It's cheaper to buy than rent in 80pc of the country
Published 21/09/2015 | 02:30
It is cheaper to buy a property than rent one, due to soaring rents. This reflects the fact that thousands of people are being forced to rent, pushing up the cost. Many of these are reluctant renters who are unable to get on into the property market, experts say.
And thousands of would-be first-time buyers will continue to be locked out of the housing market for at least another two years due to a lack of suitable houses.
Finance Minister Michael Noonan has called on the Central Bank to review its lending restrictions, claiming that they are stopping first-time buyers purchase a starter home.
"People are paying more in rents than they could pay for a mortgage. Starter homes are not being built," he said.
A survey of 54 areas around the country has backed up Mr Noonan's views. It found that it is now cheaper to buy than to rent a typical three-bed home.
Figures compiled by Daft.ie show that monthly mortgage repayments on a typical three-bed house were less than it could be rented for in most parts of the country.
The exception is the most sought-after and expensive parts of south Dublin.
In Dublin 24, it costs €1,248 to rent a three-bed house, but it could be bought with an 85pc mortgage for a monthly repayment of €939.
That is a monthly difference of more than €300. Dublin 24 includes Firhouse, Jobstown, and Tallaght.
In Dublin 7, which includes Arbour Hill, Cabra, Phibsboro, Smithfield, and Stoneybatter, it is cheaper to buy than rent.
The Daft.ie figures show that €1,462 is the typical monthly rental cost, compared with a mortgage amount of €1,377.
In Galway city, rents for three beds are typically €812 a month, but repayments amount to €670.
The mortgage figures are based on a 15pc deposit, borrowing for 30 years at 4.3pc.
Cork city rentals for a three-bed house are typically €904, compared with a mortgage amount each month on a three-bed of €741.
Trinity College Dublin assistant professor and economist at Daft.ie Ronan Lyons conducted the study.
The survey found that it was cheaper to rent than buy in 43 our of 54 areas in the second quarter of this year.
That means that in 80pc of the country renting is dearer than buying.
Financial adviser Karl Deeter said the fact that monthly mortgage payments were less than rental costs pointed to a dysfunctional housing market.
Mr Deeter, of Irish Mortgage Brokers, said: "It tells us how messed up the market is when you can buy a house cheaper than you can rent one."
He said there were now thousands of people with no choice but to rent.
This "locked-out generation" would typically need to be saving €1,000 a month to build up a deposit to secure a mortgage.
This is on top of rent of around €1,000 a month, as well as their living expenses.
People unable to buy were faced with renting for a long time, said Mr Deeter.
But he said those thinking of buying should not put off doing so for too long, or they would end up meeting repayments late in life.