Pondering Paddy
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Background - I'm single male in mid/late 20s. Living in Dublin area and renting. Over the past few years I've saved up enough to make up a deposit on a flat and recent pay rises means I can afford to save more than I have been up to now so could build up more quite quickly if I wish. I’m in a secure permeant job. Separately I'm paying into a pension plan already. I was never really saving for anything in particular other than to have savings (although I was always conscious that at some stage I'd look to buy a house that I'd plan to live in for rest of life - don't like the idea of paying rent in retirement.) Given the low interest rates at the moment I'm considering if buying an apartment is a sensible investment. Based on current asking prices and using savings as a deposit, I could afford a mortgage on a fairly nice 2 bed apartment in a good location that I'd be very happy to rent and on a 20 year mortgage my repayments would be less than my current rent + my monthly savings (i.e. if I live there I could make the repayments and still save something without reducing money I spend on myself.) I'd probably be able to rent a room as well which would reduce the cost even more but not really counting that as not guaranteed and unlikely to last anywhere near the length of a mortgage. Rent on similar properties would currently just cover the mortgage repayments so although I'd be hit by management fees and property tax, I wouldn't be far down if I end up not living in it.
Although I have no long term plan to live in an apartment, and don't particularly want to own property for the sake of it (in the sense of feeling a need to be on the "property ladder"), with my savings doing so little for me, rents going up and interest rates expected to be low for a number of years and the state of the current property market (which as I see it should mean that long term house prices and rents continue going up.) It seems to me to be a pretty solid investment and much better then leaving that money in the bank? Downsides would be losing first time buyers aids (which I don't see as that big of a deal If I can trade up on anything I buy in future, assuming house prices rise I'll be better off as I'd be using the full €220k limit this time round) and potentially being tied to a property if I ever want to move (but again given the current market I would expect to be able to sell or rent.) I'm aware that there's a risk I'm wrong on property market and prices/rents will fall too obviously and I'm also aware of the potential consequences of that happening (I only need to look at those who were my age in 2005/06 to see that!)
So the way I see it right now, If I buy a property I’m,
Although I have no long term plan to live in an apartment, and don't particularly want to own property for the sake of it (in the sense of feeling a need to be on the "property ladder"), with my savings doing so little for me, rents going up and interest rates expected to be low for a number of years and the state of the current property market (which as I see it should mean that long term house prices and rents continue going up.) It seems to me to be a pretty solid investment and much better then leaving that money in the bank? Downsides would be losing first time buyers aids (which I don't see as that big of a deal If I can trade up on anything I buy in future, assuming house prices rise I'll be better off as I'd be using the full €220k limit this time round) and potentially being tied to a property if I ever want to move (but again given the current market I would expect to be able to sell or rent.) I'm aware that there's a risk I'm wrong on property market and prices/rents will fall too obviously and I'm also aware of the potential consequences of that happening (I only need to look at those who were my age in 2005/06 to see that!)
So the way I see it right now, If I buy a property I’m,
- Avoiding low interest rates on my savings,
- Benefiting from historic low interest rates on borrowings
- Avoiding rising rents (assuming I live in it, alternatively benefiting from risking rental income v. static mortgage repayments)
- Benefiting from rising property prices