The housing market as seen by a mid 2022 First Time Buyer

There's quite a lot of narrative going around at the moment about house prices, much of it pub talk, so worth talking about my experiences as an FTB in the current market.

The background is that I've wanted to buy for years, but with values climbing above 200k for a 1 bed after 2019 and about 225k and up for a 2 bed at that time, I realised that I needed at least 22k for a 2 bed (with a subsequent mortgage of 200k) or 40k for a 1 bed (because at the time, there was a 20% deposit demanding for 1 beds). So I think I started seriously saving in 2018, and by mid 2019 had around 25k saved. The bank wouldn't even let me apply, telling me I needed more cash on hand to cover legal costs.

This put me off the process, so I decided to save another 6-7k as prices were rising at such a pace even then, that I would also have needed another 2-4k to cover the higher property costs there would be within even 6 months. And then there was a by-election, Christmas, and then a general election. By the time the dust settled on that we were hit by covid. By that point my savings were now around 30k, but you couldn't look at anything.

So a year later, my landlady offered to sell me the apartment I've lived in for 10 years at a price I could afford. By then I'd over 40k saved, well enough to pay all of the costs and an affordable mortgage. It all seemed to look good. And then my conveyancing solicitor told me the bad news: there was issues with the title, fire cert and most worryingly planning permission. Basically there was some non compliance with the design, the fire cert was missing, and the apartment had been regularised by a retention that described it as a "ground floor basement" to the apartment above, and the two were tied into a single title.

The vendor promised to sort out the legal work, but by the time the council planners actually reviewed it, it was Christmas and they refused a full retention on grounds that it didn't meet current guidelines on size. So the owner appealed.

That was January 2022. Its now July and the case still hasn't been heard by An Bord Planeala.

So I pulled out of the sale in May, and refreshed my AIP and paperwork, and hit the market, even larger deposit, now well over 50k, and substantially larger mortgage approval in hand. I ended up finding myself a small house, something I certainly didn't go looking for, but was delighted to discover I could just about afford.

Anyway, what did I learn?

1. FTBs and other buyers who go out making bids on homes need to have current approval in principle. In the end I was not the highest bidder on two of 3 properties I bid on, but ended up being offered the opportunity to buy at that price because the higher bidders couldn't produce proof of funds.

Big lesson there - have your proof of funds ready. Approval in principle letter, bank statements, even have numbers ready to go for the insurance and life cover. It worked out well for me in the end, leaving me with a range of choices.

2. You need to have the biggest deposit you can possibly afford and then some. This made the world of difference to me, and took me from looking at sub 250k properties to ones closer to 300k. There is an awful lot more choice further up the price range. Realistically you are going to struggle to find anything much in Dublin if your maximum price is under 250k.

3. Buying a house is EXPENSIVE - I found that the estimate of 5-6k was really not enough and my bill ended up looking closer to 8k. This included about 700 of costs related to the sale that didn't go ahead, of which 225 was valuations and 450 legal fees. Don't forget VAT on many of these charges. You need this upfront before you can go ahead with the sale.

4. A good surveyor will find a lot of flaws with an older home. Look for structural issues that require extensive work that makes the house unlivable. Even houses that look nice on the outside might be hiding costly surprises. On the other hand, every house is going to need work, even newer ones.

5. Location is really important, possibly more so than in the so-called "celtic tiger" years where petrol prices were about 40% cheaper. Price in "lifestyle" issues also like length of actual commutes and options for working from home if you are in a job where you can. For example I bought a house that is located less than 200m from the nearest proposed Metro station. While it seems a long way off it will still be finished before I finish paying for the house! Yet most of the locations around the proposed station on the town side here are still quite depressed compared to the newer housing estates that are already nearly 3k from the nearest station!

6. Think of future needs - if you really want a dog, you need a decent sized and enclosed garden. Likewise, don't buy a house or apartment with on street parking. Shared parking is generally ok if its an estate rather than an urban area but watch out for areas where there is no gating to prevent others from coming in and parking on private spaces. If you plan on having children, look at areas where there are plenty of decent schools and childcare facilities. Likewise shopping - if you don't like driving, then don't move somewhere where the nearest supermarket is a 10km drive away.

7. If you are thinking of buying somewhere you don't know, ask people who live there what its like.

8. If you are in Dublin (or Cork) don't forget the north side of the city. There are huge bargains in both cities in areas that are overlooked because of snobbery. Places like Artane, Marino, Raheny for example. North county Dublin is lovely and has many rural retreats worth looking at also.

9. And a big one - don't assume prices are going to shoot up leaving you with a home worth more than you paid for. The important thing is having equity in the home. That's why I recommend paying the biggest deposit you can possibly afford. It gives you a big cushion against future price drops or stagnation.

10. That said, don't get into "funny stuff" to inflate your financial situation ahead of buying a home. Its a sure sign that you are overstretching yourself and people have faced fraud charges for falsifying detail on their mortgage applications. Running to relatives for digouts is again, another sign that you cannot really afford to buy, but if they offer you enough to make up the difference on a deposit or cover the legal costs, then accept it, but don't enter into "loan" agreements they cannot enforce, as nothing leads to falling out with family like financial issues. There are also tax implications for living rent free in a relatives rental property or receiving gifts to prop up your deposit. Don't underestimate tax liabilities for your well meaning relative or yourself.

11. Be cautious about commitments made to anybody you are in a relationship with if they are not going halves with you on the home purchase. At the same time if you are insistent on buying a home regardless of whether they want to buy or not, then you really should question the relationship. Nothing wrecks a relationship like being forced to move because one of you insists on buying when the other isn't ready for that. Likewise, be careful about what the legal arrangement is - obviously they should pay you notional rent, but if they have no legal interest in the house you probably should not split the mortgage payment in half unless that really is the market rent for the area. On the flip side, they shouldn't expect a free ride either. Ideally, if you are in a relationship, wait until you are both financially in a position and agreed about what you are looking for.

12. Don't just buy a home because you think you have to. There is no shame in living with parents or renting.

13. Quite good nearly new furniture can be found in charity shops, from friends and auctions. Don't feel a need to race out and furnish a home completely.

14. If there are working appliances in the home, try to make use of them if they are in working order. In not, try to buy appliances from the one seller - sometimes they offer bulk discounts.

15. If there are a lot of minor repairs, use the surveyors reports to list them by priority and try to do things that need an empty home to complete first. Leave stuff that doesn't need you to move out until later on.

16. If you live in a rental time your exit carefully. Your notice is usually anything from 2 weeks to just under 4 months. Ask your solicitor when the sale is expected to complete and give yourself sufficient time to get critical repairs done and essentials in the home before leaving your previous home.

17. Don't listen to "pub talk" about rising or falling price predictions. Nobody really knows right now what the market will look like in 2 or 3 years time. One thing we do know is that there is a strong relationship between demand and supply, and unfortunately supply is still patching with demand still rising. Another factor is rents - very high rents tend to feed into higher asking prices.

I hope that's helpful.