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BPFI Housing Market Monitor – Q3 2021

Median deposit for First-Time Buyers exceeds €52,000 in first half of 2021 – BPFI Housing Market Monitor

Own savings is main source of buyers’ deposits although almost 42% of FTBs used gifts as part of their deposit

Substantial uplift in housing supply in the next two years with commencements at record high

Tuesday 7th December 2021 – The median deposit amount for a first-time buyer (FTB) in the first half of 2021 was almost €52,100 and €135,000 for a mover purchaser according to the latest Housing Market Monitor for Q3 2021 published today by Banking & Payments Federation Ireland (BPFI).

Looking at the source of those deposits the Monitor shows that even though gifts play a role, the main source of the deposits are from purchasers’ own savings. Nearly 42% of FTBs used gifts as part of their deposits compared with almost 25% of mover purchasers during the first half of 2021. However, some 96% of FTBs used savings to fund their deposits.

BPFI estimates that, during the same period, the total value of gifts towards deposits was almost €210 million, €149.3 million for FTBs and €60.4 million for mover purchasers, whereas own savings were almost four times that of gifts, totalling around €795 million. For mover purchasers, other sources such as inheritance and the proceeds from the sale of a previous property are significant sources of deposits.

The Central Bank of Ireland recently announced operational changes to the mortgage macroprudential measures whereby a “carry-over” system will be introduced for managing allowances where unused allowances can be accrued over for use in the first half of 2022 on the provision that those loans are approved in 2021. This is likely to increase approval activity during the rest of 2021 where drawdown activity in the first half of 2022 should reflect this increase.

Acceleration in house price growth

Commenting on rising house prices which seem to be driving deposit amounts, Brian Hayes, Chief Executive, BPFI 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. Residential property prices increased by 12.4% in the year to September 2021 at the national level, where average prices of new homes were up by 3.3% year on year whereas average prices of existing homes increased by 13%. Average prices increased by 11.5% in Dublin and 13.2% outside Dublin in the year to September 2021.”

“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. Annual housing output has been flat in 2020 and during 2021 but it is expected to increase significantly in 2022 with increased commencement activity particularly since April 2021 with the full reopening of the construction sector. However, cost inflation is likely to play a role on average price developments over the short term”, Mr Hayes continued.

Substantial uplift in housing supply in the next two years with commencements at record high

Despite the current challenges, the Monitor points to healthy market prospects with housing and mortgage activity set to exceed 2019 levels prior to the pandemic. In terms of housing output, 13,574 units were completed in the nine months ending September 2021, a slight increase compared to the same period in 2020. The share of apartments in total completions continues to increase and accounted for around 22% of total completions in the first nine months of 2021. In 2015, the share of apartments in total completions was 9%.

The Monitor shows nearly 27,000 units were commenced in the ten-month period to October 2021, with over 24,000 of these units commenced since April when the construction sector fully reopened. On an annualised basis, commencement numbers reached a record high with almost 31,000 units commenced in the year to October 2021. Dublin and Dublin Commuter accounted for over 60% of all commencements during 2021.

Highlighting the healthy prospects for the market as we look ahead, Mr Hayes said: “There is a close relationship between the number of commencements in a year and the number of completions in the following year, and today’s Monitor suggests that the significant increase in commencement numbers during 2021 is likely to lead to a substantial increase in completion numbers in 2022. 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. However, even with this caveat, the Monitor concludes there is a significant pipeline of residential home building activity which will lead to substantial uplift in housing supply in the next two years.”

The BPFI Housing Market Monitor is available on the BPFI website here.

ENDS/

Notes: Banking & Payments Federation Ireland (BPFI) represents the banking, payments and fintech sector in Ireland.  Together with its affiliates, the Federation of International Banks in Ireland and the Fintech & Payments Association of Ireland, BPFI has some 100 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.

The BPFI Housing Marking Monitor is published quarterly. In addition to presenting a unique range of loan-level data, the Monitor draws on a range of published data under the three key headings of housing supply, housing prices and rents, and housing transactions in its assessment of the current state of the housing market.

Contact: Jillian Heffernan, Head of Communications, 087 9016880 or jillian.heffernan@bpfi.ie

The BPFI Housing Market Monitor Q3 2021 is available for download below in PDF format.

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