We’re starting to look for a house. It is mostly Dot’s idea. I would rather put our meagre savings into starting a business. I’ve taken a couple of start your own businesses courses and think this will be my only way back into employment (speaking frankly, I don’t think Irish people will give jobs to a Kiwi while there are so many Irish out of work). This basic disagreement is a routine cause of marital tension, but we work at these things and I’m sure it will be possible to meet in the middle somehow. I also quite enjoy looking at property websites.
I’m quite bearish on the housing market. I think we can afford to take it slow because there are a lot of properties on the market and prices are likely to continue to fall for a week while yet.
I read a lot of opinions on this matter:
Then there are discussions such as this one on the Daft.ie website. There are some very pessimistic commentators out there.
Here‘s another pessimistic discussion that started in 2009 on the Property Pin forum concerning the ‘long term economic value’ of Irish property (“long term economic value” was introduced into Irish public discourse by the National asset Management Agency (NAMA) legislation to buy bad loans off the Irish banks). It has a useful graph of inflation adjusted house (asking) prices from the 70’s to the present.
Ronan Lyons is also an informative commentator. He used to work for Daft (maybe he still does, I don’t know).
The Irish Economy blog is very informative about macroeconomic matters including the health of the banks and the costs of the bailout.
Then there is the classic paper by UCD economist Morgan Kelly on the likely extent of Irish house price falls (.pdf here).
I think that we should use ‘objective’ measures when deciding how much to spend. For example, there is the old-fashioned principle that banks should lend only 3 times your salary. (This discussant claims in Ireland the average house price used to be 2.5 times the average wage). Alternatively, it is possible to estimate the house price based on the expected rental yield of 7% (if you’re investing in a house, it should yield a return on your investment of 7% or else it’s not worth the hassle and you’re better off putting the money in the bank instead). That means the fair price is something like 14 times the rental value. Mind you, this method is still likely to overvalue house prices since rents in Ireland are ridiculously high –that’s my subjective impression, but it seemed to be born out by an admittedly limited trawl through UK housing websites. A three bed, semi-detached house within 1 mile of Manchester city centre fetches around £750 per month or (approximately €900), whereas a comparable house in Dublin it would be around €1200.
Like I said, we can afford to wait. We do like our current situation because we get on very well with the neighbours even though the house is really too small. At the very least we’re going to have to be very cautious in our offers because it would be awful to buy a house and then have the fall wipe Dot’s full year’s wage and all our equity off its value (especially since I won’t then be able to use the equity in the house as security for a bank loan to start my own business!).