New study shows that Kildare is among the toughest areas for couples earning €107,000 to buy a home

A new study has shown that County Kildare is among the toughest areas for couples with a combined income of €107,000 to purchase a home.

The study, which was conducted by the Society of Chartered Surveyors Ireland (SCSI), considered the couple's borrowing capacity at 3.5 times their income (although it should be noted that recent changes to Central Bank rules now allow first-time buyers to borrow up to four times their income).

It found, however, that the couple could only afford a home in County Meath, and that was only with additional support from the First Home Scheme (FHS).

Gerard O'Toole, Vice-President of the SCSI, said the clear message from the report was 'the urgent need to increase supply.'

'INSUFFICIENT SUPPLY'

Mr O'Toole elaborated: "75 per cent of agents reported low stock levels, up from 71 per cent twelve months ago, highlighting the ongoing issue of insufficient supply.

"Our members are seeing the impact of the lack of supply on the ground and believe this shortage will continue until annual completion levels ramp up significantly.

"A year ago, 35 per cent of agents identified the lack of supply as the main issue for the price movements, now that number is 46 per cent."

He continued: "The other main factors, which our members believe are influencing price movements include the state of the economy, interest rates and the availability of credit, access to schemes supporting house purchases such as Help to Buy and changes in the levels of immigration and emigration.

"The findings show a slight decrease in concerns about interest rates since the last report, reflecting the ECB’s recent decision to reduce rates.

"One area of concern for agents is an increase in the number of sales agreed but not proceeding to completion."

"They believe delays caused by planning irregularities, non-compliance with building regulations as well as delays regarding probate and accessing property deeds, are continuing to pose challenges," Mr O'Toole concluded. 

The SCSI included five scenarios involving a couple’s earning a combined income of €107,000 in the latest monitor.

The organisation explained: "These scenarios demonstrate the affordability gap, if any, which exists between the total mortgage purchase limit available to a couple on average incomes looking to buy their first home and average new house purchase prices in five different locations. "

According to these scenarios, a couple on a combined salary of €107K who want to buy a new three-bed semi and who have the 10 per cent deposit having availed of the Help to Buy relief, will afford to buy in only one of the five locations, namely Meath, and only then with the support of the FHS. 

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KILDARE AND WICKLOW

However, prospective buyers in Wicklow will face a shortfall of almost €78,000, while in Kildare, the figure is €65,000.

Mr O’Toole said that the figures showed the 'massive challenges' faced by first-time buyers in the current market: "Last year our case study 'couple' could buy in three locations without the support of the FHS.

"This year, a new home is only affordable in one (County Cork) and that is with FHS support, so the widening affordability gap is a real concern.

"While buyers with savings should be able to overcome the gap in Meath, Galway and Cork, new three-bed homes in Wicklow and Kildare remain totally out of reach for people on these salaries.

"In addition, there are thousands of people on lower salaries who will not be able to buy and will require support."

He continued: "Moreover, the average cost of the three-bed homes in Kildare, Wicklow, Cork and Galway exceeds the price ceilings set for the FHS making these homes ineligible for the scheme.

"This year’s report included an affordability scenario for a two-bed terraced house in all five locations, and the picture here was a great deal more positive with the affordability gap met in four locations without recourse to FHS, while in Wicklow, it was met with the support of FHS.

"While the viability of new residential projects remains challenging, the fact that some construction costs look to be levelling off and interest rates are expected to fall are positives, but the current pace of property price inflation is not sustainable.

"In order to get to grips with it we need drive up supply as a matter of urgency while also doing everything possible to drive down costs.  

"Soft costs make up around half the cost of delivering new homes, and while the SCSI welcomed the government’s decision to waive development levies, more work remains to be done with regard to the cost of finance for homebuilders, planning reform, the resourcing of local authorities and the costs of utility connection charges."

"The SCSI has long supported the introduction of a higher density, more broadly integrated housing mix which better reflects the needs of modern Irish society."

Mr O'Toole concluded: "We believe the adoption and successful implementation of such a policy using modern methods of construction is vital in addressing the affordability / viability nexus."

To view the full report,visit www.scsi.ie.