The average income of individual or solo first-time buyers (FTBs) of new properties in Ireland last year was €67,000, according to new figures from the Banking and Payments Federation Ireland (BPFI).
The banking lobby group’s latest review of the mortgage market here also said increased housing supply over the past few years had, along with higher interest rates, “moderated” house price inflation.
However, it warned “the changing interest rate environment” could affect the viability of some of the housing projects, particularly in the institutional investor market, in 2024 and beyond, potentially undermining supply.
Assessing the FTB segment of the market, the BPFI’s report indicated that solo FTB applicants buying or building a new home accounted for 16.5 per cent of all FTB mortgage drawdowns in 2022 compared with 15 per cent in 2019.
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For FTBs buying an existing home, the share of solo applicants was 32 per cent in 2019 compared with 33 per cent in 2022.
“In other words, the share of solo applicants among FTBs remained stable over the 2019-2022 period notwithstanding the fact that average property prices increased by almost 26 per cent in the same period,” it said.
This is mainly due to increases in the average incomes of borrowers, from €59,000 in 2019 to €67,000 in 2022 for solo FTB applicants. It also noted that increases in average prices over the period contributed to higher loan values.
The report said the decline in annual property price inflation – it has fallen from more than 15 per cent in the early part of last year to less than 4 per cent currently – can be partly explained by the significant increase in housing supply since the pandemic as well as recent interest rate increases by the European Central Bank.
“After significant increases in average prices between 2013 and 2018, average price increases moderated with increasing supply in the market until the Covid-19 pandemic halted most private home building,” it said.
“As housing supply increased significantly since the pandemic, we have seen a similar trend in average price increases,” it said, noting nearly 30,000 units were completed in 2022 and 6,716 new completions in the first quarter of 2023, a 19.1 per cent increase on the same quarter last year.
The banking group also noted that this was the highest number of completions seen in any first quarter since its data series started in 2011.
It said a “good indicator of future housing supply” was the number of units commenced in a given period.
The most recent data shows that 27,542 units were commenced in the 12 months to April this year, which it described as “a healthy sign of the pipeline for completions”.
If the current trend in residential construction activity were to continue, it is likely that total output will be 27,000-28,000 this year and around about 28,000 units in 2024, the BPFI said. This is less than the Government’s Housing for All target of 33,000 units a year.
With completions and commencements increasing, the additional supply should provide “better affordability for potential home buyers as average prices start to moderate”, it said.
“At the same time, existing and further cost pressures, as well as the changing interest rate environment could affect the viability of some of the housing projects currently planned, particularly in the institutional investor market, which could affect output in 2024 and further.”
