Renting V Buying

Theboinkmaster · 08-11-2012 5:07pm

StillWaters wrote: »

There is a big difference betwen 5 and 30%, and indeed a 5% drop would still make it more advantageous to buy.

Say the average house, at €167,000, mortgage of €150,000, pays a monthly mortgage of €800 odd, based on 4.25% SVR. Couple of 30 years olds. Total cost of the mortgage is €240,000 for life time accommodation.

The renter, for the same property, will pay a whopping €1,112,000 for lifetime ocupation, based on 3% inflation.

I'm not proposing to rent for an entire lifetime, just to hold off buying a couple of years whilst we're in the midst of the nation's worst property bubble collapsing. Everyone will have a differing view on what stage of the collapse we're at.

And that's a silly example made just to support your argument. Instead of a 5% drop do it with a 30% drop and do it on a €0.7m property :P

borderlinemeath · 08-11-2012 5:38pm

Theboinkmaster wrote: »

I'm not proposing to rent for an entire lifetime, just to hold off buying a couple of years whilst we're in the midst of the nation's worst property bubble collapsing. Everyone will have a differing view on what stage of the collapse we're at.

And that's a silly example made just to support your argument. Instead of a 5% drop do it with a 30% drop and do it on a €0.7m property :P

Because ftb are just queuing up to buy properties at €0.7m. Some would say a silly example to support your argument. The average ftb isn't going to be looking at houses in that league. One of the reasons houses in the upper price brackets are falling at a faster rate is because there are feck all buyers for them full stop.

edanto · 08-11-2012 5:56pm

Renting or buying - big question.

All depends on your preferred location, your home life, any relevant employment or health issues, and of course what you think is going to happen to the local and national economy.

If anyone is looking at a particular property, and wants to calculate out the comparison between renting and buying, and how much interest they might pay on their mortage or gain from investing their deposit Ronan Lyon's calculator does all that maths for you - http://www.ronanlyons.com/2010/04/20/your-very-own-rent-or-buy-calculator/

You just put in your own predictions of the various interest and inflation rates and away you go.

Me, I bought, and glad we did. YMMV

desertcircus · 08-11-2012 7:40pm

Surely the first question is what kind of lifestyle you want, and then seeing if buying is currently an option given that aim?

My partner and I are renting a cottage in Ranelagh, but we'd never get a mortgage to cover the cost of it. In fact, we'd struggle to get a mortgage for anything at all in Ranelagh. Buying doesn't come into it; we want to live in Ranelagh, so we rent in Ranelagh. We could probably get a mortgage for a decent-sized house in Clondalkin, but we have absolutely no interest in living in Clondalkin: it's far from work, far from our families, nowhere near the pubs we like, and way too far from the city centre. Focusing on buying seems to ignore the fact that you may not want to live in the places you can get a mortgage for.

Cuddlesworth · 08-11-2012 9:13pm

StillWaters wrote: »

Property tax will be borne by tenants. Its a nonsense to think it wont be passed on.

If renting property becomes loss making for LL they exit the Market, thus tightening supply in the rental Market further.

In a market where the majority of rental property's would be in some form of negative equity, your assumptions that landlords will simply sell up and move on would be somewhat flawed. For those who outright own the property, the small cost of the household charge could easily be borne by the landlord.

Milk & Honey · 08-11-2012 9:28pm

Cuddlesworth wrote: »

In a market where the majority of rental property's would be in some form of negative equity, your assumptions that landlords will simply sell up and move on would be somewhat flawed. For those who outright own the property, the small cost of the household charge could easily be borne by the landlord.

The majority of rental property is not in some form of rental equity. In any event there are natural exits from the letting market all the time. Many landlords are having repossessed and the houses are being bought by first time buyers. Landlords die from time to time as well. The heavier the taxes the less likely investors will be to buy property for investment purposes. The result of heavier taxes will be a tightening in supply.

Cuddlesworth · 08-11-2012 9:40pm

Milk & Honey wrote: »

The majority of rental property is not in some form of rental equity. In any event there are natural exits from the letting market all the time. Many landlords are having repossessed and the houses are being bought by first time buyers. Landlords die from time to time as well. The heavier the taxes the less likely investors will be to buy property for investment purposes. The result of heavier taxes will be a tightening in supply.

Your giving simple answers to a complex situation. Rent payments are a question of supply and demand, they are not entirely dictated by what a landlord decides to charge as the landlord is in direct competition with both old and new participants to the market.

Increasing taxes, both direct and in-direct will have a effect on a already depressed property market. As house prices drop, rent will drop in relation to it. And house prices could go either way at this point. Although I'm sure we are seeing a dead cat bounce in south county Dublin too.

Milk & Honey · 08-11-2012 9:50pm

Cuddlesworth wrote: »

Your giving simple answers to a complex situation. Rent payments are a question of supply and demand, they are not entirely dictated by what a landlord decides to charge as the landlord is in direct competition with both old and new participants to the market.

Increasing taxes, both direct and in-direct will have a effect on a already depressed property market. As house prices drop, rent will drop in relation to it. And house prices could go either way at this point. Although I'm sure we are seeing a dead cat bounce in south county Dublin too.

Supply and demand is a very simple concept. Higher overheads will deter investors, hence lower supply. Couldn't be simpler. It has nothing to do with prices rising or falling. It has nothing to do with individuals deciding on their own charges without reference to the market.

Cuddlesworth · 08-11-2012 10:11pm

Lower house prices = lower overheads.

Zamboni · 08-11-2012 10:24pm

Milk & Honey wrote: »

Supply and demand is a very simple concept. Higher overheads will deter investors, hence lower supply. Couldn't be simpler. It has nothing to do with prices rising or falling. It has nothing to do with individuals deciding on their own charges without reference to the market.

So if landlords exit the rental market what do you think will happen to the properties?
Yes, they will be sold -reducing the number of tenants. These markets do not operate in isolation.

Milk & Honey · 08-11-2012 10:31pm

Zamboni wrote: »

So if landlords exit the rental market what do you think will happen to the properties?
Yes, they will be sold -reducing the number of tenants. These markets do not operate in isolation.

They will be sold mostly to first time buyers. Many first time buyers are not tenants by virtue of living with parents. Those who are renting typically buy a bigger unit, moving from a 1 bed flat to a 3 bed house. Supply will tighten. This is already happening in some areas with rents rising in consequence.

StillWaters · 08-11-2012 11:46pm

Cuddlesworth wrote: »

Increasing taxes, both direct and in-direct will have a effect on a already depressed property market. As house prices drop, rent will drop in relation to it..

No, that doesnt happen. There isn't a strong relationship between house prices and rental prices. If there was, rents would have collapsed since 2005, they havent. In fact as the Rental report out yesterday showed, as house prices fell, people moved towards rental and rents rose, so there can be an inverse effect.

Cuddlesworth · 09-11-2012 12:53am

StillWaters wrote: »

No, that doesnt happen. There isn't a strong relationship between house prices and rental prices. If there was, rents would have collapsed since 2005, they havent. In fact as the Rental report out yesterday showed, as house prices fell, people moved towards rental and rents rose, so there can be an inverse effect.

The low end of rent is being propped up by Rent Allowance, it sets the market cap and has seen minimal decreases. But as a renter, I can safely say both the mid tier and high tier markets have seen a huge decrease in cost over the last five years. While its possible that rent has increase marginally in the last year, that market can still wildly swing in the next 20 years.

You can't look at buying vs renting in terms of its cost now. There has to be some consideration for the long term. And in the next five years I can only see a further depression of the market.

djimi · 09-11-2012 8:39am

StillWaters wrote: »

No, that doesnt happen. There isn't a strong relationship between house prices and rental prices. If there was, rents would have collapsed since 2005, they havent. In fact as the Rental report out yesterday showed, as house prices fell, people moved towards rental and rents rose, so there can be an inverse effect.

Rent prices have dropped a lot in the past few years, at leastin a lot of areas they have (cant speak for Dublin, but trends in Dublin usually don't reflect the rest of the country).

Galego · 10-11-2012 12:36am

House prices will keep falling. This year they have fallen even though all the attempts made by the current government to keep them up. There is a 14% unemployment in the country and the economy is stuck in a deep recession so dont expect house prices not to be affected by the current economic events.

According to census 2011.

"Geographically, there are substantial differences in how the various local authorities fared. Limerick City, Donegal and Waterford City are topping the unemployment league with unemployment rates between 25 and 29 per cent. On the other end, below average unemployment rates are evident in Dublin City (18.5%) and its suburbs Dun Laoghaire-Rathdown (11.2%) and Fingal (16%), the commuter belt counties Kildare ( (17.9%) and Meath (18%), Cork County (14.8%), Limerick County (17.5%) and Galway County (18.1%). The greatest percentage point increases in the inter-censal period were experienced in Offaly, Wexford and Limerick City. Dun Laoghaire-Rathdown, Dublin City and Galway City experienced the smallest increase."

murphaph · 10-11-2012 11:21am

Galego wrote: »

House prices will keep falling. This year they have fallen even though all the attempts made by the current government to keep them up. There is a 14% unemployment in the country and the economy is stuck in a deep recession so dont expect house prices not to be affected by the current economic events.

Generalise much?

Germany has falling house prices in some regions and rising house prices in others, so does the UK, US and on and on.

Ireland is smaller, but don't think the property market won't become highly regionalised there too, as people begin to realise the folly of living in the middle of nowhere and commuting to a one horse town for a job in the only factory there.

Living in cities makes redundancy easier to mitigate against as you have a much greater chance of finding a job that doesn't force you to move house. Anecdotally at least, people are moving to Dublin in numbers now to find work.

Do you really think that house prices and rents in Dublin are proportional to those on Achill Island? Houses in locations with poor employment prospects may continue to fall (I would expect it in fact) to the point that they are abandoned (happened before), whilst houses in cities see increased demand.

In previous decades people just left the country, but these days we do actually have some decent employment in our urban areas for those with the skills, so people can be expected to try their luck there first, rather than leaving the country completely.

You see the same in rural Denmark come to think of it...houses (many of which are empty) can be had for next to nothing near the German border or across much of Jutland, but Copenhagen prices would make your eyes water!

MMAGirl · 10-11-2012 5:45pm

Page 10 of the Daft report tells a story doesnt it.

http://www.daft.ie/report/Daft-Rental-Report-Q3-2012.pdf

8.8% yield on 1 bed apartments in North County Dublin seems pretty good for investors.

And look at the Rent a room income and net load burden.

Even without renting rooms this looks attractive.

But i really think that the tax payer is subsidizing landlords on the rent a room scheme. Even though I used to be one of them. But there are people making healthy profits that are totally tax free.

StillWaters · 10-11-2012 5:54pm

MMAGirl wrote: »

And look at the Rent a room income and net load burden.

Even without renting rooms this looks attractive.

But i really think that the tax payer is subsidizing landlords on the rent a room scheme.

That's interesting, I havent heard anyone else call for the abolition of this tax break. Whilst it was brought in to help alleviate a very real problem, rocketing rents and house prices, which no longer exists, it also formalised part of the grey economy. I'm not sure closing this break would net the tax payer much at all tbh.

MMAGirl · 10-11-2012 6:04pm

StillWaters wrote: »

That's interesting, I havent heard anyone else call for the abolition of this tax break. Whilst it was brought in to help alleviate a very real problem, rocketing rents and house prices, which no longer exists, it also formalised part of the grey economy. I'm not sure closing this break would net the tax payer much at all tbh.

I know several people who actually make a profit on this scheme.
Sure if I rented a couple of my rooms I could put over €850 PM or over €10,000 a year into my pocket and pay no tax at all on it. And I have no mortgage anymore, so its not going anywhere but my pocket.
And even if I was still paying off the mortgage, its still income that is tax free. Significant income at that.

murphaph · 10-11-2012 6:37pm

MMAGirl wrote: »

But i really think that the tax payer is subsidizing landlords on the rent a room scheme. Even though I used to be one of them. But there are people making healthy profits that are totally tax free.

Hmmm, not sure what to make of that relief any more. It is a very generous allowance (10k I think these days) alright.

I would have concerns that closing it would convince many to cease taking in lodgers as it wouldn't be worth it any more and that means increased demand for "proper" rentals and increased rents. Not a problem for me personally as I am on the other side of the fence, but worth thinking about.

StillWaters · 10-11-2012 7:09pm

There is also the problem of pushing it back underground. In the past most people took lodgers and just didn't declare it. If it were abolished, would it actually be worth someone's time taking in lodgers especially if they are in the higher tax bracket? So it's tax neutral really.

There is a good argument to keep it in these times where people are struggling to pay their mortgages.
Haven't heard a whisper about it, and there is a lot if talk about other tax loopholes, so doubt it will be touched.

L1011 · 10-11-2012 8:50pm

We need to decide if the rent a room scheme is intended to increase the supply of rentals or to allow people to subsidise otherwise unsustainable mortgages and hence prop up the property market. It currently does both, but if its only intended to the do the latter it should be abolished.

Could easily pay your entire mortgage on a 3 bed in some areas if you took the single room.

MMAGirl · 10-11-2012 8:52pm

StillWaters wrote: »

There is also the problem of pushing it back underground. In the past most people took lodgers and just didn't declare it. If it were abolished, would it actually be worth someone's time taking in lodgers especially if they are in the higher tax bracket? So it's tax neutral really.

There is a good argument to keep it in these times where people are struggling to pay their mortgages.
Haven't heard a whisper about it, and there is a lot if talk about other tax loopholes, so doubt it will be touched.

If they dont pay tax on the income now, and they get away with paying tax on the income if/when it is actually taxable then there can only really be a net gain to the revenue if any portion at all pay tax on their income.

It would be much like landlords refusing to declare income. Make the home owners register for the PRTB and that problem is close to solved too.

I dont think any extra income should be exempt from tax. If I work for an extra €10,000 in a year I gets taxed at 41% + USC etc on that income.

Rent a roomers are earning income without handing any of it over to revenue.

murphaph · 10-11-2012 9:08pm

MMAGirl wrote: »

If they dont pay tax on the income now, and they get away with paying tax on the income if/when it is actually taxable then there can only really be a net gain to the revenue if any portion at all pay tax on their income.

It would be much like landlords refusing to declare income. Make the home owners register for the PRTB and that problem is close to solved too.

I dont think any extra income should be exempt from tax. If I work for an extra €10,000 in a year I gets taxed at 41% + USC etc on that income.

Rent a roomers are earning income without handing any of it over to revenue.

It's a tricky area IMO.

You can't really force people who take lodgers under the PRTB system as there is no tenancy. A lodger has as much legal right to remain as a guest in the home. They can be thrown out at a moment's notice.

If legislation was changed so that lodgers became tenants, it could have huge legal implications for ordinary home owners...what if a visitor decides they are a tenant and you can't prove otherwise? That's why lodgers have no rights in an owner occupied home.

I would be in favour of abolition of the relief before I'd favour the idea of considering lodgers as full on tenants in the eyes of the law.

MMAGirl · 10-11-2012 9:16pm

murphaph wrote: »

It's a tricky area IMO.

You can't really force people who take lodgers under the PRTB system as there is no tenancy. A lodger has as much legal right to remain as a guest in the home. They can be thrown out at a moment's notice.

If legislation was changed so that lodgers became tenants, it could have huge legal implications for ordinary home owners...what if a visitor decides they are a tenant and you can't prove otherwise? That's why lodgers have no rights in an owner occupied home.

I would be in favour of abolition of the relief before I'd favour the idea of considering lodgers as full on tenants in the eyes of the law.

The new branch of the PRTB, the PRLB

would solve that problem. No need to change anything.
If a guest is paying you rent then you have to register them.
You already have to declare the income, even though you arent required to pay tax on it.

murphaph · 10-11-2012 10:56pm

MMAGirl wrote: »

The new branch of the PRTB, the PRLB would solve that problem. No need to change anything.
If a guest is paying you rent then you have to register them.
You already have to declare the income, even though you arent required to pay tax on it.

Define a guest paying you rent.

What if someone comes to a party and brings a crate of beer?

Payment for time spent at your house or not?

The current system could require you to pay tax on the income from lodgers without making them tenants, which is my main point. I would favour abolition of the relief before I'd favour making lodgers tenants as it's a can of worms for normal home owners and that's why it'll likely remain the way it is: lodgers = guests and no more.

MMAGirl · 10-11-2012 11:18pm

murphaph wrote: »

Define a guest paying you rent.

What if someone comes to a party and brings a crate of beer?

Payment for time spent at your house or not?

The current system could require you to pay tax on the income from lodgers without making them tenants, which is my main point. I would favour abolition of the relief before I'd favour making lodgers tenants as it's a can of worms for normal home owners and that's why it'll likely remain the way it is: lodgers = guests and no more.

Somebody who rents a room in your house for a monthly fee.
Clearly if you give them the room for a case of beer its a different relationship than what we are talking about.

Again, nobody said they are to be made tenants in the same way as people renting houses or apartments.

The amount of money that revenue is leaving on the table here is obscene.
Where else could someone earn €10,000 completely above board and not be taxed on it.

murphaph · 10-11-2012 11:37pm

MMAGirl wrote: »

Somebody who rents a room in your house for a monthly fee.
Clearly if you give them the room for a case of beer its a different relationship than what we are talking about.

Again, nobody said they are to be made tenants in the same way as people renting houses or apartments.

The amount of money that revenue is leaving on the table here is obscene.
Where else could someone earn €10,000 completely above board and not be taxed on it.

I'm not defending the relief!!

I'm merely pointing out that it is not a solution to define lodgers as tenants (you clearly implied that when you said they should have to register with the PRTB, the 'T' stands for "Tenancies"!!) as it has implications for normal home owners.

What happens when your slightly dodgy cousin comes up to the big smoke and sleeps on your couch for a few weeks while looking for work, giving you €50 of his dole money for using your heat and light? If he was defined in law as anything other than a guest, you might have huge problems getting rid of him if he decides he's staying put on your sofa

yard_king · 11-11-2012 4:43pm

Galego wrote: »

House prices will keep falling. This year they have fallen even though all the attempts made by the current government to keep them up. There is a 14% unemployment in the country and the economy is stuck in a deep recession so dont expect house prices not to be affected by the current economic events.

According to census 2011.

"Geographically, there are substantial differences in how the various local authorities fared. Limerick City, Donegal and Waterford City are topping the unemployment league with unemployment rates between 25 and 29 per cent. On the other end, below average unemployment rates are evident in Dublin City (18.5%) and its suburbs Dun Laoghaire-Rathdown (11.2%) and Fingal (16%), the commuter belt counties Kildare ( (17.9%) and Meath (18%), Cork County (14.8%), Limerick County (17.5%) and Galway County (18.1%). The greatest percentage point increases in the inter-censal period were experienced in Offaly, Wexford and Limerick City. Dun Laoghaire-Rathdown, Dublin City and Galway City experienced the smallest increase."

house prices will keep falling outside the capital and population centres , they might even keep falling in places like west dublin where a glut of stuff was slapped up but in sought after areas , the bottom has been in for about six months

josealdo · 11-11-2012 10:33pm

djimi wrote: »

If you have not lived together before then do not even consider getting a mortgage together!!!

well said djimi , never a truer word said , that is more important advice that when to buy .

Renting V Buying

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