Today’s News: Saving For Deposits, Income Multiples & House Prices


Irish Home & Property News (2)

First-time buyers will need ‘more than four years to save deposit’

The Independent discusses today how Ireland’s main mortgage banks were grand with the proposed 3.5x income cap to mortgage lending, saying it “would seem appropriate”. However, they said it already would take an average First Time Buyer 4 and a half years to save a normal 10% deposit, now it will be twice as hard for them.

Assuming that we are talking about a mortgage above the €220,000 threshold, what would have been a mortgage deposit of say €25,000, that would mean a couple saving €5,500 a year, or €460. Not completely unreasonable. Now try saving close to €1,000 a month between two of you, while presumably paying rent and coping with the cost of living. Tough going.

Mortgage income cap will lock couples out of market

Elsewhere in The Indo, commentators have finally hit upon the impact of the 3.5x income cap, as almost being worse than the 20% deposit requirement. Our expert agent Ben Thompson already highlighted this here on Wednesday and is now echoed by the IMAF:

Mr Dowling, of the Independent Mortgage Advisers’ Federation, said all the focus to date has been on the loan-to-value criteria, or the deposit required. “But I believe the income multiple change to a maximum of three-and-a-half times gross salary will have a greater impact on the market,”

High Burden Of Debt vs Lower Number Of Mortgage Households

Here’s two stories that are worth comparing. The Irish Times reports that Irish mortgage holders have the highest debt relative to their property’s value in the whole eurozone. But RTE report on a CSO survey that notes only 33.9% of households have any mortgage on their main residence.

So those who are in mortgage debt (i.e. have a mortgage) are in a pretty bad way. But over 70% of Irish households own their home outright, with no mortgage.

We forget when constantly discussing and worrying over the effect of mortgage debt and negative equity that the majority of the county aren’t involved in this. They are homeowners who have paid off their mortgage, or long-term family homes, or any number of other reasons why they don’t have a mortgage left on their property. These households are free from crushing repayments, have no concerns over negative equity, and can sell their house at any time with their only worry being what’s the property worth right now, not when they acquired it.

Editorial: Mortgage rules won’t cool market in isolation

The Indo’s Editorial today also comes round to the conclusion that the Central Bank’s move won’t necessarily reduce house prices but might actually increase it:

There is a belief that [the Central Bank’s] regulations will bring property prices down, some think by about 20pc. There are others who believe that as there is no initiative to encourage house building, the law of supply and demand will dictate that property prices will remain at current levels, or even increase in some urban areas, particularly in Dublin

And goes on to point out other factors that are inhibiting housebuilding (prohibitive VAT on building materials, high land prices, planning restrictions, etc), which limits supply and drives up prices.

Not forgetting then 20% equity requirement will trap thousands of existing homeowners in their current properties, unable to move, which will really impact supply.

Canadian real estate trust buys Sandyford portfolio for €87.3m

rockbrookIt’s good to see more institutional investment into residential property for the purpose of renting. These companies are highly professional landlords and manage their apartments and tenants far better than thousands of individual accidental or amateur landlords.

However, elsewhere experts are voicing concerns they have over increasing rents across the capital, especially in light of the Central Bank’s mortgage rules (Keith Lowe in The Herald). Certainly some of these North American investment firms have made staggering increases on their asking rents in schemes such as The Gasworks in Dublin 4.