Starter Homes

First-time buyers have been out in force for the past month, and judging by reports from estate agents, the patterns of demand established around Dublin last year look set to continue in 1999.

There is still huge demand for artisan cottages, terraced two-up, two-downs and for former local authority homes close to Dublin's city centre in areas such as Stoneybatter, Cabra, Inchicore, the Cork Street end of South Circular Road, Crumlin, Drimnagh and Walkinstown. Some agents believe prices in these areas may rise by 8 to 10 per cent over the next six months, because of shortage of supply and increased demand due to low interest rates. In Stoneybatter, a two-bed cottage in reasonable condition now costs up to £100,000, a two-up, two-down, about £120,000.

But in the suburbs of Lucan and Dublin 15, there is still a good supply of "new" second-hand three-bed semis - built within the past seven years - for around £90,000-plus, and no prediction of early price rises. Dublin 15 - Blanchardstown, Clonsilla, Mulhuddart - and Lucan are probably the best value housing areas of the city at present. The cheapest new three-bed semi in Dublin, for example, can be found at the Blanchardstown Heath development for £109,000.

But the "new" second-hand homes appeal to a lot of first-time buyers because they include modern features, such as en suite bathrooms, and still work out cheaper than a new house, even with the loss of the first-time buyer's grant and having to pay stamp duty (reckoned to be worth about £6,000 in all). They also often include curtains, carpets, and electrical appliances in the sale, and are set in nicely maturing estates.

The definition of "starter homes" and the profile of "first-time buyers" has changed radically in the past 10 to 20 years, and nowadays, there is a growing range of properties to suit their tastes and pockets - although there is general agreement that most first-time buyers don't want to spend much over £100,000. Still, a first-time buyer could be a young single paying £82,000 for a one-bedroom apartment on Thomas Street, a young professional couple, who don't want to commute, paying £115,000 for a former local authority home in Drimnagh, returned immigrants with money and good jobs paying £150,000 for a new house in Firhouse, or the traditional couple who want the traditional new three-bed semi, buying in Lucan or Dublin 15.

Despite the shortage of supply - which will not ease for at least 18 months to two years, because of the length of time it takes to process planning applications - there is a reasonable range of first-time buyer properties that are affordable, if you have the more or less minimum entry price of a salary of over £20,000.

And in future, the choice is likely to be even wider, with some predicting the demise of the three-bed semi in favour of smaller, less expensive properties.

To some degree, this is already happening, with two-bed townhouses popping up in many mixed developments. Gerry Leahy, an agent who specialises in new homes, predicts that in the near future, "there won't be a three-bed semi built in Dublin - it will all be two-bed apartments and duplexes, with the three-bed semis being built in Mullingar and Portlaoise. When people want to trade up, it will be to an established three-bed."

Everything will depend on the decision the Government will make after it receives a report on housing densities in April - and on how planners implement expected new higher density regulations. Mr Leahy is in favour of flexible densities, which would make mixed developments of apartments, duplexes, townhouses and three-bedroom and four-bedroom homes economic for developers.

IN THE meantime, Mr Leahy, like most other property pundits, says it is better to buy a property you can afford now than to wait for prices to go down when housing supply improves on foot of land rezoning and higher densities. He reckons it could be five years before housing supply in Dublin comes any way to meeting demand "even if every blade of grass in Dublin was rezoned". Estate agent Geralyn Byrne, of Sherry FitzGerald, says her agency is predicting a general rise in house prices of about 8 per cent in 1999. First-time buyers should not anticipate prices dropping in the foreseeable future - and should not fear a collapse in the market that would leave them stuck in a starter home in a place they never really wanted to live in the first place.

Like other people in the property business, she points to the continued strength of the economy. "I don't think the market will collapse. It can't be bad advice to tell people to buy what they can afford, after comparing the cost with what they're spending in the rental market."

A sore point for many first-time buyers are building society lending rules which limit loans to 2.5 times one salary, and one time the other - which would limit a couple, each on £20,000, to a £70,000 loan. With interest rates as low as they now are, many couples can afford high repayments - and in practice do take on extra loans, with parents helping out by using their own homes to guarantee further loans.