First-time buyers paying €52k extra for new homes: Banking & Payments Federation

Substantial affordability issues remain in the housing sector despite an increase in supply, a report from the Banking and Payments Federation Ireland shows.

First-time buyers paying €52k extra for new homes: Banking & Payments Federation

Substantial affordability issues remain in the housing sector despite an increase in supply, a report from the Banking and Payments Federation Ireland shows.

The organisation’s latest Housing Market Monitor for the fourth quarter of 2019 shows an increase in both housing supply and mortgage activity.

However, the federation said it is critical that some of the cost challenges in building new houses are addressed so that lower costs can feed into lower prices and better affordability for potential housebuyers.

“We also need to see better co-ordination at policy level within various national and local government bodies as well as a rethink of our current planning approach to density,” the report states.

The federation’s chief economist Ali Ugur says that despite substantial increases in housing prices in recent years and some positive signs in relation to housebuilding, supply has not responded as hoped. This pattern has been replicated in other markets.

The report states that growing housing supply seems to be bringing some stability to residential property prices.

However, mortgage data suggest that first-time buyers are paying much higher prices, on average, for new properties than for second-hand properties.

The average mortgage drawdown value for a first-time buyer buying a new property was more than €261,000, almost €52,000 more than the average first-time buyer drawdown on second-hand properties.

This contrasted with the pattern in the peak lending period of up to 2008, when the average first-time buyers drawdown for a second-hand property was higher than that for a new property.

Dr Ugur highlights the cost factors that feed into new home prices: “Property sector data show that land and development costs account for around 55% of house prices in Ireland where cost inflation in relation to labour and materials only seem to be showing upward pressure in the past 18 months.

“At the same time, there seems to have been a significant increase in costs in relation to regulation and infrastructure service provision,” he said.

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