Renting Vs Buying

Tony255

just looking for some advice, I am currently trying to buy a house but both fell through at the signing contracts stage and it is really stressful. So now i am planning on renting and hoping that people stop making these crazy bids on property (this is the reason we lost our two as we were gazumped both times). I know people say rent is dead money but what i suppose i'm asking is do people think this is a good idea or should i just bite the bullet and go for a property of my own. A lot of my friends have their own property and can now barely live, to be honest i would prefer to stay living at home rather than live on a shoe-string budget. Any opinions what would you do?

Idleater

My advice would be not to ask an internet forum for advice.

Take a look at the several threads on house buying in this forum and in Business Economy Finance and you will see that the split is fairly 50 50 between buy and don't buy.

You seem to be wanting to live with another person so I would recommend discussing with them what is best for both people. Have you lived with this person before or is this your first venture together. This makes a big difference because buying a property with someone who you have not lived with before is asking for a lot of things to work out long term.

On the other hand, if you have been living with this person for a while, and know that you get on, have similar opinions on how a property should be managed etc then buying is more of a possibility.

If you are looking for support in buying houses, there probably is not much there for you. Dog eat dog as you have found out already. I think that you will find something that you like eventually. Summer is a slow time for selling houses so maybe you could take a look around now.

What kind of house are you looking at buying and where?

L.

The_Conductor

Owning your own property is not the be-all and end-all.
There is a DAFT survey out today- which shows that rental yields on property bought in the last 3 months are now well below 4% (with the exception of Limerick which has 4.019%). This means you can now rent in most cases for far less than the interest you would pay on your mortgage. At the end of the day- its a lifestyle choice for you as much as anything else- if you can rent a really nice place for 700 a month- as opposed to paying a mortgage of 3 times that- you can actually have a life as well as a roof over your head.

Gazumping is a bitch- unfortunately its a fact of life though. We Irish have an almost unnatural fixation with owning property at any cost whatsoever- and for the most part are willing to go to extraordinary lengths to see this through.

There are a lot of buy-to-let properties lying vacant at present (its impossible to know how many, but its possibly in the tens of thousands). As tomorrow's .25% interest rate increase begins to be digested, I think you may well find a few of these hitting the market.......

Keep your head up- renting is not the end of the world, nor is renting dead money- as is so often spouted by a lot of people. You have a lot of lifestyle options that a home owner might not necessarily have.

SkepticOne

Tony255 wrote:

just looking for some advice, I am currently trying to buy a house but both fell through at the signing contracts stage and it is really stressful. So now i am planning on renting and hoping that people stop making these crazy bids on property (this is the reason we lost our two as we were gazumped both times). I know people say rent is dead money but what i suppose i'm asking is do people think this is a good idea or should i just bite the bullet and go for a property of my own. A lot of my friends have their own property and can now barely live, to be honest i would prefer to stay living at home rather than live on a shoe-string budget. Any opinions what would you do?

The interest portion of a mortgage payment is also dead money since it doesn't go towards the capital of the house. It is simply the rent on money from the bank. In many cases you will be paying less on rent than the landlord would be paying on interest only if he or she bought the house today. So you can actually be losing more in 'dead money' by buying rather than renting.

What you don't get from renting, of course, is the benefit of capital appreciation on the underlying asset and many people (not me) believe that house prices can only go up.

If you're paying less on rent than you would with an interest-only mortgage then you're doing better in terms of 'dead money'.

Other advantages to renting is that you are not worried about interest rises or a potential collapse in the market. Also, you can rent less than a complete house or appartment if that is sufficient for your housing needs.

If you do intend to buy a house at some point in the future, however, you should put the money you are saving from not paying a mortgage into a good investment product.

Hope this helps.

Tony255

smccarrick wrote:

As tomorrow's .25% interest rate increase begins to be digested, I think you may well find a few of these hitting the market.......

Is this going up again, I've been out of ireland for a few weeks so i didnt hear anything about it???

The_Conductor

Tony255 wrote:

Is this going up again, I've been out of ireland for a few weeks so i didnt hear anything about it???

Yes, its supposed to be a .25% increase- with the probability of another 2 before the end of the year (to ECB = 3.5%) Some people are now saying it could be higher- as inflation is increasing rapidly in France and Germany.

SkepticOne

Interest rates up .25% as expected.

[RTE] ECB's key rate moves up to 3%

chump

To everyones surprise (bloomberg reported that only ~8 out of ~46 market specialists surveyed predicted correctly) the BoE upped it's base rate to 4.75%
http://news.bbc.co.uk/2/hi/business/5241974.stm
the betfair odds on the BoE .25% increase were about 5/1

dochasach

Here is an interesting breakdown of rent house vs rent money (mortgage) in one of the U.S. markets which is also at or past a bubble/boom peak:

http://voiceofsandiego.org/articles/2006/06/05/columnists/rich_toscano/97toscano.txt

If rent is "dead money", then all of the expenses of home ownership except principle payment (which tiny in the first few years of an interest-only ARM), is also dead.

I worked through the numbers for my place and it turns out as a renter I'm even further ahead of a buyer than the example renter in the article above.
Substitute our front weighted stamp-duty for their annual property tax and the break-even point for buyers moves even farther into the future.

IMHO, if you are buying and are sure that you want to stay in that particular house for at least 15% of the term of a loan and you are sure that you can keep your job, make the payments... over that time even if interest rates rise above what the fixed rate is now, then buying is probably a good idea.

If you're buying just to "get on the ladder", I hope you keep in mind that ladders can go down too. And if you'd like to see how rapidly a boom/bubble can end, look west:
http://www.pimco.com/NR/rdonlyres/A3C683ED-CA72-4193-8D2A-7D2653A02805/2420/ChartII.gif

If you look carefully, the growth rate didn't drop far below zero yet, but the trend is clear and "owners" certainly aren't beating inflation or secure interest bearing bank accounts anymore, and most are living in places that aren't as nice as what they could be renting.