playing’ and property speculation, does anyone remember the London commercial EA’s observation in a recent NAMA report on RTE? She said she remembered when the Irish big guns came over to buy office blocks in the City, that they kept referring to ‘the Property me’. In England, she said it’s ‘the Property BUSINESS’. Those same big guns are now in the hands of NAMA…

And what do you make of Dun Laoghaire, metalmike?

Or the Irish version

  1. 0-30 stay at home with mammy
  2. 31-death buy a crappy shoebox and live in it until you die

That it an excellent post.

Anecdote alert.

A neighbour here tells me that her daughter and Irish husband have bought a thatched 4 bed in Carraroe with the intention of moving there! The house, a sturdy looking recently built 4 bed, was advertised at 240k and had for 125k.

What have I learned about buying property? That interest is the real killer. Whilst some of my friends will be breaking themselves paying €1m interest on borrowings associated with a €1.5m home - the more modest approach will do me.

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Mrs TI and I have also come to the conclusion that interest is the real killer. Why slave your life away to pay interest when you can spend it on lifestyle.

I think this is where the wool was pulled over the eyes of the middle class to fund the lifestyles of a smaller elite. The mantra of “can you afford the monthly repayment” was a trick to get the middle classes mortgaged to the hilt. They then spend their working life to retirement paying interest with the caveat that they end up with somewhere to live on retirement. In the interim they churn out the next crop of Doctors, Laywers, accountants etc all ready to get mortgaged up to he hilt and repeat the same process over and over again.

We were lulled into the idea that interest was just like rent, that you never had to pay the capital, as you just got it and more back when you sold your property.

Lots of people don’t understand interest.

I think this is where the financial regulator could make it clearer.

For example look at how banks advertise mortgages and how they advertise deposits.

They only ever advertise the cheap mortgage APR studiously avoiding mentioning the actual interest over the term.

When it comes to deposits they frequently put the APR in the smaller print and quote the total interest rate over the entire term, or even more deviously have a high rate for a fixed period that then reverts to a lower rate.

It’s deliberately misleading and not in the consumers interest (pun intended)