BPFI data highlights affordability gap in housing

The affordability gap at the heart of the State’s housing market is laid bare in a new report by the Banking and Payments Federation Ireland (BPFI). It indicates that individual first-time buyers (FTBs) of new homes last year had an average income of €67,000. This is considerably higher than the State average, typically put at just under €50,000. According to the Central Statistics Office (CSO), the median, or middle value, disposable income last year was €46,999.

We’ve had income data relating to first-time buyers before but never on an individual basis. Typically, when we hear of first-time buyers’ income what’s being referred to is a first-time buyer household comprising two incomes.

The BPFI’s report indicated that solo FTB applicants buying or building a new home accounted for 16.5 per cent of all FTB mortgage drawdowns in 2022 compared with 15 per cent in 2019. For FTBs buying an existing home, the share of solo applicants was 32 per cent in 2019 compared with 33 per cent in 2022.

[ Government failed to spend 25% of social and affordable housing budget in 2022 ]

[ The piecemeal plan to fix the housing crisis: what have Darragh O’Brien’s schemes delivered? ]

We can say two things about this: solo FTBs account for a minority part of the overall FTB market, in other words most home purchases need two incomes.

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Second, and this point was emphasised by the BPFI, the share of solo applicants among FTBs has remained stable over the 2019-2022 period even though house prices have risen by 26 per cent.

A double-digit per cent price hike should, in theory, have squeezed many potential buyers out of the market but there are two countervailing forces. First, incomes rose during the period. The average income of the solo first-time buyer of a new home rose by 13 per cent during the same period, from €59,000 to €67,000, enhancing affordability.

The typical loan size also increased, also enhancing affordability. The latter is almost certain to have been helped by the introduction of the Government’s Help-to-Buy scheme, which allows first-time buyers of new homes a refund of some of the income tax they paid to help with the deposit.

Critics of the scheme and the Government’s new First Home initiative, however, say the schemes ultimately underpin higher prices. There are no easy answers to the housing crisis.