According to a recent survey conducted by Lotus Investment Group, those expecting to buy a home in the next few years anticipate spending an average of €335,000 – nearly 28% higher than the current average price of a home nationwide.
A recent survey commissioned by Lotus Investment Group, a Dublin based firm offering financing to property developers and investors, found that while many people think property prices in Ireland are inflated, most are willing to spend above market value to get their dream home. The goal of the survey was to determine who prospective homebuyers would be in the next few years and what they would be willing or planning to spend to buy a home.
Survey Offers Insight into Homebuyers Expectations
The survey conducted by Red C found that people who plan to purchase a home in the coming years expect to pay an average of €335,000. This figure is €74,000 higher than the current national average cost of a home.
According to David Grin, the chairman of Lotus Group, these figures demonstrate that while many may assert that home prices across the country have grown increasingly exorbitant in the last decade, the desire for homeownership may lead people to pay more than the acceptable market value for a piece of property.
Out of the 1000 adults surveyed, six out of ten reported that they either expect to move or buy for the first time in the next few years. Of these respondents, more men (63%) than women (57%) expressed the desire to purchase or move properties. Contrastingly, four out of ten stated that they decidedly did not intend to purchase property.
Homebuyers may be Constrained by the Current Housing Market
Grin acknowledged that under the current conditions of the housing market, many of these potential homebuyers could be left disappointed as the supply of new housing falls markedly short of demand. This supply-demand disparity is even more pronounced in the market for second-hand properties, which are popular among first-time homebuyers.
With the widening gap between demand and available supply, potential buyers may be more willing to pay prices that meet or exceed the values listed for properties. The Irish House Price Report for the first quarter of 2019 released by Daft.ie noted that in all 54 markets analysed, average home prices were higher than in the prior three months – this is only the third time this has happened this decade. Nationwide, house prices rose by €15,000 over the last 12 months, an increase of 5.9%.
The Lotus Group survey found that of those who expressed a desire to purchase a home, one-third (33%) of respondents expect to spend between €200,000 and €250,000. Just over one-fifth (23%) intend to spend between €250,000 to €300,000. A quarter of these prospective buyers (25%) plan to spend between €300,000 and €400,000.
Twelve percent of survey respondents plan to spend between €400,000 to €500,000. Only four percent expect to pay between €500,000 and €750,000. Finally, only three percent of survey participants planning to purchase a home reported a willingness to spend in excess of €750,000.
Obstacles to Homeownership in the Market
Commenting on the survey findings, David Grin stated, “Supply issues have created a large gulf between aspiration and reality when it comes to home ownership. The top line headings are as you would expect – many people aspire to buy. Many of these people are likely to be met with challenges – some will not raise enough money to do so as prices continue to rise, while others will simply struggle to find a property that suits their needs, as the construction of new homes has not nearly reached the level of output required.”
A recent report by the Irish Independent stated that first-time home buyers who qualify for exemptions from strict Central Bank mortgage rules have been turned down for home loans even though the banks are not reaching their full quota limits for lending outside of the limits. According to their findings, as few as 11% of the values of mortgages issued to first-time lenders last year were exempted from the lending limits, just half of what the banks could offer.
According to Grin, the survey offered some interesting insights into potential homebuyers and their expectations. Survey participants over age 55 demonstrated a higher purchasing power in the results. Participants also anticipated spending higher than average prices for properties in Dublin.
In analysing the results, Mr. Grin referred to an earlier survey commissioned by Lotus Investment Group that found that 78% of those aged 55 and older would consider downsizing their residence if certain conditions were met, saying that a portion of these survey respondents could fall into this category of home buyers. If this were to be the case, this downsizing could potentially add family homes into the market, addressing the current shortage of these property types.
Survey Could Signal Coming Trend in the Irish Property Market
Analysis of the data demonstrated that survey takers’ responses were strongly influenced by geography. Those residing in Dublin or those who plan to reside in Dublin expect to spend a lot more to purchase a home than those in the rest of the country. What remains to be determined is just how much further that additional spending will actually get them. Average home prices in Dublin currently range from €350,325 in North Co. Dublin to €608,549 in South Co. Dublin.
According to the Lotus Group survey results, 36% of Dubliners expect to spend over €400,000. In contrast, only 19% of nationwide respondents intend to spend over €400,000. Additionally, of those intending to reside in Munster, only 13% plan to spend over €400k. Those figures drop to 12% in Leinster and just 7% in Connacht and Ulster, respectively. These numbers demonstrate that Dubliners expect and intend to spend a significantly higher price for property.
Concluding his analysis of the survey findings, David Grin said, “While some property commentators have indicated that property prices have plateaued, the fact that potential house buyers appear to be willing to spend more could suggest that house prices will continue to rise as competition on the market heats up.”