IPAV notes cheaper cost of servicing a mortgage than paying rent as issue of supply remains

Responding to the most recent Daft.ie Rent Price Report for Q2 2021 IPAV, the Institute of Professional Auctioneers and Valuers, said the latest report highlights yet again that it is only in the two most expensive areas in which to buy property, Dublin 4 and Dublin 6, that repaying a mortgage on a three-bedroom home is more expensive than paying rent, and at that it is only marginally so.

In every other area of the country it is cheaper to service a mortgage than pay rent, substantially so in many areas – if one could only acquire a mortgage.

The institute said this is happening at a time when mortgage rates have never been cheaper and Ireland, for the first time, is now seeing European style, long-term fixed interest mortgages.

“There are now fixed rate interest mortgages for periods of up to 30 years. These give certainty to borrowers who know they will not have the worry, for the entire term of their mortgage, if interest rates rise. That gives a level of security we’ve never before seen in Ireland,” Pat Davitt, IPAV Chief Executive, stated.

However, he said under the current mortgage rules those on average wages cannot secure a mortgage in the most sought after, generally urban, areas.

“But it is the lack of supply of properties amidst severe pent-up demand that is keeping both rental and house prices elevated,” he said.

“This most recent report, demonstrates yet again, that the major issue of building homes at affordable prices remains to be tackled. In this regard the Government’s new housing plan is eagerly awaited.

“As suggested in today’s report the issue cannot be solved by ‘simplistic rent controls’.

“Tinkering around the edges of the demand side – in controlling rents and making mortgages much more difficult to qualify for, have seen two private landlords leave the market for every one that has entered, and it has seen mortgages largely become the preserve of those on higher incomes or those fortunate enough to have family resources to support them,” Mr Davitt commented.

Mr Davitt said the new housing plan must include the entire planning process as well as the entire tax treatment of housing and investors in housing.

He has previously called for the rental market to be reviewed in its entirety and said one issue that has contributed to inflated rents is the decision to leave owners of new properties exempt from the Rent Pressure Zone rules.

“New properties were left outside of the RPZ legislation entirely until July 2019 when it was tapered and the exemption from then applied to first lettings only.

“However, the exclusion means higher rent levels are set which later become the comparables cited by others to justify raising their rents,” Mr Davitt concluded.

Potential for residential property prices to continue increasing

Meanwhile, commenting on the most recent CSO Residential Property Price Index, IPAV said the rising prices of recent months are likely to continue for the foreseeable future until supply improves.

“Unfortunately the divergence between supply and demand is enormous and is unlikely to change in any meaningful way in the near future.

“In fact supply is so tight that in some cases would-be sellers are not putting their homes on the market, least they may not be able to find a suitable property to buy or that by the time they do prices may have moved beyond their budgets.

“We’re back in an upward trajectory in all areas of the country. And anyone who is concerned with the wellbeing of society as a whole would not want to see this continue at this level for long.

“Those on average incomes are unable to afford to buy a home in many areas, and where they are, a huge amount of the money they borrow and pay interest rates on for the lifetime of their mortgages goes back to the Government in taxes and levies.

“The new Government plan must tackle the supply issue in an unprecedented way,” Pat Davitt, IPAV Chief Executive said.

And he said those solutions must involve State investment as recently recommended by the ESRI, planning issues, Local Authority utility investment and a review of the tax take on housing.

“We need this so that the market develops in a sustainable way and avoids volatility,” he said.


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