Demand in commuter belt rises as buyers are pushed out
House prices in the commuter counties are rising as the Central Bank's mortgage rules are making Dublin less affordable for first-time buyers, a leading think tank has warned.
And that will put pressure on the city's already strained transport infrastructure, the Economic and Social Research Institute (ESRI) added.
Demand for housing is now shifting to the commuter counties where it is more affordable, although prices are rising.
And despite house prices stalling recently, the think tank told the Irish Independent that first-time buyers were still at risk of being priced out of the capital.
Kieran McQuinn, ESRI associate research professor, said the shift in demand to the commuter counties could lead to further congestion.
"It only works if you have the infrastructure, but unfortunately one of the downturns of having the boom/bust nature of investment that we've had is that we've had very little investment in public infrastructure over that period," Prof McQuinn said.
"So all it's going to do is cause more congestion and greater loss in terms of commuting times. It would work if you had the infrastructure in place, but I think there are substantial infrastructural deficits because of the downturn."
In its latest economic commentary this week the ESRI warned the deposit required as a result of the Central Bank mortgage rules makes buying a house in Dublin less affordable for first-time buyers.
Prof McQuinn said there was a fear such buyers could be priced out of the capital.
"I think it's a genuine fear that they [first-time buyers] could be priced out," Prof McQuinn told the Irish Independent. "Prices are getting back to an equilibrium level, certainly in Dublin, and that's quite a high level, so taking 20pc of that is a substantial amount, certainly for first-time buyers starting off, it's a hell of a sum of money to try and raise. So I think there's a very genuine risk that it could occur, yes."
It comes just days after National Asset Management Agency (NAMA) chief Brendan McDonagh said that as a result of the Central Bank's mortgage deposit rules, first-time buyers in the capital could not buy anything above €320,000.
He also said demand was increasing in the commuter belt.
Prof McQuinn reiterated the ESRI's view that the think tank agrees in principle with the macro-prudential rules from the Central Bank, but that the timing wasn't right.
He said he believes the rules do have a negative impact on supply, as it could deter some developers from progressing with a development.
"Asking prices on daft.ie show strong price growth in the commuter counties at present, indicating that demand may have shifted to some locations with better availability and affordability," the ESRI's latest quarterly commentary said.
"In particular, the down payment requirement under the new macro-prudential regulations is likely to have adversely impacted on affordability amongst first-time buyers in Dublin especially."
The report said rents nationally had increased by 8.6pc in the year to the end of September, with Dublin rents rising 8.7pc while rents outside of the capital had climbed 8.5pc.
"As fas as housing matters are concerned, the recent debate on rent certainty was disappointing in that it is somewhat tangential to the major issue confronting the Irish property market; namely the lack of a significant housing supply response."
The ESRI reiterated its view that 25,000 houses will need to be built annually to meet the growing demands.
And it suggested that among the options a land tax could be considered.