Is now a Good Time to Buy a House ?

Everyone needs somewhere to live – people leave home, get married , split up, have bigger families and they need somewhere to live . If you need a home – then now  is not a bad time to buy.

For first time buyers – the  falls in Irish house prices over the last few years must be a relief now that the silly prices have dropped back to more realistic values. If you can get a mortgage you will be able to get a bigger, better  house for your money than you would  have got 2 or 3 years ago.

Generally –  a time of  falling prices  is not the best time to buy, because the property could be  cheaper in a few months. But – when you need somewhere to live and with sellers getting increasingly desperate to cut their losses –  now might be a good time to strike a deal, so long as you can take a medium to long term view.

Paying rent while you wait for prices to drop further is an option – but once you find a house you really want  then the draw can be bigger than the chance of saving a few hundred euro.

Try and buy a home that will be big enough to last you a good few years – with some room for family growth and in a location that you are sure you will want to stay in. There are some very good value properties out there.

If house prices do fall further  –  any negative equity only becomes a problem if you want to sell. If you don’t need to sell – then the value of your house never becomes an issue.

Mortgage rates are still fairly low – with the ECB rate still at an all time low of 0.75% . If you can get a low fixed rate mortgage now  – take it. You will need at least a 10% to 20% deposit though.

Rental prices :  -In many  places the cost of renting is now more per month than the mortgage repayments on a similar property. More people are renting and in many cities there is a shortage of quality rental homes. Rental prices are rising as there is more demand for properties.
There are some sound arguments for renting – such as flexibility and mobility-    but buying can give you more security and the ability to make a house into a home.

Rental for  the long term will mean making payments to a landlord until you die – whilst a mortgage will usually be paid off by the time you retire – leaving you with a rent free home for the rest of your life or an asset to sell or pass on to your family.

The  incentive of   mortgage interest tax relief (TRS) for first time buyers has ended – mortgages taken out on or after 1 January 2013 will not qualify for any  mortgage interest relief. On a Mortgage of €150,000 – that relief was worth  about €6500 in the first 5 years .
The new Property Tax will be another extra expense for homeowners in 2013. See more details of the Property Tax Amounts for 2013 here.
But – any new home bought after  1st Jan 2013 and before Jan 2017  will be exempt from Property Tax until the end of 2016 if occupied by the buyer. Also any first time buyers who buy a second hand house  between 1 January 2013 and 31 December 2013 …..will be exempt until the end of 2016. (Owner occupiers only)

For homeowners thinking of trading up – house price falls are not all bad news . As your house price falls  – so does the price of the bigger houses you are hoping to buy. If you are not in negative equity – price falls should be good news for trader uppers.

For example – someone had a  100k mortgage outstanding on a house  that was valued at 250k in 2009. They were looking at moving to a bigger house priced at 320k in 2009
In 2013 a 40% drop in both the house prices means the house they want is now priced at €190k while their own house is now valued at €150k.
In 2009 they would have to have taken out a new mortgage of  €170k  to  buy the second house. Now  in 2013 – with the price falls – they would only need a new mortgage of  €140k  . So they would be better off by €13k (This example doesn’t take into account the capital paid off the mortgage since 2009) .The fall in stamp duty also means additional savings of around €8k compared to 2009.