Rising prices and Central Bank rules forcing homebuyers to think long-term
Published 06/08/2016 | 02:30
Are we beginning to see the end of the property ladder? Although house prices continue to rise in most parts of the country, the days of buying a house or apartment only to sell it for a profit a few years later appear to be coming to an end.
In the not-too-distant past, buyers would purchase a home close to where they worked and socialised, with a view to selling it on for a handsome profit and moving to a larger property when their circumstances changed.
But experts suggest that buyers are no longer looking for a short-term purchase, but are instead focusing on finding somewhere to live for a decade or more.
There are a number of reasons why.
"You're seeing it in the age of buyers. Schools and that kind of stuff come into play, which may not have done at an earlier stage of their life," Karl Deeter from Irish Mortgage Brokers says.
He's backed up by a recent survey from the Real Estate Alliance, which represents 55 agents across the country. It revealed that the average age of the first-time buyer increased from 29 years to 34 over the last decade.
At that stage many people have settled down, may have or be planning a family and perhaps just want to escape the hustle and bustle of city centre living.
With a shortage of family-sized apartments in our towns and cities, they need more living space, which tends to come in the form of a house and garden in the suburbs. But these homes come at a cost, and they're getting more expensive.
As the Property Price Register shows, prices have increased in almost all parts of the country, and in Dublin alone the average price paid in the first half of this year stands at almost €380,000.
The Central Bank lending rules are also having an impact. Back in the boom, 100pc mortgages were freely available, but that's all changed. Today, first-time buyers must provide a 10pc deposit on homes costing up to €220,000, and 20pc on amounts above this, to secure a mortgage.
For a €380,000 property, that means finding €54,000. In Cork, where the average price paid is just north of €202,000, €20,000 must be saved. That requirement is made more difficult by sky-high rents, which adds to financial pressure.
The Real Estate Alliance also says that a two-tier system is emerging, with first-time buyers in their 20s and early 30s now largely absent from the market where properties are priced above €160,000.
But perhaps the biggest reason is that we have learned from the mistakes of the past. Trinity College Dublin economist Ronan Lyons says people are looking for a home they can live in for a decade or more, and are risk-averse. "The big reason now compared with 10 years ago is the idea of a quick buck or fast capital gain - which was the epitome of the bubble - went by the wayside," he says. "Look at the strength of demand for a semi-detached rather than an apartment.
"Apartments were bought as three- or four-year plays. People are holding off and looking for 10 years or more. It's no bad thing, given how risky it is to have all your risk and debt tied into one immovable asset."