Q&A

What’s going to happen to the property market?

Q

I put in an offer for a house which was accepted and it is due to close in the spring. I have not signed contracts yet as I am waiting for the Budget. Also, it is early days contract-wise, as the usual questions are still being dealt with by my solicitor. I already have mortgage approval and am of the view that the mortgage is manageable.

I really like the house and I am paying what other houses in the area are priced at. Also, I am tired of renting (and am paying more in rent than in a mortgage). However, and this is the problem, I’m terrified that house prices will still decrease sharply in value, given the recent political and economic instability. I know you don’t have a crystal ball, but what would you advise? Should I renegotiate and if so, by what percentage?

- Ms SM, e-mail

A

In some ways, you appear to have answered your own question. You have been looking for a property for some time and you like the area in which the house is in. This house was priced at roughly the same level as other properties in the area that have sold recently.

All in all, it sounds like you have paid the market rate for a house you like, in an area in which you want to live.

While property is certainly one of the larger investments most people make in their lives, it is important to remember that this will also be a home – and that carries its own value. Presumably this is not something you are looking to flip for a quick profit.

Will prices continue to decline? In the short term, yes. Will events of recent weeks – ie, the EU/IMF bailout – precipitate a collapse in the market? I don’t think so. It might delay a recovery slightly and mean it is more gradual, but prices have already fallen by as much as 50 per cent in some parts of the country.

You could always look to renegotiate the price but you run the risk of losing the house. The vendors – and especially their solicitors – are unlikely to be impressed with you looking to re-open negotiations on a previously accepted offer on the basis of what “might” happen.

I know what a tracker mortgage is – for now

Q

A tracker mortgage is, by definition, linked to the prevailing ECB interest rate and this is specified in the mortgage documents, which I assume form a legally binding contract between the bank and borrower.

If the worst came to worst and Ireland left the euro and the ECB was no longer our “central bank”, what impact would that have on tracker mortgages? Would the loan be automatically re-denominated in “An Phunt Nua” and the interest rate linked to the Irish Central Bank’s rate? Or would the contractual link to the ECB rate still stand?

- Mr LK, Dublin

A

Tracker mortgages only appeared in the Irish market after we joined the euro, so there is no track record on how we would deal with a change in our currency. You are correct in your assumption that your tracker mortgage contract is a legally binding document, adjustable only within the terms of the contract itself. On that basis, I can only assume that banks would be forced to continue to set rates by reference to the ECB rate, not on any reconstituted Irish central bank. Of course, there is still nothing to suggest we will leave the euro.

This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into.

Please send your queries to Dominic Coyle, QA, The Irish Times, 24-28 Tara Street, Dublin 2. E-mail: dcoyle@ irishtimes.com