New mortgage reliefs may send house prices soaring

unison.ie/irish_independent/ … e_id=15188

CHANGES in the Budget have made homes more affordable for first-time buyers, but there is now a risk that this will re-ignite the housing market.

A typical first-time buyer has been left €130 a month better off by the Budget, which means new buyers can now borrow more.

But the fear is now that the generous changes to mortgage interest relief will send house prices rocketing again this year, economist Annette Hughes said yesterday.

Last year, house prices rose by 11.8pc, but by the end of the year the rate had slowed to a standstill.

Most commentators are now predicting house prices will rise at a much more moderate level this year, probably between 3pc and 6pc.

An affordability index released yesterday shows the changes to mortgage interest relief in the Budget have cancelled out three of the last interest rate hikes.

Ms Hughes, of DKM Economic Consultants, who complied the study, said there was a major risk that the generous budgetary changes for first-time buyers would set off a new house-price spiral.

“The risk is this will fuel house-price inflation. It is all down to how confident buyers are in the market.”

In last December’s Budget, Finance Minister Brian Cowen doubled the amount of tax relief new buyers can claim.

This left first-time buyer couples with mortgages more than €300,000 better off by €133 a month.

A typical Dublin first-time buyer couple taking out a 90pc mortgage for the average house priced at €363,000 had net repayments of €1,767 a month before the Budget.

The doubling of mortgage interest relief has reduced their monthly repayments to €1,637.

This is a gain of €130, according to the DKM/EBS Affordability Index. Ms Hughes said this was a reduction of almost 7.5pc in their total repayments in the month.

Even with the expected 0.25pc rise in European Central Bank rates in March the couple’s monthly repayments would rise by €45, but they would still be €85 better off.

The survey shows that the average new-buyer couple across Ireland is spending 24.7pc of their net income on their mortgage. This compares with to 26.6pc in December 2006.

The corresponding figure for the Dublin first-time buyer couple is 29.8pc at the moment, compared with 32.7pc in December 2006.

Whoop. Why not rent it for €950?

And now house prices are falling anyway, it’s a no-brainer surely.

But it will only be a temporary respite anyway…interest rates are still, by the looks of things, not at the top of their curve yet.

Show me a house or a flat renting at €950 in North County Dublin with 2 bedrooms.

€1200 at least for something palatable.

They’re talking a 4 bedroom probably there, which would rent at something like €1600 or more.

The letting argument makes sense in city but I don’t see it in the suburbs.

The original article was done for PropertyBuyer magazine. Knowing that kinda colours your judgement on it’s content.

That rent is typical enough for Balbriggan and Skerries, TUG. Donabate also an option. Corresponding purchase price though is around 315K which is a bit less.

That being said, they can’t have their cake and eat it. Either the property market corrects and that’s a good thing, or it doesn’t correct and that’s a good thing. But you can’t demand stamp duty changes to support the property market and then complain when an alternative (non-stamp duty) change has the impact of supporting the market.

I guess it’s interesting that the main green areas on the DIFF charts on the Daft Q4 report thread are in the less expensive parts of Dublin, on average.

Huh?

Read the article. They said, “90pc mortgage for the average house priced at €363,000”.

Houses renting for €1600 are valued at twice that. I should know, I rent one. :laughing:

EDIT:…in North County Dublin too!

So you’re spending €1600 a month on rent?

Fair play to you. :confused:

Yes. But I sense the irony in your response.

It’s all about Cashflow. See the article below written in May last year for an explanation.

kildaretoday.ie/ViewArticle2.aspx?SectionID=3868&ArticleID=1509934

I understand the implications of cashflow and sense the irony in your response. However, for me, the key issues are security and medium to longterm and given the state of Ireland’s renting laws versus what I want to do with a property long term, I find it hard to justify parting with €1600 for rent.

But I don’t criticise anyone for doing it, it’s your choice and sincerely, fair play to you.

=1&limit=10&search_type=rental&id=438991 :slight_smile:

I’m sorry but the words very nice and Balbriggan can never be used in conjunction IMHO! :stuck_out_tongue:

The current price of a two bedroom flat in North Dublin at the moment is in the region of €330,000. the mortgage costs plus maintenance, service charge I would estimate at about €2,000 per month the rental value per month is about €1,100. Net rental yield of about 3.3%. Something is amiss.

I’d say that’s slightly on the high side, Duplex.

Especially if you jack up the term to 40 years. Sure nobody pays off in less than 30 years nowadays… :unamused:

1800 maybe in a 100% mortgage case scenario over 35 years and estimating management fees of 100E and insurance of around, 60E a month, give or take.

We should send an email of loce to Karl, hi smortgage calc has served us well,

jeacle.ie/mortgage/

Always Handy

:open_mouth:

Speak english, Mick! :stuck_out_tongue:

There or thereabouts UWG give or take a €100. The prospects of wages and consequently rents rising to surpass ownership costs are more than remote in the short, medium and long term, hence the scramble for the exits by investors. :unamused: