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How has the cost of buying a home changed for first time buyers?

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14 Mar 2017

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House prices may have increased in 2016 but the economic recovery and new loan regulations have shielded First Time Buyer (FTB) couples from rising prices, according to the EBS/DKM index November 2016.

The good news for house hunters is that FTB couples’ ability to repay their mortgage remained relatively stable in 2016. The report reveals how much of their income Irish homeowners spend on their mortgage repayments. This is one of the best indicators of people’s ability to make their mortgage repayments and the EBS/DKM Index has been tracking these figures for the last few years.

Demand may have driven house prices up but the introduction of the Central Bank rules on lending and the increase of the average wage across Ireland helped the market to level off. This has prevented prices from shooting up and means that couples aren’t struggling to pay off their mortgage despite a 5.6% rise in house prices since December 2015.

Read on to discover the major market trends in 2016 and find out the important predictions for next year.

House prices across Ireland

Wages increased nationally in 2016, a sign that the economy is recovering. But without the stock to meet this demand, house prices grew by 5.6% since December 2015.

Looking at house prices in August 2016, an average first time buyer’s mortgage was €195,344, meaning a working couple could expect to pay €1,009 per month toward their mortgage (almost 21 per cent of their combined after-tax income).*

There are considerable differences in affordability depending on location. The least affordable area for first-time buyers is Dun Laoghaire Rathdown, Co. Dublin where it takes almost 34% of after-tax income to pay the mortgage (based on average earnings of €36,600 a year for an Irish working couple).

The capital price

First time buyers in Dublin will be happy to discover that house prices in the capital have been increasing at a slower pace than the rest of the country. They were up 4.5 per cent annually in August 2016, compared with 11.4 per cent outside Dublin.

However, house prices are still well above the national average; the average FTB property price in Dublin was estimated at €314,303 in August 2016 implying an average mortgage of €264,015.*

What can first time buyers expect in 2017?

Things are looking up for first time buyers for next year, with the announcement of the ‘Help to Buy’ scheme in the October budget. This aims to kick start supply and the building of new homes and help first time buyers on the property ladder. This should improve affordability for first time buyers, if it encourages construction of new homes.

It will also give buyers a helping hand in saving their deposit, as the incentive will take the form of a rebate of income tax paid over the previous four years, up to a maximum of 5 per cent of the purchase price of a new home up to a value of €400,000.

Regional trends: can the rest of Ireland afford to buy?

Beyond the pale, the most affordable county for first time buyers is Roscommon, with an average price of €73,000, where it takes just 7.4% of the couple’s after-tax income to fund a mortgage – while the corresponding figure is 9.8% in Mayo.

The least affordable counties are Wicklow, where mortgage repayments account for 26% of after-tax income, followed by Kildare (22%) and Meath (21%).

Single buyers have it tough

What about the lone buyers out there? Although affordability improved a little for them in 2015,
it is still a struggle for single people looking to buy.

On average, a single person will need to earn €55,000 to meet monthly mortgage repayments of €1,009.*

Mayo, Waterford City and Roscommon are the most affordable locations, with single FTBs paying less than 15% or less of their income on mortgage repayments. Outside Dublin, the least affordable locations are Wicklow, Kildare and Meath.

Want to know more?

You can access a summarised version of the report in our handy EBS/DKM Affordability infographic, and if you want the full picture, you can download the EBS/DKM Affordability Index here.

EBS_DKM_Irish_Mortgage_Affordability_Infographic_CTA
EBS_DKM_Irish_Mortgage_Affordability_Report_CTA

Note: The EBS/DKM affordability index measures how much after-tax income FTBs need to pay for their mortgage - not how easy it is to raise one in the first place. The new deposit rules, renewed in January 2017 by the Central Bank, require FTBs to come up with a minimum deposit of 10% of the house value.

* Based on an 84% loan to value ratio.

Thinking of applying for a mortgage?

If you need more information about applying for an EBS mortgage, check out our First Time Buyer and Next Time Buyer Guides here.

You can also use our mortgage calculator to find out how much you may be able to borrow.

The content of this blog is expressed in broad terms and is limited to general information purposes only. Readers should always seek professional advice to address issues arising in specific contexts and not seek to rely on the information in this blog which does not constitute any form of advice or recommendation by EBS d.a.c.

EBS d.a.c. neither accepts nor assumes any responsibility in relation to the contents of this blog and excludes all warranties, undertakings and representations (either expressed or implied) to the fullest extent permitted under applicable law.

EBS d.a.c. is regulated by the Central Bank of Ireland.

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