CSO House Prices – Budget Must Improve Affordability
Thu Oct 15 2020
Commenting on today’s CSO Residential Property Price Index for August, Brokers Ireland said prices, with a slight overall drop of 0.6pc, continue to be steady, but with a substantially reduced volume of transactions, a drop of 40.2pc compared with the same month last year.
The organisation which represents 1,225 broker firms said this clearly represents the fallout from Covid-19 when construction activity was curtailed.
Rachel McGovern, Director of Financial Services at Brokers Ireland said demand for homes continues to be strong and supply is way off meeting that demand.
“It is hoped that this week’s Budget measures will lead to more homes being built at more affordable prices.
“With a median house price of €375,000 in August in Dublin, a first-time buyer (FTB) would need a household income of €96,428, based on the Central Bank income limit of 3.5 times income to be able to afford such a home, along with savings of €37,500 for a deposit.
“And with the lowest median house price in the country of €108,000 in Leitrim, the corresponding figures would be €27,771 and €10,800, considerably more affordable.
“Acquiring a home, particularly in the most populous urban regions, is no longer affordable for huge swathes of the population, a bad recipe for society at large and it needs to be tackled,” she said.
Ms McGovern said those whose lives were already on hold from the last financial crisis are being further disenfranchised in the fallout from the pandemic, with even tighter lending conditions. “There is no time left to dally on affordability,” she warned.
She said even though indications are that rental prices may have softened in recent months there is still a gulf between mortgage repayments and the cost of rent for similar properties, with it being far cheaper to service a mortgage, provided you can acquire one.
Brokers Ireland has called for the 3.5 times income limit to be extended to 4.5 times with loan-to-value requirement set at 90pc for all, including second and subsequent buyers.
“This would result in a fairer process with no exemptions. And lenders would not have to be constantly trying to readjust criteria on exemptions in a bid to stay within Central Bank requirements.”
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.