Do you believe rent is "dead money"?

Sir Oxman

di2772 wrote: »

I thought the majority of home-owners actually do own their own homes outright, with no mortgage left at all. And another huge chunk of them dont have very little outstanding on their mortgage.

Why does everyone think that most people bought their houses in the last 5 or 6 years?

Its recent buyers, recent investors and people who topped up that are going to be struggling.

If your landlord wants you to move, you'll be moving. Reading the rules and regulations you are talking about will reveal this to you.

You are right about picking and choosing though. Id love to be able to do that.
With a zero mortgage you would think i would be able to do that, but i cant. I have a family.

According to this 40% outright (I don't know if that's just normal households or includes buy-to-let)

Just look at the most advanced societies in Europe having just 7% outright home ownership! (Germany, Sweden, Denmark, Netherlands)

On a whim is a tad strong though, all renters with leases are aware of notice periods as are landlords.

Course you can,
Nothing is impossible (except maybe selling the gaff) <--;)

jhegarty

You can only answer the question when you know:

1) Average rent rates over the next 30 years
2) Interest rates over the next 30 years
3) House prices in 30 years time

Only someone who knows all these facts can answer which is better.

MG

jhegarty wrote: »

You can only answer the question when you know:

1) Average rent rates over the next 30 years
2) Interest rates over the next 30 years
3) House prices in 30 years time

Only someone who knows all these facts can answer which is better.

Not necessarily - in the short term it is obvious that house prices will fall for the next 12 months and most likely well beyond. As long as house prices are falling by a reasonable amount (rule of thumb, in excess of your rent) , the short term rent or buy decision is a no brainer.

You are correct in a general sense that the rent or buy decision is dependant on when you buy and when you sell. The only thing we can say for sure is that now is not the time to buy.

For me this is not a question of which is better, it is a question of timing.

Rybka

You are all traitors!!

You should all buy a house on a 35 year term.
You should all buy a house a at 5x+ your current salary.
Think about an investment property.
House prices always go up.


What could possibly go wrong?

beeno67

davyby wrote: »

Quote from the website propertypin.ie



Me: But this is a manic bubble, it's gonna crash.

Them: You're just jealous you didn't get on the ladder in good time, besides look at you, you're paying someone else's mortgage and rent is dead money.

Me: Ah, but my rent is x amount less than your mortgage and the money I'm saving goes towards stocks that pay a healthy dividend, pension and other non property fund.

.

So that's all the savings down the toilet with the stock market crash. You should have invested in property. It hasn't done nearly as bad:D

gurramok

di2772 wrote: »

I thought the majority of home-owners actually do own their own homes outright, with no mortgage left at all. And another huge chunk of them dont have very little outstanding on their mortgage.

Why does everyone think that most people bought their houses in the last 5 or 6 years?

Its recent buyers, recent investors and people who topped up that are going to be struggling.

Think you'll find all those recent buyers(non-investors) were mostly younger people under 40.
Its the older generation that are mortgage free, with inflation helping them along the way.

If your landlord wants you to move, you'll be moving. Reading the rules and regulations you are talking about will reveal this to you.

You are right about picking and choosing though. Id love to be able to do that.
With a zero mortgage you would think i would be able to do that, but i cant. I have a family.

A landlord can only kick you out if he sells or wants to move a family member in.
Funny you say that about the kids, i was just in an apt of a renter yesterday and its across the road from the primary school, very handy for the parents!

kmick

I think renting is probably the right decision right now and will be for some time to come. Everyone could see that when a 4 bed semi in Rathfarnham was costing 1.3 million we were all in trouble. There has been a massive correction to date but there is more to come - maybe not quite as much as what has come before it but

However there are a few stats to keep in mind.
About half of the homeowners in ireland do not have a mortgage.
Of those homeowners with a mortgage about 20% are in negative equity i.e. those who bought in the last 5 years. So about 10% of home owners are in negative equity. Most of these are younger people so even though their plans of moving on to something bigger in 3 years are gone they do have longer to sit it out.

The one point I would make is that negative equity is just the opposite of what people experienced in the boom i.e. a notional value that cant be realised until you sell. If you dont sell then you dont lose out. Its inconvenient but not terminal. Just dont lose your job or get divorced any time soon!!!

faceman

smccarrick wrote: »

People will beat up with the renters- with the 'dead money' argument- and owners will not admit that their 2 hour commute morning and evening is slowly killing them- people are like sheep- and do not like to stand out from the crowd.

This drives me mad - why do people assume that any young people who buy property have a 2 hour commute to work every day? They have trains/buses/luas in the suburbs and even the commuter belt too! It also assumes that canal ring of Dublin is the be all and end all of irish life.

MG wrote: »

Not necessarily - in the short term it is obvious that house prices will fall for the next 12 months and most likely well beyond. As long as house prices are falling by a reasonable amount (rule of thumb, in excess of your rent) , the short term rent or buy decision is a no brainer.

Define short term? Vast majority of people who buy a house do so as a long term decision.

The_Conductor

faceman wrote: »

This drives me mad - why do people assume that any young people who buy property have a 2 hour commute to work every day? They have trains/buses/luas in the suburbs and even the commuter belt too! It also assumes that canal ring of Dublin is the be all and end all of irish life.

Not all do- I am simply drawing attention to the manner in which towns even west of the Shannon and in Waterford and Wexford to the South and Dundalk in the North- were sold as being Dublin commuter towns. I'm personally familiar with one girl doing the exact opposite- she commutes from Dublin to Athenry on a daily basis. I used have a 2 hour commute each way- I exchanged it for half with a new job, and am in the process of shaving another chunk from it.

faceman wrote: »

Define short term? Vast majority of people who buy a house do so as a long term decision.

In general when talking about property- the short term would be viewed as 5-7 year period, the medium term between 7-20 years and the longterm periods in excess of 20 years. These are only rules of thumb though- different people will have different definitions.

faceman

smccarrick wrote: »

Not all do- I am simply drawing attention to the manner in which towns even west of the Shannon and in Waterford and Wexford to the South and Dundalk in the North- were sold as being Dublin commuter towns.

How EA and developers got away with shenidigans like that is unreal but hopefully those days are over

wrote:

In general when talking about property- the short term would be viewed as 5-7 year period, the medium term between 7-20 years and the longterm periods in excess of 20 years. These are only rules of thumb though- different people will have different definitions.

Exactly. Therefore short term for renting and purchasing are vastly different time scales thus need to be distingushed

irish_bob

di2772 wrote: »

I thought the majority of home-owners actually do own their own homes outright, with no mortgage left at all. And another huge chunk of them dont have very little outstanding on their mortgage.

Why does everyone think that most people bought their houses in the last 5 or 6 years?

Its recent buyers, recent investors and people who topped up that are going to be struggling.

If your landlord wants you to move, you'll be moving. Reading the rules and regulations you are talking about will reveal this to you.

You are right about picking and choosing though. Id love to be able to do that.
With a zero mortgage you would think i would be able to do that, but i cant. I have a family.

tennant rights in this country are actually quite strong , if you know your rights , you can be quite obnoxious or even unreasonable as a tennant and get away with it for quite a while , like most things to do with the area of property in this country , its by no means black and white

Macha

irish_bob wrote: »

tennant rights in this country are actually quite strong.

Relative to other European countries, tenant rights are not very strong in Ireland.

Dudess

No, I don't think rent is dead money. I hate that phrase. It's payment for a service - and renting tends to be viewed as something which is almost shameful in this country. That's far from how it is seen elsewhere.

Macha

Dudess wrote: »

No, I don't think rent is dead money. I hate that phrase. It's payment for a service - and renting tends to be viewed as something which is almost shameful in this country. That's far from how it is seen elsewhere.

Absolutely. I think a lot of people don't realise how much they actually pay for their mortgage. So borrowing €230,000 costs about €120,000 - and that's at today's low interest rates of 3% (over 30 years).

irish_bob

taconnol wrote: »

Relative to other European countries, tenant rights are not very strong in Ireland.

while thier isnt the same level of clearly defined long term rental agreements available here , this is more to do with the fact that we dont have a renting culture like they do in europe , that doesnt mean its easy for a tennant to be dumped out on thier ear , the law here purtaining to tennancy is often a very grey area

Macha

irish_bob wrote: »

while thier isnt the same level of clearly defined long term rental agreements available here , this is more to do with the fact that we dont have a renting culture like they do in europe , that doesnt mean its easy for a tennant to be dumped out on thier ear , the law here purtaining to tennancy is often a very grey area

Well it's kind of chicken-and-egg, isn't it? Many people don't want to rent because they feel too vulnerable but you're saying it's like that because we don't have a culture of renting.

The_Conductor

taconnol wrote: »

Well it's kind of chicken-and-egg, isn't it? Many people don't want to rent because they feel too vulnerable but you're saying it's like that because we don't have a culture of renting.

I'd dispute that the reason people don't tend to rent here is because they feel 'vunerable'. Landlords very often feel vunerable and at times powerless- because of tenancy rights enshrined in the 2004 Residential Tenancies Act. For the last few years- the pendulum has swung firmly in favour of the tenant- to the extent that there are several famous court cases documented in this forum- where it took landlords upwards of a year, to legally evict non-paying tenants.

There is a culture of owning property here- quite unlike in any other country on the planet- and owning at any cost. The very name of this thread questions whether rent is 'dead money'- which in the mindset of many it does. The provision of property as a service is a concept that has not entered the Irish psyche- and there is no good reason for this.

S.

MG

faceman wrote: »

Define short term? Vast majority of people who buy a house do so as a long term decision.

That's not the point - the point is that even if it's a long term decision, it clearly makes no sense to buy in the short term with prices dropping and no realistic sense of where the bottom is.

People see to get very confused about the long term. Overpaying is a bad decision, long term or not.

Kipperhell

smccarrick wrote: »

There is a culture of owning property here- quite unlike in any other country on the planet- and owning at any cost.

I don't think that is true considering our close neighbours. Italy also has a home ownership rate close to ours. The history of Europe and the mass destruction of housing during WW2 has a lot more to do with it than some hazy idea of a cultural psyche determining our habits.

gogglebok

Kipperhell wrote: »

I don't think that is true considering our close neighbours. Italy also has a home ownership rate close to ours. The history of Europe and the mass destruction of housing during WW2 has a lot more to do with it than some hazy idea of a cultural psyche determining our habits.

I'm not being a smart-ass, Kipperhell, but how would that work? I'd have thought the mass destruction of houses would encourage people to rent, not buy. Why make a thirty-year commitment to something the Luftwaffe might turn into rubble?

Sir Oxman

gogglebok wrote: »

I'm not being a smart-ass, Kipperhell, but how would that work? I'd have thought the mass destruction of houses would encourage people to rent, not buy. Why make a thirty-year commitment to something the Luftwaffe might turn into rubble?

Or indeed 'the allies' as Germany has just 7% outright home ownership

irish_bob

taconnol wrote: »

Well it's kind of chicken-and-egg, isn't it? Many people don't want to rent because they feel too vulnerable but you're saying it's like that because we don't have a culture of renting.

we dont have a well developed long term rental agreement system here , mainly because the demand isnt there , things might change now

faceman

MG wrote: »

That's not the point - the point is that even if it's a long term decision, it clearly makes no sense to buy in the short term with prices dropping and no realistic sense of where the bottom is.
.

But buying is a long term decision. So you need to look at the bigger picture and consider your personal circumstances
Its no different than taking out a pension in that regard.

Kipperhell

gogglebok wrote: »

I'm not being a smart-ass, Kipperhell, but how would that work? I'd have thought the mass destruction of houses would encourage people to rent, not buy. Why make a thirty-year commitment to something the Luftwaffe might turn into rubble?

Yes it did as Germany had mass destruction of housing and needed to build new housing quickly. The same applies to most countries that had high destruction levels of housing. State regulated housing schemes sprung up making it easy and really the only option to rent. In former communist states housing was provided by the state most of which was sold or given to the tenants. In fact state run housing generally tends to be sold on in most countries. Germany used commercial business which retained the property hence high renting.

One of the reasons we have high ownership is the state built housing and eventually sold it to tenants also. So sure enough history and WW2 have had a major impact on home-ownership rates. The reason many other countries have high renting is there really isn't a need OR an option. They aren't making the same decision as you would be here.

MG

faceman wrote: »

But buying is a long term decision. So you need to look at the bigger picture and consider your personal circumstances
Its no different than taking out a pension in that regard.

Buying is a long term decision but whether it is better to buy or rent long term depends on timing. If you buy low, buying is often a better option whereas if you buy high (like in the last 3 years or so) then renting is likely to be the better long term option. The logical question to ask if therefore, is now a good time to buy? For me and most commentators, the market has some way to go before bottoming out. Provided your short term rental costs are lower than price falls (and the cost of financing these falls), then the answer is clear; buying now is bad in the sort term and therefore bad in the long term too. This is the short term decision which influences the long term outcome.

For example say you are looking at a 400k house built think prices will fall 10% in the next year. Rental cost for the year would be 15k.

Option A would be to buy now for 400k. Option B is to buy in 12 months for 360k saving 40k (plus the finance cost of this 40k over the term of the mortgage) but at the cost of 15k.

Do you opt for option A, shrug your shoulders and say never mind it’s a long term decision? Or do you also consider the short term and say thanks I’ll save my self the long term cost of carrying an additional 25k?

I don’t know about you but saving 25k (plus finance costs) means retiring earlier or putting the kids through uni etc. Now that’s really considering the long term.

Kipperhell

MG wrote: »

Or do you also consider the short term and say thanks I’ll save my self the long term cost of carrying an additional 25k?

I agree about it all being about timing and I can understand both sides pros and cons of renting. Generally I think if you basically stay in the same area renting and then buy there rent can be seen as dead money. It is however a service that gives flexibility to time a jump into the market or just simply less commitment.

Just picking up on the point above. There are quite a few people with some problems with maths out there. There were a lot of people who bought cars with part of their mortgages/re-mortgages. Some are not aware of the long term costs by not paying back the car cost in the same time frame as a regular car loan. I tried to explain this to a friend a few years back but he didn't believe it cost him any more but recently he told me he didn't understand what I was saying and has since realised the extra cost.

However don't forget if people have credit card debit, car loans or personal loans while renting to wait out the market they aren't really saving any money. I know a guy with savings money who is paying off a car loan that he could afford to pay out right with no penalty.

This stuff can get very tricky and some people just hear the action and never get how it works or applies to them. I heard a guy talking about moving his CC debit to another card and he thought it would reduce his actual debit not the interest being charged

MG

Kipperhell wrote: »

However don't forget if people have credit card debit, car loans or personal loans while renting to wait out the market they aren't really saving any money. I know a guy with savings money who is paying off a car loan that he could afford to pay out right with no penalty.

This is a different issue about their financial management - renting or buying does not change their short term debt situation. I take the point though that a helluva lot of people have problems with basic financial management.

ZYX

gambiaman wrote: »

Or indeed 'the allies' as Germany has just 7% outright home ownership

Nearer 50% really

The_Conductor

Overall owner-occupancy levels in Germany are currently 42%. This masks a massive urban/rural shift- with home ownership in urban centres as low as 4.2% in Berlin- and as high as 94% in rural parts of Baden Wurtemburg. In general urban ownership of housing units is around the 9% level (between 8.4 and 12.2% in Frankfurt, Munich, Hamburg, Stuttgart, Cologne and Leipzig).

The urban-rural divide in Germany is the subject of many very interesting social studies thesis......

patbrady877

it is in a rising economy, but its not in a falling economy.......