Monday, September 22, 2008

A Sort Of Homecoming

Yeah, so I bought a house and collected the keys yesterday. I know, you're incredulous.

I wrote this exactly three years ago explaining why I wasn't going to buy a house.

I wrote this at the end of 2006 when I felt that the crazy rises that year as a result of 100% mortgages over 40 years starting at rock bottom interest rates meant the market peak had definitely been reached.

So what has changed? Well the crash, obviously, but I know I'm buying probably a year too early. So this is my story...

Around June this year me and the woman decided to move in together. The problem was my flatmate didn't want to move out and her house was designed for rental by four single professionals - not couples. So we looked at the glut of houses and apartments available in the city and, while there was plenty available, nothing was as nice or convenient as our respective places. One or other of us was going to have to seriously disimprove our living arrangements.

Anyhoo, despondent, I started checking house prices, out of curiosity, and, while they had dropped, asking prices were still stubbornly high. I was still seeing tiny 2-bed townhouses for €360,000 in any area I'd choose to live in. Clearly people prefer to leave their houses on the market for months at a time rather than wake up and smell the coffee. The stuff in the sticks had dropped alright, 10 - 15% or so, but there was no way I was moving away from the city.

Then I found a 3-bed end of terrace on the Rochestown Road advertised as 'reduced to sell' for €325,000. If you know Cork at all , you'll know the Rochestown Road is a very desirable address. This house is beside the Rochestown Park Hotel, in a small estate built about 1983, literally 2 minutes walk from Douglas Village (as opposed to estate agent 2-minutes!). It's only 1,000 sq ft and needs sprucing up, but in terms of location, relative privacy and build quality it was ideal for me and my budget.

But there was no way I was paying €325,000 for it so I did some research and discovered that it had gone on the market for €375,000 in September 2007 and that a sale had been agreed in February this year for €355,000, which subsequently fell through. Anyway I liked it, so I offered €295,000. The estate agent shot me a look that would kill, which I enjoyed, and said "That's not a realistic offer". "Go read the papers" I said, "I'll be offering 275 in six months...

The long and short of it is that we settled on €305,000, pending the engineer's report. The engineer said lots of great things about the structure, but that both the fuse-board and gas boiler needed replacing. So I beat another €3K off the price and, in the end, I've paid €302,000 - 20% off the original asking price.

So was what I wrote in 2005 wrong? Well no, it wasn't. For a start I've basically gotten my house for the price it would have been at the beginning of that year - and I've the guts of four years more savings in that time. I'm paid a lot more than I was then too. Also, and I'm very grateful for this, my Da has been in a position to help me out, which he wasn't at the time.

And, if I want to be very pedantic about it, I can back-calculate the effect of inflation in that time (as recorded by the CSO) and find that €302K now was worth about €262K at the end of 2004. Now I don't think I've bought at the bottom of the market at all. I think the same houses could be going for another €20K less this time next year. Although I think it's more likely that people who got so used to thinking that their badly built identikit shoeboxes in the sticks were worth €400,000 just won't bring themselves to sell.

Instead the real carnage will be in the buy-to-let sector when all those idiot investors are forced to flog their apartments to avoid defaulting because they can't find anyone to rent them. And to think people tried claiming rents were going up!

But as far as I'm concerned I've been rewarded for holding on when all the geniuses insisted the price of property was just going to go up for ever, that Ireland was different and all the rest of that shite. I've a very affordable mortgage, fixed for three years, and I have no intention of trying to trade up for at least six years. So I should manage to see out the crisis.

Still though, houses really are money pits. We'll spend as much on furnishings as we would on rent for a full year... she better be worth it!
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