First-time buyers need deposits of €52,500 as house prices rise

The average deposit needed to buy a home is now €52,500 for a first-time buyer (FTB) and €135,000 for a mover purchaser, according to figures from the Banking and Payments Federation Ireland (BPFI).

This is more than double what it was less than a decade ago, reflecting the rapid increase in house prices since the low point of the crash in 2012 and the Central Bank of Ireland's mortgage lending rules, which require buyers to have bigger deposits relative to the value of the property.

The BPFI’s latest housing market monitor includes a loan-level analysis of the source of deposits in the first half of 2021.

It found that nearly 42 per cent of FTBs and 25 per cent of mover purchasers used gifts as part of their deposits.

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The total value of gifts towards deposits was almost €210 million, €149 million for FTBs and €60 million for mover purchasers, whereas own savings accounted for €795 million, it said.

For mover purchasers, inheritance and the proceeds from the sale of a previous property were also found to be a significant source of deposits.

Commenting on rising house prices which he said was driving deposit amounts, BPFI chief executive Brian Hayes said: "House price growth has accelerated in recent months mainly due to the imbalance between supply and demand, where supply was seriously affected due to the pandemic."

He noted residential property prices increased by 12.4 per cent in the year to September 2021 at the national level.

“In contrast, the lower-than-estimated supply, due to the pandemic, in 2020 and 2021 has put further pressure on average prices and affordability is becoming challenging with average rents also at their highest levels, more than one-third higher than their peak in 2008,” he said.

The BPFI’s report noted that the annual rate of rental inflation was recorded at 7 per cent in the second quarter of 2021 with the national standardised rent level increasing to €1,352. In Dublin, 69 per cent of properties paid rent of more than €1,500.

Separate CSO data indicate that 35.8 per cent of tenants had total gross income of less than €20,000 in 2019 and 57.9 per cent had income of less than €30,000.

On housing supply, the BPFI noted that some 13,574 units were completed in the nine months ending September 2021, a slight increase compared with the same period in 2020.

The group said housing commencement numbers reached a record high with almost 31,000 units commenced in the year to October. Dublin and the capital’s commuter belt accounted for more than 60 per cent of these notices.

In its report, the BPFI said there was a close relationship between the number of commencements in a year and the number of completions in the following year. “The only downside risk to the estimated increase in completions in 2022 is the increasing share of apartments in completions and the likelihood that apartment commencements take longer to complete,” it said.