News Charlie Weston

Tuesday 23 September 2014

Still feeling the pain – first-time buyers and debt-laden owners

Published 29/05/2014 | 02:30

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Thousands are still waiting on refund on property tax. Picture posed: Thinkstock

For some, house prices are not rising fast enough.

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These are the boom buyers who bought between 2005 and 2012.

They are now stuck in negative equity, with their property's value having fallen so much it is only worth half of the value of the mortgage taken out on it. It is estimated that up to half of those with a mortgage are in negative equity.

They, along with Finance Minister Michael Noonan, want prices to rise.

The latest figures from the Central Statistics Office may show prices surging, particularly in Dublin, but they have not gone up enough for these people.

Nationally, prices are still 46pc off their peak levels in 2007. Not every boom buyer bought at the very top of the market but many will need prices to rise for years to lift them out of the dreaded negative equity.

Then there are the first-time buyers, who will look with horror at prices shooting up by 18pc in Dublin in the past year and by 1.3pc outside the capital in the past 12 months.

They are already being priced out of a market with very limited supply, particularly by cash buyers. Up to half of all sales are for cash, suspected to be investors eager to capitalise on strong demand for rental properties.

Such is the shortage of properties being put up for sale that homes are now only changing hands once every 75 years, according to calculations by Davy Stockbrokers. They say that the chronic shortage of properties in towns and cities means that prices will probably rise by at least 20pc over the next five years. That is dangerous as it will lead to many first-time buyers stretching themselves too much to buy a home.

And it is the negative equity generation who are holding back the market. They cannot do otherwise as they have lost so much on their properties that they can't sell. Most do not even qualify for a negative equity mortgage, if their bank offers one.

What both new buyers and debt-laden boom buyers really need is a much slower and sustainable house-price growth.

Irish Independent

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