First time home seekers continue their search

First time buyers have been out in force this year and, as economists wrangle about the possible impact of the Central Bank’s proposals to change mortgage deposit requirements, they are continuing to shop.

First time home seekers continue their search

A key factor has been the increased availability of finance. During the first nine month of this year that group borrowed €1.2bn towards the purchase of 7,437 homes.

This compares to 7,532 purchases involving the borrowing of €1.15bn over a full 12 months last year, as shown in the Irish Banking Federation figures. First-time buyers account for 50% of all mortgages, and a similar rate can be expected for the final quarter of the year.

Auctioneers report that while first-time buyers (FTBs) activity picked up at the end of last year, it was only in March and April 2014 that this gathered pace.

Ann O’Mahony of Sherry FitzGerald in Cork says first-time buyer purchases were boosted not only by mortgage ability but also by a return of confidence.

“There was a belief that the market had hit bottom and people who had been waiting for this began to buy.’’

This year she noticed the emergence of two grades of first-time buyers in Cork city. The first — as always — was the young couple looking for a first foot on the property ladder and the other was a more affluent first-time buyer.

“These have been renting during the last few years and have good savings. They usually have a few children and they are looking for a long-term family home, they are going into competition against the trade-up buyers,’’ explains Ms O’Mahony.

She says the first type are typically spending €170,000 to €270,000 and are mostly looking at second-hand properties in the city. The second type tend to spend €330,000 and €420,000, and are buying in sought-after locations such as Douglas, Bishopstown and the Model Farm Road.

New and previously unsold stock beyond the city also moved well in 2014, with all the major agents: Cohalan Downing sold 31 houses in individual sales at Rooskagh Valley Shanagarry, with 10 receivership sales in Ardfield, Grange (previously rented), and Jeremy Murphy sold 30 contemporary Bridgefield, Curraheen Road units to FTBs at prices up to €200,000 for duplexes, two-bed apartments at €135,000 and townhouses sold out at the start of the year at €190,000, and would clear €225,000 now, Mr Murphy reckons.

Michael O’Donovan of Savills in Cork also pointed to the level of interest in any unsold stock of new homes “In April and May we sold 12 houses at Tír Cluain in Midleton where prices ranged from €130,000 to €150,000”. Now that most the remaining new houses have been purchased, he says first-time buyers are buying second hand.

Since existing supplies of new homes are almost exhausted and few new developments are coming on stream, the biggest obstacle facing first-time buyers now - especially in the cities - is shortage of supply. In its latest report Daft noted that just 30,000 homes were for sale on October 1, the lowest level since 2007.

In the cities, young couples are competing with well-heeled first- time buyers, trading-up buyers, investors and downsizing buyers, and as a consequence the increased level of activity is causing prices to rise. In normal circumstances trade-up buyers would be putting their homes on the market, but as Mr O’Donovan points out a great many people trading-up now have sold in the boom and have been renting.

The consequence of increasing demand and constrained supply is that prices have risen by 11% in Cork city and 29% in Dublin city centre, as shown in a recent Daft report.

While there is still considerable debate on Central Bank’s plan to introduce a requirement for a 20% mortgage deposit and tighter salary multiples in order to stabilise the market, Ms O’Mahony of Sherry FitzGerald says that so far it hasn’t significantly impacted activity.

“There is uncertainty about what is happening with this proposal but the first-time buyers who are shopping now already have mortgage approval. Talk about the proposals has given them a focus - but they are not panicking”

Both Ms O’Mahony and Savills’ Mr O’Donovan report that neither the cold nor the imminent arrival of Christmas have diminished the enthusiasm of the first-time buyers who were determined to find a new home by the end of the year.

Quite possibly they were being spurred on by recent reports which found that it is now more expensive to rent than to buy in the major cities.

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