Should we rent or buy? What to consider!
Lina Oksaite from our Property Team discusses renting vs buying in today’s market
Statistics show that by 2018, home ownership in Ireland had increased up to 70.3% and people continue to buy homes for various reasons, be it for their own use or as an investment, especially in present times where renting a property is almost impossible.
One may see that owning a home may be an investment and another may see renting as a way of saving their money and ensuring that their finances and any outgoings are stable and predictable, so they are able to plan and even save.
Of course, many of us cannot imagine how paying money into landlords’ pockets, can be of any benefit at all. It has been noted that statistics show 14% rise in rents in 2022 alone, which is one of the highest increases in rental prices so far in Ireland according to Daft.ie, Irelands most popular property website. Daft.ie notes that at the end of 2016, there were less than 2,800 homes for sale in the Dublin market, however, in comparison, in December 2018, there are over 4,800 and it continues to increase making it harder for people to find homes to rent as selling property becomes more favorable.
In 2022 there were only 345 homes to rent in Dublin and 1087 homes nationwide, which explains why renting is becoming unaffordable for many.It is important to note that Russia’s invasion of Ukraine, forced many residents to move and re-locate, some of whom have ended up in Ireland also increasing the demand for housing.
Article 31 of the Council of Europe’s Revised European Social Charter sets out that the responsibility of the State is to:
“promote access to housing of an adequate standard, to prevent and reduce homelessness with a view to its gradual elimination, and to make the price of housing accessible to those without adequate resources.”
Over the past number of years, Ireland has been struggling to maintain affordable accommodation for renting purposes and even with the introduction of HAP, tenants face serious issues as their income may be “just little bit over” the threshold and they would fall outside the eligibility for this scheme.
If you are one of the lucky ones and manage to secure a tenancy, one of the most obvious advantages, is that as a tenant, your responsibilities are limited such as to pay rent, keep the property in good condition as far as practicable and to pay some of utilities such as gas/electricity. Your Lease would usually contain all the covenants that you agree to by signing the Lease for a specific term.
As a tenant in the property, you do not need to concern yourself with property taxes, management Fees or even repairs that may be due. You have flexibility in terms of your lifestyle, being able to move around without worrying about leaving your property behind or selling it. Renting property also provides the tenant with fixed expenditure therefore allowing the tenant to predict their expenditure and budget accordingly.
However, if you are a considerably large family or wishing to settle it could be extremely difficult as a Lease would only last for a specific term and the Landlord is entitled to re-claim their property at any time for their own use or sale. This can be very unsettling as families usually find it difficult moving homes.
Threshold, the tenants’ rights organization, which provides independent advice and advocacy to people experiencing housing problems, have reported that there is an ongoing increase in the number of people experiencing homelessness each month and even the lucky tenants are now forced to accept low-standard properties as supply drops but demand keeps increasing.
In its report of 13 October 2022 called “Renting and Risk”, Threshold mentions the 2019 Focus Ireland Report, which found that 68% of homeless families in Dublin reported their last stable home as being in the private rented sector, with just over one-third of these becoming homeless because their rental property had been removed from the market (e.g., landlord selling).
On the other hand, buying a house is a big step for anyone. The most obvious advantage is that it creates stability for families. You are your own boss, you can keep pets, make improvements you like, and no one is there to tell you otherwise.
With rent prices being so high, you may see it more profitable to pay a mortgage which would be the same or less than rent payments. Especially nowadays where renting is so hard to find for a reasonable price. RTB statistics show that average rent payments in Dublin are around €2000 while average monthly mortgage instalments according to Bank of Ireland Calculators, could range between €1,300-€1,700 for a reasonably sized property, therefore meaning that paying a mortgage especially if you are living in Dublin, could be cheaper than renting a home.
However, it’s not as easy as it sounds. Buying a home is a big financial expense. You are required to have a deposit of 10% and a wage of a certain level if you wish to get a mortgage as the size of the mortgage you are able to receive will always depend on your income. Any loans, or similar commitments will also reduce the size of the Loan you are able to receive.
Apart from your mortgage, there is other expenditure you may incur such as paying taxes e.g. LPT, if it’s an apartment you will have to pay management fee, you will be responsible for repairs etc.
Owning a home means you cannot just move without having a responsibility to look after it or being forced to dispose of the property, which also can be a great expenditure, especially where the market value falls, and you are not able to sell your property for the value you bought it.
Despite the above, many people still choose to buy property due to the market being so good at this time and they are able to obtain other help which is available for buyers. There are other Loans available such as First Home Scheme, which is finance up to 30% of your new property and is given for first-time buyers. There is also Help to Buy Scheme which is essentially Government tax refund scheme and was enacted to help purchasers get deposit for their home.
*Please note that the content of this blog does not amount to professional advice. Legal advice should be sought in respect of specific queries. This update is provided on the basis of information available as at February 2023. For further information, please contact Lina Oksaite /Lisa McKenna or any member of the McKenna & Co Property Team.