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first time buyers

It's taking up to a third of a working couple’s income to pay the mortgage on their first home

The least affordable area for first-time buyers is Dun Laoghaire Rathdown in Dublin, while the most affordable county is Roscommon.

IT CAN TAKE up to 34% of a working couple’s combined after-tax income to pay for the mortgage on their first home, according to the EBS DKM Housing Affordability Index.

The index measures the proportion of after-tax income required to meet the first year’s mortgage repayments.

Looking at a working couple earning €36,600 each, it found repayments can cost anywhere between 7% to 34% of their after tax income, with considerable differences depending on location.

The least affordable area for first-time buyers is Dun Laoghaire Rathdown, Dublin where it takes almost 34% of after-tax income to pay the mortgage.

Outside of Dublin, the least affordable counties are Wicklow, where mortgage repayments account for 26% of after-tax income, followed by Kildare (22%) and Meath (21%).

The most affordable county is Roscommon, with an average price of €73,000, taking just 7.4% of the couple’s after-tax income to fund a mortgage, while it’s 9.8% in Mayo.

For single first-time buyers earning around €55,000, housing affordability remains very challenging at an average of 31.4% of their net income.

shutterstock_6835834 Shutterstock / Peter Cox Shutterstock / Peter Cox / Peter Cox

The average first-time buyer property price nationally was €232,552 in August 2016 implying a mortgage of €195,344, assuming an average 84% loan to value ratio.

The corresponding monthly mortgage repayment was €1,009 which compares with the average monthly rent nationwide of €1,037.

Meanwhile, the average first time buyer property price in Dublin was estimated at €314,303 –  which would mean an average mortgage of €264,015, also assuming an 84% loan to value ratio.

That would leave the average monthly mortgage repayment at €1,364 as average monthly rents in Dublin are between €1,351 to €1,735.

Director of DKM Economic Consultants, Annette Hughes, said that “the average first-time buyer couple paying the average price of €232,552 for a new home would have had to raise a deposit of €37,208 under the macro-prudential rules, based on our assumption of an 84% loan to value ratio.

“However, the Help to Buy incentive in the form of a tax rebate of €11,628, effectively reduces the cash deposit required to €25,581, which should have a positive impact on affordability, provided it is accompanied by an increase in new homes.”

Read: Investors blamed for ‘dramatic’ rise in Dublin house prices>

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