Renting cheaper than buying

gilmo1973

Am I right in thinking that in a falling market that it is better to rent than to buy?

ixoy

Never! Renting is dead money always, in absolutely every single instance! You're paying someone else's mortgage! There's never been a better time to buy!

... Or yes, there's good arguments to be made for renting. Let's take the place I'm in. Advertised prices are €395k for a 2-bed apartment (stupid I know). Now annual rent here is about 15k. That's less than 4% of the total cost. It is not remotely inconceivable that the price of the apartment will drop 4%+ in the next year. Thus by next year, I won't have lost anything and - here's the good bit - I'll actually have saved because I'll be paying less interest on the reduced house price (very roughly, you could pay 1e in interest for ever 1e of the mortgage).

But there's more - think of the mortgage repayments on 395. Let's be generous and say you've a deposit of 45k - that's a 350k mortgage. Monthly repayments - 1950 or so (including TRS). Difference between renting and mortgage - 700 a month. Shove that 700 a month into a high-interest account and in a year you'll have over 9k extra (600 or so from high interest). Put that extra 9k against the deposit in the following year (or whenever) and you yet further reduce your re-payments then.

All of the above predicated on high-interest savings accounts and falling house prices, both of which seem quite likely in the current climate.

travellerI

Yes you are

rocky

What's the AER on the high interest account and what banks are offering them? I currently get 7% with BoI up to 5k, is this good or bad?

IanCurtis

OP - how on earth do you expect to keep up with the Jones's if you're renting?

Ok, it might cost you hundreds of thousands, but you'll never be able to hold your head up at the school gates in a small engine car and a rented house?

BrandonBlock

OP - It depends on the property itself (If some madman is selling a 5-bed in rathmines for €100k well then it's better to buy - extreme but illustrating a point) your personal circumstances (is your career area secure, will your salary increase to scale) etc. and will interest rates keep rising in the near future (there's an argument for buying and securing a fixed interest rate now). Banks are becoming increasingly reluctant to do this though.

antoinolachtnai

It just depends. Obviously there is no point in buying a property you think is going to drop in value.

One thing in favour of buying in Ireland is that it gives you security of tenure. You have very little security of tenure with rental here.

You have to look at what alternative things you can do with your money too. It has been the experience during turbulent times in the past in Ireland that holding cash is not a great thing to do. If there is inflation, the cash savings just diminish into nothing.