Wednesday 11 December 2019

Charlie Weston: 'We have gone past the point of affordability for many buyers'

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Charlie Weston

Charlie Weston

Want to know why property prices are falling in Dublin and a huge slowdown is evident in the rest of the country?

It's not too complicated actually. What is happening is that we have gone past the point of affordability for many potential ordinary buyers.

Surging rents and the rises so far in property prices mean few can now afford to buy or even rent. But none of this matters to cuckoo funds which continue to dominate in the market. Ordinary people can't afford to buy, but funds are flush.

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What are called non-household buyers are snapping up anything they can get their hands on, at the same time that Central Bank rules and the past surge in prices mean that first-time buyers are forced to fold. Non-household buyers, which include funds, approved housing bodies and local authorities, are now the main players.

There has been a 40pc increase in purchases of residential property by non-householders in the year to date. This is at a time when buy-to-let investors are making themselves scarce in the housing market.

First-time buyers are still big players, but an 85pc rise in prices since the lows experienced in 2013 sees many priced out.

So expect to hear more calls, like those yesterday from the Institute of Professional Auctioneers and Valuers (IPAV), for a relaxing of the Central Bank lending rules. These stipulate that buyers can only borrow three-and-a-half times their income and new buyers need a 10pc deposit.

The IPAV reckons large numbers of first-time buyers are being priced out of the market and that many on incomes of €30,000 to €50,000 would be in a position to service a mortgage but are stymied by the loan-to-income limit on mortgage lending.

The estate agents say we are seeing that the lending limits are having a big impact, particularly in Dublin. Homes costing more than €400,000 are out of reach for more and more buyers. This is particularly the case in the plush environs of Dún Laoghaire.

However, it is questionable if allowing people to borrow more will make homes any more affordable. But we can be sure that such relaxing of the rules will ensure people have higher debts.

What we need is more homes to be built.

Figures out yesterday show that housing starts across the country were up 33pc in the last year. This works out at around 25,000 new homes in 2020, according to Davy economist Conall Mac Coille. This is still below the 35,000 analysts estimate are needed every year to meet demand.

Central Bank deputy governor Sharon Donnery this week warned that supply was not rising fast enough, noting that for every 12 new jobs created in Dublin over the past five years, just one new dwelling has been built.

However, as the builders get into their stride, expect prices in Dublin to keep falling, and the slowdown in the rate of rise in the rest of the country to continue.

Irish Independent

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