In a dysfunctional property market, new data on the financial gifts that help to fund mortgage deposits show where the purchasing power really lies.
People buying for the first time received almost €150 million in gifts in the six months to June and owners moving received more than €60 million. Banking and Payments Federation Ireland, the lenders’ lobby group, says purchaser savings were almost four times higher than gifts. But there is no doubt that money from the Bank of Mum and Dad gives some buyers an edge.
All told, nearly 42 per cent of first-timers and 25 per cent of movers received gifts. To a greater or lesser extent, such contributions were always a feature of the market. Still, the figures suggest the scales are tipped against buyers who don’t have some family cash. That Irish borrowers pay mortgage interest at rates more than double the euro zone average only adds to the strain.
No matter where the money comes from, buyers face huge challenges as prices rise inexorably and the Central Bank imposes limits on the amount they can borrow.
First-timers these days need as much as €52,100 for a deposit, a sum that would take eight years and more to amass if they saved €500 every single month with no interest accumulating. Saving is a struggle, particularly when pay is low early in working life, all the more so with rents practically twice as high as they were a decade ago.
That many buyers take gifts is no surprise.
These pressures are all too real and they are changing the landscape. Buyers are older now. The proportion of first-timers aged 30 or less was 27 per cent in 2020. In 2004 it was 60 per cent. That may be a lifestyle choice for some but immutable forces are such that many don’t have the choice at all.
Last month the Government reversed plans to change the tax treatment of family loans, another form of parental aid. If such loans are even half as prevalent as gifts, many would have been antagonised. The fundamental problem remains lack of housing supply.