First time buyers fear further price increases

Since our last mortgage monitor a General Election has passed where promises were made to the electorate in relation to housing. Issues such as the supply of housing were discussed and talked about at length while those who hold property were more concerned with issues such as property tax and water charges. 

This month we look at how these issues have impacted on our Mortgage Monitor. 

Our mortgage monitor continues to track the momentum and sentiment of people in the Irish property market. As always we spoke to 1,000 Irish people many of whom represent the 504,000 Irish people looking for somewhere to live.

This wave we see a slight drop off of 1% in the number of people looking to buy compared to the previous time we ran the mortgage monitor in November. This may be as a result of the Central Bank rules limiting first time buyers. Nevertheless it's clear that the speculation will continue into the summer surrounding the new rules. 

Price Panic eases but still growing

Since the last wave in November 2015, there is a slight decrease in the perceived rate people believe house prices in their county will increase by. While the average person (engaged with the market or not) believes price increases will increase by 10%, this is unlikely as lending regulations have kept house prices relatively flat in the past 6 months.

The perception that prices will increase and the reality that a first time buyer now needs on average a €51,000 deposit to purchase in Dublin has led to a decline in the number of mortgage approvals for first time buyers.

The Rental Trap

The by product of this unhealthy property market is that those in the rental market are becoming squeezed. While new rules have frozen rates for a further 18 months, rent prices are so high preventing people from saving towards these high mortgage deposits.

With this artificial demand for rent - from many who have no other option - there is a perception that rates will rise by 11%. New rental regulations will prevent this level in 2016, but will landlords seek this rises after the two year window?

It remains to be seen the full impact of these rule on the Irish property market. Currently the country is in the midst of political uncertainty and with this comes uncertainty over promises and policies made by previous Governments. We've already heard talk of backtracking in relation to Irish Water and it seems that the Central Bank is reconsidering it's latest rules. What effect this has on the market we'll have to wait and see in upcoming Ignite Mortgage Monitors. 

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