Monday, June 06, 2005

Irrational Exuberance on Speed

On Saturday, I was checking out and I stumbled across a place that was having an open house that very day and was only 5 minutes from my in-laws' house. Even though we have to find jobs before we can get a mortgage (banks are funny that way), we're trying to get acclimmated to this housing market. It is, in a word, crazy.

If the US stock market of the late 90's was faulted for "irrational exuberance", then I'd say the Dublin housing market suffers from irrational exuberance on speed. We know we're going to end up in a much smaller house, possibly in a dodgy or inconvenient neighborhood, and our mortgage payments are going to be a bit more steep. (On the plus side, interest rates over here are around 3% so that takes a bit of the sting out of it.)

Back to the open house. It was in an area called Sallynoggin, which is a staunchly working class neighborhood. A lot of the houses appear to date from the 1930's and were probably built to house workers, perhaps for the port in Dun Laoghaire, I don't know. The house was tucked away on a street of similar houses, all attached as is often the case in Dublin.

We stepped into the house and into a narrow entryway, which had a door on either side of it and stairs going to the second floor. (Except here, it's the first floor and what I think of as the first floor is the ground floor.) The room to the left of the stairs was billed in the brochure as the third bedroom. I could see it getting used as a family or television room. It had a fireplace and grubby walls that were in desperate need of cleaning and painting, but it did have potential.

The room to the right of the stairs was the living room/dining room. It was a big open space that was also in need of cleaning and painting. In a "what doesn't belong here" sort of moment, I noticed an oven of indeterminate but ancient age. This struck me as odd, until I walked into the kitchen. Then all was made clear. The kitchen was about the size of a parking space and had a sink. That's it. I thought my hallway with appliances in Wheaton was bad. This made the Wheaton kitchen look like a palace.

The kitchen had a door that led out into what the brochure called "the lobby". That's a lofty description. It was basically a tacked on shed with a corrugated plastic roof. The lobby had a door at the end of it, which led to a toilet. I thought "Nice, a 1/2 bathroom downstairs. Little weird that you have to practically go outside for it though."

The garden was excellent. It was enclosed by 8 foot high stone walls. A collection of bushes lined the walls, giving the place a very green look. It's the kind of place you could imagine hanging out and hosting cookouts.

We went upstairs, where we encountered 2 bedrooms. The bedrooms had nice old wooden floors that would probably look great when they're refinished. The planks were nice and wide and it felt rustic and homey at the same time. Both bedrooms had fireplaces and small closets. Old houses over here sometimes don't have closets. (Especially, it seems, the really posh ones. I guess rich people had beautiful hand-carved armoires so they didn't need closets.)

I walked between the bedrooms a couple of times, trying to figure out what was missing. Then it struck me - an upstairs bathroom with a bath or shower. I asked Peter about it and he gestured to a washbasin on a stand and said "That's the shower."

So, let's recap. No kitchen. No real bathroom. A modern day outhouse. No usable appliances. Every room in need of strip-down cleaning and painting. Floors in need of refinishing. Original wiring in need of complete replacing. Probably ditto for the plumbing. Basically, it was 690 square feet of big-time fixer-upper.

We estimated that it would require at least 200,000 euro worth of work to make it a place you'd actually want to live. But with the size of the garden, you could probably slap a nice extension on it. The guts of the house seemed pretty solid. It definitely had potential, but it would require a lot of money and work.

So, what was this little money pit going for? 310,000 euro, which is about $380,000. It's enough to make you cry. When we were out for an evening walk later that evening, we walked up a street near Peter's parents' house. Peter told me that when he was a kid, he looked down on this street because it was fairly working class and not as nice as the street he lived on. I said "You looked down on it then and now you couldn't afford to buy a house on it." That is a sad fact.

I'm not sure where we'll end up. I fear that we're buying at the peak of a bubble and we're going to end up locked into a mortgage with negative equity. But friends of ours bought a place 3 years ago and that's what they thought. Their house has nearly doubled in value. We think if we buy into a gentrifying area, we should be okay. The prediction is that in 15 years, Dublin will have a population of 2 million. And all those people are going to have to live somewhere, right?


At 8 June 2005 at 13:17, Anonymous Dave said...

Sounds like West Lakeview (or "Wrigleyville Near") ;-)

I looked at an Irish real estate site a few years ago and was shocked. Good luck!

At 8 June 2005 at 15:39, Anonymous Anonymous said...

It would seem that the Irish real estate bubble isn't likely to burst any time soon because of the strength of the Euro not to mention the ever growing EU. Of course I can't even pretend to understand what impact member European nations and their respective ecomonies might have on one another. But I would guess that it could create a sort of balance between them. Which would delay or perhaps soften the blow from the bottom falling out of the market. But again... my math scores in school kept me just above the line which would require me to wear a helmet and a drool guard.

- Shane

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