The latest report from the BPFI reveals that property sales grew fastest in the Dublin commuter belt as priced-out buyers seek value elsewhere.
It should no longer be a shock to Irish consumers to hear that we face some of the highest mortgage interest rates in Europe. This, coupled with house prices that continue to grow at a faster rate than incomes, mean it has become increasingly difficult for people to get a foothold on the property ladder.
Despite the challenges faced by those looking to break into the property market, data released recently from the Banking & Payments Federation of Ireland (BPFI) has revealed that mortgage drawdowns for first-time buyers have increased by almost 15% compared to this time last year.
We take a look at the facts and what this means for consumers.
Who is the BPFI?
The BPFI is the main representative body for the banking and financial services sector in Ireland.
Its Market Monitor report is a quarterly update released by the federation with analysis and commentary on the state of the housing market in Ireland.
The monitor reviews a series of housing indicators, such as housing completions and mortgage drawdowns, in order to help analyse the wider trends facing Irish consumers and households.
The latest report for Q3 2019 has revealed that successful mortgage drawdowns for first-time buyers increased by a whopping 14.3% year-on-year. Across all segments, mortgage approvals rose by 8.8% and drawdowns by 8.5% year-on-year.
The median deposit that first-time buyers had was €37,000, a marginal fall of 0.6% year-on-year, and largely unchanged since the end of 2017.
But despite the median deposit for first-time buyers marginally falling in the capital (0.3%) for the third successive quarter, data suggests that almost half of those committing to first-time mortgages are choosing to move to satellite towns in the orbit of Dublin.
Data has revealed a 41% increase in mortgage drawdowns for homes located in the Dublin commuter belt, with the fastest sales in the same region - up 15.6% in Q3.
The steep increase in first-time buyers moving to areas of Kildare, Louth, Meath, and Wicklow outlines a distinct trend among first-time buyers to move away from Dublin city.
This trend is largely due to financial pressures, particularly on first-time buyers, to move to more affordable areas despite not being necessarily closer to their places of work or family.
The Chief Economist with the BPFI, Dr Ali Uğur, had this to say:
“It should be noted that the pattern of more residential housing activity taking place in the Dublin commuter belt is likely to put pressure on the infrastructural needs in these areas.
"Price developments are seriously limiting potential buyers’ preference, particularly first-time buyers, to live in areas closer to where they work or currently live, as average income levels of this cohort of potential customers are affected by the macroprudential framework in place for mortgage lending taking into account average price levels, particularly in Dublin.”
The report from the BPFI was released on the same day that the new Governor of the Central Bank, Gabriel Makhlouf, appeared before the Joint Committee on Finance, Public Expenditure and Reform.
Highlighted in the Governor’s address was a defence of the Central Bank’s decision to keep the mortgage lending measures in place, expressing that they are a “central component of our macroprudential toolkit.”
The mortgage lending rules, introduced in February 2015 by the Central Bank, have had a necessary and positive impact on the housing market, according to Governor Makhlouf, stating that "both the level of house prices and the proportion of highly indebted mortgage borrowers would have been significantly higher in 2019" had the rules not been in place.
It’s clear that Makhlouf is concerned with safeguarding the health of the Irish financial system as a whole while simultaneously trying to look out for borrowers, but the rules are certainly hampering certain household’s ability to buy their first home and get on the property ladder or move up the ladder and into their second home.
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What are your thoughts on the monitor report released from the BPFI? Is the housing market accessible for first-time buyers and do you agree with the Central Bank's mortgage lending rules?