We think we have enough for a deposit. Should we buy now or rent a bit longer?

Property Clinic: All your queries answered

Should we go out into the rental market with a view to trying to get a short-term lease, or do we stick it out for a bit longer?

Should we go out into the rental market with a view to trying to get a short-term lease, or do we stick it out for a bit longer?

 

My wife and I have been living with her parents since returning to Ireland in 2018. Covid has been fairly good for us as we have managed to save some money for a deposit. However, I bought a house in Scotland in 2013 so am not considered a first-time buyer in Ireland. I have spoken to a mortgage adviser, who said we would be in a good position to receive a mortgage exemption meaning our 10 per cent savings would be fine. As far as I am aware, though, these are on hold due to Covid.

Should we go out into the rental market with a view to trying to get a short-term lease, or do we stick it out for a bit longer?

Deciding between renting or buying is an ongoing dilemma for purchasers, primarily due to the uncertainty in the property market. You have the added complexity of living with your in-laws, which can prove challenging too. That said you have managed to save money for a deposit, which is really positive.

To help make your decision you firstly need to consider the cost of renting. The average rent nationally according to Daft.ie is €1,419 with south Dublin average rentals at €2,223 per month. Rents continued to increase nationally by 1.2 per cent year on year despite Covid. However, the rental market in Dublin saw the number of available units double in size with rents falling in Dublin for the first time since 2011, albeit from a very high rate. This has seen rental values in Dublin overall slip by 0.8 per cent in Q3 2020 while city centre rents have decreased by 2.3per cent.

If renting, you have the security of knowing your monthly outlay and the landlord takes responsibility for all upkeep and maintenance, so it’s a relatively secure and short-term option. But when you buy a property, not only do you give yourself full security of tenure but those payments that you make build equity in your own future.

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The Banking and Payments Federation of Ireland (BPFI) estimates that 19,000 to 20,000 new homes were completed last year, well short of the 35,000 units required to meet annual demand. Based on those figures and the time it will take to increase production, the Society of Chartered Surveyors Ireland estimates that housing supply in Ireland won’t meet demand/supply equilibrium until 2031. In that scenario, the demand for new homes is likely to remain strong for the foreseeable future.

The second-hand homes market supply has also been particularly tight over the past 12 months with numbers at their lowest in 14 years. With continuing strong buyer demand, recent property reports show that asking prices have been steadily rising over the last 12 months – by 4.8 per cent in Dublin and 6.3 per cent nationally, according to MyHome.ie. As a result, it is unlikely that any dramatic or significant drop in prices will occur in the short-term.

Interest rates are low and your 10 per cent booking deposit is already saved leaving you in a strong position. The fact you are not selling in order to purchase will also be viewed more favourably by agents on the basis you are not in a complex buyer chain.

Remember past performance does not guarantee future appreciation so a longer-term view is always better when buying a home

Additional costs to be aware of when purchasing are building inspection reports, mortgage valuation reports, legal fees and stamp duty together with property tax, maintenance, refuse and insurance, post purchase.

In relation to exceptions, these were certainly scarce during the early stages of Covid-19 lockdown, but as time has progressed the banks have reopened for new exceptions and you should definitely engage with your mortgage specialist to progress. Bear in mind, though, that even if a loan to value exception is available from a lender under the Central Bank rules, the lender’s credit criteria may limit lending to 80 per cent of the property value for a non-first-time buyer mortgage, in which case a 20 per cent deposit will be needed.

Remember: past performance does not guarantee future appreciation.So a longer-term view is always better when buying a home. The best of luck with your decision.

Anne Carroll is a chartered valuation surveyor and a member of the Society of Chartered Surveyors Ireland, scsi.ie

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