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Phalinn Ooi
do the sums

Is it cheaper to rent or buy a home? We have the figures for you

Rents have been going up – but so have sale prices.

SKY-HIGH RENTS HAVE pushed the monthly cost of renting small and medium-sized homes well above the amount buyers would have to shell out in repayments on equivalent mortgages.

In some regions, renters are being asked to pay over 50% more each month to secure a property than those able to afford deposits and buy will be handing their banks.

Figures compiled by show that in virtually every part of the country the repayments on a loan for a one-, two- or three-bedroom property would be less than the comparable rent.

In Waterford City, the average rent for a three-bedroom home was €619 per month for the first quarter of 2015 compared to mortgage repayments of €430 a month on the same size property – a difference of €189, or 44%.

Meanwhile, the average loan repayments for a two-bedroom home in Limerick City were calculated at €355 per month against rent of €580 - a 63% premium.

In the commuter counties around Dublin, where rents have recently been rising at the fastest rates as workers are priced out of the capital, two-bedroom properties cost an average €733 per month to rent, compared to mortgage costs of €594.

The data revealed it was only for the largest family homes of four and five bedrooms that the balance shifted and it became cheaper each month to rent. All the calculations were based on a loan taken out with a 15% deposit at a standard variable rate of 4.3%.

This is how each region compared:


Click here for a larger version

‘Justifiable reasons’

The site’s latest rental report showed a severe undersupply in available rental properties was pushing up prices across the board, while sale prices have also been on the rise.

Report author and economist Ronan Lyons told people were more wary about buying one- and two-bedroom properties now than they were a decade ago and that partially explained the big discount for those with mortgages.

“As you move up into four and five beds, typically the maths swings … there you are typically talking about people putting down roots for 10-, 15-plus years,” he said.

If you fast forward to 15 years down the line having paid 15 years of a mortgage and 15 years of rent you’re in a very different position. In one case, you half own a house and in one case you don’t. So there may be justifiable reasons why people may be prepared to pay more to buy than rent.”

In this video, Lyons explains more about whether it makes more financial sense to rent or buy:

Video / YouTube

Note: Journal Media Ltd has shareholders in common with publisher Distilled Media Group.

READ: The rental squeeze is the worst it has been for a decade >

READ: Waitress gets $3,000 tip after telling customer she was about the be kicked out of her apartment >

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