Buying your first home? Here’s what to consider

Buying a new home is a major life decision. At any time, it’s a process charged with a degree of uncertainty and emotion for those stepping on to, or up or down the so-called property ladder.

In the current climate of rising interest rates, levels of inflation not seen since the 1980s and global political tensions fuelled by the ongoing war in Ukraine, one could be forgiven for simply battening down the hatches and waiting for the proverbial storm to pass before making a financial commitment that, for most of us, will likely remain in place for decades. But life goes on and we all need somewhere to live in good times and in bad.

Having said that, nobody wants to pay too much or even to be seen by others as having done so in a market where asking prices continue to grow exponentially owing to the ongoing imbalance between demand and supply and to the spiralling cost of construction.

But while the latter issue could well be resolved shortly through the sharp shock of a recession, people could be disappointed if they are holding out for the supply of new homes to come into line with the conservative 34,000 completions the Central Bank said in 2020 will be required each year until 2030 to meet demand. And their disappointment could be greater still, should the population growth figures the Government relies on prove to be as inadequate as Tetrarch Homes chief executive Michael McElligott claimed in an opinion piece published in The Irish Times this week.

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If, as McElligott suggests, the State is basing the people’s requirement for housing on the 2016 census, when Ireland had a population of 4.75 million people, rather than the 5.12 million recorded in this year’s census, neither the present Government nor the ones to follow will preside over the delivery of homes in sufficient numbers any time soon.

The Tetrarch chief and his peers within the property industry do of course share an obvious interest in building more homes and selling them. However, the consequences of their running profitable businesses need not be divorced from the positive impact this has on housing supply. Nor should it be seen as incompatible with the needs of people who want to own the roof over their heads.

Even with the current cost-of-living crisis and with interest rates on an upward curve from their historic lows, the demand for new and second-hand homes remains robust. That much is evidenced by the latest figures from the Central Statistics Office, which showed house price growth of 13 per cent in the 12-month period leading up to July 2022.

While that number was down on the 14 per cent recorded in June, and doesn’t factor in the dampening effect the rising cost of domestic energy is likely having now, it is still significant when one considers that it occurred in the absence of the aggressive lending practices of our financial institutions in the years leading up to the global financial crisis.

With the Central Bank’s mortgage-lending rules now thankfully restraining both banks and borrowers, the risk of the latter overextending themselves when buying a new home has been greatly reduced.