EBS DKM Index Shows First Time Buyer Housing Affordability Has Improved
31 Jul 2015
Posted in: Mortgages
On Thursday 28th May through the EBS DKM (Economic Consultants) Affordability Index, it was shown that the amount of disposable income needed by the average first time buyer (FTB) working couple has fallen to 19.5% in April 2015. This is lower than 20.6% last October because a drop in the prices of houses at the beginning of this year. This marks a dramatic improvement from the situation in 2006 where the average FTB couple needed 26.4% of their net income to fund their mortgage, at the peak of property prices.
The findings of this index show that there’s a big difference between the property markets in Dublin versus the rest of the country. In Dublin, a FTB working couple currently requires 22.6% of earnings to fund their mortgage, down from 24.3% in October 2014. A further improvement in Dublin affordability is forecast to 22.1% in June.
The index also ranks housing affordability by county. Apart from Dublin, Kildare and Wicklow are the most expensive counties and a FTB couple requires 21.6% and 21.1% of their respective net incomes in order to fund their mortgage repayments. For Galway and Cork, the figures are 13.4% and 14.4% respectively. The most affordable county to buy a home in Ireland is Longford with a couple only needing 6.9% of their net income to fund their mortgage.
The affordability of a mortgage is a significant issue that faces single people who are faced with the prospect of paying 38.9% of their net income to fund their mortgage based on average earnings of €36,000.
The benefit of the EBS DKM Affordability Index is that it captures monthly changes in house prices and the other determinants of affordability. With the volatile changes in house prices in the opening months of 2015, the positive and negative swings in affordability can be clearly seen.
EBS – DKM Housing Affordability Index
The proportion of net income required by a First Time Buyer working couple to fund mortgage repayments on the ‘average’ FTB property.
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