€1,000 per month is €12k per annum in rent. On a house worth €300k this is a 4% yield.
There are no 4% yields anywhere in Ireland on houses, except on very large houses in certain parts of Dublin.
The national average yield for 3-bed houses is 7.6% So a more realistic comparison is about €1,900 a month in rent for a house you'd buy for €300k.
Another issue is actually having that €300k to invest, a bank will give you that money to buy a house, they won't generally to invest.
But assuming that you did have €300k knocking around, very simplistically -
Option 1: If you bought the €300k house and it increased in value by an average 4% per annum (not sure what the figure for Ireland should be over long time lines?) for 30 years it would be worth €975k. You'd have paid €30k in LPT along the way, and maybe something like €50k in maintenance (that would be covered in a rental). Net position about €900k.
Option 2: If instead you invested the money and it grew at say 6% per annum (stockmarket level returns), it would be worth €1.4m after 30 years, less CGT you'd have €1.1m. Assuming rent increases at 2% per annum (figure picked out of the air, open to suggestions), after 30 years you'd have paid €485k in rent. So your net position is about €600k.
It's really all about the assumptions of course, but in most cases I think I've favoured the renting scenario here. €12k rent may be low depending on where the house is, 6% growth in your investment is probably aggressive considering you asked for property-level growth and I used 4% when calculating the house value increase, CGT may well go up closer to income tax levels or deemed disposal rules get widened, rents have been increasing by more than 2% for quite a while in Dublin anyway. Interesting all the same!
Net was probably a poor choice of words there. You had to invest €300k in both cases, so really your "net"/profit is €600k for Option 1 or €300k for Option 2. But either way, based on those assumptions (lots could be challenged in them to be fair!) renting does not look like good financial sense to me. There are also intangible benefits to buying over renting I think; you can make alterations to the property, truly feel at home etc.Thanks Zenith63
So using your calcualtions based on those assumptions:
Option 1) Buying a house returns €900K net
Option 2) Renting and investing returns net €600k
Thats a substantial difference of €300K and a clear winner for buying over renting..
If only there was no CGT on stock market investments... :-(
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