Priced-out home-buyers ‘drifting’ to Dublin’s commuter belt

Home-buyers are being forced to live further and further away from their place of work because of the price pressures in the Dublin property market, Banking and Payments Federation Ireland (BPFI) has warned.

In its latest housing market monitor, the banking lobby group highlighted a significant increase in house sales in Dublin's commuter belt counties – Louth, Meath, Kildare and Wicklow. It said this was because prospective buyers were being priced out of the Dublin market.

Using loan-level data, the group noted that 41 per cent of first-time buyer mortgages on property in this area involved buyers moving county, reflecting what it described “as an increasing drift of first-time buyers moving to the Dublin commuter belt”.

BPFI's chief economist Ali Ugur said that despite stabilising house prices and encouraging signs in relation to housing supply, first-time buyers continue to face affordability challenges which are placing serious limitations on where they can afford to buy, particularly in Dublin.

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This is reflected in the increasing shift of buyers to areas outside of Dublin, which is likely to negatively impact not only on these regions but the wider economy in general.

“Price developments are seriously limiting potential buyers’ preference, particularly first-time buyers, to live in areas closer to where they work or currently live, as average income levels of this cohort of potential customers are affected by the macroprudential framework in place for mortgage lending taking into account average price levels, particularly in Dublin,” Mr Ugur said.

According to the Central Statistics Office (CSO), the typical or median price paid for a home in Dublin in the 12 months to September was €368,000 compared to a State median of €265,000.

BPFI’s report noted that the build up of sales in Dublin’s commuter belt was matched by an increase in housing output and commencement notices. A similar pattern of housing development emerged during the boom.

Competitiveness

“Regional mobility perhaps shows the flexibility of the workforce in the Irish economy. However, it should be noted that the pattern of more residential housing activity taking place in the Dublin commuter belt is likely to put pressure on the infrastructural needs in these areas, which is likely to have a negative impact on the overall competitiveness of the Irish economy,” Mr Ugur said.

In its report the group noted that housing supply continued its upward trend in the third quarter of 2019, mainly driven by a significant increase in apartment building, albeit from a low base.

It said the number of apartment completions increased by around 81 per cent in the quarter compared with the same period in 2018, accounting for nearly one fifth of all completions during the third quarter of 2019. It said this was the highest share since 2011 when the current CSO data series began.

“Some 7,600 dwelling units were commenced in Q3 2019, bringing the total number of commencements to 19,856 units in the first nine months of 2019, up 22 per cent on the same period last year.”

In terms of Irish mortgage activity, it said drawdowns and approvals more than tripled between 2011 and 2018. Most recently mortgage approval volumes rose 8.8 per cent year-on-year in the third quarter.