Border region still most affordable for FTBs
Brokers Ireland said while prices generally are reasonably steady, albeit with much lower volumes arising from the Covid-19 shutdown, underneath all is not well in terms of affordability for aspiring first-time buyers.
The CSO Residential Property Price Index for May shows the border region may still be among the most affordable for aspiring first time buyers (FTBs) with a 2.5 per cent decrease in house prices over the past three months.
However, according to the same set of stats, the fall in prices seems to have plateaued over the past month, with a zero increase in the Residential Property Price Index between April and May.
This compared to elsewhere in the country, such as Dublin which has reported no change in pricing, and a 0.7pc increase in the rest of the country in the year up to May.
Brokers Ireland said while prices generally are reasonably steady, albeit with much lower volumes arising from the Covid-19 shutdown, underneath all is not well in terms of affordability for aspiring first-time buyers.
Overall, the national index is 18.1% lower than its highest level in 2007. Dublin residential property prices are 22.4% lower than their February 2007 peak, while residential property prices in the Rest of Ireland are 21.1% lower than their May 2007 peak.
Property prices nationally have increased by 82.7% from their trough in early 2013. Dublin residential property prices have risen 92.1% from their February 2012 low, whilst residential property prices in the Rest of Ireland are 81.6% higher than at the trough, which was in May 2013.
Rachel McGovern, Director of Financial Services at Brokers Ireland, said with a mean house price of €296,043 in the year to May, as indicated in today’s CSO publication. At that rate a FTB would need an income of €84,584, based on the Central Bank income limit of 3.5 times income.
“In addition such a buyer would need to have saved a deposit of €29,604.
“Hence, it is not surprising that less than a third of purchasers are FTBs,” she said.
And she said the pandemic is likely to exacerbate an already difficult situation for the lower income cohorts.
“Already we know that home building is going to be woefully behind schedule as a result of the pandemic. In December last the Central Bank estimated we need 36,000 new homes each year over the next decade. More recently the Bank now estimates that delivery will be down to just 16,000 this year.”
She said such scarce supply is likely to “keep house prices steady, if not elevated.”
“Unfortunately it is those in the lower income cohorts who would normally expect to be able to buy their own homes who will be hit hardest.
“Therefore the onus is on the Government to make homes more affordable. That will require doing something that has not been done to date,” she said.
Brokers Ireland welcomed the commitment in the Programme for Government to retain and expand the Help-to-Buy scheme.
“However, that of itself will not be nearly enough,” she warned.
Brokers Ireland has consistently maintained that home ownership acquired at an affordable price is the best way to grow personal wealth over the longer term.