First-time buyers must save for years

Soaring rents and rising house prices have increased the down payment and extended the time a first-time buyer must save to secure a mortgage — with Dublin recording the longest wait, according to major research by the Central Bank.

The study reveals big disparities across the country and highlights that in many parts of Dublin, first-time buyers have to save for years to secure a mortgage deposit because rents have risen sharply and house prices are higher in the capital.

A first-time buyer wanting to buy a three-bedroom home will have to make a down payment of as much as €76,000 in south Co Dublin, while a payment of €20,600 is required in Cork City to secure a mortgage loan.

Down payments of €14,100 and €12,100 are required in Limerick and Waterford, and around €8,315 in both Connaught and Ulster.

The study is the first of its kind since the Central Bank implemented its so-called Macro-Prudential rules in February last year that seek to prevent any repeat of the housing market price collapse during the banking crisis.

“The overarching message from this analysis is that households with the same income level will have different housing market experiences depending on their location,” according to the study.

In Dublin, the average first-time buyer must save for between two and a half years and four years, depending on the area, while in Cork and other major urban areas, the buyer will have to save for up to 18 months to meet the downpayment.

In rural areas, this “time-to-save” period is under a year.

A household on an income of €50,853 in most parts of Dublin, and with high rental costs, mean the buyer “cannot save to accumulate a housing downpayment in under five years”, the research finds.

Since mid-2014, the time-to-save period has increased in all areas, but by most in Dublin, though the Central Bank says savings times are still in line with those experienced in the US.

“The most striking change across the two periods has been in South County Dublin where the downpayment requirement has increased by over €40,000 in the two years from mid-2014 to mid-2016 (a €35,280 downpayment increasing to €76,000),” the research finds.

“Increases of €10,000 to €22,000 have also been observed in other Dublin areas. However, the picture is markedly different outside Dublin, where down-payment requirements have increased by less than €5,000.”

The Central Bank research is based on the first-time buyer saving for a mortgage deposit to purchase a three-bedroom house, while renting a two-bed home.