Dublin homeowners now need deposit of €140,000 to trade up

The difficulties faced by first-time buyers and those trading up have been laid bare in a new report showing that a homeowner looking to trade up in Dublin will now need a deposit of about €140,000, while the median income for first-time buyers has shot up to €70,000.

According to the survey, published last week as part of the Banking & Payments Federation Ireland housing market monitor, incomes of first-time buyers (either based on a couple or an individual) who succeeded in obtaining a mortgage rose by 5.4 per cent over the year to December. This is far higher than national wage growth (about 2 per cent), indicating that putative first-time buyers need higher incomes to combat rapidly rising property prices.

The median first-time buyer is now on an income of €67,500, up considerably on the €60,000 required back at the start of 2015. Unsurprisingly, the incomes required for Dublin buyers are significantly higher, rising from €70,000 back in early 2015 to €80,000 as of the end of 2017, up by 7 per cent on the year. Given the Central Bank rules, an income of €80,000 translates to a purchase price of €222,222, based on an income multiple of 3.5 times and a deposit of 10 per cent.

In the Dublin commuter regions, incomes are up by 4.3 per cent to almost €69,000, while first-time-buyer incomes rose to almost € 63,000 in counties Cork, Galway, Limerick and Waterford, the highest level in the region since the series began in 2012.

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Deposits

With property prices continuing to rise, it’s no surprise also that the deposits needed to secure a property are also on the move. First-time buyers now need a median deposit of €36,500, up by 1.4 per cent on the year, or more than €50,000 in Dublin, or about €22,000 outside the main urban areas. However, the increase has not been as sharp as might have been expected, due to the Central Bank’s decision, introduced on January 1st last year, to allow first-time buyers borrow up to 90 per cent of the purchase price. For example, in the second quarter of 2017 the median deposit required in Dublin was as much as €55,000.

The survey also shows the difficulties faced by those looking to sell their existing home and trade up. Given the stricter rules imposed by the Central Bank – a deposit of 20 per cent is required – it’s no surprise that those looking to either move into a larger home or downsize will need a substantial cash pile to do so.

According to the survey the median mover deposit rose by almost 12 per cent to €90,000, while in Dublin, someone looking to move on from their current home will need a staggering €140,019 to do so.

Incomes for trader-uppers, however, are broadly unchanged, at €100,000 on a national basis and €120,000 in Dublin. Outside the main urban areas the median income for trading up is about €80,000.