Ronan Lyons | Personal Website
Ronan Lyons | Personal Website

Rent or buy revisited – what’s most important?

This morning, I awoke to find that the blog has been making waves again! The Irish Independent obviously liked my recent post on a comparison of the first year costs for renting or buying – they wrote an article about it here. However, the guys on thepropertypin were less enthusiastic – the notion that there might be figures suggesting it’s cheaper to buy than it is to rent led to much discussion trying to figure out what on earth I was talking about. Some saw it as disingenuous, as to them renting will always command a premium over buying, while others saw it as flawed, not including some important part of the maths. Most of the discussion seemed to stem from a presumption that I was trying to justify buying. That presumption certainly must have made my analysis of rent/buy scenarios with 50% falls in prices from peak to trough very confusing indeed!

In fact, my post was an attempt to put some numbers on how much things have changed over the past few years, taking the stand-point of a prospective first-time buyer couple looking at how much money they would save or lose per annum, were they to go ahead and buy or stay renting. In effect, it was examining affordability through the opportunity cost of (not) buying, over the time horizon of just 12 months. It found that people could save more now in their first year as a buyer than they could even at the height of the boom in 2005/2006. However, people clearly aren’t buying in the same droves as 2005/2006. This means that affordability cannot be the only factor that’s important when people weigh up whether to buy. As a mathematician might say, affordability may be necessary, but confidence is sufficient.

In the discussion that followed my last post, I wondered whether it would be possible to measure confidence. In the absence of something more concrete, I decided a quick poll might be the next logical step. It’d be great if you could fill it out. Feel free to more fully express yourself in the comments below also.

Which of the folllowing statements best sums up your attitude towards the rent-or-buy decision?

View Results

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I’m hoping to revisit this topic in a couple of weeks, taking a 5-10 year cashflow perspective, and using medium-term interest rates rather than current ones, to add a different dimension to the debate.

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