Renting Vs Buying

just looking for some advice, I am currently trying to buy a house but both fell through at the signing contracts stage and it is really stressful. So now i am planning on renting and hoping that people stop making these crazy bids on property (this is the reason we lost our two as we were gazumped both times). I know people say rent is dead money but what i suppose i'm asking is do people think this is a good idea or should i just bite the bullet and go for a property of my own. A lot of my friends have their own property and can now barely live, to be honest i would prefer to stay living at home rather than live on a shoe-string budget. Any opinions what would you do?

Simple answer-whatever makes you happy at a (monthly) price you can afford.

irrespective of where you stand on the direction of the irish property market interest rate increases should slow things down a little - there may be another 0.25% increase announced this afternoon.

how much larger than your monthly would your mortgage have been if you had bought either of the properties that you were looking at? see if you can save the difference in a high interest account and see what this does to your lifestyle.

Tony, I'm in a similar situation to yourself. Got involved in bidding wars on two properties which I lost out on. As you know, property prices have increased phenominally over the last five years. However when I did a bit more research, I found out that rents had stayed pretty constant over the same period (note, I'd been out of the country for the last few years so was a bit out of touch). I gather it's not too hard to find a place either - the queues of 2001 are no longer common place.

The way I see it now, €1200 rent will get you a similar property in a better location than €1800 mortgage repayments (25 years at around 4%). Now in the first few years that €1800 breaks down as approx €1200 in interest repayments and €600 in capital repayments. So you could argue that your €1200 is dead money either as rent or as interest.

Now, I'm somewhat bearish about the future direction of the property market in Ireland (see the "Great Financial Debates" section for more on this). But it's up to each person to make up their own mind on how they see this and what level of risk they want to take. So, if you think there is a risk that prices will not increase in the future (i.e. we get the "soft landing" many are now talking about), or even decrease somewhat, then you should only buy if you feel you would be happy living in the place for the next 10 years or so.

Because if prices don't increase you will probably end up losing money when you sell (based on the high transaction costs - stamp duty, legal fees, time involved in selling and purchasing again with more stamp duty). Of course, if prices do go up, then you don't have this problem (assuming the price for the house you're selling has gone up as much as the prices for the type of house you now wish to buy)

Seeing as I don't really know yet what I want for the next 10 years or so, and I don't expect large price increases over the next 5 years, I've decided to rent and will be looking for a new place in the coming weeks.

Good luck whatever you decide to do. It sure aint easy...

Tony, I am also having the same thoughts but havent gone to buy yet.

With current prices I cant justify paying 400,000 which is still an awful lot of money for a pokey 3 bed house in a suburb of dublin, but yet i know i need to settle down. those two words ring in my ear so much "dead money" but is it really! i know you could rent a nice 3 or 4 bed home for around 1100-1300 per month or maybe less and be slightly more comfortable!

Is it so bad to rent??

househunter7 said:

Is it so bad to rent??

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Not at all. Someone else has to pay for the furniture and repairs after all.

Rent does not go up with interest rate rises . There is no linkage. It is linked to supply. There is plenty of supply in Dublin.

Rent has hardly risen at all in 5-6 years in Dublin , it may even have fallen in nominal terms and mroe in real terms as it fell behind inflation .

If the landlord mentions a rent increase you simply threaten to leave , Landlords do not want to lose good tenants nowadays.

As interest rates rise any money you can save will attract a better interest rate return , you may say that 'your' house would cost €1800 mortgage and €1200 rent. Why not 'simulate ' that mortgage for a year by saving €600 a month on top of the €1200 rent and increase that as the interest rates rise .

Are you comfortable without that money to spend each month , maybe you cannot afford that mortgage so ???

2Pack said:

Rent does not go up with interest rate rises . There is no linkage.

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is this really true though, as interest rates rise, landlords mortgage goes up and they start askin u for more rent! will this not happen on a broad scale then?

it does make sense what your sayin 2pack though. sounds appealing too to a certain extent too

Some landlords own their properties outright and will be unaffected by interest rates. Many other landlords bought years ago at much cheaper prices so will not be under much pressure due to interest rates rises. Only landlords that bought recently at highly inflated prices will feel the pinch and try to raise rents.

househunter7 said:

is this really true though, as interest rates rise, landlords mortgage goes up and they start askin u for more rent! will this not happen on a broad scale then?

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They will ASK , of course they will. Their pricing power is very limited though given the number of properties out there nowadays . Why are 2 beds in the IFSC costing more or less the same to rent now as in 2000 or 2001 ??????

sounds appealing too to a certain extent too

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never mind what it sounds like . Look at the hard evidence I posted here

Dont forget in looking at exepnse stream that depending on what you buy you can if needs be rent out one or two rooms to supplement income

padh said:

Dont forget in looking at exepnse stream that depending on what you buy you can if needs be rent out one or two rooms to supplement income

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Two rooms available to rent sounds optimistic for a Dublin FTB does it not ...especialy given the shoeboxes on offer and if you buy 3 bed out in the Pale at the Back Of Ballivor you will not be able to rent any bedroom out.

From what i can see it may happen like this

ECB rates by the end of the year reach 4%+ people can not afford to keep their house decide to sell but as there is nobody buying houses because of high interest rates there is no construction so the hundreds of thousands of foreign nationals heavily involved in the construction sector are out of work and may need to return home leaving thousands of vacant rental properties. Landlords panic and try to sell off their properties but as the market is flooded they are stuck with them and are forced to accept whatever tennants they can find. I may have this totally wrong but this is the way i can see the big economy crash coming.

Welcome to the Bears' club Tony - the only thing is none of us have been proved right so far

padh said:

Dont forget in looking at exepnse stream that depending on what you buy you can if needs be rent out one or two rooms to supplement income

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yes but if your willing to live with others you can rent/share a house/apartment with a few friends for next to nothing! 3 friends of mine rent a million euro house in ranelagh for 500euro each a month,they walk to work in ten minutes and save the money they dont spend on a mortgage in tax efficient pensions and low risk long term diversified investments. They have been there a few years and have it decorated with their own furniture etc, they dont have to pay mortgage ,insurance, maintenance repairs etc. The interest on a mortgage is the "rent" for use of the banks money.The banks are selling their properties to rent!! renting is not a bad thing and will be proven to be a very good thing in years to come.