Mortgage affordability declines in first half

Urban housing activity has picked up but market depends on loan availability, says CIF

A single first-time buyer on average earnings who buys a house at the national average price typically spent 27.9 per cent of their net income on their mortgage repayments in May this year, according to the latest affordability index by lender EBS and economic consultants DKM. Photograph: Matt Kavanagh

A single first-time buyer on average earnings who buys a house at the national average price typically spent 27.9 per cent of their net income on their mortgage repayments in May this year, according to the latest affordability index by lender EBS and economic consultants DKM. Photograph: Matt Kavanagh

 

Mortgage affordability worsened in the first half of 2013, as the Government removed mortgage-interest tax relief for first-time buyers, the latest affordability index by lender EBS and economic consultants DKM shows.

A single first-time buyer on average earnings who buys a house at the national average price typically spent 27.9 per cent of their net income on their mortgage repayments in May this year, up from 23.6 per cent in December 2012.

A couple both earning the average industrial wage will typically have spent 13.9 per cent of their combined net income on their mortgage, up from 11.8 per cent at the end of last year. For a Dublin couple, this figure rises to 16.9 per cent, up from 14.1 per cent at the end of last year.

Collapse in prices

However, average first-time buyers will still be paying less than half of what they would have paid on monthly mortgage repayments in December 2006. This is due largely to the collapse in housing prices.

Annette Hughes, director at DKM Economic Consultants, said housing affordability would remain “relatively stable” during the rest of 2013. “Recently, a cautious optimism has been gaining momentum that the Irish property market has turned a corner in certain parts of the country,” she added.

Meanwhile, figures released by the Construction Industry Federation (CIF) show an increase in new house starts in Dublin, Cork and Galway during the first five months of 2013.

Nationally, the number of new housing unit starts grew by just 0.4 per cent to 1,665 during the period, with some parts of the country, including Limerick and Sligo, experiencing a decline in activity. However, new Dublin starts rose 25 per cent to 361 units, Galway starts rose 38 per cent to 184 and house-building in Cork increased 13 per cent to 200 units.

“In most urban centres the supply is falling and this is creating a strong demand for new housing stock,” said CIF director of housing Hubert Fitzpatrick.

Finance

The number of house completions fell in several parts of the country, including Dublin, he added. “Future supply continues to be constrained by the shortage of development finance and the high costs of construction. Availability of mortgage finance will also play a major role in determining how the market proceeds from this point.”