JOB SECURITY, price stability and availability of finance are the three pillars that drive people to commit to buying, says Frank Conway, director of advice site Moneycoach.ieand Irish Mortgage Corporation.
“Many would-be buyers can’t tick those three boxes, although interest remains strong. Our search engine found that while interest in property dropped by 10 per cent in 2011, the drop in mortgage lending, in the same period, was 55 per cent,” he says.
“The 2012 budget measures are welcome, but they’re not going to drive people to buy properties.”
Still, there are potential first-time buyers (FTBs) out there. These days most will have saved for the deposit, says Wade Wise of agency Beirne Wise.
“Having been priced out of the market, they have been renting and saving for the last few years. But many are still getting help from their parents.”
The “bank of mam and dad” is definitely still open for business, although not to the same extent as before, says Wade. One-third of his FTBs are getting some sort of assistance from their parents.
Nowadays parents are helping out with monies of up to €20,000 and €30,000, Wade says.
“In the boom years it would have been six-figure sums. Back then they would have raised funds through their bank. Now they’re writing a cheque from their savings. The monies are no longer borrowed on assets.”
Marian Finnegan, chief economist at Sherry FitzGerald, says people who can get a mortgage are in a much better position than people who bought a few years ago. “At the height of the market couples spent 45 per cent of their collective net salary on their mortgage repayments. Now they’re spending 22 per cent, which means it has gotten significantly more affordable to buy than to rent, if you can afford the deposit.”
Typically, people should be spending 30 to 32 per cent of their net salary on their mortgage, Marian says.
As much as falling prices tempt FTBs, the significant drop in the price of residential property from 2010 to 2011 levels scares them, too, says Frank Conway.
“Prices are still dropping at a rate of 1.5 per cent per month. Prices are low but we don’t know how much further they’re going to drop.”
Most important of all is the problem of getting a loan.
Anecdotal evidence says the banks are not lending. But the Bank of Ireland says it has ringfenced €1.5 billion for lending to home buyers.
“We are open for business,” says Niamh Murphy, business development manager at AIB. “Last year we did over €800 million worth of mortgage business, and we’re looking to do more than that in 2012.”
AIB has seen a steady pick-up in enquiries since last summer. Murphy attributes this to customers needing time to get used to the new tax charges, including the universal social charge.
Maria Whitmore, a spokesperson for Permanent TSB, “welcomes the budget tax relief as another aid to attract first-time buyers back into the market”.
She adds: “Ultimately, economic and employment confidence will determine transaction levels.
“The 25 per cent relief applies to houses bought in 2012 only, so for first-time buyers who are in a position and willing to buy, this move is helpful in the short term.”
If you are planning to buy this year, the average interest rate would-be home owners should calculate their repayments at is 6 per cent – a median of the highs of 8 per cent seen in the 1990s and the below 4 per cent rates seen in the noughties, says Daft economist Ronan Lyons.
Lyons is a first-time-buyer in waiting. He hasn’t bought yet due to personal circumstances, he says.
He is studying for his doctorate at the moment and doesn’t have a full-time job. “It will be two to three years before my fiancée and I start looking.”
At some point prices will stop falling, Frank Conway says.
“The market will call itself.”
