Renting ‘increasingly cheaper’ than buying a new home for first-time buyers

Renting became increasingly more affordable for first-time buyers last year than taking out a mortgage on a new home as both borrowing costs and house prices kept climbing, property database GeoDirectory has said.

The group’s latest residential buildings report, compiled with EY, shows that despite some 28,742 new residential address points being added to the database last year — a modest 0.8 per cent increase on 2022 — house prices climbed by a further 4.7 per cent nationally to an average of €370,709 in the 12 months to the end of October.

The report also highlights a 0.1 percentage point decline in the number of vacant properties in the State with the rate of vacancy standing at 3.9 per cent in December, the lowest rate since GeoDirectory began compiling the data. The number of derelict homes fell by 7.9 per cent in the 12 months to December 2023 with a total of 20,780 derelict units identified across the State.

GeoDirectory chief executive Dara Keogh said falling vacancy and dereliction rates indicate that Government policies aimed at bringing these units back into the housing stock “are having an impact”.

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However, the data further illustrates the affordability gap for prospective first-time buyers looking to buy a new home. As interest rates increased last year, so too did the cost of servicing a home loan with the required monthly repayment rising to an average of €1,824 based on a median new house price of €400,000.

Standardised monthly rents, meanwhile, were comparatively cheaper at €1,574. It meant that in 29 out of the Republic’s 31 local authorities — excluding south Dublin and Longford, where the difference was marginal — monthly rents were more affordable than monthly mortgage repayments.

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Buying an existing home was a more affordable proposition with required monthly repayment averaging €1,357 across the State, some €217 cheaper than the standardised average monthly rent.

The data indicates that the pipeline of new homes remains relatively strong with some 22,777 new residential buildings under construction in the Republic in December — up 3.5 per cent from last year — 15.7 per cent of which were in Dublin. Building levels were highest in Leinster, accounting for 60.2 per cent of the total, with Munster second at 24.4 per cent, followed by Connacht and Ulster at 8.8 per cent and 6.6 per cent respectively.

Of the 28,742 new residential addresses added to the database last year, slightly more than half were in the Greater Dublin Area with Dublin itself accounting for 33.2 per cent of all new entries.

Meanwhile, the average cost of a residential property in Dublin was €536,472, while Longford was the county with the lowest average price at €176,823. When Dublin is excluded from the study, the national average house price falls to €300,319, according to the report.

Some 48,606 homes changed hands in the 12 months to the end of October last — up 426 on 2022 — 18 per cent of which involved a new dwelling.

Annette Hughes, director of EY economic advisory services, said the figures were encouraging with “all of the key the indicators pointing in the right direction. The lagged effect of national policy frameworks and incentives is becoming visible in the data. However, it is crucial that the momentum is maintained.”

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