Valentine’s Day is for popping the question. Should you wait or go for it?
Should young couples buy their first home in today’s climate or wait?
Let’s take our minds off the awful weather conditions for a moment and consider waves of another kind – the waves of love that will be washing up against the walls of restaurants country-wide next week. Valentine’s Day is an apt occasion for proposals and for those of you who are hoping for (or expecting) a proposal or are in a sweat already because they will be popping the question this 14th February, here is some advice on the next step, namely buying a property together.
You might have been renting together for a while but with all the talk about property prices having reached the bottom and starting to climb again, you are thinking that on the way home from the restaurant you’ll walk your new fiancé (e) past the estate agents and have a look at what’s on the market.
So, should you “Go for it” as the current outdoor campaign for a major bank suggests?
Prices are rising
First, I’d like to explain why prices are increasing. It’s a simple lack of stock. There are not enough properties coming on the market for a number of reasons, probably the most significant one being that people can’t afford to sell because of negative equity – the price their properties will make on the market is less than what they owe on them, which means they’ll be carrying debt into their next purchase. Some lending institutions will not even consider them for a new mortgage in this circumstance.
This explains why, according to the recent SCSI report, house prices in Leinster increased by 4.6% in 2013 and those in Dublin by a whopping 15.7%. Outside Dublin, the same report suggests prices will increase by 0.1% in 2014.
The banks are starting to deal with mortgage debt
AIB announced in the last few days that they have put in place a mechanism to help distressed mortgage holders. By repaying the portion of their debt that relates to the market value of their home and ‘warehousing’ or parking the remainder, owners may free themselves from properties they have outgrown but in which they felt trapped by negative equity sooner than we had expected. We have heard anecdotal examples from other banks of cases where mortgage debt has been written off. Serious and purposeful attempts by the banks to work through mortgage debt should mean more properties on the market suitable for first-time buyers. Greater supply will hopefully mean prices don’t go through the roof.
Be prepared
So, while on the one hand there is a lack of housing on the market causing prices to rise, on the other hand rents are expected to rise in 2014 meaning that the cost of not buying will continue to go up. The conclusion: prepare now and be ready to buy when the right property comes on the market.
How can you prepare? Do your due diligence. Figure out with your lender what you can afford to borrow and save like crazy. If you have saved up a greater proportion of the asking price of the house you eventually want to buy, you’ll need to borrow less, which will help your chances of getting approved for a mortgage. What that means for your wedding plans, I don’t know!
Watch the housing market. Note how long properties similar to what you want are on the market and what they sell for. When you see the right place for the right price, you’ll be ready to pounce.
Of course, O’Neill & Co is here to offer advice and to help you identify the right property at the right price. You can call us at the office on 045 856604 or email us on info@oneillandco.ie.
I’ll leave you with some reasons to be cheerful:
- As a first-time buyer, you don’t have negative equity to contend with
- Mortgage interest rates are relatively low and, as the European Central Bank tries to drag the EU out of the doldrums, they are likely to stay low
- House prices are still 47% lower than they were at the peak of the bubble in 2007
- Homes bought after 1st Jan 2013 and before Jan 2017 will be exempt from Local Property Tax until the end of 2016, if occupied by the buyer
Oh, and I hope it’s a ‘yes’.