Up and down the property ladder - Irish Times Sat June 23

Didn’t notice this posted yet, from Saturdays Times.
irishtimes.com/newspaper/wee … 99445.html

It’s a rent or buy piece in their lifestyle section. Barcalys and Ronan Lyons suggest buying is better than renting,
yet their sample of 4 people suggest renting is the way to go.

RL states "Let’s take an average house price of €160,000,”… 12 annual mortgage repayments over 30 years will cost €300,000 on a €160,000 property, and the property might then be worth about €290,000.
Paying €800 in rent 12 times a year on that property for 30 years, allowing for 2 per cent rent inflation, would mean the renter would have paid €390,000. "

So, what do people think?

  • Rent or Buy?
  • Are the figures right? Do they account for maintenance?
    and
  • Could the price level matter? ie. what makes sense at avg price of 160k may not make sense at avg SCD price of 500k?

Did they not have a deposit, 100% mortgage? christ!!
30 years to pay back €160,000, christ almighty!!

He is banking on 2% p.a. property inflation for the next 30 years?
Maybe, or maybe there is another 15% fall before property starts to go up - who knows?

You would need a yield multiplier of 16.666 to justify paying €160,000 on a €800 rent p.c.m property - any pro investor here taking bet?

No mention of property tax, maintenance, upkeep, fees, furnishings etc etc etc

One of the things that puts me off as a long term renter ( I have be renting for 13 years…) is that a lot of places are furnished and often not great standard or to your taste. If renting in the long term is your choice I think you want to have your own stuff so it can feel properly like your home.

Interesting post though. I would say that traditionally that owning in some of the scenarios outlined is better value in that you have an asset at the end of it. But in the current climate where people don’t want to be tied to a bankrupt country owning a house could become an anchor.

Right now for me buying makes sense because intend to stay here. When I deduct my deposit, the monthly mortgage payments will be lower than the monthly rental value and in the event that I had to move for some unforseen circumstance I have a insurance policy of sorts.

Right now, for me at least, the real option value of being able to up sticks and follow a better professional option somewhere else in the world seems high enough to push me to continue renting. Of course, I don’t have that quantified.

I’m sure there are others in the same boat.

I’m in that boat. It’s nice to have an exit strategy.

They are rough (very rough) estimates and I hate when they use the “rent for 30 years” argument. If you rent for 30 years then you’ve paid 390k - you have no asset at the end and still have to provide a roof over your head.

If you buy you pay 460k - but have an asset worth 290k, no mortgage, so you don’t have the expense of housing yourself.

irishtimes.com/newspaper/pro … tml?via=mr

I was thinking the exact same when I was reading it, but I cannot ignore the fundamentals.

Insolvent banks
Bankrupt country
High unemployment
Emigration
Oversupply
Euro meltdown

Surely you accept that there must be some price where stability can co-exist with those fundamentals. Particularly when the prospect of a serious dose of inflation should be on your list too. You would need to make a case why the current price levels are not conducive to stability.

IMO, we’ve reached the point where the one-size fits all descriptions no longer work and the near future prospects vary by location. Where I’m looking to buy, I see the basis for stabilisation, but where I moved from I see no prospect for the foreseeable future.

Maybe I’m being very stoopid here!! But how does paying €800 per month x 12 months x 30 years equate to €390000??

Ha, this was my exact thought too!

they’re assuming 2%/year rent inflation

Ah thanks… missed that… :blush:

And also the massive deficit, that affects everyone.

I don’t think inflation is a given, deflation first, meaning debts get costlier, then inflation once the velocity of all that printed money picks up, if it ever does.

I don’t think one size fits all ever worked so I agree there, but thankfully I couldn’t give a shit about prices in SCD or Galway city.

Where is this economic stability you speak off?

I’ve done the sums (big spead sheet) and right now buying makes more sense for us. The down side is that it also requires plowing in all or most of our savings. The pluse side is moving from appartement to house with nice garden. Another down side is I’m not much of a gardner.

That plus side is available to renters also

No mention of instrusive, arsehole landlords, but I suspect most landlords would place considerable value on good tenants rather than repeatedly harrass them. We’ve been renting for twelve months. We keep the house absolutely immaculate and look after it as if it were our own. We don’t bother the landlord with problems, but rather deal with anything arising ourselves. We put up with living with a weirdo neighbour who plays loud music all day and pay our rent by dd on time without fail every month. We like the area and would be happy to stay renting here longer term if it weren’t for the LL persistently sticking his nose into our business, wanting to visit the house, thinking of reasons to call or text us. He also has a neighbour watching us and reporting on our movements to him (which became apparent nearly a year ago when he rang my husband at midnight one Sunday asking why our windows were open and when he texted about us having cut the hedges within a half hour of the job being completed). The house is uninsulated and was FREEZING in winter. Our heating bills were enormous. He now claims that we are getting the house too cheap (we’re not) and wants to increase the rent by 8%. He is retired with plenty of money but I guess you really can’t account for people’s stupidity and greed.

That’s my experience of renting. At this stage, if we have to pay over the odds to buy somewhere that would (hopefully) allow us some privacy and quiet and not have some pseudo Canny McSavvy prick trying to hold us to ransom, well so be it. No contest, as far as I’m concerned.

Rant over.

Dejaview, I’ve had a similar experience with renting. Not the intrusive landlord but the LL trying to put the rent up despite us being model tenants. It’s very frustrating.

Firstbass, his greed has backfired, as we have given our notice. Now he has to go through the reletting process. If there is a vacant period of a month or even a few weeks, he will be at the loss of the rent for that period, and will have difficulty recouping it, even if he charges new tenants a higher rent. But sure that’s his business. Perhaps there’s no shortage of model tenants in Dublin these days.

Should add as well that I actually wouldn’t have a problem with the increased rent per se where it is warranted; it is the feeling of never being at ease due to privacy/intrusion issues that is my over-riding concern.