We are constantly asked ‘is now a good time to buy’ and the answer as always is ‘that depends’. It depends on what you are hoping for, if you want to invest in an asset that will never lose value then no, it’s a terrible time to buy a house. If you want to buy a home because you are at a point in your life where that is what you want to do then it’s a decent time.
We were telling people from 07′ until this year to stay away from property, and now we believe that the time has come where you can make decisions rationally. It doesn’t sway it either way but you can at least get a good idea of some of the pros and cons involved.
Firstly, there is the property price register, there are issues with it – we have pointed this out before. While knowing what something sold for in the past gives no indication of the future selling price (and property is particularly heterogeneous) it gives some grounding when matched with asking prices in an area and tools that track price rises and falls.
The answer financially is that the interest rate environment is uncertain, while we expect rates to remain low the banks will not peg any pricing to those rates, the tendency has been to actually increase rates while base rates drop.
This normally screams out ‘fixed rate’ but the premium built into fixed rates is so high that you pay an incredible cost to do so with the majority of lenders.
What you can do is look at the cost of renting versus buying, we still have our calculator over on MyHome.ie which allows you to put in price increases and price drops as you choose to predict them over the next ten years (and the same for rents), then, using an assumed 6% mortgage rate we make comparisons.
The one thing that some buyers realise and others don’t is that TRS is a valuable tax break, and much like that ad on the radio ‘when it’s gone it’s gone’, the plan is to kill it off from 2013 and not revive it.
This moment in time (if you are in the camp who believe city prices are realistic) is one where you can take out a mortgage and with every payment you make your personal balance sheet improves (assuming prices don’t fall rapidly), not only that but you get a tax break for doing so, and the final plus is that you obtain the utility value of the property as well!
I am confident that in the future people will look back on 2012 and say ‘that would have been a good time to buy’, but that clarity will only come with hindsight as do so many good investment decisions. Sadly there are no guarantees in life and that means that the people who take that leap could lose but all factors considered, it is – in our opinion- a good time to consider a home purchase.