STATE agents are reporting an increase in first-time buyer activity during 2017 and so too is the Banking & Payments Federation of Ireland.
During the first nine months of 2017 first-time buyers borrowed €2,448 million to buy 12,157 homes — quite a significant increase up on the €1,788m they borrowed to buy 9,848 properties in the same period in 2016.
The most noticeable increase was in the third quarter when first-time buyers spent €1,010m on purchasing 4,885 homes. This is the highest number of first-time buyer drawdowns in a quarter since 2008 and the first time that first-time buyer borrowing went above €1,000m since that year.
First-time buyer spending , which now makes up approximately 50% of all mortgage activity, has been boosted by the government’s help-to-buy scheme providing income tax rebates of 5% of the value of a new house, up to a limit of €20,000. The increase in activity which might be attributed to economic recovery, comes about despite the chronic shortage of new homes across the country, which are the only type of houses for which first-time buyers can avail of these reliefs.
The Banking Federation say the 18,000 houses likely to be completed this year, falls very far short of the 40,000 that would be required to meet demand. (Although it is an increase on the 15,000 built in 2016.) Several of the auctioneers who the Irish Examiner spoke to saw first-time buyers getting into bidding wars with each other and with trading-up buyers for secondhand houses because of the shortage of the type of new homes that first-time buyers have traditionally bought.
They have also observed a change in the profile of a typical first-time buyer. During the boom era many first-time buyers were young couples in their 20s; now most auctioneers say they are couples in their 30s who been renting and saving or are returning from abroad.
“First-time buyers now are 30-something-year-olds who missed out on the boom,” says auctioneer Dan Howard who was one of a small number of auctioneers in the Cork area fortunate enough to have new developments on his books this year.
He says he has sold 80 new properties since April with around 60% of these going to first-time buyers. The majority were in the Janesville development in Carrigaline where they were typically spending between €295,000 to €350,000. “We released 50 in April and they were gone by the end of the month,” says Mr Howard pointing out that the 5% tax rebate significantly boosted demand.
Glenn O’Connor of DNG Creedon says he noticed a very strong increase in first-time buyer activity in the second hand market at the start of the 2017: “During the first six months all the secondhand houses in the €200,000 to €350,000 range went ‘sale agreed’ in three or four weeks,” In May he listed a three-bed semi at Inchvale Park in Shamrock Lawn at €240,000 and sold it for €271,000 after a bidding war. “The purchaser was a first-time buyer and the under-bidder an emigrant who planned to rent it out for a few years and return to live there at a later stage,” says Mr O’Connor noting that this type of a bidding war was common at the start of the year, and that the high level of activity shows in the mortgage drawdown figures for the third quarter.
Mr O’Connor says he noticed a drop off in activity in the second hand market in the second half of the year as a result of new houses becoming available at Janesville in Carrigaline, and in Drakes Pool in Crosshaven.
He says this has led to a noticeable softening of second-hand prices in the areas DNG Creedon are selling. “A three-bed semi in Shamrock Lawn, similar to the one sold in May but in better condition recently went sale agreed for €245,000.”
Mr O’Connor says the first-time buyers tax rebate scheme as well as 3% cashback on drawdown being offered by most banks are making new homes very attractive: “These incentives make buying a new home great value due to the low level of running costs of A-energy rated houses. There is also the fact that there is no bidding, set prices and just a €5,000 security deposit to secure a home make a new home a very attractive proposition.”
In Limerick Ailbhe O’Malley of Sherry FitzGerald also noted the increased presence of first-time buyers with loan approval competing in a market where shortage of stock continues to a major problem.
“Typically spending between €200,000 and €220,000 they find it difficult to get what they are looking for,” she says adding that they prefer houses which are in good condition and don’t require renovation because they can’t borrow for renovations.
New developments are much in demand but are also in short supply: “We launched 11 houses at Bloomfeld in Anacotty with three bed semis at €265,000 two weeks ago and sold all but a couple on the day,” said Ms O’Malley.