TO BUY or not to buy, that is the question. Uncertainty over the property market has created a dilemma for potential first-time buyers - whether to buy or rent accommodation.
With higher interest rates being charged on new mortgages and rents beginning to fall in some areas, the argument in favour of renting is getting stronger.
Until the start of this year, landlords definitely had the upper hand. Queues of prospective tenants turning up to viewings meant that they could command huge rents. However, the balance of power is shifting towards the tenant, thanks to a deluge of rental properties flooding the market. Figures from property website Daft.ie showed that the supply of property available to rent increased by almost 50 per cent in the last quarter of 2007.
This deluge is most likely a consequence of investors and developers who failed to sell in 2007 deciding to "park" their properties in the rental market. The dramatic jump in supply has led to a levelling-off in rents, and anecdotal evidence is now emerging that landlords are starting to drop their asking rents.
The latest rent report on Irishpropertywatch.com makes encouraging reading for tenants. It estimates that there were close to 800 rental price reductions on properties advertised on Daft.ie from April 2nd-9th. The average cut was €102 or 7.4 per cent.
Furthermore, three-quarters of the properties listed in the last three weeks had not yet been rented.
Do these figures indicate that renting is becoming a more attractive option than buying? Ronan Long, economist at Daft.ie, suggests that few tenants in Dublin would agree. Rents are still very expensive in the capital. "Average rents in Dublin city centre rose from €1,200 in 2004 to almost €1,700 in early 2008 in Dublin city centre, and from €900 to €1,200 in Cork," he says.
The latest DKM/EBS affordability index found that while there may be some benefit in holding off buying in the immediate term (on the basis that house prices may have further to fall), a first- time buyer couple will still be better off purchasing rather than renting if they intend to stay put for more than three years.
Like all economic models, this evaluation was based on several assumptions. The key one was that property prices will grow by 3 per cent annually, a development which is far from certain.
The Daft rental report for the first quarter of the year will be published soon and, as the first in-depth analysis of the 2008 rental market, will be essential reading for anyone torn between renting and buying.
