Ah Jebus Conor! Rent is dead money?

The sole and only interest I have in buying right now is the post-retirement rental situation. Frankly most of the houses within commutable distance of Dublin are completely horrible.

However, the key issue I have about retirement is not even whether I’ll have a house to live in or not but whether my pension will even exist given that the government has started appropriating some of it already and the whole pensions thing is considered to be a timebomb anyway.

Additionally, I fully expect that by the time I reach 68, the retirement age will have changed again. Unemployment is more likely to be a problem.

pension ages were set when life expectancy was lower so it makes sense to revise them upwards but should apply to all pensions including politician pensions so you don’t draw it until you hit that age

I think we will see the introduction of mandatory pension contributions which will be income tax in all but name as the benefits will be open to further levy at the whim of a government and no guarantee you will live to receive them

Ahhhhh! Nothing like some timely, relevant news:
irishtimes.com/newspaper/bre … um=twitter

So, according to this article, property is decreasing at 12.5pc per year (which of course is subject to change). So the money ‘lost’ in capital on a property valued at 100,000 is 12,500 a year. So for a property like this, at these rates, if you are paying less than €1,041 a month in rent, you should continue to rent. So if you are paying e.g. €800 a month for renting such a property, then you are saving at least €241 a month by renting. Taking other costs in to account (mortgage interest, property taxes, etc.), the savings are probably more substantial.

Granted, this is all very generalised but it does highlight how renting will make more sense in a falling property market than in a static or growing property market.

  • In relation to pensions, have you checked the value of your pension recently? Go ahead and get an estimate, you’ll be in for a bit of a shock I reckon.

Issue with buying a property is that if you plan to buy at some stage then at some stage you actually do need to buy and how long can you wait for the bottom of the market. If you are 25 then not an issue, if 35 probably still ok but if you are 50 then maybe time is getting tight?

In same way as you should always max out life assurance before you go for a medical (in case they find anything nasty) - you’ll need life assurance to get a mortgage and older you get the higher the probability of developing a disease that means you won’t get that life assurance (fine if you plan to save and buy mortgage free or if you have some other contingency but many don’t).

In this day and age if you don’t have instant online access to the value of your pension, plus performance figures and transparent charges, you should be moving it elsewhere. Pension industry thieving fuckbags thrive on apathetic individuals who have no idea how their pension is performing or what it is costing.

P.S. Mine is worth 1% more than last year, having moved it all to cash. Otherwise it would be down c. 20%.

A link to Ronan Lyons Calculator.

A big house is a threat to your retirement, -CBS Moneywatch article about the cost of home ownership.

In this article it assumes that the cost of maintaining a property is in the region of 2% per annum, so I think it is entirely fair to factor this cost in by reducing the expected appreciation of the house.

Perhaps it would help to establish the base cost of owning a property to help make a more accurate assessment of the benefits or otherwise of purchasing

I’m reminded of this recent comment…

As one who quite deliberately sought ‘Fixer-uppers’ to purchase for our first and second (as in selling no. one and moving to no. two, mind!) homes and got both as executor sales I well appreciate what lack of care and maintenance over a decade or so can do to a dwelling and its grounds.
We had to make up any saving in price in a lot of later work over a few years in each case - although labour was cheap as it was mostly our own!
As one grows older you have neither the resources nor the interest in keeping on top of these things and, apart from sentimental attachment to the place you probably brought the familiy up in etc, the assorted difficulties of practically down-sizing are not to be underestimated.
In my own case, largish (by current standards) 1950 4-bed D12 row house with big gardens, I would reckon that ongoing maintenance, repair and renewals (including appliances) would be in the order of 3,700 pa. average

That assumption is just not realistic - may suit some countries, but certainly wouldn’t suit Ireland. I speak from personal experience as a former homeowner and from plain common sense. If a house costs €300,000, annual maintenance will be nothing close to €6,000 (2%) per year.

In the year up to when I sold my house, I crammed far more than an annual maintenance load into the property: cleaning gutters, regular garden tidying, planting, etc, several painting & decorating jobs, a few bits of electrics, replacing one or two shabby bits of furniture, more-than-the-usual level of windowcleaning and other paid-for cleaning tasks, and so on. All that lot came to about €1000 over the entire year - and as I mention was far more than the typical annual requirement. Yet by the assumption of 2% I should have spent another €5,000: it could only apply to people who change an entire bathroom suite every year and the kitchen every three or four years. Total nonsense.

If you’re going to figure out ‘the base cost of owning a property’ you’d need to be wary of this kind of arbitrary assumption.

Cost of maintaining != cost of maintenance. I always assume those type of figures come from countries where there is a substantial annual property tax.

It might appear to be nonsense if you haven’t grasped the argument.

Sure, a property has ongoing maintenance costs, and a provision of between 0.5% and 1% of the value of the property probably covers these costs, but it doesn’t cover the longer term depreciation or the home improvements that are required to keep the property in a comparable condition with the rest of the housing stock.

Let’s assume that the kitchen is replaced every 10 years at a cost of 5% of the property value. For a 200k property that’s a cost of 10k, or 0.5% of the property value per annum.

Now let’s assume the bathroom is fully replaced every 20 years at a cost of 10k, 0.25% of the cost of the property every year.

Over the mortgage life of a property it will also be necessary to replace windows, improve insulation and to replace worn or damaged fixings. It may also be necessary to paint the exterior, repair roofs, fix broken drains, rebuild fences, gates etc.

I have presented an argument that a provision of 1% should be made against the appreciation of the property to cover these long term maintenance costs. The article I linked suggests that 2% of the value is required, and clearly it is closer to reality than I was.

Do you still dismiss it as nonsense? Why?

Very true. I think it’s important to distinguish between ongoing maintenance costs (interior painting, cleaning gutters, painting fascias or doors, unblocking drains/toilets, fixing leaking pipes or dripping taps etc,) and longer term ‘depreciation’. I am attempting to examine the cost of providing for this longer term ‘depreciation’. My argument is that a property will not appreciate in line with the general market if these works are not carried out.

If we can arrive at a percentage it can be used to substantially increase the accuracy of Ronan Lyon’s otherwise excellent calculator.

You forgot to add… “in a normal market”…

That’s true, but over the long term the market probably averages out at ‘normal’.

Because the assumptions are unsound and they do the entire rent-versus-buy debate a disservice. For example,

Kitchen replacements come at all prices (for more, see below) and a bathroom is unlikely to cost 10k at present-day prices if you shop around even the mid-to-upper end of the market. So the costs have to be inflated a little to start getting even close to 2%. And not all homeowners feel the need to replace the kitchen every 10 years if they are happy with what they have.

Exactly the type of things that were included in my examples. Over the course of 10 years - which happens to be the length of time I lived in my house and a reasonable timespan for a maintenance cycle - my annual spend would have been roughly 0.5% of the value of the property, all-inclusive. If my house had been worth more we’d have been talking about an even lower percentage-based average maintenance cost.

And - in case you were wondering whether I was a complete slob who stinted on the maintenance - I have the ultimate evidence that the house must have been maintained to a standard that kept it in a comparable condition to the rest of the housing stock: when I sold the property, the condition was such that it fetched more than a nearly-new house on the same road that was built to the same footprint and size and almost identical layout. The new owner of my house (with whom I have occasionally spoken) had no major outlays other than swapping out the kitchen (at a cost of 6.5k, by the way, not 10k) and some carpets - which he admitted were perfectly good but not to his taste. *Including *the new kitchen and all other costs you have indicated, over time he will have a similar annual spend to mine: something of the order of 0.5% per annum of the value of the house.

Then it’s time you took a reality check! You think that someone who pays €400k for a 4-bed semi-detached in a Dublin suburb has to spend an average of €8k a year on maintenance? The guts of a grand a month on top of their mortgage? That would require an extra €1500 pre-tax income PER MONTH! If people did that, then nobody would ever buy a house (but then I suspect the purpose of such nonsense arguments and erroneous arbitrary assumptions is to try to demonstrate that nobody should).

I think the pair of you are getting tied into the sale value (which includes site cost) and the buildings value. Site values will vary depending on location, maintenance costs will depend on age (and existing level of upgrades).

Buy a 1970s semi-d that has not been upgraded, however well it has been kept, and you will have OFCH, if any, no insulation, single-glazed pine windowframes etc.

A fair point.

From what I read into the arguments put forward by Coles2, he was including, for example, new insulation and the periodic upgrading of windows if necessary as maintenance costs - which I absolutely agree are part of maintaining and upgrading a house to keep it at a fair market value.

If an older house has had all of these necessary maintenance upgrades done it will command a similar market value to the rest of the (more modern) housing stock. Of course not all houses will need new windows and insulation every 10 years. If an older house has not been maintained, its owner will forfeit a certain level of value when trying to sell it, because of the level of refurbishment and upgrades required. But even with such periodic upgrades, there’s no need to spend an average of 2% of the house price every year.

As a case in point, my own house experience demonstrates that it is possible to maintain/upgrade a house and keep its value level with the market value of the wider housing stock without spending even close to the 2% figure suggested above. No amount of assumption-based argumentation can demonstrate anything different.

Ok. So let’s try to figure it out then. Make your case.

I’ve presented an article that suggests that a provision of 2% should be made to cover the depreciation of the house and the need to upgrade it in line with the market. I certainly the figure is between 1% and 1.5%.

The importance of this is clearly seen when you input the figures into Ronan Lyon’s calculator.

I would be very interested to hear the opinions of others on this issue.

Below is from a US site but gives a rough approximation.

freeby50.com/2008/12/what-do … -cost.html

Great find Tyler.

The bit at the start is interesting and it clearly suggests that my estimates of 1%-1.5% are on the low end of the scale.

A link to the Coldwell Banker article cited.

I think anything over 2% would be nuts, but less than 1% would be over optimistic.

Here’s a link to HomeWise.ie for some info that’s more relevant to Ireland.

So, how about we assume a general figure of 1.5%?

You can assume 1.5%, but it needs to be of the rebuild cost, not of the market value of the house. As I say, site value counts for a lot.