INCOME tax changes in the Budget have made it more expensive for first-time buyers to purchase a home, new research has found.
A reduction in the tax credits, and changes in tax bands, along with the new universal social charge, have left all taxpayers with less money.
But despite the income tax hit, the average first-time buyer now requires just 13pc of their disposable income to pay a mortgage, research from DKM Consultants and EBS shows.
Monthly mortgage payments for the average new buyer have fallen to €639, half of what it was in 2006. First-time buyers now make up almost half of the shrunken mortgage market.
Affordability has improved with house prices down almost 40pc, according to the main house price index. The average first-time buyer is paying around €156,000 for a house at the moment, according calculations by economist Annette Hughes of DKM Consultants.
A first-time buyer couple with a gross income of €77,197, would end up paying 13pc, or €635 a month, in mortgage payments, Ms Hughes estimates. This compares with €1,323, or 26pc of net income, at the height of the housing boom in 2006.
Even if mortgage rates rise by 1pc, and taking account of further pay cuts and the Budget tax changes, houses would still remain affordable.
The couple would not end up spending more than 19pc of their net income, or €868 a month, on mortgage repayments, assuming the couple spends €200,000 on a house.
However, housing and mortgage experts have said that many buyers are holding off because of problems getting mortgage finance, while there is no urgency to buy at the moment as the feeling is that house prices have further to fall.
Consumer confidence is also low, prompting many potential buyers to hold off.