Business Property & Mortgages

Sunday 31 August 2014

Investors, developers keep buyers off property ladder

Thomas Molloy and Colm Kelpie

Published 11/06/2014 | 02:12

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First-time buyers and families now account for less than a third of all cash transactions, compared to two-thirds last year
First-time buyers and families now account for less than a third of all cash transactions, compared to two-thirds last year
Lack of homes forcing up rent
Lack of homes forcing up rent

FAMILIES and first-time buyers trying to buy homes are facing an even tougher task than last year as investors and developers edge ordinary buyers out of the housing market, according to research seen by the Irish Independent.

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First-time buyers and families now account for less than a third of all cash transactions, compared to two-thirds last year, according to a report by Savills auctioneers. Cash is still the most common way of paying for a house at the moment as individuals struggle to borrow from banks.

Savills says investors, developers and those buying second homes have become the main cash players in the country's property market.

“Last year, owner-occupiers accounted for two-thirds all cash purchases. In 2014 this figure has fallen to less than 30pc,” said economist and Savills director John McCartney.

Cash is still king but the percentage of houses bought without a mortgage has fallen to 52pc from 63pc last year. Cash buyers tend to be particularly active at the top and bottom ends of the market and outnumber mortgage buyers in the €1m-plus bracket by three to one.

The report concludes that there is a severe shortage of houses for sale despite recent increases in transaction numbers. Sales are running at less than a third of the rate in England which is also experiencing a housing shortage.

“Just over 6,500 residential units were traded in Ireland in the first quarter of the year,” said Mr McCartney. “If properties were changing hands at the same rate here as they are in England, then this figure would be closer to 20,000.”

At a conference in housing supply in Dublin yesterday, Trinity College professor and property expert Ronan Lyons warned that the capital was experiencing a “house price spike”. He warned action was needed to avoid the mistakes of the past. “If you've got too little supply for whatever demand is there, that can change people's expectations,” Prof Lyons said.

“If we don't tackle the supply constraints we will find ourselves in another bubble. Three or four years of this, and we will certainly be in another bubble.”

Savills predicted that the declining influence of cash buyers was likely to continue and would have a long-term effect.

Finance

The fall in cash buyers “means that the cost and availability of mortgage finance will have an increasing bearing on the market”.

Demand was likely to remain strong at the lower end of the market because banks were more likely to lend to first-time buyers, Savills said.

“As recent mortgage lending has been skewed towards first time buyers and strict lending conditions now apply, the depth of market demand is likely to remain at the lower and middle ranges of the price spectrum.”

First-time buyers are looking for two-, three- and four-bedroom semi-detached houses with gardens but flats are increasingly popular.

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