Should you Rent or should you Buy?

Should you Rent or should you Buy?

As long as I have worked in brokerage this has been a burning question for people who are thinking about buying a property. Now you can work out the answer for yourself thanks to our Rent or Buy calculator.

There have been some great calculators around but we never saw one that lets you factor in changes in rents and purchase prices in the future to give a more user oriented solution. This calculator will also factor in Tax Relief at Source for first time buyers and rent relief for renters, as well as compounding interest on savings so that you get a more genuine feel for the real life end result.

Trying to model ‘real life’ scenarios is difficult, and there is always a difference of opinion on what should or should not be factored in.

We did our best to replicate a situation based on the up to date taxation treatment of property and rent as well as using realistic rates for mortgages and savings to give as clear a picture as possible.

If you want to read through the methodology you can find it here.

This is the first in a series of calculations we are going to develop and in time they might even appear on the MyHome phone app!

Feel free to post your results and have your say in our poll.

It goes without saying that we need strong criticism to improve so any additional thoughts on changes to methodology are welcome.

And one last thing, what other burning questions do you want answered? Are there any other calculations you’d like to see to help you make better decisions?

[poll id=”33″] [poll id=”34″] [poll id=”35″] [poll id=”36″] [poll id=”37″]

There are 12 comments for this article
  1. MICKEY MOUSE at 10:02 pm

    Hi Karl.Estate agents’ and mortage advisers played a huge part in the shit were in. Inflated house prices gosumping were the norm. Buy the way how’s the tax free gigging going.

  2. barry o’brien at 9:42 pm

    I would have thought there would have to be a significant difference over the life of a mortgage and im talking of over €100k and more to justify renting over buying with the advantage of having the asset debt free at the end of the mortgage in the buy corner.

  3. Roberta at 6:34 pm

    @Karl – I definitely think the flexibility is the preference to stay mobile, if needed, and it makes sense in these times of economic uncertainty.

    Also, by talking with people who are thinking of buying (and I am in this category) I see they are more prone to save and build nice deposits, and apply then for 10/15 years mortgages, instead of 30/35years

    Does it make economic sense? I don’t’ know, but 30 years mortgages feel like a cage.

  4. Brian Salazar at 5:08 pm

    My guess regarding reason for renting: Propensity for flexibility probably has to do with the volatility of the job market itself. Even here in the States, rental growth is far outpacing home sales. This a direct result of employment insecurities. The secondary reason, I presume, has to do with selectivity in committing to a home purchase – a “wait and see” approach. As in prospective home buyers are seeking to be in neighborhood A, but are currently priced-out, but in 2-3 years time perhaps values will have come down to a level that makes Neighborhood A more accessible.
    Cheers

  5. Ja at 2:25 pm

    @Karl ” I suppose there will always be some who support a world of less information.”
    In the past these people were known as Estate Agents. Wait until we get a register like the UK where all sale prices are listed in an accessible way so people don’t have to second guess any more. Currently prices will drop and continue to do so as the Government squeezes more money from each household. Some people can’t even get their deposits together and those that have don’t want to see their hard earned money lose its value as bricks and mortar values continue to dip. Buying a house is an Irish obsession, not shared by many of our European neighbours. That’s a mind-set we might be seeing change now.

  6. Niall Harrison at 1:39 pm

    I think it is always important to keep in mind interest rate changes as even a 1 or 2% change can significantly impact monthly mortgage repayments. Point being that if you are calculating the price comparison between rent or buy, don’t forget to look at how much your mortgage would rise if interest rates go up – which they will eventually.

  7. Nell Leinnon at 11:48 am

    Due to the egregious policies of Bertie and Biffo’s Fianna Failure gansgsters I am neither renting or buying. I’ve had to move to the mainland and therefore I no longer contribute to the Irish economy. Mass emigration is the reality, further eroding tax revenues and thus the downward spiral continues. As long as Ireland is one of the PIGS I will remain abroad.

  8. Ann Twomey at 11:22 am

    Karl,
    Maybe I am misinterpreting the calculator/results but cash purchasers don’t appear to be factored in. Thankfully I’m not in negative equity but am moving to Dublin but given Peter’s comments regarding his situation in Beaumont would I be better off letting my house and renting in Dublin until such time as the market settles [if it ever will :-)]. Would much appreciate your advice. Ann

  9. Karl Deeter Author at 11:05 am

    @Peter That is a bitter pill I am sure, on the calculator you can put in those price drops, have you done that?

    I did it based on a purchase price today of 210,000 and it showed some interesting results, if prices fall 15% and that is all then it is better to buy now, if they fall 15% two years in a row then your thesis holds – although the actual ‘cost’ is still cheaper for the buyer over 5 years.

  10. Peter at 10:53 am

    If you can afford rent for another year you should hold on. I be live prices will continue to fall by another 15% this year and maybe the following year. We bought a house in Beaumont exactly four years ago for €410,000. There is now a house on our road for sale for €210,000. Next year, if rates continue to drop, that house would cost €178,50. In two years a similar house would cost €151,725.
    There is little reason to see the prices of houses rise. The government is continuing to spend very little. The Euro crisis is continuing. Greece is on the verge of defaulting. This may have knock on effects in Ireland. €210,000 may seem like a bargain price now. So did €410,000 four years ago. Just think of the value you’ll get next year or the year after. You may even have a disposable income afterwards!

  11. Karl Deeter Author at 10:43 am

    I always find some of the results to polls interesting,

    So far renters have shown a propensity (52%) to opt for renting for flexibility over price – does that indicate a more mobile work force? Or a preference to the ability to stay mobile if needed in the current jobs market?

    The split is currently 54% who want to rent vs 46% who want to buy, but of those who are thinking about buying 58% of them have not done the full calculations on the financial impact it would have! (worrying)

    Oddly, 17% of people think that having a calculator to help determine the costs of renting versus buying is a bad thing – I suppose there will always be some who support a world of less information.

    And lastly, for at least 47% of people, the decision to buy won’t be swayed by what the calculations show, they plan on buying anyway.

    We’ll keep you up to date as we progress!

  12. bob sheeran at 10:36 am

    better days ahead