RTÉ claims it's cheaper to buy than rent!

BendiBus

Did anyone see the 9 O'Clock News this evening?

RTÉ reported it as FACT that it's cheaper to buy than rent :mad:

They used a 250K 2-bed apartment in Dublin City Centre claiming rent is €1200 where a mortgage could be as low as €680 (or thereabouts)!

This was based on a 1 year discount rate of 2.45% from BOI for FTBs. I can only assume it's interest only as well.

Piss poor reporting from RTÉ that hopefully won't fool anyone.

Can't find an online link yet.

johnnyskeleton

BendiBus wrote: »

Did anyone see the 9 O'Clock News this evening?

RTÉ reported it as FACT that it's cheaper to buy than rent :mad:

They used a 250K 2-bed apartment in Dublin City Centre claiming rent is €1200 where a mortgage could be as low as €680 (or thereabouts)!

This was based on a 1 year discount rate of 2.45% from BOI for FTBs. I can only assume it's interest only as well.

Piss poor reporting from RTÉ that hopefully won't fool anyone.

Can't find an online link yet.

It's not interest only but it includes TRS. I don't know what LTV they were using. Rate is from AIB btw.

To be honest, if all 2 bed apartments in Dublin City Centre were selling for €250k I wouldn't be too upset with them publishing this figures. Apartments would still be overpriced and IMO likely to fall further, but at least there would be some kind of market activity which would spur on the reduction in prices of most other properties.

BendiBus

johnnyskeleton wrote: »

It's not interest only but it includes TRS.

A little checking on Karl Jeacles mortgage calculator suggests it might be an 80% LTV over 30 years less TRS.

So you still need 50K up front and be ready to brace yourself for an increased interest rate in 12 months. What's the current best non-introductory rate on offer for a mortgage like this? But fair enough, in the example given, it probably would still be cheaper.

It is BOI by the way. It's a new fund to be announced tomorrow.

Link up now

http://www.rte.ie/news/9news/

Senna

I do know of houses near me that would definitely be cheaper to buy rather than rent, even when rates go up to 5%. But with rents dropping here and a huge oversupply of houses to rent, i still cant see it being the "smarter" option just because there is some balance at this moment.

dny123456

as Senna says.. rents defintely cheaper than mortgages, standard variable... in my area. But this might change as people start leaving the country. Academic really as a lot more people are about to lose their jobs and wont be able to buy or rent!

MG

They are reporting cash flow only, need to take into account the loss in value of the asset when buying at the moment, could in the region of 2k a month (depending)

sorella

Also issues like maintenance.

20goto10

BendiBus wrote: »

Did anyone see the 9 O'Clock News this evening?

RTÉ reported it as FACT that it's cheaper to buy than rent :mad:

They used a 250K 2-bed apartment in Dublin City Centre claiming rent is €1200 where a mortgage could be as low as €680 (or thereabouts)!

This was based on a 1 year discount rate of 2.45% from BOI for FTBs. I can only assume it's interest only as well.

Piss poor reporting from RTÉ that hopefully won't fool anyone.

Can't find an online link yet.

What are you fuming at? Their facts add up. They make it clear and state numerous times that it is a 1 year fixed rate. You need to figure out what the rate will be when you come off in a years time. Its safe to say it will not be any higher than todays rates. I'm not going to work it out because I'm not looking to buy but I wouldn't be surprised if a mortgage was less than rent even on a standard variable.

20goto10

Senna wrote: »

I do know of houses near me that would definitely be cheaper to buy rather than rent, even when rates go up to 5%. But with rents dropping here and a huge oversupply of houses to rent, i still cant see it being the "smarter" option just because there is some balance at this moment.

Its not black or white. It all depends. A 26 year old with no commitments is less likely to be interested in buying at the moment. But there are a rake of people out there who do want to own their own home who are just sitting it out. I think the report made it clear that its well worth them at least taking a look at the market again and the main point was that AIB and BOI are now ready to listen to FTB's again.

Sure, if you buy now you're going to lose value on your home. But its a bit foolish (not of you, I'm speaking generally) to think of property as an investment nowadays.

bangersandmash

20goto10 wrote: »

What are you fuming at? Their facts add up. They make it clear and state numerous times that it is a 1 year fixed rate. You need to figure out what the rate will be when you come off in a years time. Its safe to say it will not be any higher than todays rates. I'm not going to work it out because I'm not looking to buy but I wouldn't be surprised if a mortgage was less than rent even on a standard variable.

What facts exactly? Twice last night RTE stated categorically that it IS cheaper to buy than rent, no caveats or clarifications. Then they provided rent and mortage figures for one city centre apartment development, with no details on the development and no explanation of their figures.

If you think this single comparison applies to vast swathes of apartments in Dublin then I would be highly surprised. If you think it applies to the majority of family-sized homes and not just a subset of shoeboxes then you're deluded. And anyone who really expects their mortgage interest rate to stay near 2.45% for the next 20-30 years is seriously deluded.

In other news rents are down 12%-15% in Dublin in the last year according to Daft. I wonder how this affects RTE's "facts".

20goto10

bangersandmash wrote: »

What facts exactly? Twice last night RTE stated categorically that it IS cheaper to buy than rent, no caveats or clarifications. Then they provided rent and mortage figures for one city centre apartment development, with no details on the development and no explanation of their figures.

They quoted that it was cheaper to buy than rent for a 2 bed Dublin apt with a rent of €1200 and value of 250K when taking out the 1 year fixed rate with BOI. That was clearly stated. They never once generalised it as swathes of apartments in Dublin. But having said that, If I had the time I could easily pull out similar properties for you.

bangersandmash wrote: »

And anyone who really expects their mortgage interest rate to stay near 2.45% for the next 20-30 years is seriously deluded.

Nobody expects rates to stay as they are but when they do go back up nobody will care because it means the economy is back on its feet. Its highly unlikely that rates will go back up by much while property values are still declining. Are you suggesting people wait until rates peak again before buying? I don't understand your argument here.

bangersandmash wrote: »

In other news rents are down 12%-15% in Dublin in the last year according to Daft. I wonder how this affects RTE's "facts".

It doesn't affect their facts at all because the rent on the apt was €1200.

bangersandmash

20goto10 wrote: »

They quoted that it was cheaper to buy than rent for a 2 bed Dublin apt with a rent of €1200 and value of 250K when taking out the 1 year fixed rate with BOI. That was clearly stated. They never once generalised it as swathes of apartments in Dublin. But having said that, If I had the time I could easily pull out similar properties for you.

They gave a single rental figure and a single valuation. Despite what you say it was not clear at all that it only applied to a single property with the special BOI rate. Yet they repeatedly said "it is cheaper to buy than rent" - they failed to clarify that it was only the case in very specific circumstances. It was poor journalism yet again from RTE. They were deliberately vague and obtuse.

20goto10 wrote: »

Nobody expects rates to stay as they are but when they do go back up nobody will care because it means the economy is back on its feet. Its highly unlikely that rates will go back up by much while property values are still declining. Are you suggesting people wait until rates peak again before buying? I don't understand your argument here.

This rate applies for 12 months. It's unlikely in the extreme that the economy will be back on its feet in 12 months. Yet buyers are being encouraged to base their calculations on short fixed-rate offers.

20goto10 wrote: »

It doesn't affect their facts at all because the rent on the apt was €1200.

It's relevant because the variance in asking prices across Dublin is high and there is significant room for haggling. We have no idea whether €1200 is really the market rate for this development.

Funny how some people posting say it's cheaper to buy than rent but don't have inclination to find all these bargain basement deals.

20goto10

bangersandmash wrote: »

They gave a single rental figure and a single valuation. Despite what you say it was not clear at all that it only applied to a single property with the special BOI rate. Yet they repeatedly said "it is cheaper to buy than rent" - they failed to clarify that it was only the case in very specific circumstances. It was poor journalism yet again from RTE. They were deliberately vague and obtuse.

This rate applies for 12 months. It's unlikely in the extreme that the economy will be back on its feet in 12 months. Yet buyers are being encouraged to base their calculations on short fixed-rate offers.


It's relevant because the variance in asking prices across Dublin is high and there is significant room for haggling. We have no idea whether €1200 is really the market rate for this development.

Funny how some people posting say it's cheaper to buy than rent but don't have inclination to find all these bargain basement deals.

I don't think anyone is naive enough to base their first property purchase on a single rte report without looking into the facts of their own particular purchase. What the report was saying is that there are people out there who can afford a home and have been holding out (and quite rightly so imo) and that both AIB and BOI are once again open for business in the FTB market. They simply gave an example of how the current situation could be advantagous. Thats all. I think people are reading too much into the report.

It's my opinion, not the reports, that this example is not a once off. But I've no facts to back that up nor do I have the desire to go and get them.

shoegirl

BendiBus wrote: »

Did anyone see the 9 O'Clock News this evening?

RTÉ reported it as FACT that it's cheaper to buy than rent :mad:

They used a 250K 2-bed apartment in Dublin City Centre claiming rent is €1200 where a mortgage could be as low as €680 (or thereabouts)!

This was based on a 1 year discount rate of 2.45% from BOI for FTBs. I can only assume it's interest only as well.

Piss poor reporting from RTÉ that hopefully won't fool anyone.

Can't find an online link yet.

What planet are they on and what agenda are they trying to promote? I've a friend with a 220k mortgage and she is paying around €900 PLUS insurance (which a tenant doesn't have to pay unless they want contents insurance - IF they can get a quote, which a large proportion cannot). The only way somebody will get that low a mortgage is if they have a downpayment of about 50% and a very secure income - which in most cases will mean that they are already homeowners are highly unlikely to be looking for an apartment in town.

According to Ulster bank online, after TRS, somebody putting down 25k as a deposit and borrowing the rest will pay €1030 a month, but if they don't have a downpayment or are borrowing 250k on a slightly more expensive property (as effectively 100% mortgages are gone) over 30 years they will pay a minimum of €1122 on a fixed rate of 4.8%.

THEN add insurances to this, and it probbably will come to more than 1200 a month. RTE are talking nonsense.

Plus it doesn't take into account potential depreciation on the property which might mean that it could be unsellable for many years without making a considerable loss.

Tigger

thats a €550 euro profit

people should snap these up and make €550 a month an we all know property always goes up in value

soon we'll all be rich
:cool:

Caoimhín

Doctor Goebbels would be proud.

crocro

Another way of looking at it is that if you can get rent of 1200 on a 250K apartment then that's a 5.76% yield which is not bad as it exceeds cpi and borrowing and deposit rates. Still you have the fear of further capital value slides and further rent declines.

From an owner-occupier's point of view, the property ladder idea is gone so there is no idea that buying a small property now will put you in a better position to buy a larger property in the future when prices have risen. Indeed you may be in negative equity so renting is safer.

ParkRunner

Why don't banks in this country offer mortgages with long-term fixed rates? The 2.45% rate is good but for 12 months? Especially as the first few years you will be paying mostly interest.

Is there something preventing one bank offering say a 10 year low fixed rate mortgages and attracting a lot of customers, which would yield similar profits to a handful of customers taking out short term fixed rate mortgages where the interest rate will go painfully upwards while the customer's income will more than likely fall?

The BOI offer seems to be enticing FTB's into a high risk position where jobs and incomes are unstable, property values are plummeting and interest rates will rise considerably in the medium term

crocro

There are a number of 10 yr fixed rate on offer in ireland. AIB offers 4.27% APR for 10 yrs fixed

The 1 yr rate is just a discount and not a profitable long term rate. You would have to show that your income was capable of supporting the current long term rates plus 2%.

http://www.finfacts.com/Private/dip_rate/mrt_10yr.htm

ParkRunner

A 4.27% interest rate for 10 years doesn't seem too unattractive really, if you can predict when the ECB will start raising interest rates again and begin the mortgage just before then.

shoegirl

crocro wrote: »

Another way of looking at it is that if you can get rent of 1200 on a 250K apartment then that's a 5.76% yield which is not bad as it exceeds cpi and borrowing and deposit rates. Still you have the fear of further capital value slides and further rent declines.

From an owner-occupier's point of view, the property ladder idea is gone so there is no idea that buying a small property now will put you in a better position to buy a larger property in the future when prices have risen. Indeed you may be in negative equity so renting is safer.

Interesting post and well thought out.