Tuesday 26 September 2017

Renters Paying Twice as much as paying mortgages

Renters are moving home to their parents in ever-increasing numbers in an effort to get on the property ladder, according to a national group of estate agents.

With rents exceeding average monthly mortgage costs around the country, tenants are finding that the only way they can raise finance is to abandon independent living in the short term and return home.

“It is increasingly difficult for first-time buyers to save deposits and purchase properties due to the combination of high rental and childcare costs,” said Anthony McGee of REA McGee in Dublin 24.

“There are lots of instances where we are seeing people moving home to parents to save deposits.

“Even though the rents they are paying are in excess of a mortgage on the same property, they can’t seem to attain a mortgage due to their inability to raise money for a deposit.”

The rental market is being squeezed ever upwards by a perfect storm caused by tenants renting on a much longer basis according to REA spokesperson Healy Hynes.

“Tenants traditionally moved around in the hunt for better and cheaper accommodation, but this is no longer the case, and tenancies are becoming much longer,” said Hynes, a specialist in the area.

“This means that there are less rental properties on the market, and those that come up are very often being converted to Airbnb usage.

“All of this has heated a rental market where average rents nationwide are now €1,017.15, having risen 2.8% in the past quarter.

“In contrast, the cost of servicing a €200,000 25-year mortgage on the REA Average Three-Bed Semi price of €221,843 would be €969 at current rates.

“This difference is made even starker when you consider that the average rental price is based mostly on two-bedroomed apartments, not three-bed semi-detached houses which obviously command a higher rent.

“Although 60% of rental properties in the country are now covered by rent pressure zones, they are simply a fire-fighting exercise as it will be 2020 before we can evern hope to see a sufficient supply of new homes coming on to the market.

Dublin agent Ed Dempsey believes that the rental market is a huge problem in Dublin, fuelled by the migration of properties in the capital to Airbnb.

“There are currently 3,000 properties available to rent on Airbnb that would otherwise be in the rental sector. In contrast, there are just 1,000 properties available to rent on the long-term market,” said Dempsey.

REA agents in Balbriggan are finding that in some cases prospective buyers can halve what they are paying rent if they purchase a property in the area.

“If renters can obtain mortgages they are willing to buy sooner rather than later, as in many cases they are halving their rental payments,” said John Cumisky from REA Cumisky.

“Rents have gone through the roof in the area fuelled by an all-time low of supply of suitable rental properties, with many prospective buyers trying to escape from rents of €2,000 a month in Dublin.”

In commuter areas, buying is still far preferable to renting according to Brian Farrell of REA Brophy Farrell in Naas.

“Assuming that an average house priced at €260,000 in Naas will rent for €1,500 per month, a mortgage of 90% loan to value (LTV) will cost 75% of that amount to service, at €1,132 per month.

“When you factor in the cost of mortgage protection insurance, house insurance, property taxes and general repairs and maintenance these figures work out at a similar amount on a month to month basis.”

The traditional investor who buys a three-bed semi and rents it out appears to be retreating from the market on a monthly basis to be replaced by the ‘Air Investor’ according to Robert McGreal of REA McGreal Burke in Castlebar.

“If we take Westport, for example, there are 14 properties listed to rent, 166 for sale, but 250 listed as currently available on Airbnb,” said the Mayo auctioneer.

In Tipperary a significant number of renters, mainly people who have settled in the area over a long term from Eastern Europe, are now opting for the security of home ownership.

“This category of buyer now makes up 50% of our three-bed semi sales. Many of them have substantial savings and recognise that mortgage payments are now significantly less than the rent that they are currently paying,” said Eoin Dillon of REA Dillon in Nenagh.


Available for interview:
Healy Hynes, REA spokesperson 087 263 2295
Media information: Darren Hughes, 086 293 7037,