is buying really cheaper than renting?

Samuel T. Cogley

BoatMad wrote: »

heath, education and social welfare

Indeed, a system that is used to finance housing people that can't afford to house themselves.

BoatMad

Samuel T. Cogley wrote: »

Indeed, a system that is used to finance housing people that can't afford to house themselves.

only a very small part of the overall budget , landlords play tax like everyone else . big deal

Samuel T. Cogley

BoatMad wrote: »

only a very small part of the overall budget , landlords play tax like everyone else . big deal

Never mind, it's clear you have a particular view. One that's shown to be a major part of finding a solution in the short term that can be built on but carry on. Athtrasna does enough cleaning up after me so I'll leave the last word in this little tête-à-tête to you.

BoatMad

Samuel T. Cogley wrote: »

Never mind, it's clear you have a particular view. One that's shown to be a major part of finding a solution in the short term that can be built on but carry on. Athtrasna does enough cleaning up after me so I'll leave the last word in this little tête-à-tête to you.

merely addressing the misconception that any tax paid by any sector can be claimed to exclusively support any other sector . thats all

murphaph

david75 wrote: »

From Germany up through all the Scandinavian countries renting is the MO.
We have a hangover about property thanks to the brits.

Germany is around 52% owner occupied and growing. In 1993 it was 38%. Things change. Don't know what the trends are in Scandinavia.

https://de.m.wikipedia.org/wiki/Wohneigentumsquote

Samuel T. Cogley

murphaph wrote: »

Germany is around 52% owner occupied and growing. In 1993 it was 38%. Things change. Don't know what the trends are in Scandinavia.

https://de.m.wikipedia.org/wiki/Wohneigentumsquote

I wondered when you'd show up regarding Germany :pac: - very interesting trend! Given my German amounts to being able to ask for a beer and the directions to the local house of ill-repute any chance of your take on it?

BoatMad

murphaph wrote: »

Germany is around 52% owner occupied and growing. In 1993 it was 38%. Things change. Don't know what the trends are in Scandinavia.

https://de.m.wikipedia.org/wiki/Wohneigentumsquote

if you translate the article , the reasons become clear

in Germany , as the article says , the actual number of homeowners has not actually increased , rather the decline in the birth rate and extended living age, has meant that as a percentage homeownership has increased , as homes tend to be owned by the older person

It cant be used to justify any increase of " desire " to own a home as was the context in which you presented it

it should be note that the average home ownership in Europe is 74% and Dublin is already 5 % behind that , and close to Germany levels

murphaph

BoatMad wrote: »

if you translate the article , the reasons become clear

in Germany , as the article says , the actual number of homeowners has not actually increased , rather the decline in the birth rate and extended living age, has meant that as a percentage homeownership has increased , as homes tend to be owned by the older person

It says the absolute numbers of home owners hasn't increased markedly but the older generation who were typically tenants have departed this earth so the ratio of home owners to tenants has increased as the younger generations who favour home ownership begin to come through the ranks.

One look around where we live and you'd know things were changing. Houses being built everywhere. We paid €60/m² for our site in 2014. Now you'd have to pay €145 for sites in poorer locations. There's a huge building boom going on and it's all owner occupiers in their 30s and 40s.

davindub

A mortgage really only costs you the interest it draws, so on a 180k mortgage thats 5400 for the 1st year + stamp duty etc.

This obviously gets cheaper as the capital is repaid.

Choose the house carefully in Laois, "Nicer" is superficial and I know some of the estates on the outskirts are a disaster waiting to happen, get an engineer to go over every inch of it including the ground works.

wordofwarning

BoatMad wrote: »

I meant that we need a wholesale reworking of the long term rental lease structure

(A) no eviction under any circumstances once Lease terms are met, sale of property occurs with sitting tenant ( as in commercial sales )

(B) Long Term leases with break clauses, should be legally be required to be offered by landlords , lease sets out rent increases and agreed arbitration processes

(C) option of a repairing lease at lower rates

(D) removal of the issue of tenants and landlord fixtures issues . Tenants has a right to engage in modifications with agreement with landlord , and where such agreement is reasonably expected


(E) State needs to examine ways where retirees have security of rented tenure, irrespective of income

So we need leases that give tenants even more rights? If landlords are selling up in vast numbers as it. What your suggestions will only do is cause more people to leave the market. None of your suggestions benefit the landlord at all.

You can't even get landlord term mortgages in Ireland. If you have a variable mortgage, your bank can decide to change your interest rate from 3% to 7%. So you suggest forcing landlords to set rent 10-20 years into the future, when they might not be able to tell what their mortgage interest rate will be in 2 years? Why don't we just make it easier and quicker for everyone by bankrupting landlord tomorrow with your suggestion.

Landlords need to be able to change their rents inline with costs. But when the Government is changing taxes, LPT and mortgage rates change so much. How can you suggest fixing rents for 20 years today, when those costs change?

The state needs to provide social housing. People need to stop expecting landlords to be almost altruistic. The state are not going to provide social housing, when people including yourself think the solutions to renting is ordering a landlord what to do with their assets. We the penny finally drops ie you can't tell a landlord want to do with their asset, the state might provide social housing.

jamesbondings

jester77 wrote: »

You have a lot of extra bills with owning. My annual insurances for the house (life, content, building, liability, etc) are 1500 per year. Then you have things like property tax, bins, tv license, etc that might already be part of your rent. And then there is the maintaining of the property. The heating, water and air circulation systems cost a few hundred per year to maintain and service. And that is before you keep the place in shape. Replacing furniture, maintaining garden and surrounds, painting rooms, and so on quickly add up.

Bar property tax and house insurance I look after all of the above as the tenant. If you don't then you get stuck paying huge amounts for a substandard hole no? Yes the landlord is responsible for most of it, but it would be a year and a day trying to get him out to fix anything. Best off looking after the house as if it were your own and see the landlord once a year.

johnnyskeleton

regi3457 wrote: »

We rent in co Laois in a house worth around 180 000 euro. We saw a similar nicer house but farther out of town for the same price. If we were to put down a 10% deposit and take out a mortgage with BOI the bank rep said our repayments (variable) would be 900 euro which is what we pay in rent at the moment. Now I know your repayments initially are mostly interest so when you make your payments over the first 5 years you pay the bank just the same as I pay my landlord right? Also with a mortgage don't you need additional insurance? I don't know how much that can be but surely that would make the repayments and insurance much higher than the rent payment we make each month right now?

I must add that in our case we would have the means to save up the full 180k in 5 years so we could cancel our mortgage early hypothetically speaking but in the interim from now until 2022, would it be wiser to keep renting or to buy a house? It seems to me that we would have the full 180k sooner if we carried on renting but maybe I am missing something. Anyone care to tell me what I am missing? I suppose property goes up over time but not always so surely speculating about this is not the way to go.

I see that BOI's rates are 4.5% on the variable >80%, which is quite high. They lure people in with their 2% cash back scheme.

In any event, if you wanna know what the amounts of principle and interest you will pay on a 25 year variable rate of 4.5% on €162,000, which has a monthly repayment of €900.45, and assuming no overpayments/missed payments/changes in variable rate, it would be:

YEAR INTEREST PRINCIPLE END OF YEAR BALANCE
2017 €7,216.58 €3,588.80 €158,411.20
2018 €7,051.71 €3,753.67 €154,657.53
2019 €6,879.27 €3,926.11 €150,731.41
2020 €6,698.90 €4,106.48 €146,624.93
2021 €6,510.25 €4,295.13 €142,329.80
2022 €6,312.94 €4,492.45 €137,837.36

That is to say, at the end of 5 years if you just pay the mortgage as normal, you will have paid off €20,000 in principle.

As other posters have said, there are higher expenses with home ownership - life insurance, mortgage protection, management fees, property tax, buildings insurance, mainteance and repairs, furniture etc. I would allow €2,000 per year on these. Another factor, although not an expense, is the loss of interest/return on your deposit of €18,000.

There are also stamp duty, legal fees, surveys etc which I would say will cost €4-5,000

So after 5 years the €20,000 less approx €14-5k additional expenses, is the net benefit of buying over renting in your scenario i.e. €5-6k better off. If you sold after 5 years you would have further legal expenses and estate agent expenses, so say €3-4k.

However, the big factor here is whether the property will go up, down or stay the same in value. If it goes down by more than €3-4k, you will have made a loss by buying over renting. If it goes down by €3-4k then you will have more or less broke even. If it goes down by less than €3-4k or stays the same or goes up, you will have made a gain on the purchase over renting.

So the above are just rough calculations, obviously it would be best if you do your own homework on it and make reasonable assumptions re: different values. The repaying early will obviously reduce interest payments per year and will probably be better than what you will get on deposit interest.

I would suggest you work it all out and make an educated guess, but the largest variable is what the market will do in your specific area.

The_Conductor

Deleted User wrote: »

In the last 4 years of renting our shoebox, my partner and I have spent 59,000 euros. I'd much rather be 60k into my mortgage, than just being glad Ive had a roof over my head for the last 4 years.

Yes home ownership is more expensive then renting, its not just the same as swapping the rent payments for the mortgage payments and being quids in, but at the end of the mortgage, you get to keep the asset. You also get to modify it anyway you want. Paint it any colour you want, and get rid of the sh1tty bargain basement fridge freezer the LL put in because they had to put in a fridge freezer.

If you took out a an average mortgage 4 years ago- and paid 60k into it over that time- an initial mortgage of 220k @ 4% on a 35 year term- which are what the average rates were and the average mortgage drawdown-

After 4 years, using compounded interested, you'd have paid back 60k to the bank- and reduced your mortgage from 220 to 196k- i.e. 34k of your 60k repayment would have gone in interest- 26k against the principle- and you can be damn sure your sundry costs would be significantly higher than 26k over the 4 years........

So- paying 60k off a mortgage over the last 4 years, would in all probability have cost you more in interest and cost of ownership- than would the equity you'd have accrued in the asset- though its a close run thing.

Its not as straight forward as saying your 60k in repayments on a mortgage would be a better investment than renting- sit down and plug the figures- you cannot equate 60k in mortgage payments with being 60k better off- when you enumerate everything- its very possible you're no better off whatsoever.

regi3457

wordofwarning wrote: »

Do you know how much it costs to run a house? I just get the impression, you have not sat down with a BIC and scrap of paper to realise you pay LPT, home insurance, maintenance, life assurance if you are a couple, decorating, gardening etc. Owning a home is a lot more expenses than just a mortgage

The bank rep said that we only have to pay mortgage insurance and life insurance. Apparently those are not so expensive so do you think 100 euro a month would be enough for those?

regi3457

jester77 wrote: »

You have a lot of extra bills with owning. My annual insurances for the house (life, content, building, liability, etc) are 1500 per year. Then you have things like property tax, bins, tv license, etc that might already be part of your rent. And then there is the maintaining of the property. The heating, water and air circulation systems cost a few hundred per year to maintain and service. And that is before you keep the place in shape. Replacing furniture, maintaining garden and surrounds, painting rooms, and so on quickly add up.

yes and I suppose the 1500 or more would go into your savings if you didn't rent. Hmmm, maybe the real and only value in buying is actually being able to live in your own home which is nice but does it make it cheaper than renting, not so sure anymore. I do see that people do have a pressure to buy asap perhaps it gives them some false sense of security or perhaps they just really believe that renting is more expensive.

regi3457

Samuel T. Cogley wrote: »

On the bills front, I'm not sure of beyond the Pale but within Dublin you could have a mortgage and a run of bad luck where everything needed to be replaced over a 2 or 3 year period and still come no where near what you'd pay in rent. With renting you're also assuming the LL will be arsed fixing the washing machine/fridge or whatever in any sort of timely manner.

not sure what the going rate for a house in Dublin but we would need at least double the amount of money to buy something in Dublin. Let's say 360k for now. On that mortgage our mortgage repayments would be like 1800 euro. That is without any other expenses so not sure how much cheaper than renting that is. Wouldn't it be about the same as renting?

regi3457

Parchment wrote: »

Thats not the case for everyone.

in 5 years? maybe a wee bit but there is inflation here with the euro being weak and I don't care about stats blah blah. When I do my shopping I feel it. Things get more expensive and especially over the past two years so your higher salary (if it is higher) goes on other expenses

pilly

regi3457 wrote:

in 5 years? maybe a wee bit but there is inflation here with the euro being weak and I don't care about stats blah blah. When I do my shopping I feel it. Things get more expensive so your higher salary (if it is higher) goes on other expenses

I think what the poster meant is not everyone's salary goes up.

regi3457

Deleted User wrote: »

In the last 4 years of renting our shoebox, my partner and I have spent 59,000 euros. I'd much rather be 60k into my mortgage, than just being glad Ive had a roof over my head for the last 4 years.

Yes home ownership is more expensive then renting, its not just the same as swapping the rent payments for the mortgage payments and being quids in, but at the end of the mortgage, you get to keep the asset. You also get to modify it anyway you want. Paint it any colour you want, and get rid of the sh1tty bargain basement fridge freezer the LL put in because they had to put in a fridge freezer.

but after 4 years you wouldn't be 60 k into your mortgage, most of that would be interest paid to bank

at the end of the mortgage you get to keep the asset but if you rent and save the 180k as in our case you also get to keep an asset, just not the one you have been renting.

regi3457

davindub wrote: »

A mortgage really only costs you the interest it draws, so on a 180k mortgage thats 5400 for the 1st year + stamp duty etc.

This obviously gets cheaper as the capital is repaid.

Choose the house carefully in Laois, "Nicer" is superficial and I know some of the estates on the outskirts are a disaster waiting to happen, get an engineer to go over every inch of it including the ground works.

haha, you are right about the disaster estates, we know full and well

This house is a country house just outside of town on a nice big plot of land. It is a real house

regi3457

johnnyskeleton wrote: »

I see that BOI's rates are 4.5% on the variable >80%, which is quite high. They lure people in with their 2% cash back scheme.

In any event, if you wanna know what the amounts of principle and interest you will pay on a 25 year variable rate of 4.5% on €162,000, which has a monthly repayment of €900.45, and assuming no overpayments/missed payments/changes in variable rate, it would be:

YEAR INTEREST PRINCIPLE END OF YEAR BALANCE
2017 €7,216.58 €3,588.80 €158,411.20
2018 €7,051.71 €3,753.67 €154,657.53
2019 €6,879.27 €3,926.11 €150,731.41
2020 €6,698.90 €4,106.48 €146,624.93
2021 €6,510.25 €4,295.13 €142,329.80
2022 €6,312.94 €4,492.45 €137,837.36

That is to say, at the end of 5 years if you just pay the mortgage as normal, you will have paid off €20,000 in principle.

As other posters have said, there are higher expenses with home ownership - life insurance, mortgage protection, management fees, property tax, buildings insurance, mainteance and repairs, furniture etc. I would allow €2,000 per year on these. Another factor, although not an expense, is the loss of interest/return on your deposit of €18,000.

There are also stamp duty, legal fees, surveys etc which I would say will cost €4-5,000

So after 5 years the €20,000 less approx €14-5k additional expenses, is the net benefit of buying over renting in your scenario i.e. €5-6k better off. If you sold after 5 years you would have further legal expenses and estate agent expenses, so say €3-4k.

However, the big factor here is whether the property will go up, down or stay the same in value. If it goes down by more than €3-4k, you will have made a loss by buying over renting. If it goes down by €3-4k then you will have more or less broke even. If it goes down by less than €3-4k or stays the same or goes up, you will have made a gain on the purchase over renting.

So the above are just rough calculations, obviously it would be best if you do your own homework on it and make reasonable assumptions re: different values. The repaying early will obviously reduce interest payments per year and will probably be better than what you will get on deposit interest.

I would suggest you work it all out and make an educated guess, but the largest variable is what the market will do in your specific area.

I think people who buy homes need to look at things as you have outlined them here. This basically says it all. Thanks.

regi3457

pilly wrote: »

I think what the poster meant is not everyone's salary goes up.

Yes I got that but I was saying that even if it does, it would only be a litle higher and I wonder if that salary increase people get actually does compensate for inflation (not the inflation they say but the real one)

randomname2005

regi3457 wrote: »

I think people who buy homes need to look at things as you have outlined them here. This basically says it all. Thanks.

If it is just from a profit or loss, then yes. If you need to factor in stability then no. LL terminates lease ( legally) and you end up having to move which impacts commutes, social interactions that you may have built up with your neighbours and most importantly, schools. If you want to keep your kid or kids in the same school, or in a school with the same ethos you might have problems getting a place in a school close to your new abode or have to commute out of the way every morning and evening.

regi3457

regi3457 wrote: »

.......... It seems to me that we would have the full 180k sooner if we carried on renting but maybe I am missing something...............

If you buy now via a mortgage you surely aren't going to save and wait until you have 180k to make an early payment.

You can overpay your mortgage several times a week if you want to, every week once you are on a variable rate mortgage.

Rhetorical question though. Having the means to save 180k over the next 5 years is great in theory. You don't seem to have saved much to date though if you are looking at 90% mortgages on 180k properties.

mickoneill31

regi3457 wrote: »

not sure what the going rate for a house in Dublin but we would need at least double the amount of money to buy something in Dublin. Let's say 360k for now. On that mortgage our mortgage repayments would be like 1800 euro. That is without any other expenses so not sure how much cheaper than renting that is. Wouldn't it be about the same as renting?

On 360k over 30 years that's about 1600 per month.
In 10 years assuming you've paid nothing extra off it'd be the same.
If interest rates go up by a percent you'd be paying an extra 150.

In 10 years we don't know what rent will be. But I can look back at mine. My house costs me 1200 in mortgage after 10 years on our mortgage. The house beside mine rents out at 2100pm.

I do pay for extra costs like LPT and any maintenance and improvements. And I don't have the flexibility to move easily which I don't need.
So it's not black and white. I suppose it's a matter of assigning a monetary value to intangible pros and cons and plugging them into a spreadsheet.

irelandrover

you're also assuming that the rent stays the same over the 5 years
with the RPZ now i can guarantee that the rent will rise each year in areas close to Dublin.
Landlords dont want to be caught below market rate.
Id assume a 4% rise every year.

Year 1: 900*12 = 10800
Year 2: 936*12 = 11232
Year 3: 973.6*12 = 11681
Year 4: 1011.9*12 = 12143
Year 5: 1052.4*12 = 12628.5
Total over 5 years: = 58484

Yourself isit

BoatMad wrote: »

if you translate the article , the reasons become clear

in Germany , as the article says , the actual number of homeowners has not actually increased , rather the decline in the birth rate and extended living age, has meant that as a percentage homeownership has increased , as homes tend to be owned by the older person

It cant be used to justify any increase of " desire " to own a home as was the context in which you presented it

it should be note that the average home ownership in Europe is 74% and Dublin is already 5 % behind that , and close to Germany levels

The average home ownership in Europe is much higher than people think, as you say. And both the UK and Ireland are dropping rapidly unlike Europe.

Zubeneschamali

Bob24 wrote: »

"buying cheaper than renting" doesn't really make sense.

Long term, buying is obviously cheaper - rental properties are bought and rented out to make money - if renting was cheaper than buying, all landlords would lose money all the time, and soon there would be no rented property.

However, this is only true on average and in the long term. Something like the 2008 crash can leave you stuck in negative equity if you bought, where a renter might see rents drop or at least stop rising. You might buy at the top and have to sell at the bottom, and lose a packet. It is an investment, and value may go down as well as up.

And if you need to move/sell often, the transaction costs of buying and selling might not make sense.

regi3457

Zubeneschamali wrote: »

Long term, buying is obviously cheaper - rental properties are bought and rented out to make money - if renting was cheaper than buying, all landlords would lose money all the time, and soon there would be no rented property.

However, this is only true on average and in the long term. Something like the 2008 crash can leave you stuck in negative equity if you bought, where a renter might see rents drop or at least stop rising. You might buy at the top and have to sell at the bottom, and lose a packet. It is an investment, and value may go down as well as up.

And if you need to move/sell often, the transaction costs of buying and selling might not make sense.

long term for sure but if you had a 5 year plan as we do? then maybe it works out to about the same excluding speculative property price increases/decreases

Sunny Disposition

My mortgage and monthly insurance payment is about €100 pm less than renting a similar house in the same estate. Mightn't sound like a huge difference, but buying means building up equity so it is way better value in the long term, provided property prices don't crash relative to when you take on the mortgage. Property prices and rents are likely to go up so I'd say it's a good move to buy now.


With all the hype it seems everyone wants to get on the famous 'property ladder' once again. We mightn't be seeing a bubble at the moment but we are definitely vulnerable to another one, still no sign of a Government or even a party that is determined to make housing affordable.