Home ownership beyond the reach of many

Survey shows that many are struggling to pay rising rents, one in five say they will never own a home, and ‘accidental’ landlords are on the increase

The dream of home ownership remains as strong for most people as it has been at any point

The dream of home ownership remains as strong for most people as it has been at any point

 

Nearly one in five Irish adults who do not currently own a home have all but given up on ever doing so, because they can’t envisage being able to afford it, while 14 per cent of renters have missed a rental payment over the past year, mainly because they didn’t have the money.

These are the starkest numbers contained in a survey from online insurance brokers 123.ie which takes in the views of more than 3,000 people and highlights the pressure many people are under, struggling to keep a roof over their heads.

The difficulty in covering accommodation costs was highlighted in a separate survey published this week by property website daft.ie. It showed rents across the State rising by an average of 2 per cent in the first quarter of the year, with the increase taking average monthly rent nationwide in March to €1,006, the first time since May 2008 it has been above €1,000.

The rental story was even worse in Dublin, where the annual rate of inflation in the year to March 2016, was 8.8 per cent, a rate which has seen rents in the capital climb to higher than they were at their previous peak, recorded in early 2008.

Despite growing problems with affordability – problems which are borne out of higher rents, fast climbing house prices in certain areas, as well as tighter mortgage lending rules imposed last year by the Central Bank – the dream of home ownership remains as strong for most people as it has been at any point in modern Irish history, the 123.ie survey indicates.

It was carried out among more than 3,000 landlords, homeowners, people renting and those living with their parents, and covered a range of issues including rental properties, mortgages, renovations and water charges.

1

While 19 per cent said they did not think they would ever be in a position to buy their own home, a massive 91 per cent of adults currently renting or living with their parents do want to buy.

Just over three-quarters said they wanted to own a house, while only 5 per cent said they would prefer an apartment, with 17 per cent saying they’d be happy either way.

However, for most, buying will not be a realistic prospect until at least 2020, with one in three respondents saying that it could take up to five years before they are in a position to buy. The survey shows that 64 per cent of those who are planning to buy in 2020 are aged 25-35 while 31 per cent are in the 18-24 age bracket.

“Affordability is a massive issue for younger people,” says 123.ie’s Padraig O’Neill.

“Almost one in five of those renting or living at home who feel that they’ll never be able to buy, say it’s because property prices are too high. But the issue is more complex than that and there are multiple factors at play that make ownership for some seem like a remote prospect.”

According to the research, the main barriers to home ownership include worries about being unable to service a mortgage and difficulties getting the deposit together. The short-term outlook for those who would like to buy appears to be gloomy, with 71 per cent saying they believed property prices would continue to rise in the short to medium term.

2

Rent increase

The pressure people are under is laid bare across the rental sector, where 39 per cent of people in rented accommodation have had a rent increase in the past 12 months. Rent went up by more than 20 per cent for 16 per cent of those polled, according to the 123.ie figures. That would equate to a minimum rise of €3,600 per annum on a typical monthly rent of €1,500.

It is estimated that there are more than 300,000 households in private rented accommodation, which is owned by around 200,000 landlords.

“Landlords are often the subject of negative publicity, which in some instances may well be justified, but the research actually shows that 83 per cent of those in rented accommodation are happy with their property,” Mr O’Neill says. “Almost three-quarters of landlords are responsive when it comes to maintenance issues and more than 60 per cent have not increased their rent in the past 12 months, which might come as a surprise, given the shortage of rental accommodation in the market at present.”

Despite the grim picture for many, the survey also suggests that there is likely to be considerable activity in the property market over the next two years, with 24 per cent of those polled who are currently renting or living at home, saying they planned to buy over that period, with 58 per cent of this cohort saying they wanted to buy in Dublin or neighbouring counties.

The survey also highlights the numbers who became “accidental landlords” as a result of either living abroad and renting out their primary residence, or by renting another property that better meets their needs.

“Most landlords weren’t into purchasing multiple properties and playing the speculation game,” according to O’Neill. “Of course, there were many big players, but these are not representative of the average landlord. He said 43 per cent of landlords polled would like to sell and get out of the market entirely.”

3

Of those who wish to sell, 11 per cent said they planned to do so in the next two years, while a third said they would have to wait for the price of their property to improve before putting it on the market

“Many landlords bought for investment or pension purposes and they were hit hard by the economic downturn. They are now stuck in negative equity and their loan-to-value ratio means that they are badly caught up in debt,” says O’Neill.

“There is no quick-fix solution. They either ride out the storm and hope that property prices will rise, allowing them to pay off their mortgage, or play the long-game and hold on to the rental property. We’re surprised with the response from landlords, which shows that there is currently a lack of interest in buying rental property despite the high rent/value in the market at present.”

The survey also looks at homeowners and it found that two-thirds of this cohort plan on staying in their current home in the long term. Rather than looking to move house, more than a quarter said they would upgrade or extend, which could spell good news for building contractors and builders’ providers.

Kitchen extensions

The average spend is €23,000, with the kitchen being the most popular room in the house for an upgrade. Extending living areas is more of a priority than adding bedrooms, as the average household size falls.

“When it comes to our own homes, as a nation we like to stay put,” says O’Neill. Overall, around 63 per cent of survey respondents see themselves living in their current residence for the rest of their lives. For some, the reason might be related to being in negative equity, but for most, they are happy with their home.

The survey also asked about water charges. Unsurprisingly, 73 per cent said they should be scrapped, with greatest support for abolishing the unpopular measure noted in Dublin, among younger people and those in local authority housing.

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