Renters Paying Twice as much as paying mortgages

Renters are moving home to their parents in ever-increasing numbers in an effort to get on the property ladder, according to a national group of estate agents.

With rents exceeding average monthly mortgage costs around the country, tenants are finding that the only way they can raise finance is to abandon independent living in the short term and return home.

“It is increasingly difficult for first-time buyers to save deposits and purchase properties due to the combination of high rental and childcare costs,” said Anthony McGee of REA McGee in Dublin 24.

“There are lots of instances where we are seeing people moving home to parents to save deposits.

“Even though the rents they are paying are in excess of a mortgage on the same property, they can’t seem to attain a mortgage due to their inability to raise money for a deposit.”

The rental market is being squeezed ever upwards by a perfect storm caused by tenants renting on a much longer basis according to REA spokesperson Healy Hynes.

“Tenants traditionally moved around in the hunt for better and cheaper accommodation, but this is no longer the case, and tenancies are becoming much longer,” said Hynes, a specialist in the area.

“This means that there are less rental properties on the market, and those that come up are very often being converted to Airbnb usage.

“All of this has heated a rental market where average rents nationwide are now €1,017.15, having risen 2.8% in the past quarter.

“In contrast, the cost of servicing a €200,000 25-year mortgage on the REA Average Three-Bed Semi price of €221,843 would be €969 at current rates.

“This difference is made even starker when you consider that the average rental price is based mostly on two-bedroomed apartments, not three-bed semi-detached houses which obviously command a higher rent.

“Although 60% of rental properties in the country are now covered by rent pressure zones, they are simply a fire-fighting exercise as it will be 2020 before we can evern hope to see a sufficient supply of new homes coming on to the market.

Dublin agent Ed Dempsey believes that the rental market is a huge problem in Dublin, fuelled by the migration of properties in the capital to Airbnb.

“There are currently 3,000 properties available to rent on Airbnb that would otherwise be in the rental sector. In contrast, there are just 1,000 properties available to rent on the long-term market,” said Dempsey.

REA agents in Balbriggan are finding that in some cases prospective buyers can halve what they are paying rent if they purchase a property in the area.

“If renters can obtain mortgages they are willing to buy sooner rather than later, as in many cases they are halving their rental payments,” said John Cumisky from REA Cumisky.

“Rents have gone through the roof in the area fuelled by an all-time low of supply of suitable rental properties, with many prospective buyers trying to escape from rents of €2,000 a month in Dublin.”

In commuter areas, buying is still far preferable to renting according to Brian Farrell of REA Brophy Farrell in Naas.

“Assuming that an average house priced at €260,000 in Naas will rent for €1,500 per month, a mortgage of 90% loan to value (LTV) will cost 75% of that amount to service, at €1,132 per month.

“When you factor in the cost of mortgage protection insurance, house insurance, property taxes and general repairs and maintenance these figures work out at a similar amount on a month to month basis.”

The traditional investor who buys a three-bed semi and rents it out appears to be retreating from the market on a monthly basis to be replaced by the ‘Air Investor’ according to Robert McGreal of REA McGreal Burke in Castlebar.

“If we take Westport, for example, there are 14 properties listed to rent, 166 for sale, but 250 listed as currently available on Airbnb,” said the Mayo auctioneer.

In Tipperary a significant number of renters, mainly people who have settled in the area over a long term from Eastern Europe, are now opting for the security of home ownership.

“This category of buyer now makes up 50% of our three-bed semi sales. Many of them have substantial savings and recognise that mortgage payments are now significantly less than the rent that they are currently paying,” said Eoin Dillon of REA Dillon in Nenagh.


Ends

Available for interview:
Healy Hynes, REA spokesperson
healy@hynes.ie 087 263 2295
Media information: Darren Hughes, 086 293 7037, Darren@mediaconsult.ie

Q3 2017 REA Average House Price Survey

The average three bed semi-detached house nationally has risen by 3.1% to €221,843 since June, the Q3 REA Average House Price Survey has found.
The REA Average House Price Survey concentrates on the up-to-date actual sale price of Ireland's typical stock home, the three-bed semi, giving a real-time picture of the property market in towns and cities countrywide to the close of last week.
Overall, the average house price across the country has risen by 11.2% over the past 12 months – just under twice the 6% increase registered to the full year to September 2016.
The average three-bed semi-detached home in Dublin city’s postcode districts has jumped in value by €17,000 in the three months to the end of September, and now costs an average of €431,500.
The 4.1% rise over the last quarter means that prices in the capital’s postcode areas have increased by 15.6% over the past year, with properties selling in an average of four weeks after hitting the market.
“Supply is the main driver of these continuing price rises with our agents reporting that the volume of listings is down around the country,” said REA spokesperson Healy Hynes.
"In what is becoming a vicious circle, families looking to trade up are not seeing the larger homes becoming available while empty nesters looking to downsize do not have a ready supply of smaller homes emerging on the market.
“To complete the equation, first-time buyers are not seeing the three-bed semis coming through in sufficient numbers.
“Although planning permissions rose by 55% year-on-year in Q2, the 3,630 houses approved will not be on the market for the next two years, and even then this year’s overall figure will be less than half is what is required on an annual basis.
“Looking at the supply figures, it could be 2020 before we see any normalisation in the marketplace.
“Our agents are reporting that where there are new builds coming on stream, the market is extremely active and the first-time buyer is opting to pay a premium of 15-20% higher than the second-hand rate.
“This is having a knock-on effect into the second-hand market with a more discerning buyer now concentrating heavily on energy ratings.
“Where the price is right, we are seeing a good flow of credit into the market, with cash buyers now just making up 20% of the commuter market and sales in Dublin and surrounding counties closing in just four weeks – down from an average of seven a year ago.”
The commuter counties continued to rebound after a relatively static 2016 and saw an increase of 2.7% this quarter, with the average house now selling for €229,300.
However, once again the influence of house pricing relative to the deposit threshold is illustrated in a 4.7% rise in Meath where the average is €234,375 almost twice the percentage increase registered in Kildare (1.8%) and Wicklow (2.4%) where average house prices are above the €260,000 mark.
The commuter flight has once again spread as far as Laois where REA Seamus Browne reports a €10,000 increase in average prices over the past three months as buyers leave Dublin and Kildare in the quest for suitable housing at the right price.
The slowest growth nationwide was registered in the main cities outside of Dublin, as while Galway at €255,000 (up 4.1%) and Limerick at €190,000 (up 2.7%) showed growth, Cork city prices remained static over the three-month period, and just 5.1% up on the year.
The country’s smaller rural towns situated outside of Dublin, the commuter belt and the major cities out-performed the national index with prices rising by an average of 2.8% over the quarter to €142,867.
House prices in Longford have risen by 32% in the past year – but the county still has the cheapest semi-detached houses in the country at an average of €90,000, up from €68,000 in September 2016.
Longford, Leitrim (€97,000) and Donegal (€93,750) are the three counties where properties can be still be purchased for a five-figure sum.
Despite the absence of sterling buyers because of Brexit and the exchange rate, prices in some parts of Donegal have risen by an average of €6,250 since June, fuelled by an acute lack of supply of suitable properties.
Brexit is having an unusual effect on the rental market in West Cork where former sterling buyers are now opting to rent on a long-term basis, creating added pressure on an under-supplied market, according to REA Celtic Properties.

Ends

Available for interview:  
Healy Hynes, REA spokesperson, healy@hynes.ie, 087 263 2295
Media information: Darren Hughes, 086 293 7037, Darren@mediaconsult.ie