Buy or rent longterm

Sunnyisland

My daughter & son in law are thinking of buying there 1st house in co meath.They have good jobs and have deposit saved but a thought has come to mind that why should they buy at all,Would it be better to rent long term as in some european countries and maybe buy a holiday house in spain or portugal,Is it cheaper to buy than rent, and if so by how much? How do things look now compared to the boom years and how will things look if house prices and rents continue to fall? What would be the pros and cons of this ? Thanks

StillWaters

Have a look at Prices Keep Falling thread, there is a debate on renting v buying now.

Renting gives more mobility, less responsibility, somewhat less exposure to price rises and falls. However, you obviously have no asset at the end of 25 years, so you would need to be saving a fair bit in order to house yourself after you stop earning.

IMO it would depend on the price of the house, any couple on decent money thinking of borrowing €100,000 for a residential property shouldn't regret it. If they are borrowing lots more that's a different kettle of fish.

NIMAN

I'd say rent for another year or two, to see if there's more falls in the house prices.

And I wouldn't advise buying a holiday home abroad that you would only use the odd time. Lot of people made big losses on that type of purchase.

Milk & Honey

realies wrote: »

My daughter & son in law are thinking of buying there 1st house in co meath.They have good jobs and have deposit saved but a thought has come to mind that why should they buy at all,Would it be better to rent long term as in some european countries and maybe buy a holiday house in spain or portugal,Is it cheaper to buy than rent, and if so by how much? How do things look now compared to the boom years and how will things look if house prices and rents continue to fall? What would be the pros and cons of this ? Thanks

Buying a holiday home is a lot more expensive than renting a house for a holiday.
The costs of maintaining and insuring a house in another country and keeping up with local taxes and bye laws makes little sense to anybody without the ability to spend a significant amount of time in the second home.
The sensible strategy at the moment is to save a big deposit and be alert for the turn in the market. When the overhang clears rents will rise sharply. When that happens it will look very stupid to be paying a large rent when the repayments on the same house would be much less. Fat lot of good it will do to have a holiday home in Spain which will simply be a money pit, will have absorbed savings which may have formed a deposit and will mitigate against being able to afford repayments.

StillWaters

Regarding the holiday home, I agree it makes no sense for someone without property here to buy one. There are no tax advantages to doing so, in the same way there is tax relief here. There can also be large service charges and local taxes. It is totally economically unviable. It will also negatively affect opportunity to borrow here if they do decide to buy at home.

Also, a young couple will choose a different holiday destination to when there are babies, young children, teenagers to consider.

Francie Barrett

Don't buy anywhere, house prices are only going one way.

Mr. Loverman

I am 33. I never bought - always stayed a renter. (Many reasons, not necessary to state them here).

As a result of never owning, about a year ago I was able to give one months notice to my landlord and I fecked off to China. I live here now with my Irish girlfriend.

In another few years we will move to another country (probably Korea or Japan).

We have plenty of savings because we never bought, so financially we are in a good place.

Disadvantages? It would be nice to own. It would be nice to have something I could truly call my own. But these are emotional wants. They are not necessities.

Everyone is different, everyone wants different things. I don't want to be trapped somewhere for XY years.

Greentopia

Milk & Honey wrote: »

The sensible strategy at the moment is to save a big deposit and be alert for the turn in the market. When the overhang clears rents will rise sharply.

How can you tell what will happen in a year or two though? It's true that parts of Dublin and Cork city are seeing rent increases due to fall off in the total stock of rental properties but that's not the case in many other (particularly rural) areas in the rest of the country.

From Daft-
Year-on-year change in rents – major cities, Q4 2011
- Dublin: €1,057, up 0.3%
- Cork: €865, up 2.6%
- Galway: €747, down 1.2%
- Limerick: €673, down 2.4%
- Waterford: €632, down 2.4%


And rent supplement rates have been cut in January thereby naturally exerting future downward pressure on rents in that sector as tenants are being asked to renegotiate decreases in rents with their Landlords to the new maximum rent thresholds set by the Office of Social Protection.


It'll be interesting to see how that effects rents overall in the coming year as next month is the cut off for tenants to either get reductions or move. I know as I'm in that position at the moment (thankfully I've secured suitable alternative accomodation).

Surely it will have a knock-on effect to private rents also, as any smart private tenant will not want to pay more for a property than the going rates for rent supplement tenants in their local area.


To the OP: I'd agree with Milk & Honey-save like mad for a deposit and wait for the market to turn before buying.

djimi

The way I see it is to guage how much how prices are falling per year in your area, and if the cost of renting for a year is less than the fall in the house price over the year then it makes more sense to rent for the moment and keep saving. House prices are falling, so by renting and continuing to save towards the deposit it means that in a couple of years they will have a bigger deposit and will require a smaller mortgage on what will be a cheaper house.

ted1

I'd buy. I pay about 15k a month in rent. If I buy a house for 200k which I would have no plan for selling for at least t years means I would have paid 75k in rent. If the house price fell by 30% in that time means the difference is still in my favour. Also a mortgage on 200 is about 200 a month cheaper than renting the property I'm looking at.

Monty Burnz

ted1 wrote: »

Also a mortgage on 200 is about 200 a month cheaper than renting the property I'm looking at.

At today's all-time low interest rates...

Mr. Loverman

ted1 wrote: »

a mortgage on 200 is about 200 a month cheaper than renting the property I'm looking at.

At today's near zero euro interest rates. They won't last forever...

ted1

Mr. Loverman wrote: »

ted1 wrote: »

a mortgage on 200 is about 200 a month cheaper than renting the property I'm looking at.

At today's near zero euro interest rates. They won't last forever...

A .5% rise would add about 70 Euro so I'm good for 3%. Plus the savings in between, with the added bonus if been in a position I'll have some where to live when I'm retired as I'll not have rent or mortgage to pay.

Milk & Honey

Greentopia wrote: »

How can you tell what will happen in a year or two though?

Surely it will have a knock-on effect to private rents also, as any smart private tenant will not want to pay more for a property than the going rates for rent supplement tenants in their local area.

The overhang will clear. Sooner or later. There can't be certainty as to when.
Look at this article. In some areas the market rent is above the subsidy level.
Private tenants are clearly paying above the rent supplement rates. Private tenants pay according to supply and demand.
http://www.irishtimes.com/newspaper/ireland/2012/0302/1224312635755.html

Banks are not lending to prospective landlords. Will not for some time yet. Supply of rental properties will eventually dry up. NAMA will eventually finish its sell offs and let offs.

ted1

Milk & Honey wrote: »

Greentopia wrote: »

How can you tell what will happen in a year or two though?

Surely it will have a knock-on effect to private rents also, as any smart private tenant will not want to pay more for a property than the going rates for rent supplement tenants in their local area.

The overhang will clear. Sooner or later. There can't be certainty as to when.
Look at this article. In some areas the market rent is above the subsidy level.
Private tenants are clearly paying above the rent supplement rates. Private tenants pay according to supply and demand.
http://www.irishtimes.com/newspaper/ireland/2012/0302/1224312635755.html

Banks are not lending to prospective landlords. Will not for some time yet. Supply of rental properties will eventually dry up. NAMA will eventually finish its sell offs and let offs.

NAMA has very little sellable property. It's either apatments, commercial units or high end residential. No houses for the general public.

Zamboni

ted1 wrote: »

I'd buy. I pay about 15k a month in rent. If I buy a house for 200k which I would have no plan for selling for at least t years means I would have paid 75k in rent. If the house price fell by 30% in that time means the difference is still in my favour. Also a mortgage on 200 is about 200 a month cheaper than renting the property I'm looking at.

I am guessing you mean 15k a year @ 5years = €75k in rent spent?
But what about mortgage rates rising, property taxes, cost of ownership, maintenance, insurance etc on top?
Would it not make more sense to hold off until the property price drop at least levels off to the point that, on a basic level, the price drop is equal to or less than a years rent?
You are simplifying the equation by omitting a host of other variables in relation to property purchase.

StillWaters

Zamboni wrote: »

I am guessing you mean 15k a year @ 5years = €75k in rent spent?
But what about mortgage rates rising, property taxes, cost of ownership, maintenance, insurance etc on top?
Would it not make more sense to hold off until the property price drop at least levels off to the point that, on a basic level, the price drop is equal to or less than a years rent?
You are simplifying the equation by omitting a host of other variables in relation to property purchase.

Interest rates rise, rents rise. Property taxes rise, rents rise. Landlords only stay in business whilst it is profitable to do so. I know we are in an anomolous situation now with many landlords entering the Market during the bubble when there was no profit to be made.

But over the long term, unless rents are regulated, they are tied into the cost of home ownership anyway.

Mr. Loverman

ted1 wrote: »

A .5% rise would add about 70 Euro so I'm good for 3%. Plus the savings in between, with the added bonus if been in a position I'll have some where to live when I'm retired as I'll not have rent or mortgage to pay.

Yeah but 3% is still historically very low.

Mortgages are long term commitments.

Milk & Honey

ted1 wrote: »

NAMA has very little sellable property. It's either apatments, commercial units or high end residential. No houses for the general public.

They have a large number of housing units. they are unsold and unlet. They will obviously have an effect on the market when they are released.

ted1

Milk & Honey wrote: »

ted1 wrote: »

NAMA has very little sellable property. It's either apatments, commercial units or high end residential. No houses for the general public.

They have a large number of housing units. they are unsold and unlet. They will obviously have an effect on the market when they are released.

The properties are listed on the nama site. There is really no housing on Dublin. Maybe some in some back arse town. But really who wants one.

Have a look its only badly built apartments in Dublin.

Monty Burnz

ted1 wrote: »

Have a look its only badly built apartments in Dublin.

NAMA have a couple of thousand units in Dublin - in Dundrum, 'Central Park' on the Luas line, Sandyford, etc. etc.

They may be badly build, but 90% of property in Dublin is badly built so it fits right in.

ted1

Monty Burnz wrote: »

ted1 wrote: »

Have a look its only badly built apartments in Dublin.

NAMA have a couple of thousand units in Dublin - in Dundrum, 'Central Park' on the Luas line, Sandyford, etc. etc.

They may be badly build, but 90% of property in Dublin is badly built so it fits right in.

People have copped on and don't want badly built apartments.

Milk & Honey

ted1 wrote: »

People have copped on and don't want badly built apartments.

What of it? They would be rented if put on the market at a reasonable enough price. That would cause a ripple effect by reducing the numbers of potential tenants elsewhere.