Mortgage repayments cheaper than rent in all but two areas

Mortgage repayments cheaper than rent in all but two areas
Written by Publishing Team

It’s funny how we used to beat ourselves up about wanting to own a home, calling it some sort of Irish obsession. The most imaginative thing was that it arose from some colonial remnants around the land, and that if we could just be like our continental neighbors and make the rent, all would be well.

These arguments – weird and stupid as they now seem – were made in the run-up to the 2008 crash. In the context of the higher prices and rents we see now, it’s financially reasonable to want to buy. Paying off a mortgage on a typical three-bedroom home is now less expensive than paying rent in almost every area of ​​the country. Only in the two most expensive regions to buy – Dublin 4 and Dublin 6 – is it more expensive to pay off a mortgage than rent.

According to the 2016 census, 85% of 65-year-olds own their own home, while only 14% rent. Compare that with the fact that an estimated 12 percent of 25- to 39-year-olds – those of prime working age – now own their own home, and you’ll understand better the term rental generation.

The dramatic decline in home ownership was detailed in a report released this week by the Parliamentary Budget Office, which noted that after the 2008 financial crisis, profits plummeted and stagnated while home prices and rents rose.

The mismatch saw home ownership fall 10 percentage points to 67.6 percent between 2007 and 2016, the report notes, while the number of renting households rose from 21 percent to 28 percent.

The bleak outcome was “high prices relative to income drive potential buyers out of the market into rental housing, social housing, or immigration.”

There are two primary forces fueling the housing crisis here: supply and price. One is very low and the other is very high. Economists argue that increased supply – expected to rise significantly in the next few years – will at least moderate home price inflation and, if wage growth improves, affordability will improve, but this is something of a slow fix.

Without much fanfare somewhere along the line, we’ll likely continue in this vein for a while – the cold comfort of those seeking to get out of the so-called rent trap.

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