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First-time buyers squeezed out by high prices, lack of stock and competition

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First-time buyers are faced with tight availability of new housing stock, and high prices. Photo: Gareth Fuller/PA Wire

First-time buyers are faced with tight availability of new housing stock, and high prices. Photo: Gareth Fuller/PA Wire

First-time buyers are faced with tight availability of new housing stock, and high prices. Photo: Gareth Fuller/PA Wire

First-time buyers (FTBs) are being squeezed out of the market for new homes, with cash-rich purchasers and cuckoo funds snapping up half the available stock.

New figures from the Banking and Payments Federation of Ireland (BPFI) show that although FTBs make up the majority of mortgage buyers, they are more than twice as likely to buy second-hand.

This is true even though FTBs can qualify for tax relief and up to €30,000 in state support from Help to Buy if they buy a new home.

Industry experts say high prices, overall lack of supply and competition from well-financed corporate buyers gives FTBs less access to new housing, pushing them toward existing stock.

The dynamic is the opposite to what was typical during the Celtic Tiger boom, when FTBs dominated the market and overwhelmingly bought new houses.

“Investment is highly focused on cash and institutional buyers nowadays,” said Karl Deeter, analyst with Irish Mortgage Brokers.

“Approved housing bodies and others like them are the drivers of apartment building, which is not coming up for sale for first-time buyers.”

The latest BPFI data on mortgage drawdowns in the third quarter show fewer than one-third of FTB mortgages – 1,867 in total – were to buy a new home.

Even when mover-buyers and residential investors are added, the number of mortgages being used to buy a newly-built dwelling rises only to 2,410.

Housing completions in the second quarter were at 5,021, according to the Central Statistics Offices, indicating that about half of new building stock is bought without a mortgage. This continues a trend going back to 2009, when residential construction ground to a halt.

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Since then, FTBs have been increasingly pushed into the second-hand market by sluggish supply and the growing presence of acquisitive property funds.

Residential investors have all but disappeared from the market, with fewer than 30 each quarter going back a decade.

“The value of FTB and mover-purchaser mortgages on second-hand properties both reached their highest Q3 levels since 2006,” said BPFI CEO Brian Hayes.

“This underlines the severe limitations we have seen on the construction industry during the pandemic, which is having a clear impact on supply.

“With all residential construction now under way again, the challenge remains how to satisfy the strong demand for housing, clearly evident in today’s figures, with the continued pressure which has been growing on supply.”

Another factor is price, as new homes tend to be higher spec and therefore more expensive.

“The modern new-build is not necessarily geared to first-time buyers,” Mr Deeter said. “They’re A-rated, and that can be more expensive than second-hand properties.” The BPFI echoed that point, adding that many buyers prefer to own homes in established communities.

Michael Stanley, CEO of Cairn Homes, the State’s biggest house builder, said last month there were 500,000 people in the “stuck middle” who would be locked out of ownership unless there was an increase in supply beyond the Government’s target of 30,000 homes per year.

Overall, 11,479 new mortgages with a value of €2.8bn were drawn down in the third quarter, an increase of 40.9pc in volume and 42.3pc in value over the same period in 2020.


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