High rents, falling prices: is buying better than renting?

Has the gap between rents and repayments narrowed as sharply as reports out this week claim? Fiona Tyrrellassesses five properties

Rising rents and falling house prices mean that for the first time in around five years, the gap between mortgage repayments and rents is narrowing, according to a report this week from property website Daft.ie.

The report indicates that rents have increased by 6.6 per cent in the past 12 months, with the average rent nationwide at an all-time high of €1,400. Rents in Dublin have increased by 8 to 10 per cent in the last year.

This had led to a scenario in certain areas of Dublin and Limerick where the cost of buying a property is the same as the cost of renting one, according to the report.

"While loan repayments remain higher than rents, on average, the gap has become quite narrow. Indeed, in some areas like west Dublin, where yields are highest and growing most strongly, this gap has been eliminated."

Meanwhile, a report from Real Estate Alliance released last night painted a similar picture. Rental incomes in some of the most sought-after locations in south Dublin have seen an average increase of 15 per cent.

Maynooth and Cork county saw an average increase of 10 per cent and Cork city saw increases of 12 per cent, according to the study.

In 2007 investors all but disappeared from the market. However a survey published yesterday indicated that 93 per cent of buy-to-let investors intend to maintain their portfolio over the next five years and 54 per cent of those polled said that they plan to increase the size of their property portfolio within the next five years.

The survey commissioned by EBS Building Society and Gunne Residential also indicated that rental incomes are also on the increase - 47 per cent of landlords have seen an increase in their income from rental properties, up 9 per cent on last year.

With hopes pinned on changes in mortgage interest relief in the Budget it could shortly make even more sense to buy rather than rent.

So, is it now cheaper to buy than to rent? We searched for new homes where the gap between mortgage repayments and rents has narrowed.

Address:Adamstown Square, Lucan, Co Dublin.

Property: two-bedroom apartment with around 74sq m (800sq ft) of living space.

Price: from €320,000.

Rent:west Dublin has seen strong rents in the last year and the excellent transport links at Adamstown have pushed them up even higher. Expect a monthly rent of €1,250-€1,350.

Mortgage repayments: buying the apartment as a first-time buyer and borrowing 92 per cent would mean a mortgage of €294,400. On a rate of 4.99 per cent over 35 years this would equate to a monthly mortgage repayment of €1,483.76.

Interest relief, which can be up to €266 per month for a married couple or €133 as a single person, could bring this figure down to €1,217, potentially making this property cheaper to buy rather than rent.

Agent:Gunne New Homes

Address:Charleston Maltings, Ballinacurra, Midleton, Co Cork.

Property:two-bedroom duplex in new scheme.

Price:€295,000.

Rent:high rents are being achieved at this attractive waterside scheme which has been developed beside a converted malthouse. The agent says rents are around €1,050.

Mortgage repayments: buying the duplex as a first-time buyer and borrowing 92 per cent would mean a mortgage of €271,400.

Borrowing on a rate of 4.99 per cent over 35 years would equate to a monthly mortgage of €1,367.85. Mortgage interest relief (up to €266 per month for a married couple or €133 for a single person) could take the cost down to as little as €1,101.85 per month - just €52 more than the rent.

Agent:Sherry FitzGerald New Homes.

Address:Charlestown, off St Margaret's Road, in Finglas, Dublin 11.

Property:two-bedroom apartments in newly-constructed scheme.

Price:from €330,000.

Rent:although new owners are just about to move in, investors who have purchased at the scheme are expecting a monthly rent of around €1,300.

Mortgage repayments:a first-time buyer borrowing 92 per cent would get a mortgage of €303,600. Borrowing on a rate of 4.99 per cent over 35 years would result in monthly repayments of €1,530.14.

Mortgage interest relief (up to €266 a month for a married couple or €133 for a single person) would take the cost down to as little as €1,264.14 per month, potentially making this property cheaper to buy than rent.

Agent:David Rogers Estate Agents

Address:Castleforbes Square, Castleforbes Street, Dublin 1.

Property:two-bedroom apartments measuring 70-79sq m (750-850sq ft).

Price:from €450,000.

Rent:rents in the fast-developing docklands area are extremely strong. Expect rental income in the region of €1,800-€2,000 in this new scheme.

Mortgage repayments:a first-time buyer borrowing 92 per cent would get a mortgage of €414,000. Borrowing on a rate of 4.99 per cent over 35 years would equate to monthly mortgage repayments of €2086.56.

Mortgage interest relief (up to €266 a month for a married couple or €133 for a single person) would take the cost down to as little as €1,820.56 per month, potentially making this property cheaper to buy rather than rent.

Joint agents:Hooke & MacDonald and Gunne New Homes.

Address:Segrave Square, Ashbourne, Co Meath.

Property:two-bedroom apartments in phase two of a new mixed-use scheme currently under construction.

Price:from €295,000.

Rent:rents are strong in Ashbourne thanks to its relative proximity to the capital and the major expansion of retail business in the area. Expect rents in the region of €1,050-€1,150.

Mortgage repayments:Buying the apartment in Segrave Square as a first-time buyer and borrowing 92 per cent would mean a mortgage of €271,400. Borrowing on a rate of 4.99 per cent over 35 years this would equate to a monthly mortgage of €1,367.85; mortgage interest relief of up to €266 per month for a married couple or €133 as a single person, would give a substantial drop in the monthly repayment.

Agent:Grimes Real Estate Alliance, Ashbourne, Co Meath.