Despite property prices hitting a new high in May, a record number of mortgage applications were still approved for first-time buyers.
Last month, more than 3000 applications were submitted and approved for first-time home buyers, these applications represent an overwhelming 64% of all the approved home loans in May.
This is the highest recorded level of approvals since the Banking and Payments Federation Ireland (BPFI) started recording data on mortgage approvals 12 years ago.
In this article, we will look at all the factors that are affecting the real estate market.
Housing Prices
The Irish real estate market has experienced a notable surge in housing prices, reaching unprecedented levels in recent years. This upward trajectory in property values has sparked both interest and concern among potential buyers, sellers, and industry experts.
But despite the stiff increase in housing prices over the last few years, the figures released on first-time buyers show there is still great demand and confidence in the market.
To give you an idea of how much house prices have risen, the average price for a 3-bedroom semi-detached house in Dublin is now €500,000. The average house price for the same property type across the rest of Ireland has risen to €300,000.
According to the latest Irish Independent REA Average House Price Index, prices for the average three-bed home in the capital have seen a 0.3% increase over the past three months. Remarkably, these prices now stand at 14% higher than their peak level during the Celtic Tiger era, which amounted to €431,000.
The upward trend in housing prices indicates continued growth and resilience in the real estate market, particularly in the capital city. The 0.3% increase in the past three months highlights the ongoing demand and limited supply of three-bedroom homes in Dublin.
Interest Rate Increase
Another factor that would cause trepidation in the real estate market and potentially deter buyers is interest rates increasing. Despite hopes that interest rates would ease, quite the opposite has transpired.
The reason for the increase is the central bank attempting to stem inflation, invariably the first port of call is to hike interest rates.
When mortgage rates increase, the premium homeowners pay monthly increase in tandem.
Despite this increase in interest, many first-time buyers are racing to get onto the property ladder.
First-time Buyer Mortgages
So despite interest rates and property prices increasing it seems that the real estate market remains strong with thousands of new mortgage applications every month. The government has applied a lot of focus and time on incentivising first-time home buyers to enter the property market, schemes such as Help-To-Buy and the first home scheme are specifically targeted at this demographic.
Looking at his month’s figures from the BPFI, it would seem that those efforts have paid off. According to their figures, the BPFI calculate that there was a total of 4,928 mortgages approved in the month of May, with 3,170 of them being submitted by first-time buyers.
On average first-time buyers were approved to borrow €292,000 in the month of May. This is up by €14,600 on the average approval amount in the same month last year.
The total value of approved mortgages amounted to €1.4 billion, out of which nearly €1 billion was attributed to first-time buyers, while mover-purchasers accounted for €333 million.
Compared to the previous month, the value of mortgage approvals experienced a significant increase of 25%. However, there was a 4% decrease in the value of approvals when compared to the same month last year. In terms of re-mortgage/switching activity, there was a substantial decline of 72% in volume over the past year.
Brian Hayes, the chief executive of BPFI, commented on the latest figures, stating that “although total mortgage volumes declined by 8% in May, first-time buyers continued to defy this trend. First-time buyer volumes saw a year-on-year increase of 20.1%, reaching a total of 3,170 approved mortgages.”
Property Managers Ireland
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