Housing demand in commuter towns surges, IFG claims

First-time buyers are being priced out of the Dublin property market, creating a surge in demand for houses in commuter towns, according to mortgage broker IFG Mortgages.

The company has released figures showing an 88 per cent jump in the volume of mortgage business in commuter towns in the first quarter of this year, compared to the first quarter of 2005.

By contrast, mortgage business in the Dublin area grew by just 7 per cent in the same period.

The findings about first-time buyers came as another report warned that construction activity may be slowing down. Davis Langdon PKS, a cost consultancy, said the number of housing starts recorded in the last three months of 2005 and the first quarter of 2006 showed significant reductions. However, it said it still expected 80,000 housing completions to be achieved this year.

IFG Mortgages, which is the largest network of mortgage brokers in the Republic, said the growth of mortgage activity in the commuter belt was evidence that buying in the capital was no longer an option for a large proportion of buyers. Among single buyers, mortgage applications at IFG have more than doubled in commuter towns, compared with just 3 per cent growth in Dublin.

Shane Connole, sales director at IFG, said escalating house prices in Dublin would soon be replicated in commuter towns as they become more popular with buyers who work in Dublin.

"The continual improvements in infrastructure leading into the capital makes places such as Carlow and Kildare a more realistic option for many people, though this demand could place some pressure on house prices in key satellite towns," Mr Connole said.

Michael Dowling, president of the Independent Mortgage Advisers Federation (Imaf) and a mortgage adviser at Sullivan Dowling, said the falling number of planning permissions for new units in the Dublin area was not satisfying demand, forcing first-time buyers out into the commuter counties. There was a 45 per cent drop in planning permissions for new units granted in the capital in 2005, falling from more than 24,000 in 2004 to just over 13,200 last year.

"There is demand for about 25,000 new units in Dublin every year. At any new development, there are now queues of people hoping to be able to buy," Mr Dowling said.

In the first four months of 2006, house prices in the commuter counties of Kildare, Wicklow, Meath and Louth grew by 6 per cent, compared with a rate of 2.6 per cent in the first four months of last year.

The average price of a property in these counties in April this year was €316,749, compared with an average price in Dublin of €388,466 and a national average property price of €291,678.

According to the latest annual Permanent TSB / Economic and Social Research Institute (ESRI) house price index, published last week, high Dublin house prices have had a "ripple effect" in the surrounding counties.

House prices have increased at a more rapid pace in Dublin than they have outside Dublin over the past decade. The average price gap between buying a house in Dublin and outside Dublin widened from €18,000 to almost €130,000 over 10 years.