Even with mortgages approved on the basis of four times a person's income over a term of 40 years, many potential first-time buyers still find it impossible to find property they can afford without compromising on what should be one of their first principles: location. Laura Slattery reports.
"People can only buy property at a price range that will suit their pocket," says Mr Michael Dowling, president of the Independent Mortgage Advisers Federation (IMAF). Increasingly, this means settling in a town that is as far down their wish list as it is far away from their place of work.
Permanent TSB/ESRI house price index figures for August 2003 revealed that the price gap between a house in Dublin and outside Dublin was seven times the difference that existed in August 1996.
In August 2003, the average price paid for a house in Dublin was €298,196, compared to €194,125 outside Dublin. Back in 1996, average prices were €89,043 and €73,782 for Dublin and outside Dublin respectively.
Similarly, the Department of the Environment's Housing Statistics Bulletin for the quarter ending June 2003 shows how demand for property in the Dublin area continues to outstrip the national average rate.
The year-on-year increase in new house prices in the Dublin area has increased by 14.5 per cent, compared to a rate of 13 per cent nationally.
The difference in the growth rates of second-hand house prices is even more pronounced, standing at 23.4 per cent in the Dublin area compared to 17.9 per cent nationally.
So it seems that after securing mortgage approval, purchasing property and adjusting to the mortgage repayments, first-time buyers face one more daunting task: getting used to the commute.
"North of Dublin, they would typically look as far as Drogheda, south of Dublin, they go down as far as Gorey, and west as far as Mullingar," Mr Dowling says.
"The commuter belt is coming from places you would never expect," agrees Mr Joe Pitcher of Joe Pitcher Financial Services. "It's not quite Cavan, but they are coming from places like Kells."
Mr Pitcher believes that most, but not all, of his mortgage clients would live closer to Dublin if they could afford it. Even "trader-uppers" who thought they would like the idea of "the big house in the country" sometimes change their minds.
"People have moved out thinking they could hack the travelling, signed and then found themselves looking for something smaller in Dublin that was perhaps of less value to what they originally had," he says.
"It's not a pleasant journey, commuting for one to two hours each time," says Mr Dowling. "The eventual aim would be to sell within a few years and use the equity to get back to Dublin or where they came from."
The trend is set to become even more exacerbated, he believes. "We were all hoping for single digit increases this year."
Products like Ulster Bank's new 40-year mortgage for borrowers aged 25 and under may not be the solution, he adds, as the difference between repayments on a 35 and a 40-year loan is not that great.
Prior to the Ulster Bank announcement last week only Bank of Scotland offered 40-year mortgages, and then only to customers with a loan-to-value of 80 per cent. Ulster Bank joins Bank of Scotland, Permanent TSB, IIB, ICS and Bank of Ireland in the 35-year mortgage market.
"I've never done a 40-year mortgage and the number of people who take the 35-year option is very low," Mr Dowling says. If first-time buyers do have any cash to spare, it seems many will be spending it at the petrol pumps.
