Why it’s so difficult to find a second-hand house to buy in Ireland

Talk to any estate agent and you get the same story. Even in a relentlessly chirpy profession, all the talk is of the shortage of second-hand properties coming on to the market.

A lot of the debate on housing is – correctly – about the supply of new homes which, delivered in enough scale and at the right prices, will fix a lot of the ills of the market. But the second-hand stasis is now a big issue, an important signal of dysfunction – and also a sign of the times.

New home supply is seen as the answer to the plight of first-time buyers. And to a large extent it is, but life is more complicated than just building a load new three-beds or duplexes. The majority of first-time buyers purchase second-hand homes because, even taking into account the State supports available when they buy new homes, they are often cheaper, or are in areas in which they want to live. But as supply on the second-hand market has dried up, more first-time buyers are being driven towards the new home market.

Many of these new houses are in the commuter counties around big cities, where more land is available and costs are lower – allowing builders to sell homes below the €500,000 limit of State schemes. High BERs are a bonus. New home building in the Dublin commuter counties per capita is way ahead of Dublin, where a look at the property price register shows that much of the new housing – as opposed to apartments – supply is around the periphery of the county.

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The latest figures from Banking and Payments Federation Ireland (BFFI) – the representative body for the banks – shows that these first-time buyers are now dominating the market. Movers are finding it hard to get a look in. In January mortgage approvals for first-time buyers grew by 10 per cent on the same month last year, with approvals for movers down 16 per cent. For the final quarter of last year, according to an analysis by Goodbody Stockbrokers, there were 7,267 first-time buyer mortgages, not far off three times the 2,555 loans taken out by mover-purchasers.

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While some mover-purchasers do buy new homes, the vast bulk – not surprisingly – purchase second-hand properties. And the lack of supply on the market is now chronic. Recent figures from Sherry FitzGerald, Ireland’s biggest estate agent, show that there were just 11,050 second-hand properties for sale in January, 27 per cent down on the same month last year and 46 per cent below January 2020, just before Covid-19 hit. With few options to move, white vans and skips are everywhere as people, in Simon Harris’s famous pandemic phrase, “dickey-up” their existing houses rather than move.

So are we just in a loop, with people not putting their house on the market because they can’t find another one to trade up – or trade down – to? Certainly the wider shortage in the market is a big factor, cutting options across the board. As is the chronic shortage of “trade-down” options for older people living in bigger homes in suburbia.

[ Should you buy a new or a second-hand home? ]

But the sharp rise in interest rates has also been a problem for potential movers over the past 18 months. The sums for trader-uppers, particularly with house prices back at historic highs, are often off-putting. Remember that while some may be carrying forward equity from their first home, their mortgage is generally restricted to 3.5 times income, compared to 4 times for a first-time buyer.

Even for movers who can then raise sufficient funds, mortgage brokers say that those in their mid-40s are often baulking at the prospect of high monthly repayments – which can run to €2,000 or €2,500 a month, given the shorter mortgage terms available to those in this age group, compared with those in their 20s or 30s. The pre-financial crash days of taking out large loans and hoping for the best are gone, not only because the rules are tighter, but also people are now more cautious.

Whether this is because of the lingering memory of the crash or a post-Covid reassessment of working lives and lifestyles is an open question. But it is one of the reasons Ireland’s second-hand housing market is stuck in a moment that it can’t seem to get out of. And why first-time buyers – who might like a nice two- or three-bed house being sold on by an expanding family looking for something larger – are finding life so difficult, forced to bid on what second-hand homes are coming on to the market, or chase the insufficient supply of new homes, not always in their ideal area.

For policymakers, and the rest of us, there are a few messages here. The first, which we have all realised by now, is that housing is the most complex and knottiest of policy issues, full of trade-offs and unintended consequences. Help first-time buyers to purchase new homes under €500,000 and while you support many, you also immediately create an incentive for houses to be sold at just below this point, while adding to price rises in this sector.

While rising costs have been a factor, too, it is no coincidence that new home prices rose 9.2 per cent over the past year while second-hand prices are up by just 1.6 per cent, leaving the premium for the new-build at its highest level for many years.

The second is that the lack of new supply has wider reverberations across the market. It is not the only reason why the second-hand market is stuck, but it is a contributing factor.

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The third is that while the key policy intervention is about new supply, it needs also to have a wider vision. Part of this involves accepting that this will take time to fix, not a popular political message. And part of it is the complicated job of deciding what kind of houses Ireland needs, where it needs them and whether policy is all about home ownership or also about developing a longer-term private rental model.

The Housing for All Government strategy goes some of the way here, and the Opposition have some interesting ideas. But there is still too much on-the-hoof response to the latest pressure point – and the general election campaign is likely to descend into an auction about who can build how many houses and by when they can do it.

Perhaps the Commission on Housing report can open up this debate. Or perhaps, like the eminently sensible recommendations of the Commission on Tax and Welfare, it will just be another report to be cherry-picked for political ends.