First-time buyers need to be earning nearly €100,000 a year to secure a mortgage for a new home in Dublin, a report by KBC Bank has indicated.

The study found that the price of new homes purchased by first-time buyers has “virtually doubled” from about €200,000 to €380,000 since 2012. This has eroded affordability for first-time buyers, it said.

A first-time buyer or a dual-income first-time buyer household availing of a 90 per cent loan-to-mortgage would typically need an income of €98,000 to qualify, the report noted.

In all four regions of the Dublin property market there was a marked pick-up in new home prices for first-time buyers relative to existing home prices, it said.

The report said the drop in purchases of new homes in Dublin by first-time buyers last year “likely reflects the drop in affordability coming from a cumulative increase in new homes prices of 90 per cent from 2012 to 2019”.

Through this period there has also been an acceleration in new home prices relative to existing home prices.

Typical asking prices in the capital are now more than nine times the average salary. In the past an “affordable” home was considered to be three to four times a person’s income. The Central Bank’s mortgage restrictions, which limit people to borrowing 3½ times their income, reflect this measure of affordability.

KBC’s report noted that Dublin experienced the first drop in home sales by households last year since 2011.

It said while overall activity in the city’s residential market increased in 2019 this was due largely to a pick-up in purchases by public sector bodies and institutional funds, many of which are now buying property for the private rented sector .

In contrast purchases by households fell for the first time in seven years, driven by a 15 per cent drop in the purchases of new builds.

“This drop in household purchases reflects ongoing structural changes driven by affordability issues as well as the growing importance of the non-household buyers in the Dublin,” KBC economist Shawn Britton said.

Property buyers

In 2010, households bought 95 per cent of residential properties sold in Dublin. This fell to 72 per cent in 2019.

The non-household sector comprised a very diverse group of property buyers, including private companies, charities and State bodies, the report said.

The most recent figures for 2018 show that public services, education and health sectors made up 35 per cent of non-household transactions, followed by the financial and insurance sector with 24 per cent, and real estate groups with 13 per cent.

It also noted that in 2019 new build homes accounted for a fifth of total purchases, with 52 per cent of these being bought by first-time buyers.

The share of first-time buyers as a proportion of household buyers was 37 per cent, down from 60 per cent in 2010, the report said.

The latest CSO figures show annual headline property price inflation nationally fell to just 0.9 per cent last year. The weaker trend is being led by a softening of prices in Dublin, where prices actually fell by 0.9 per cent last year.