Rent v buy

StillWaters

An interesting article from The Times discussing what has been hotly debated on several different threads on this forum.
The pro renters will say maintenance is not included
Pro buyers (like me) will say the calculations need to be done over 50 not 30 years.

I think property is so much part of the national psyche that people can take trenchant positions. The article is right in that there has been a shift amongst younger people who view renting as very different to the older generation. I acknowledge that my own experience of renting (law on side on LL, substandard flats, shoddy furniture and fittings, no PRTB, queuing up Herald in hand to view flats) might colour my views. So am very interested in those who rent as a lifestyle as well as an economic choice.

My own view is that it makes economic sense to buy now, and if one does not foresee a need for mobility and buys a home that will suit their needs for 5+ years they win out over the renters both in terms of money and lifestyle.


http://www.irishtimes.com/newspaper/weekend/2012/0623/1224318499445.html

djimi

StillWaters wrote: »

My own view is that it makes economic sense to buy now, and if one does not foresee a need for mobility and buys a home that will suit their needs for 5+ years they win out over the renters both in terms of money and lifestyle.

I think the bolded part is the key for me. How many people at the moment really know what the next 5 years is going to bring? How many people can say with absolute certainty that they will not need to move (either around the country or abroad) in an effort to find work over the next few years? My personal opinion is that at this moment in time you would want to be extremely confident in your employment future to want to commit to buying a house, and from my own perspective (and many more like me Im sure) it would be absolute lunacy to tie myself into a property the way things are at the moment.

hohojojo

djimi wrote: »

I think the bolded part is the key for me. How many people at the moment really know what the next 5 years is going to bring? How many people can say with absolute certainty that they will not need to move (either around the country or abroad) in an effort to find work over the next few years? My personal opinion is that at this moment in time you would want to be extremely confident in your employment future to want to commit to buying a house, and from my own perspective (and many more like me Im sure) it would be absolute lunacy to tie myself into a property the way things are at the moment.

i don't really agree with you due to the fact your whole arguement is saying that every one is so uncertain about their jobs that you should shy away from doing anything but it doesn't matter if your in a recession or not once you have a morgage and a property that you call your own you'll always have this kind of stuff on your mind even on the way up you could loose your job and find it hard to get another one but if you want to own your own house this is the chance you take if you have to move you can always sell or rent it out and off set the costs

to be honest i would prefer to buy young and own the house fully before i get to old and be able to save for my retirement than to be stuggling later on in life were stress will affect you more

djimi

hohojojo wrote: »

i don't really agree with you due to the fact your whole arguement is saying that every one is so uncertain about their jobs that you should shy away from doing anything but it doesn't matter if your in a recession or not once you have a morgage and a property that you call your own you'll always have this kind of stuff on your mind even on the way up you could loose your job and find it hard to get another one but if you want to own your own house this is the chance you take if you have to move you can always sell or rent it out and off set the costs

to be honest i would prefer to buy young and own the house fully before i get to old and be able to save for my retirement than to be stuggling later on in life were stress will affect you more

I agree with you to a point, but the difference between now and before was that before if you lost your job it was likely enough that you would find something fairly quickly, whereas now its an awful lot harder to find work, and the likelihood of having to move to find work is much greater. Obviously there is always a risk involved in buying a house, but in my opinion that risk is far greater now than it was a few years ago when times were better, and it has to be a very serious consideration when buying a house. You say you can always sell or rent if needs be but there are an awful lot of people out there who cannot sell because of negative equity, and renting out a property should not be seen as an easy out as their are obligations and considerations involved, and too many unwilling landlords out there at the moment are making the rental market a bit of a minefield.

Catweasel

Stating the obvious but it's all about timing. Moneyweek in the UK did a study a few years ago - basicly if you bought when prices were low, then buying is better, buy in a boom and you were better off renting.

Nothing startling there. Basicly the message for buyers is to do your homework and don't be afraid to rent. Personally I got nervous a few years ago and sold up. Never saw myself as a renter but 5 years later I'm still renting. There's nothing wrong with it.

As for the central question of whether to buy now - it's the same considerations as should always be the case: value based on a few methods especialy yields, take account of opportunity costs and personal circumstances. Maths and life! I would say that for the first time since I sold, I would be ok to buy now (but only at the right price;)).

kennyb3

These are fictitious figures used.

A 100% mortgage?

30yrs to pay off €160k?

only 2% inflation

€800pm rent on a house that costs €160k - a near 17% yield

Assumes no more falls in mean time

Should I go on?

Lets make up stuff to suit.

Catweasel

kennyb3 wrote: »

€800pm rent on a house that costs €160k - a near 17% yield

Lets make up stuff to suit.

6% Gross yield, no?

zac8

kennyb3 wrote: »

€800pm rent on a house that costs €160k - a near 17% yield

That's a 6% yield.

Catweasel

kennyb3 wrote: »

These are fictitious figures used.

A 100% mortgage?

30yrs to pay off €160k?

only 2% inflation

€800pm rent on a house that costs €160k - a near 17% yield

Assumes no more falls in mean time

Should I go on?

Lets make up stuff to suit.

Are you even on the right thread - did you mean to post to the "Property prices on the way back up!!" thread?

UDP

StillWaters wrote: »

My own view is that it makes economic sense to buy now, and if one does not foresee a need for mobility and buys a home that will suit their needs for 5+ years they win out over the renters both in terms of money and lifestyle.

I disagree. Would want to be talking 20+ years that the house would want to suit the needs of the owner.

A friend of mine purchased a house recently not realising the amount of work and costs involved in owning a house. You have household tax, house insurance, cost of repairing problems (structural, furniture/fittings, plumbing, electrical etc -lots of things go wrong), immobility if you lose your job but also if knackers or any other scumbags move in next door which can happen to anyone. And many other hassles and costs.

I would love to own my own place as it would be nice to threat it like a project in that all the work I put into the home is mine but to me it just ain't worth it for the amount it will cost me.

I think many people forget that it is probably the biggest investment by far they will ever make in their lives. Get it wrong and it will make your life a misery - or even get it right and then some scumbag/a$$hole moves in next door and your life is still a misery. Too risky imo unless you have lots of money to take the risk.