Stay renting or buy?

sandwichpolice5

Hi all

I was hoping some people with some knowledge and experience could advise me...

For the last year I've been renting a 1 bed apartment in north Dublin cc for 1000/month. I have been looking to move for the last while and have been checking out daft, it seems that there's a lot of good options out there now around that price range to rent in the city centre. I did a search in the 'for sale' section for fun, and found a lot of similar apartments up for sale, with asking prices of about 200,000. According to the mortgage calculators they have advertised, a mortgage of such an amount would amount to about 700 euros per month (I understand that this would vary a lot based on the type of mortgage you choose etc.), and so for the first time I've considered the option of buying.

I'm 24 years old, single, I have a degree of job security (junior doctor) on a decent enough income. I don't feel I would have a problem getting a mortgage, although I would have to save the deposit etc. Like everyone, I paid attention to the property market in the news and subsequently became terrified of the thought of buying and taking on that responsibility in an uncertain market. Now I'm not so sure...

Is it crazy to consider buying now? Is 200k for a modern one bed in the city centre significantly lower than what it was at the peak? Would I be naive to think that it wouldn't drop significantly in value (considering it's location) if I bought now, or would I be better off renting still? Should I wait and see? I really wouldn't like to make a big financial mistake...

What do you think?

PCPhoto

I was looking at buying during the "better days" .... and city center apartments were approx 280-350K at the moment they are approx 200-250ish.

you could talk to your landlord and reduce your rent.

according to "experts" the prices will continue to drop, so its a question of do you want to keep giving your money to landlord or give it to the bank towards your own place.

(if you can afford a place and consider the price to be reasonable then spend money - but you have to accept that you will more than likely loose money in the transaction - but gain your own property)

gurramok

That 700quid a month is probably on teaser super low interest rates. Stress test it when rates go back to normal to 4%+ within a couple of years(global/Euroland economy recovers)

Rents are rducing too. You should be able to nab a 2bed for 900 in North Dublin, i do see alot on daft for that now.(assuming you are not in an upper class area )

Yes, the prices will continue to drop in price. Work out how much you fork out in rent(12k) and compare that to how much your target gaff will/has dropped in price over a year. I bet it has dropped more than 12k hence you are actually saving alot of money by simply waiting.

tedstriker

A report came out the other day from the central bank showing how much of an increase there has been in mortgages. Basically the amount of mortgages given out by institutions for the first 3 months of 2009 was €428million compare to a whooping €2.6 billion for the first 3 months of 2008 and march this year saw only €20million worth of mortgages given out.

These figures are important because they emphasize the fact that banks are not lending, regardless of how much you consider yourself to be a fairly low risk. The reason banks are not lending is because they need to reduce their loan to deposit ratio. The average loan to deposit ratio in irish banks was/is something like 177% but Irish Life & Permanent went as far as 277%. That means for every €100 that came into an account on deposit €277 was loaned out for mainly mortgages. Yes this is one of the highest ratios in the western world. The result now is simply that banks won't lend, the government and the money markets have effectively set it out this way.

So how does this help the original poster? Well it means that because no mortgages will be given out (very few anyway) and because of many other things like massive increase in unemployment, higher taxes coming into play, a realization by the general public that property is not a golden goose and also the fact that there is a massive amount of property build and standing idle it means that the average price of an irish house will more than likely drop by over 50% in the next 2 or 3 years.

Therefore I would recommend you continue to rent, and also seek a reduction in rent because there is a massive overstocking of rental apartments and houses too. Save money and in perhaps about 2 years (obviously keeping an eye on the markets and everything else) you can buy a better place for a much cheaper price.

A final point is that in order to understand the value of a place you are buying calculate that the maximum you should pay is about 14 times the yearly rental price. So if you pay 1000 a month, then thats 12,000 a year and therefore the apartment you live in right now is only worth 168000 realistically. I bet your landlord thinks its worth about 300,000.

francish

sandwichpolice5 wrote: »

Hi all

I was hoping some people with some knowledge and experience could advise me...

For the last year I've been renting a 1 bed apartment in north Dublin cc for 1000/month. I have been looking to move for the last while and have been checking out daft, it seems that there's a lot of good options out there now around that price range to rent in the city centre. I did a search in the 'for sale' section for fun, and found a lot of similar apartments up for sale, with asking prices of about 200,000. According to the mortgage calculators they have advertised, a mortgage of such an amount would amount to about 700 euros per month (I understand that this would vary a lot based on the type of mortgage you choose etc.), and so for the first time I've considered the option of buying.

I'm 24 years old, single, I have a degree of job security (junior doctor) on a decent enough income. I don't feel I would have a problem getting a mortgage, although I would have to save the deposit etc. Like everyone, I paid attention to the property market in the news and subsequently became terrified of the thought of buying and taking on that responsibility in an uncertain market. Now I'm not so sure...

Is it crazy to consider buying now? Is 200k for a modern one bed in the city centre significantly lower than what it was at the peak? Would I be naive to think that it wouldn't drop significantly in value (considering it's location) if I bought now, or would I be better off renting still? Should I wait and see? I really wouldn't like to make a big financial mistake...

What do you think?

I would hold off unless you can find a really desperate seller who is willing to sell at well below average market price, While you may have job security, there are a lot of people out there who are very nervous about buying for fear they would loose their jobs and this will drive the market lower. Also, would echo point made in other replies, interest rates will rise in coming years as rest of eurozone comes out of recession, this will further depress prices. Landlords are desperate not to loose tenants so negociate hard.

Firetrap

As an aside, I think you should look at last night's Late Late Show - the last half hour of it. It should be up on RTE's website soon. I think it's repeated on Monday or Tuesday night as well.

It was a feature on negative equity and one of the guests was Derek Brawn who's recently written a book blowing the whistle on the Irish property bubble. It might not give you an answer but it could give you food for thought.

I dunno about buying a one bedroomed apartment either. I've stood in one-bedroomed apartments in Dublin and while they're grand for singletons, they're not suitable for families. If your circumstances change and you have kids, do you think you would be able to offload the apartment? What about if you have family or friends who want to visit and stay over? Even issues like storage space?

johnnyskeleton

sandwichpolice5 wrote: »

What do you think?

With the caveat that you should do your own research, look at all the relevant factors (including your projections for wages, house prices and interest rates in the next few years) and sit down and work out all the various factors, if it were me, I would:

1) find somewhere cheaper to rent e.g. a 2 bed for less than €1k is doable, share with someone and save up a deposit;

2) when you have your deposit saved, do the calculations again.

3) when you have your deposit saved, maybe you will want something more than a one bed.

It strikes me as odd that a single 24 year old is renting a one bed apartment for €1k, it just doesn't ring true with me. On the basis that a junior doctor earns €35,534, with a take home pay of €2,294.63 (Post April budget '09 including PS levy), spending €1k on rent seems extortionate. I'm sure there are plenty people in the hospital you work in who are looking for someone to share with, and you can get this down to €500 p.m. quite easily. You can then save €500 p.m. for your deposit, which in 2.5 years will give you enough for an 8% deposit on a 200k property. That, plus your low post count, suggests to me that you might not be who you claim to be. Sorry if my cynicism is misplaced, but there are a lot of people who, for various reasons, try to pretend that there are a lot of young professionals with steady jobs paying too much in rent and looking for any old property to buy.

Well done on getting your job by the way - you must have been lucky to go straight from school to college and then finish your 6 year degree just between the recruitment freezes in the HSE. I would wait until there is a bit more certainty in my job before I bought if I were you.

Senna

tedstriker wrote: »

These figures are important because they emphasize the fact that banks are not lending, regardless of how much you consider yourself to be a fairly low risk.

Not arguing with your point, but a huge factor is market sentiment. The market will continue to drop for the next few years and everyone knows it. Some people wont get a mortgage now, but far more just dont want to buy until the market reaches a more sustainable level. A junior doc on 34k a year would get a mortgage for 200k now, even if its madness.

Also to the OP, if you're going to be happy in the 1 bed for the next 10-20 years and you can afford the mortgage repayments when they jump from the historical low rate now, meaning your repayments will be more like €1300, not €700, then go ahead.

heebusjeebus

100 percent mortgages are still available through some institutions for some jobs, Doctors being one of them.
johnnyskeleton, I know a few doctors and they make most of their money through overtime and night shift work so they could easily afford 1,000 a month for rent.

My perspective;
I've just got sale agreed on a 2 bed apartment for 245,000. I'm happy with the price and I'm not looking at this property as an investment, I plan on living there for at least 10 years, which if I was paying rent would cost me 80k (670 euro x 12 months x 10 years).
So, in 10 years time if I do sell the apartment for a loss, so long as I sell for more than 165,000 I'll be a happy man.

Also, I find it far more satisfying living in a place that I have full control over. I'm so over renting sh1th0les and paying other peoples mortgages.

johnnyskeleton

heebusjeebus wrote: »

100 percent mortgages are still available through some institutions for some jobs, Doctors being one of them.
johnnyskeleton, I know a few doctors and they make most of their money through overtime and night shift work so they could easily afford 1,000 a month for rent.

I realise that they could afford it, it just strikes me as odd that they would actually pay it.

heebusjeebus wrote: »

My perspective;
I've just got sale agreed on a 2 bed apartment for 245,000. I'm happy with the price and I'm not looking at this property as an investment, I plan on living there for at least 10 years, which if I was paying rent would cost me 80k (670 euro x 12 months x 10 years).
So, in 10 years time if I do sell the apartment for a loss, so long as I sell for more than 165,000 I'll be a happy man.

I think you might have forgotten to factor in the monthly mortgage payment. I hope you don't mind me saying this, but since you are sale agreed rather than having a signed contract, it might be worth a look.

245k over 30 years at 3% is €1,032.92 p.m or just shy of €124k over 10 years. After 10 years of a 30 year mortgage your remaining principle is c. €187k.

So if you rent for the next 10 years the total cost is €80k (and this assumes no further rent decreases). If you buy and then sell in 10 years for 165k, the total cost is €146k (€124k mortgage payments + €22k loss on sale (187-165)). That also assumes no increases from our current low rates of 3% and also ignores factors such as legal costs, sale costs, stamp duty on the house you buy afterwards (as no longer a FTB), management fees, repairs, insurance and other utilities that if you were renting would be paid by the landlord.

heebusjeebus wrote: »

Also, I find it far more satisfying living in a place that I have full control over. I'm so over renting sh1th0les and paying other peoples mortgages.

Just so long as one of the following conditions are met:
1) you are prepared to pay at least €6.6k more per year for the next ten years to "own" rather than rent this property and are prepared to accept the risk of property prices falling even further and interest rates increasing significantly;
2) there is massive inflation over the next few years in the eurozone;
then it should be fine.

Freddie59

Firetrap wrote: »

As an aside, I think you should look at last night's Late Late Show - the last half hour of it. It should be up on RTE's website soon. I think it's repeated on Monday or Tuesday night as well.

It was a feature on negative equity and one of the guests was Derek Brawn who's recently written a book blowing the whistle on the Irish property bubble. It might not give you an answer but it could give you food for thought.

I dunno about buying a one bedroomed apartment either. I've stood in one-bedroomed apartments in Dublin and while they're grand for singletons, they're not suitable for families. If your circumstances change and you have kids, do you think you would be able to offload the apartment? What about if you have family or friends who want to visit and stay over? Even issues like storage space?

Here's the Late Late Show Clip. (1hr26m in). http://www.rte.ie/player/#v=1047020 It is scary stuff. Look at what happened to others - then make your decision. And visit these sites:

www.treesdontgrowtothesky.com

www.thepropertypin.com

www.irishpropertywatch.com

www.irishhometruths.com

Then decide.

Me - I wouldn't consider buying for at least 6 - 9 months, unless you get an absolute steal in the meantime.

mdebets

heebusjeebus wrote: »

Also, I find it far more satisfying living in a place that I have full control over. I'm so over renting sh1th0les and paying other peoples mortgages.

You won't have full control over your apartment. What do you do for example if in 2 years time someone new moves in to the apartment next to you, who likes to have loud parties every weekend? Dependent on the management agent and the owner of the other apartment, they might not do anything against it.
If you would be renting, you could just leave. If you own your apartment, you are stuck and might not be able to do something about it (or it might take a long time if you take legal actions).

sandwichpolice5

Many thanks to everyone that's taken the time to post here and provide links etc., I'm very very grateful!! That's some really great advice..

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I dunno about buying a one bedroomed apartment either. I've stood in one-bedroomed apartments in Dublin and while they're grand for singletons, they're not suitable for families.

Yes, I hadn't really considered that fully...

Therefore I would recommend you continue to rent, and also seek a reduction in rent because there is a massive overstocking of rental apartments and houses too. Save money and in perhaps about 2 years (obviously keeping an eye on the markets and everything else) you can buy a better place for a much cheaper price.

A final point is that in order to understand the value of a place you are buying calculate that the maximum you should pay is about 14 times the

yearly rental price. So if you pay 1000 a month, then thats 12,000 a year and therefore the apartment you live in right now is only worth 168000 realistically. I bet your landlord thinks its worth about 300,000

I'll remember that It sure does make sense..your post was amazing btw

Here's the Late Late Show Clip. (1hr26m in). http://www.rte.ie/player/#v=1047020 It is scary stuff. Look at what happened to others - then make your decision. And visit these sites:

Checking that out now! :eek:

It strikes me as odd that a single 24 year old is renting a one bed apartment for €1k, it just doesn't ring true with me. On the basis that a junior doctor earns €35,534, with a take home pay of €2,294.63 (Post April budget '09 including PS levy), spending €1k on rent seems extortionate

I think you quoted the basic salary for an intern, this year I make just over 41k for a 39 hour week. I make in the region of double that figure when you factor in the inevitable overtime I have to work though.

Thanks for your post, even if it was a little passive aggressive. My 80hr+ working week is probably what keeps my post count down...