Rent is dead money

NewDirection

D3PO wrote: »

Dont you mean 33 years

Nope, going retiring early at 65, due to me not having any accommodation costs!

ei.sdraob

NewDirection wrote: »

Nope, going retiring early at 65, due to me not having any accommodation costs!

i dont have any accommodation costs (beside regular bills, any future repairs and any enhancements)

im not planning on retiring any time soon i love my work

Graces7

For many of us, this is academic as we have no choice.

We sold our wee house, which we owned, because maintenance costs became too high to cope with on a pension. (not sure if that aspect is covered anywhere in all this?)

Houses tend to need repairs etc.

Sold it just in time too before the crash in prices came.

Renting means that eg washing machines etc and also repairs, are done.

Finding the right place is a problem of course, And, yes, many moves indeed, but we have very exacting needs.

Saruman

Is that not a big point of buying? By the time you are of pensionable age you own the house. You can then either sell it and live your life off the proceeds by renting and having plenty of spare cash or keep for the kids and live off their charity.

Coyote

That article is very flawed in my opinion.
unless your planing to die at 55 you have to take more that just the length of the mortgage in to account.
you don't seem to compare like with like

pay €1,700 a month to live in a five-bedroom detached house in Blackrock, instead of €7,000

any house you can rent for €1700 a month can be bought for €550K to €750K asking price. where your cost of €7000 a month would be more in the range of 1.3mill at 5% nearly 2 time the price. (asking price could be 1.5-1.6mill)

A 5 bed in Blackrock costs 2 times as much as a 4 bed in Castleknock but they rent for nearly the same!

the four-bedroom semi-detached house in Castleknock. Currently, it rents for €1,635 a month, whereas a mortgage based on current asking prices would be €3,665.

again where is the like for like a house renting for €1600 would cost about 450K asking price, prob even less. where your cost of 3665 per month mortgage would be in the range of 630K (asking price prob in the 700K+ range)

I have done up the figures and they are here for everyone to see To Buy or Not

Age 30
buying a house in Castleknock for €415K
loan of 90% for €373,500 at 4.6% (you can get a fixed rate for 10 years right now at that)
repayments €2097 per month
rent same house for €1350 per month
now taking your figures of a rise in house value of 2.5% per year and rent inflation of 2% per year over the 25 years.

Age 55
House: worth 750K no outstanding loan.
Renter: €40K (deposit not used) and saving (€750-0 over the 25 years) per month = €367K in the bank (growth at 4.5%)
now lets look at the next 10 years

Age 65
House: owner saved €2000 per month (what used to be his/her mortgage) for last 10 years with 4.5% growth = €323K in the bank and house worth €960K
Renter: rent now costs €2214-€2647(over 10 years) per month so no saving made, and saving used to help pay the rent. saving down to €199K

now even if we say that the house never when up in value the house owner is better off. there are other costs that could come in to it. insurance, maintenance, replacing stuff and other costs. the renter has costs as well insurance for contents, moving costs every 4 years (no landlord wants a sitting tenant) if you have kids moving them from friends, good neighbors. and other things.

Age 75
House: owner still saving €2000 a month saving worth €825K house worth €1.2mill
Renter: rent now cost €2700-€3227(over the 10 years) per month so no saving made, and saving used to help pay the rent. rent now costs €39K a year. saving = €-142K

So if your planing to die at 55 and want the cash to have fun with it's a good idea to rent. your other option would be to hope that the government will provide you with a house (but remember there will be a lot more retired people then than there is now with people living longer, and probably less money to give to pensioners) and they won't till you have spent your saving so you will have to live on the old age pension and state housing)
Life expectancy in Ireland is 78.9 (76.5 for guys 81.6 for women) that's without life expectancy being extended over the next 30-40 years. none of my grandparents died before 86 and oldest was 101 (she lived in the same house for 94 years) and her sister was 104.

Coyote

fontanalis

Coyote wrote: »

That article is very flawed in my opinion.
unless your planing to die at 55 you have to take more that just the length of the mortgage in to account.
you don't seem to compare like with like

any house you can rent for €1700 a month can be bought for €550K to €750K asking price. where your cost of €7000 a month would be more in the range of 1.3mill at 5% nearly 2 time the price. (asking price could be 1.5-1.6mill)

A 5 bed in Blackrock costs 2 times as much as a 4 bed in Castleknock but they rent for nearly the same!

again where is the like for like a house renting for €1600 would cost about 450K asking price, prob even less. where your cost of 3665 per month mortgage would be in the range of 630K (asking price prob in the 700K+ range)

I have done up the figures and they are here for everyone to see To Buy or Not

Age 30
buying a house in Castleknock for €415K
loan of 90% for €373,500 at 4.6% (you can get a fixed rate for 10 years right now at that)
repayments €2097 per month
rent same house for €1350 per month
now taking your figures of a rise in house value of 2.5% per year and rent inflation of 2% per year over the 25 years.

Age 55
House: worth 750K no outstanding loan.
Renter: €40K (deposit not used) and saving (€750-0 over the 25 years) per month = €367K in the bank (growth at 4.5%)
now lets look at the next 10 years

Age 65
House: owner saved €2000 per month (what used to be his/her mortgage) for last 10 years with 4.5% growth = €323K in the bank and house worth €960K
Renter: rent now costs €2214-€2647(over 10 years) per month so no saving made, and saving used to help pay the rent. saving down to €199K

now even if we say that the house never when up in value the house owner is better off. there are other costs that could come in to it. insurance, maintenance, replacing stuff and other costs. the renter has costs as well insurance for contents, moving costs every 4 years (no landlord wants a sitting tenant) if you have kids moving them from friends, good neighbors. and other things.

Age 75
House: owner still saving €2000 a month saving worth €825K house worth €1.2mill
Renter: rent now cost €2700-€3227(over the 10 years) per month so no saving made, and saving used to help pay the rent. rent now costs €39K a year. saving = €-142K

So if your planing to die at 55 and want the cash to have fun with it's a good idea to rent. your other option would be to hope that the government will provide you with a house (but remember there will be a lot more retired people then than there is now with people living longer, and probably less money to give to pensioners) and they won't till you have spent your saving so you will have to live on the old age pension and state housing)
Life expectancy in Ireland is 78.9 (76.5 for guys 81.6 for women) that's without life expectancy being extended over the next 30-40 years. none of my grandparents died before 86 and oldest was 101 (she lived in the same house for 94 years) and her sister was 104.

Coyote

You're basing the rising house prices on what?

Coyote

I'm basing them on ronanlyons article posted at the start of this thread.
which is that they would match inflation. it could be more or less who knows.
but in general I think matching inflation a conservative number.

And what of the house itself? What will it be worth in 25 years time? Well, nobody knows of course. The least unlikely guess is that – just as house prices did from when the Government started measuring them until the mid-1990s – house prices will match inflation. An average of 2.5% inflation would mean the home is worth €925,000 in 25 years time – right between the 4% and 5% return portfolios presented above.

billybigunz

any house you can rent for €1700 a month can be bought for €550K to €750K asking price.

What are you basing this on? I see loads of places renting for 1500-2000 that would cost 1-2 million to buy.

Coyote

compare like for like
where do you see "loads of places renting for 1500-2000 that would cost 1-2 million to buy"

rent
4 Bed for €1600
4 Bed for €1750
4 bed for €1695

sale
4 bed for sale €735K asking price
4 bed for sale €675K asking price
4 bed for sale €509K asking price

billybigunz

Coyote wrote: »

compare like for like
where do you see "loads of places renting for 1500-2000 that would cost 1-2 million to buy"

rent
4 Bed for €1600
4 Bed for €1750
4 bed for €1695

sale
4 bed for sale €735K asking price
4 bed for sale €675K asking price
4 bed for sale €509K asking price

I'm in one.

Try this out for size as well.

www.daft.ie/2857340

Coyote

Ok for a start it's only a 2 bed. and it's not in blackrock which is the location that he was using for a example. I did not pick the locations or the type of houses, I my point is that his examples are flawed. and if you want to compare like for like show two places nearly the same one for rent and one for sale.
how much is that 2 bed lightly to sell for right now.

2 Bed mew in Ballsbridge asking price €850K not €1-2mill and you would probable get it for €750 maybe less

billybigunz

Coyote wrote: »

Ok for a start it's only a 2 bed. and it's not in blackrock which is the location that he was using for a example. I did not pick the locations or the type of houses, I my point is that his examples are flawed. and if you want to compare like for like show two places nearly the same one for rent and one for sale.
how much is that 2 bed lightly to sell for right now.

2 Bed mew in Ballsbridge asking price €850K not €1-2mill and you would probable get it for €750 maybe less

Check out how many houses are for sale on Ailesbury Road.

AARRRRGH

Coyote wrote: »

That article is very flawed in my opinion.
unless your planing to die at 55 you have to take more that just the length of the mortgage in to account.
you don't seem to compare like with like

any house you can rent for €1700 a month can be bought for €550K to €750K asking price. where your cost of €7000 a month would be more in the range of 1.3mill at 5% nearly 2 time the price. (asking price could be 1.5-1.6mill)

A 5 bed in Blackrock costs 2 times as much as a 4 bed in Castleknock but they rent for nearly the same!

again where is the like for like a house renting for €1600 would cost about 450K asking price, prob even less. where your cost of 3665 per month mortgage would be in the range of 630K (asking price prob in the 700K+ range)

I have done up the figures and they are here for everyone to see To Buy or Not

Age 30
buying a house in Castleknock for €415K
loan of 90% for €373,500 at 4.6% (you can get a fixed rate for 10 years right now at that)
repayments €2097 per month
rent same house for €1350 per month
now taking your figures of a rise in house value of 2.5% per year and rent inflation of 2% per year over the 25 years.

Age 55
House: worth 750K no outstanding loan.
Renter: €40K (deposit not used) and saving (€750-0 over the 25 years) per month = €367K in the bank (growth at 4.5%)
now lets look at the next 10 years

Age 65
House: owner saved €2000 per month (what used to be his/her mortgage) for last 10 years with 4.5% growth = €323K in the bank and house worth €960K
Renter: rent now costs €2214-€2647(over 10 years) per month so no saving made, and saving used to help pay the rent. saving down to €199K

now even if we say that the house never when up in value the house owner is better off. there are other costs that could come in to it. insurance, maintenance, replacing stuff and other costs. the renter has costs as well insurance for contents, moving costs every 4 years (no landlord wants a sitting tenant) if you have kids moving them from friends, good neighbors. and other things.

Age 75
House: owner still saving €2000 a month saving worth €825K house worth €1.2mill
Renter: rent now cost €2700-€3227(over the 10 years) per month so no saving made, and saving used to help pay the rent. rent now costs €39K a year. saving = €-142K

So if your planing to die at 55 and want the cash to have fun with it's a good idea to rent. your other option would be to hope that the government will provide you with a house (but remember there will be a lot more retired people then than there is now with people living longer, and probably less money to give to pensioners) and they won't till you have spent your saving so you will have to live on the old age pension and state housing)
Life expectancy in Ireland is 78.9 (76.5 for guys 81.6 for women) that's without life expectancy being extended over the next 30-40 years. none of my grandparents died before 86 and oldest was 101 (she lived in the same house for 94 years) and her sister was 104.

Coyote

A couple of things here.
My house is paid off and im not 40 yet. The mortgage was originally for 25 years, but i paid it almost all off in 12 years and then let it trickle for a few years when it was only . Im planning on spending, and paying the max into my pension with the money i wont be paying on rent or mortgage though, not saving it What are you going to do with a couple of million at 75
Sell up and take the cash at 60 or so.

Getting married and having my first child before the end of the year. Its a huge comfort knowing that there is no money, apart from taxes, insurance and maintenance (average of a bit less than €1000 a year since i bought the house) from now on for us.

But I can totally see that some people want to rent too. If renting suits their needs then thats great for them. They need to think about their future too, which people dont seem to do in Ireland. You cant rent a room in a shared house for life, so your rent cost will undoubtedly increase when you start a family. 5 years ago i was never going to get married or have children. Now i am, so life has changed a hell of a lot.

Dont forget you could always sell the house and rent or downsize when its paid off too. That would put more money in your pocket.

I certainly do not want to be depending on the government for a pension and a roof over my families head. So im making sure i have it covered for myself.
Someone had a great post earlier about living in a house share when you are old. Had me laughing for ages.

I think your calculations are about right. I think your growth of 4.5% per year is a bit ambitious though on deposit. Better off buying equities (you are open to crashes in the markets, but i guess it evens out because you are open to crashes in property with the house too). Take it that house prices will only go up or down by inflation over the long term and that rents will go up or down with inflation too.

Dont forget mortgage interest relief and rent relief too.
These are both supposed to be gone in the next few years, but who knows. these things change with the weather these days. They are here now, so count them in.

AARRRRGH

NewDirection wrote: »

Nope, going retiring early at 65, due to me not having any accommodation costs!

Im aiming for retiring long before 60
So im making sure that i have my own pension and accommodation all taken care of. I dont intend to rely on the government for anything at all. They'll probably have the state pension age at 80 by the time im 68. Im not taking that chance

BostonB

There lots of places at at bubble prices still and lots to fall yet further. It would be daft to decide any of this on those prices.

catbear

As someone said, as soon as growth kicks off in Europe expect interest rate increases.

Another important factor that has to be noted is the introduction of property taxes. I believe this a certainty, postcodes are on their way and their main use to governments is as a tax tabulation tool.

Government has no choice but to raise taxes to meet it commitments and fixed assets are the easiest target.

The world now runs on the energy standard, land while paramount in the past is secondary to our modern way of living when compared to oil, gas, etc..
Without them, it's back to potatoes lads.

My thoughts on buying versus renting; interest is the rent you pay on capital and if the interest is greater than the rent, then rent until it is otherwise.

BTW, Coyote this business of landlords not wanting sitting tenants is a thing of the past. I have friends now working what is essentially a second job at their own expense trying to keep their investment properties let. I seen one friend age ten years in the last three and its not pretty. She wanted to start a family but with emotional and financial stress it just not happening.

As far as I'm concerned, no one wins in the bust.
We have a long way to go yet in this bust, Japan is still deflating two decades later, our membership of the Euro should hasten the process.

Coyote

billybigunz wrote: »

Check out how many houses are for sale on Ailesbury Road.

What has how many houses are for sale on Ailesbury road got to do with it?
you posed a 2 bed mew and said it was worth 1-2mill and you can rent it for €1625 a month and I showed you can buy a 2 bed mew for prob €750K

I think your calculations are about right. I think your growth of 4.5% per year is a bit ambitious though on deposit. Better off buying equities (you are open to crashes in the markets, but i guess it evens out because you are open to crashes in property with the house too). Take it that house prices will only go up or down by inflation over the long term and that rents will go up or down with inflation too.

the growth of 4.5% was half way what he listed 4% or 5% and it's assumed that you would invest the money you save in a number of diff things not just leave it in the bank. again I used the figures he used for growth in house prices and rent (ie inflation)

mortgage interest relief and rent relief

who knows where they will be in 5,10,25 years

There lots of places at at bubble prices still and lots to fall yet further. It would be daft to decide any of this on those prices.

the point is it's not about what the sale price or rent is, it's there relationship to each other (if mortgage costs(ie sale price) drop and rent drops your still only saving the same amount), it's about how much you would save paying rent over a mortgage and if that money was invested. I think he has picked prices and interest rates that make his numbers look good, over priced house and under priced rent with a high interest. I used 4.6% for the interest rate as you can get a 10 year fixed rate from a bank right now after that anyone who said they know is tell fibs

have a look at the spreadsheet
for the 415K house bought it costs €630K over 25 years
rent the same house at 25 years cost = €518K great you saved 110K
rent the same house at 35 years cost = €809K
rent the same house at 45 years cost = €1164K (1.16mill)

as a point I'm not telling people to buy now or later, people need to do what suits them, renting might be the best thing to do for you. people just need to understand in the long run it will cost more.

billybigunz

What has how many houses are for sale on Ailesbury road got to do with it?
you posed a 2 bed mew and said it was worth 1-2mill and you can rent it for €1625 a month and I showed you can buy a 2 bed mew for prob €750K

You can buy a 2 bed house in Cavan for 50K probably as well. How much do you think a nice 2 bed house on Ailesbury road with 3 offstreet parking spaces is worth?

AARRRRGH

billybigunz wrote: »

You can buy a 2 bed house in Cavan for 50K probably as well. How much do you think a nice 2 bed house on Ailesbury road with 3 offstreet parking spaces is worth?

I think he means for us to use a bit of common sense here.
He is not saying it is written in stone. He is giving broad examples and proving his point. He gives examples you can plug different values into to see if it holds true for most cases.

If you want to pick specifics for your side of the argument, you arent really arguing. You are just picking the data you need to reach your conclusion.
Ask the climate scientists about that one

Coyote

catbear wrote: »

As someone said, as soon as growth kicks off in Europe expect interest rate increases.

which is why I used 4.6% fixed rate for 10 years he used 5%
rates are out of there normal range right now. ECB+1.5% would be a normal rate but the banks are having to borrow at higher rates. in 5 years if they are still around they will be borrowing money at best interbank rates (euribor rates)

catbear wrote: »

Another important factor that has to be noted is the introduction of property taxes. I believe this a certainty, postcodes are on their way and their main use to governments is as a tax tabulation tool.

they might try it but last time it did not work that well they were put out of power.

catbear wrote: »

The world now runs on the energy standard, land while paramount in the past is secondary to our modern way of living when compared to oil, gas, etc..
Without them, it's back to potatoes lads.

true but even if your renting you need to heat your place and buy gas for your car

catbear wrote: »

My thoughts on buying versus renting; interest is the rent you pay on capital and if the interest is greater than the rent, then rent until it is otherwise.

well if you borrow 90% of the 415K house the interest at 4.6% fixed 10 years is 1400 a month the rent is 1400 a month so they are nearly the same.

catbear wrote: »

BTW, Coyote this business of landlords not wanting sitting tenants is a thing of the past. I have friends now working what is essentially a second job at their own expense trying to keep their investment properties let. I seen one friend age ten years in the last three and its not pretty. She wanted to start a family but with emotional and financial stress it just not happening.

I'm sorry for your friend, but being a landlord is a job even if it's your second job. I have been one for a long time. people should not have gotten in too it thinking it was a 3-5 year thing. you make your money after 15-20 years it's a long term investment

catbear wrote: »

As far as I'm concerned, no one wins in the bust.
We have a long way to go yet in this bust, Japan is still deflating two decades later, our membership of the Euro should hasten the process.

I had a long reply to this but, it's not on topic. this is a about renting or buying not about the property bubble and how bad it will be.

Coyote

Coyote

billybigunz wrote: »

You can buy a 2 bed house in Cavan for 50K probably as well. How much do you think a nice 2 bed house on Ailesbury road with 3 offstreet parking spaces is worth?

I did mean for people to use common sense
I live in and know the area very well, the mew I listed was a 3 bed with 2/3 parking spaces on Waterloo Lane, Ballsbridge, Dublin 4. as you know it's closer to town but not as posh. picking the most expensive street in Ireland with a mew to rent but none for sale makes making a comparison too hard.
the point was I did not pick where, type of house, low interest rates or low saving growth. I used the figures/house type/area in the article posted at the start. and live date from daft.ie and myhome.ie using like for like (discounting places that did not have photos of the inside, so in general the standard was the same with the rent and sale houses)

AARRRRGH

A little story I heard from a guy i know a while ago.
He gave me an example that he bought an apartment as an investment 12 years ago. I might not have everything he told me in here, but you get the point of it.

He got a 25 year mortgage. he is paying €600 (fixed for 10 years since about 2 years ago, it has been roughly the same before that too) per month for the mortgage + mangmt fees + maintenance now.

He paid out the equivalent of €15,000 in deposit and solicitors etc.
He furnished it for €3000. So total €18000.

Now he gets €1000 a month (used to get €1400pm which gave him even more profit) which is €10,000 per year assuming 2 months empty.

€600 * 12 = 7200 per year are his costs.

Thats a profit of €2800 in a year if its empty for 2 months, which it hasnt been yet. Longest it was empty was 2 weeks so far, but he still assumes 2 empty months just in case.

He gets a couple of thousand euro extra each year after taxes, mortgage etc are paid, which he keeps in an account earning interest in case he needs to put it back into the apartment at some stage,which he hasnt yet. Currently in that account there sits over €30,000.

To cut a long story short, he was just pointing out that for an investment of €18000 he will have an apartment all paid off in another 13 years (minus CGT to be paid if he sells it then). And already over €30,000 sitting in his bank account and more to come.

A clever use of €18k i think. He hasnt had to add to that at all.

Could this be repeated today though?

It could be argued he could have invested that 18k in equities then, but given the disaster that is the wordwide economy now It would probably be worth the same now.

FTSE was about 6000 in 1998
It was 5703 on Friday.

shoegirl

What we really need is to move away from the binary yes/no choice on renting/buying - there are zero other options really for most working people as effectively social housing is closed off for people who pay their way.

I am surprised at whoever commented on "savings" that renters might make - in reality a lot of renters pay quite a lot more rent than they ideally would like to so don't have savings. The only things you do save on are decorating, appliances and repairs - but that assumes they are done.

I do think what we need are hybrid models which are common throughout Europe - co-operative housing schemes, part ownership models, and more secure long term tenancies. This is precisely why ownership is less of an ideal. The only reason it is such in Ireland is because historically renting has been both more expensive in the long term and is associated with substandardness right up to and including the present day.

jackal

AARRRRGH wrote: »

A little story I heard from a guy i know a while ago.<snip>

That to me looks like a prime example of simply doing the maths, covering costs, not relying on capital appreciation and investing prudently at a good time. In addition by the sounds of it he avoided the temptation to leverage the investment and invest in more and more properties.

If only our banks and amateur speculators/landlords had been a bit more like him instead of like this: http://www.independent.ie/national-news/courts/propertyobsessed-man-to-list-assets-2064756.html we would not be in the situation we are in.

As said above, its not a simple yes/no answer. There are numerous examples of people who have won and lost in the property investment game.

ronanlyons

So thanks for all the feedback and discussion. As I mentioned earlier in the thread, I've been working on a widget that will allow people to put in their own dream home and beliefs about future house prices, interest rates, etc.

The calculator is up and running now: http://www.ronanlyons.com/2010/04/20/your-very-own-rent-or-buy-calculator/
I've also worked in a few of the themes you've been discussing into a sort of FAQ at the bottom of the post.

So give it a shot, and any thoughts, comments or questions are as per usual welcome.

ZYX

ronanlyons wrote: »

So thanks for all the feedback and discussion. As I mentioned earlier in the thread, I've been working on a widget that will allow people to put in their own dream home and beliefs about future house prices, interest rates, etc.

The calculator is up and running now: http://www.ronanlyons.com/2010/04/20/your-very-own-rent-or-buy-calculator/
I've also worked in a few of the themes you've been discussing into a sort of FAQ at the bottom of the post.

So give it a shot, and any thoughts, comments or questions are as per usual welcome.

You are assuming a low average inflation rate of 2%. While this is, and has been the aim, history tells us this rate is unlikely to be the average.

You also assume equities will grow by 9% a year which seems excessive especially if one considers the value of equities at present, the bid/offer spread and management charges. A look at current investment funds shows the average growth rate over last 10 years is substantially less than 9% (even before charges)

An average interest rate on deposits of 3% also seems high when you have an inflation rate of 2% and a mortgage rate of 6%. Both figures also exclude DIRT/Capital Gains tax.

Teddy Daniels

I'm 189,000 better off renting which is what I assumed and I changed the rtn on inv to 3%

ronanlyons

ZYX wrote: »

You are assuming a low average inflation rate of 2%. While this is, and has been the aim, history tells us this rate is unlikely to be the average.

You also assume equities will grow by 9% a year which seems excessive especially if one considers the value of equities at present, the bid/offer spread and management charges. A look at current investment funds shows the average growth rate over last 10 years is substantially less than 9% (even before charges)

An average interest rate on deposits of 3% also seems high when you have an inflation rate of 2% and a mortgage rate of 6%. Both figures also exclude DIRT/Capital Gains tax.

Well, the calculator lets you put in your own assumptions, I just put in defaults because most people would look at that and not even know where to start!

All the baseline figures are explained below the calculator - including margin of error on ECB inflation targeting - while the average rates of return on savings and shares don't come from me, they come from an established literature on long-run returns to these things (the 'equity premium puzzle' literature). Safe to say, though, that looking at the 2000-2010 period is about as representative as looking at the 1996-2006 period - you can't tell anything from one data point, you need to look at a lot more.

But again, the advantage of the calculator is that if you don't like the defaults, you can change them!

You are right about the figures being net of taxes - which also includes stamp duty/future property taxes and capital gains tax on the house. The calculator also doesn't include maintenance costs of owning a property, such as insurance, mortgage protection and general maintenance, which a tenant avoids. (Perhaps things for version 2.0...)

ZYX

ronanlyons wrote: »

Well, the calculator lets you put in your own assumptions, I just put in defaults because most people would look at that and not even know where to start!

All the baseline figures are explained below the calculator - including margin of error on ECB inflation targeting - while the average rates of return on savings and shares don't come from me, they come from an established literature on long-run returns to these things (the 'equity premium puzzle' literature). Safe to say, though, that looking at the 2000-2010 period is about as representative as looking at the 1996-2006 period - you can't tell anything from one data point, you need to look at a lot more.

But again, the advantage of the calculator is that if you don't like the defaults, you can change them!

You are right about the figures being net of taxes - which also includes stamp duty/future property taxes and capital gains tax on the house. The calculator also doesn't include maintenance costs of owning a property, such as insurance, mortgage protection and general maintenance, which a tenant avoids. (Perhaps things for version 2.0...)

I accept what you are saying but to suggest equities will give a return of 9% a year over the next 25 years is optimistic. First of all we are starting from a very high level even if you take into account recent stock market crashes. PE ratios remain very high.
Secondly, even if the market did gain an average 9% a year, then the average fund would grow slightly less, add to that bid/offer spread and charges of at least 0.5% a year. So even at this optimistic level of 9% annual growth in the market it would be more reasonable to assume about 7% actual growth in the fund. Tax then reduces this to 5.5%.

On the other point, capital gains tax on sale of house obviously doesn't come into it and mortgage protection is less of an issue as most people should have life assurance in some form once in a long term relationship or when they have children.

drunk_monk

You have to look at the bigger picture not just the life of the mortgage.

My father & auntie were renting together in England in the late 60's.
In 1970 my father got a mortgage which he had paid off by 1983. Now after being mortgage free for 27 years and in retirement he is looking to down size and realease more money.

In 1970 my auntie went into rented accommodation, now aged 71 she & her husband are still renting (albeit the same house).The money they saved during their working years is now dwindling fast. They are unable to downsize or even to leave the house to their children when the time comes.

For those of you who rent and do manage to save hundreds of thousands of euro to pay for your rent in retirement well done. But for most of you I feel you will not have that in the bank and will live to regret not buying like my auntie.