A new report issued by EY-DKM Economic Advisory, confirms that nearly half of all counties (46%) in the Republic of Ireland are now unaffordable for first-time buyers on an average income, with Laois ranking number 19 on the list for affordability.
The report titled “Just how affordable is housing for Ireland’s first time buyers?” provides an analysis of Ireland’s housing market using a unique modelling tool and highlights the worrying trend that the lack of affordable houses for first time buyers has moved beyond urban centres such as Dublin and Cork, and has now become an issue in many less urban areas nationwide.
The report assesses affordability using two factors; whether first-time buyers can afford the mortgage repayments on a property based on a mortgage of 3.5 times their household income, and second, their ability to accumulate a sufficient deposit of 10% to purchase the property.
The findings reveal that a significant barrier to home ownership for first-time buyers’ is their ability to save the required 10% deposit due to a range of factors, which, in some counties, can take over 15 years to accumulate on an average income.
In Laois, the report finds that it takes first-time buyers on an average income four years to save for a deposit.
The Dublin commuter counties of Wicklow, Meath and Kildare top the results as the most unaffordable when it comes to saving for a deposit, with an average of 15+ years required to save 10%.
Roscommon follows closely behind at 10.4 years while, in contrast, first-time buyers in Dublin are required to save for 4.3 years.
Leitrim is the most affordable county, with a little over one year required to achieve a 10% deposit.
These figures may appear counter-intuitive, but they reflect differences in property prices and household incomes across the country.
Between 2015 and 2018 property prices in Laois grew by 14.1%, the strongest growth in the country, while Sligo experienced the weakest growth at 3.9%.
Commenting on the report, Annette Hughes, Director, EY-DKM Economic Advisory said,
“Ireland is an economy of contrasts, and our analysis provides striking evidence of the differentials in housing affordability.
“In half the country, a deposit would take three years or more to save, meaning that for many, house ownership is currently out of reach.
“While incomes nationally have grown, rents have grown much faster, which has resulted in an ever-increasing pressure on first time buyers’ ability to save.
“We know that supply is a key contributor to these challenges so it’s encouraging that construction activity has ramped up in recent years, however simply building more housing is not the solution.”
Ignoring the need for a deposit, the report assessed affordability when looking at the ability to meet mortgage repayments, based on a mortgage of 3.5 times household income.
In this instance, houses across the country are deemed significantly more affordable, with just seven counties classed as unaffordable using this metric.
Dublin, Cork, Galway, Meath, Wicklow, Kildare and Louth remain out of reach to the majority of first-time buyers even if the 10% deposit was achieved.
However, houses in all other areas of Ireland are deemed relatively affordable on this measure.
First-time buyers in Laois were found to have a mortgage to income ratio of 3.3.
Annette added, “It is vital that the balance between owner occupied and build-to-rent developments is carefully managed to deliver affordable rents which will not only increase living standards but free up money to save for a deposit.
“Our analysis sheds light on the scale of the challenge facing Ireland if it is to achieve the objectives set out in the Project Ireland 2040 Plan, whilst at the same time showing the opportunities available to attract talent to areas other than Dublin.”
Other findings from the report show:
- The top five affordable counties in Ireland for first-time buyers saving for a deposit are; Leitrim (1.3 years), Waterford (1.6 years), Sligo (1.6 years), Cavan (1.7 years) and Longford (1.9 years).
- The five least affordable counties in Ireland for first-time buyers saving for a deposit are: Meath (15+ years), Wicklow (15+ years), Kildare (15+ years), Roscommon (10.4 years) and Galway (8.3 years).
- The number of houses in rented accommodation in Dublin in 1991 was 8%, in 2016 that figure rose to 20%.
- There is no evidence to suggest that first-time buyers are moving to areas where houses are seen as more affordable, as the more affordable counties do not appear to be growing faster, on average, than the less affordable counties, in terms of the growth in the number of property transactions.
- EY’s latest forecast projects GDP growth of 4.1% in 2019, with moderated growth to 2023 and beyond. This forecast will increase employment levels with a projected further 210,000 jobs coming on stream in the next five years. Foreign workers will be drawn in to meet this need, but this in turn will put further strain on the property market.