There was a survey done last month that found that 60% of people believed that the stamp duty changes that were introduced in the December budget “will help those who buy a new home”.
First-time buyers, who are now exempt from all stamp duty on property, should be overjoyed by the reforms. But clearly, something is still holding them back and it has to be the problem of finding a house that isn’t going to keep falling in value. And for the rest of us, the simplifying and reduction of the stamp duty rates would also be a really welcome development under more normal buying circumstances. But again, it’s a risky business trying to catch a falling knife; buying a home in Ireland is going to be exactly that a risk until we can all be sure that we aren’t treading in negative equity territory.
No matter what vested interests, like estate agents, builders and mortgage lenders say, and this survey was commissioned by the mortgage brokers
Simply Mortgages, no one knows for sure when the price bottom will be touched. However, given the massive inflation in house prices here from 1996-2006 about 250% nationally and c300% in Dublin and the experience of other countries that have experienced major property ‘corrections’, it isn’t unusual for four to 10 years to pass between when prices fall and are then restored to the price levels from which they fell. If that was the case, it could be 2010 before prices even stabilised.
Be that as it may, we still need somewhere to live and not everyone is going to want to rent that long. If a house price is affordable that is, after interest rate movements, possible employment changes and even the starting of a family is taken into account and you still feel compelled to buy – then you should certainly go ahead and do so. Just keep in mind that you need to take a minimum five year view before you consider putting the house back on the market.
One bit of news that was very relevant in the Simply Mortgage survey was that a third of those questioned with existing mortgages didn’t have a clue what interest rate they were paying. (Men were found to be more familiar with their mortgage interest rate with just 27% of men were unsure of the rate they pay, while 45% of women admitted they did not know what rate they paid.)
The longer this slump continues the more aware everyone will be of the cost of their home loan, especially if the banks continue to raise interest rates ahead of any changes introduced by the European Central Banks (as a direct consequence of the international banking credit crunch.) While it’s always advisable to shop around for the mortgage, it¹s absolutely crucial right now, and borrowers should seriously consider fixing their rate, especially if they can secure one in the region of 5% or less.
Buyers will also, I suspect, give far more attention to other fundamentals of property purchase, such as: the location of the property; access to public transport; a large enough site to extend a kitchen or add another bedroom; good national and secondary schools which have places available for new students; nearby shopping, etc.
For those people who¹ve decided not to trade up (or down), their concern might be how to raise sufficient finance to fix up their homes instead, and exactly what renovations they should prioritise in order to maximise any future sale price.
National Irish Bank has the most competitive LTV (Loan to Value) mortgage product on the market, but credit is tightening so you may want the help of a good broker (ideally a fee-based one.)
Meanwhile, a recent UK survey by the Nationwide found that adding a modest 300 square foot loft conversion added 21% extra to a sale price, another bedroom, 12%, central heating, 6.8% and secure (i.e. indoor) parking another 6.5% to the price. In the UK, at least, an extra garage will add 14.5% extra to the price of your home, while an extra bathroom raises the price just 5%.
The sting in this survey’s tail, however, is that one in four renovations goes seriously over its budget, so make sure you check with a few estate agents in your area to see what ‘sells’ and what doesn’t.
In a buyer’s market like the one we are now in, you may find that it isn’t just an extension that will add value to your home. A nicely laid out garden will also add value as will ‘original’ features, like fireplaces and wood sash windows in period homes.
Estate agents are in agreement on one point in this challenging market this year: the need to price your home correctly and the need to hone your presentation and negotiating skills.
As a seller, you should take a leaf out the house builder¹s books and have a game plan that includes not just a tempting price, but a few sweeteners: everything from existing planning permission for an extension, to a willingness being to throw in curtains and carpets, garden furniture, tools and other equipment and even good quality appliances (especially if your potential buyers are FTBs.)