Return of the first-time buyer as borrowing rules loosen up
Price growth in commuter belt slows down as capital more affordable, writes Residential Property Editor Mark Keenan
Moves to soften the mortgage lending and tax regimes for first-time buyers have had an immediate effect on the property market, with formerly squeezed-out first-timers now flocking back to Dublin from the cheaper commuter counties in search of newly accessible homes in the capital.
The surge has increased the rate of property price inflation for average houses with Dublin postcodes - rising at 4.2pc in the final quarter of the year as first-time buyers returned to Dublin viewings. At around 1.4pc per month, price rises in the capital are matching inflation rates that occurred during the boom years. It means that the last quarter produced half of the total inflation experienced for the entire year (8.9pc) within all postcoded addresses.
The average three-bed semi-detached in Dublin city now costs €389,167 - a rise of €15,834 in the past three months and an increase of 8.9pc over this time last year, the Q4 Irish Independent/REA Average House Price Index has found. Meanwhile, it took just five weeks to sell the average house in Dublin city in Q4, a drop of two weeks from Q3. Nationally, the price of an average semi-detached house now stands at €202,926 - a rise of 1.4pc on the Q3 figure of €200,148.
The REA Average House Price Index concentrates on the sale values of Ireland's typical stock home, the three-bed semi, giving the most up-to-date picture of the property market in towns and cities countrywide to the end of the selling season in December.
There were substantial rises in both South County Dublin (€406,667, up 2.5pc) and North County Dublin (€267,500, up 2.9pc) as the capital's property market - which had seen prices falling this time last year - finished with prices up an 8.1pc annually for all locations (postcoded and county areas).
But increases slowed dramatically in the commuter belt, which experienced a rise of 1pc in Q4, with prices now static in towns such as Ashbourne, Blessington, Naas, Maynooth and Celbridge. It means that those commuter counties which experienced the greatest price growth over the past few years have now seen their progress slow or stagnate over the past three months, with changes in Meath (1pc), Kildare (0pc) and Wicklow (0.8pc) starkly contrasting with the growth in the Dublin market.
Much of this was a hike which occurred artificially on the back of the original Central Bank lending restrictions introduced two years ago, which drove Dubliners further afield in search of homes.
But a rowing-back in November for first-time buyers has reversed the pace of increase in the commuter towns and could freeze or even reverse commuter town price inflation in the new year. At the same time as the Dublin buyers started moving off due to the recent changes, prices had already been hitting levels that had started to restrict local buyers.
"Agents are reporting that the income multiplier restrictions are having the greatest effect in commuter counties, and couples earning €60,000, for example, cannot now afford suitable homes due to lack of supply," said Eamonn Spratt of the Real Estate Alliance.
"There is a cap with the multiplier of 3.5 times income beyond which many couples cannot go, and while there is plenty of activity, in some commuter towns, prices are probably as high as they can go under the current regulations."
The major cities such as Cork, Limerick and Galway returned an increase of 1.1pc over the past three months, with an average semi in Cork city now €295,000 - a rise of €10,000 (3.5pc) on the December 2015 figure.
The biggest percentage increases over the past year came in smaller rural towns situated in remoter counties. Prices rose by around 12.3pc over the year, with a three-bed semi now costing €134,290 - an increase of 2.4pc in the past three months.
Lack of suitable supply is the biggest influence nationwide, according to Mr Spratt.
"In many lower-priced towns, a previous oversupply has now worked its way out of the market, and buyers are realising that there will be no new developments, as it is still uneconomical for builders to start new-builds," he said.
Longford, which is the most affordable county in the country, has seen its three-bed semi price rise by a massive 41.8pc over the past 12 months - going from €55,000 last December to its present price of €78,000.
Similarly, owners in Roscommon saw values rise by 28.6pc over the past year, with agents reporting that Q4 rises of 8pc in Roscommon town are fuelled by buyers realising there will be no building in the short-term.
The average time taken to buy a house dropped from six to five weeks in Q4, with both Dublin city and county and large regional towns experiencing even shorter sale times.
There was also an increase of mortgage-financed buyers nationwide, with cash buyers making up just 32pc of sales around the country - down from 40pc at the end of 2015.
In Dublin, just 25pc of sales of three-bed semis are cash buyers, while the figure in the commuter counties is 21pc.
Barry McDonald, of REA McDonald in Lucan, thinks it will be the new year before we see the full impact of the lifting of the Central Bank restrictions and the Government's help-to-buy scheme.
"First-time buyers are definitely the main cohort out in the market in Dublin - most obviously in the €250,000 to €300,000 price bracket, which is moving very well," he said.
"However, as you move up the price range to the €400,000-plus market, buyers are thinner on the ground. This is a side-effect of the continued 20pc deposit restrictions placed upon second-time buyers, who cannot afford to trade up, freeing up suitable starter homes.
"We are also seeing vendors thinking that they may do better in the new year and holding off before coming to market.
'The market is very definitely being driven by supply and not demand. The typical scenario now is that there are between one and three bidders for a property, rather than five or more, and buyers are finding that if they miss out, there is not necessarily an equivalent property out there."