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Mortgage Update - Is now the time to buy?
Financial Engineering recently undertook some research into the housing market and came up with some positive results. There are great opportunities for both first time buyers and investors to get good property at the right price.
House prices experienced at least a 30% drop since 2007. The ECB rate has fallen from a high of 4.25% to 1.50% with a possible further reduction forecast. Rates available in the market are at an all time low. First time buyers can avail of a rate as low as 2.4% fixed for 1 year. The research shows that location is a major factor when looking at purchasing a new property.
The following positive conclusions can be ascertained:-
Strong Affordability for First Time Buyers:
In 2007, to purchase a 3 bed semi in North Dublin based on a 90% mortgage you would have required a salary of €83,000 and in 2009 the salary required is €41,000. Repayments are as low as €1,102 and factoring in the Tax Relief at Source for first time buyers the repayments drop to €947 per month, whereas the cost of renting the same property is €1,300. Please click here to view our Affordability Comparison.
Buying into a desired location:
For those looking to trade up to area where a premium would have been paid in the past now is a great time to get in to these areas. An example of this can be seen in Blackrock, South Co Dublin. A 3 bed semi is now 27% cheaper than in 2007. A couple required a joint income of €161,000 in 2007 this has now dropped to €77,000 in 2009. The positive signs of strong rents, lower interest rates and the possibility of converting your existing mortgage to interest only may allow you to purchase the new house and rent out the existing house to cover the mortgage payments with the rental income.
Investors can take advantage of higher rents:
With mortgage payments low and rents strong now is a good time for investors to enter the market. An example is seen at the Parkview development, Stepaside, which have been reduced by up to €180,000 on apartments and by over €200,000 on penthouses. A property at Parkview, now costing €260,000 would have repayments of €728 per month on an 80% investor mortgage. Rental income on the same property is €1,150 per month. This gives the investor a positive cash return to allow for the lean months of no rent.
Researching the market is important (Location, location, Location)
It's clear from the information gathered that carrying out your research into the area you are looking to buy into is paramount. You can purchase a 3 bed semi in Oranmore, Galway for €290,000 and earn a rental income of €750 per month, but for €10,000 less you can purchase in Montenotte in Cork and earn €1,000 in rental income. If you are willing to pay the €20,000 extra you can buy in North Dublin and receive €1,300 in rental income. Picking the right location for your investment can mean a large difference in the earning potential of that property even though they are priced similarly to purchase
Please contact James Magure on Telelphone: 01 614 8000 or by email: jmaguire@fen.ie if you would like further information.
James Maguire - Associate Director, Lending Division
Financial Engineering Network Ltd
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