Tuesday 22 May 2018

Charlie Weston: We all lose out if the 'locked-in generation' is forced to remain in unsuitable properties

If people, who need to move home, are unable to do so then everyone loses - including first-time buyers (Stock picture)
If people, who need to move home, are unable to do so then everyone loses - including first-time buyers (Stock picture)
Charlie Weston

Charlie Weston

There has been a lot of focus on the plight on people who want to buy their first home, but those who want to move get little attention. Often there are considerable obstacles for want-to-be movers.

First-time buyers can get a tax rebate of up to 5pc of the property's value, worth up to €20,000 under the help-to-buy scheme.

Recent changes to the Central Bank's lending rules mean that first-time buyers can get mortgage approval with a deposit that is as little as 10pc of the value of the property. New buyers can escape the property tax, as new and previously unused properties purchased from a builder or developer between 2013 and October 31, 2019 are exempt until the end of 2019.

Mover-purchasers, in contrast, need a deposit of 20pc of the property's value. Many have only recently emerged from the blight of negative equity, and may not have a property with a great enough value to allow them to sell it, clear the mortgage, and be left with enough to use as a 20pc deposit on another home. Having to put together a deposit of that size in cash is a tall order.

Want-to-be movers also face difficulty in finding a suitable property to down-size to when children leave home, or a partner dies.

Another reason making people reluctant to move is the fact they may lose a good-value tracker mortgage. Banks sometimes allow movers to transfer what it still owed on the tracker onto a new property, but often they increase the margin, making this unattractive.

In line with all buyer types, movers find there is a chronic shortage of properties for sale.

All of this is why KBC Bank economist Austin Hughes refers to people who need to move, but can't, as the locked-in generation.

It helps to explain why there are so few housing transactions. In the year to February there were almost 44,000 properties sold. Some 12,500 of those were purchased by first-time buyers. The biggest group was owner-occupiers, who bought 22,500 properties. The rest were snapped up by investors.

The difficulties faced by movers trading up or down are considerable. Often it is a case of people needing to move rather wanting to move. Families outgrowing their first home, relationship breakdowns and the need to relocate for a job are just some of the reasons people need a different property.

We used to refer to this group as the negative-equity generation. Most are now in some form of positive equity, but large numbers are still shackled by large loans going back to the property bubble days.

If people, who need to move home, are unable to do so then everyone loses - including first-time buyers.

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