Revealed: First-time buyers need almost €80k income to get on property ladder

Revealed: First-time buyers need almost €80k income to get on property ladder

Local authorities find it increasingly difficult to get tenders to build taxpayer-funded homes. Picture:PA

First-time buyers now need “significantly higher incomes” than they did during the Celtic Tiger boom to get a mortgage, new figures reveal. 

The median household income of first-time buyers now stands at €77,000, according to a new report from the Banking and Payments Federation Ireland (BPFI).

This figure has risen by €6,000 between 2019 and 2021 and is over €20,000 more than the median household income in homes across the country, illustrating the high household income first-time buyers need to purchase a home.

In 2005, 51% of first-time buyers purchasing new homes had incomes of up to €60,000 but that fell to just 13% of first-time buyers last year. 

BPFI chief executive Brian Hayes said: "It’s important to note that the mortgage market is very different now. 

Mortgage interest relief was available on qualifying home loans drawn down between 2004 and 2012 and played a key role in reducing home mortgage costs. 

"Additionally in 2015, the Central Bank introduced limits on the loan-to-value and loan-to-income (LTI) ratios of new mortgages.

"The median LTI for first-time buyers fell from 4.5 in 2008 to 2.7 in 2013, according to the Central Bank, before rising to 3.2 by 2017.

"This essentially means that new mortgage customers need higher incomes than in the past."

Meanwhile, the Government plans to build 35,000 homes a year have been thrown into grave doubt by a “marked decline” in developers tendering to build taxpayer-funded homes.

The fall in developers seeking to build State-backed projects is down to a refusal to be bound to fixed-priced contracts at a time of inflationary uncertainty.

An Oireachtas committee will hear today that local authorities are finding it increasingly difficult to get anyone to tender for the jobs they want built, jeopardising the ambitious targets to 2024 set out in Housing For All.

“Local authorities were also seeing a marked decline in the number of tenders being received for house construction projects (in the first quarter of this year). 

"Contractors were opting not to tender for projects until greater certainty both in terms of increasing material costs but also in anticipation of a change to the fixed price tendering system,” Eddie Taaffe, programme coordinator at the Local Government Management Agency, will tell the committee.

TDs will hear that local authorities have found that, since the start of the year, a significant number of contractors involved in social housing construction experienced negative financial impacts from increased material costs and in several incidences indicated that, reluctantly, they would not be in a position to continue to deliver housing on a fixed-price basis.

Absorb costs

This situation is particularly prevalent among small to medium-sized building firms which, local authorities believe, have less scope to absorb costs, Mr Taffe will say.

The Society of Chartered Surveyors Ireland will also tell TDs that the cost of delivering a new estate-type home (three-bedroom semi-detached) was €330k in 2016 but that rose to €371k in 2020.

While building sites have been at risk of shutdown due to rising material prices, the housing minister says closures will not happen.

Housing Minster Darragh O'Brien said that while building sites have been at risk of shutdown due to rising material prices, closures will not happen. Picture: Brian Lawless/PA Wire
Housing Minster Darragh O'Brien said that while building sites have been at risk of shutdown due to rising material prices, closures will not happen. Picture: Brian Lawless/PA Wire

Darragh O'Brien said that measures brought by his Cabinet colleague Michael McGrath under the Inflation Co-operation Framework to "soften the blow of inflation" have worked to ensure Government building projects had not shut down.

He said that framework should assuage the fears sounded by both the Society of Chartered Surveyors Ireland and the Construction Industry Federation about the impacts rising materials costs will have.

Mr O'Brien also said that the Government wants to "ensure that it remains on track" to meet this year's housing target of 24,600 new builds.

However, he said he could not say where or when the planned 5,000 apartments through the Croí Cónaithe cities fund, which is planned to jumpstart dormant planning applications, might come from or be finished.

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