Is it really cheaper to buy a property than to rent one? As rents keep rising in Dublin city – surpassing their Celtic Tiger peak, according to the latest Daft survey – it's tempting to do the maths on purchase prices and see an attractive margin between what a property costs to rent, and what the mortgage repayments would be to buy something similar.
Take a one-bed apartment in a mature development close to the city centre: Gandon Close in Harold's Cross, Dublin 6W, is a low-rise block of units built around communal gardens, where a one-bed apartment has just been rented at €1,400pm. Currently you can buy a similar one-bed in this scheme for €225,000, through estate agent Quillsen. Based on the myhome.ie mortgage calculator, the repayments on a 90 per cent mortgage (over 35 years) would be €803. The asking price includes parking.
This is a healthy margin for anyone who’s considering the options of buying versus renting. But, there are other costs to take into consideration. A would-be buyer would need to have a 10 per cent cash deposit to put down in the first place, as well as money for stamp duty and legal costs. And once you own the property, there will be maintenance costs. At Gandon Close, for instance, there’s an annual maintenance charge of €1,190, or approx €99 per month, that covers the communal areas of the development.
Maintenance costs
Internal maintenance costs will include decorating and furnishing as well as heat and light. On the plus side, an owner occupier could take advantage of the rent-a-room scheme to help pay the mortgage – a handy tax-free arrangement that allows homeowners to earn up to €14,000 per year
The sums aren’t quite as attractive for investors buying the same property, however, as they will be liable for income tax of up to 40 per cent on rental income and other costs associated with being a registered landlord.
For owner-occupiers, if you have sufficient funds for a deposit, mortgage clearance to buy and a medium or long-term plan for the investment, that would include taking on the role of a landlord after the property has outlived its usefulness to you as a home, there’s a good case to be made for buying rather than renting.
However, it is worth remembering that with mortgage repayments you will end up paying off a lot more than you borrowed over the life of the loan. For instance, with the mortgage on the Gandon Close apartment, the total amount would be €337,417 based on a 35 year mortgage. Spread the repayments over 25 years instead and that figure drops to €296,975.
Other examples
Here are four more properties that would cost less to buy than rent. The figures below are based on a simple ratio of rent versus mortgage repayments over a 35-year period. Loan terms of between 30 and 35 years are increasingly common among young buyers. According to statistics compiled by the Central Bank, first time buyer loan terms of 30 - 35 years were the single biggest category of loans for Jan - June 2017, at almost 50 per cent.
In the Dublin Docklands, a two-bed apartment in a scheme called Forbes Quay is for sale through Owen Reilly at €400,000. The apartment would rent "very easily" says Reilly for €1,800 per month. The mortgage repayments on the myhome calculator work out at about €1,451 per month.
In Smithfield, Dublin 7, a two-bed apartment in a scheme called The Richmond on North Brunswick Street is for sale at €270,000 through GWD. Mortgage repayments on the myhome mortgage calculator are just over €960 per month, whereas on rent.ie a similar apartment is available to rent at €1,800 per month through Ray Cooke Auctioneers.
In Phibsborough, Dublin 7, a terraced two-bed in turn-key condition at 39 Avondale Avenue is to let at €1,950 per month through MoveHome Estate and Letting Agents. Nearby, number 13 Avondale Avenue, a refurbished house that has managed to squeeze a third bedroom into its layout is available to buy at €395,000 through DNG, which would mean monthly mortgage payments of just over €1,398.
In Ringsend, a two-bed apartment in the Gasworks development beside Google's HQ is available to buy at €495,000 through estate agent Lansdowne Partnership. According to the myhome calculator the monthly mortgage repayments would be €1,748. Similar apartments in the building are currently renting on Daft at €890 per week or approximately €3,560 per month, well in excess of the repayments.
All four examples are based on a loan-to-value ratio of 90 per cent and a 35-year mortgage
