To rent or to buy? How costs vary around Ireland
This story was published in partnership with the Irish Independent.
We may consider ourselves a nation of homeowners, but in parts of Ireland it pays to rent.
There are huge variations around the country in the gap between the cost of long-term renting and the cost of a mortgage and deposit, a Data Investigation and Storytelling analysis has found.
The results mean that tenants in some areas may make long-term savings by not buying their own home.
In South County Dublin — considered by many to be the most affluent region of the country — buying a property will cost you on average over €138,000 more than renting. On the other end of the scale, in West County Dublin, renting for three decades will set you back almost €200,000 more than buying a home with a 30-year mortgage.
In total, five areas were found to be cheaper to rent than to buy. As well as South County Dublin, they include Wexford, Wicklow, Kilkenny and Waterford County.
Of the areas where buying was found to be more expensive than renting, the top four areas where the gap is greatest all lie in Dublin. As well as West County Dublin they include the City Centre, North City and North County. In fifth place was Limerick City, where it was found to be €137,304 more expensive to buy a home.
Nationally, it is just over €100,000 more expensive to rent over the long term compared to buying a home. Renting for 30 years will set households back €545,760, while a variable mortgage over the same period with a 10 per cent deposit will cost €445,403.
South County Dublin is the most expensive area to live, with rent costing on average €820,800 over three decades, while a mortgage and deposit will set residents back €959,610. Leitrim is the cheapest place to live, with long-term rents at €267,120, while the average cost of buying comes to €238,714.
The variation comes as both rents and house prices continue to rise. Recent figures from property website Daft.ie revealed that, in the third quarter of this year, the national average rental price for new homes to the market soared to €1,516. Rents across the country rose by 6.8 per cent compared to the same period in 2020. Key to this increase is a lack of supply — on November 1 Daft saw just 1,460 homes available to rent on their site; the lowest figure they have recorded since 2006.
Meanwhile, according to Daft.ie the national average listed house price was €287,704 in Q3 2021, representing the fifth quarter in a row of rising prices. The buyer’s market has also been hit hard by supply issues with just 12,675 homes available to buy on the site on September 1 — almost 10,000 fewer than the 2019 average.
When it comes to regular payments, the average rental price is €359 more expensive than the average monthly repayment for a 30-year variable mortgage. Only in Wexford and South County Dublin is the region’s average rent cheaper than its average mortgage repayment.
According to Eurostat about 70 per cent of people in Ireland own their own home, slightly above the EU average. Potential home purchasers need to follow strict lending rules set by the Central Bank of Ireland — for first-time buyers, this includes having a minimum deposit of 10 per cent of the value of the property, while the amount that can be borrowed is limited to 3.5 times the household’s average income.
As house prices soar, people who wish to get on the property ladder have found it increasingly difficult to save for a deposit. As a result, four-in-ten first-time buyers received gifts as contributions to this cost — typically from parents’ savings — during the first six months of 2021. Data from Banking and Payments Federation Ireland also found that first-time buyers paid a median deposit of just over €52,000 on homes purchased in the same period.
Borrowers can avail of variable and fixed term mortgages. While variable rates were used to calculate the mortgage costs for this analysis, fixed rate home loans are becoming increasingly common in Ireland, and in October accounted for 83 per cent of all mortgages agreed that month.
Fixed rates typically last between one and ten years, allowing home-owners certainty in the level of their repayments. After the fixed period, the mortgage will then revert to variable rates or another product if offered by the lender. However, fixed-rate mortgages with longer terms have recently been introduced into the Irish market, with Avant Money and Finance Ireland now offering 30, 25 and 20-year fixed-rate periods and reducing several of their products’ interest rates.
This increased competition in the Irish mortgage sector has led to big differences in the overall cost of buying a home. In a comparison of variable and five year fixed-term mortgages for the national average house price, non-bank lenders were among the cheapest home loan providers — in some cases, offering savings over the course of the mortgage of almost €100,000.
The cost of a 30-year variable mortgage plus 10 per cent deposit with ICS Mortgage came to just under €407,000, compared to the same offering from Bank of Ireland totalling more than €501,000.
For five-year fixed term mortgages plus deposit, an Avant Money loan amounted to under €383,000, while Bank of Ireland’s offering cost more than €478,000. All offerings were deemed available to first-time buyers and were calculated using the Competition and Consumer Protection Commission’s (CCPC) mortgage comparison calculator.
While a deposit and mortgage repayments make up the bulk of the financial cost of buying a property, homeowners face additional charges such as legal fees upon purchase, stamp duty and local property tax. Ongoing maintenance and furnishings can add considerably to the cost of owning a home.
It should also be noted that, while list prices are an indication of house prices, final ‘sale agreed’ prices can be even higher due to lack of supply and increased competition for homes. Prospective first-time buyers have been increasingly finding themselves outbid by competitors, including investment firms who in recent months have been bulk-buying properties with the aim of leasing them to tenants on the open market. Earlier this year, for example, there was public outrage when it was revealed that an investment firm bought 135 new homes in a single estate in Maynooth, Co Kildare.
Similarly, tenants are also prone to fluctuations in rents. In an effort to stem the tide of rising rents, caps on increases in designated rent pressure zones around the country have been introduced. But with the supply of rental accommodation at alarmingly low levels, it is unclear how effective the caps will be in addressing soaring rental prices.
The Government will be hoping its new ‘Housing for All’ strategy, which aims to deliver 33,000 new homes per year on average to the Irish market between now and 2030, will go some way to address the crisis. However, it is unlikely that the strategy will impact prices in the short term, leading tenants to question whether buying a home will ever be an option, or if a life of renting is the cheaper alternative.
How this analysis was carried out
Average variable mortgages were calculated using the average list price for each region according to the Daft.ie House Price Report for Q3 2021. Assuming a 10 per cent deposit, the house price and mortgage amount were inputted into the Competition and Consumer Protection Commission’s mortgage comparison calculator. The average of the 30-year variable mortgage offerings for each house price was then found and added to the corresponding deposit figure to get the overall ‘cost of buying’ amount.
Average monthly rents for each region were taken from the Daft.ie Rental Price Report for Q3 2021. Each value was multiplied by 360 (30 years X 12 months) to get the overall ‘cost of renting’ figures. This story’s data can be accessed here and here.
