Rental markets, savings and the accumulation of mortgage deposits

Connor Kelly and Fergal McCann ()
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Connor Kelly: Central Bank of Ireland

Quarterly Bulletin Articles, 2016, 56-70

Abstract: The ability of households to accumulate mortgage deposits has featured prominently in the public debate in Ireland in recent years, due in large part to increases in rental prices and house purchase prices which have been ongoing since 2011 in some markets. In this article we use publicly available information on rental and house purchase prices across sixteen geographic regions in Ireland to calculate the required down-payment for a First-Time Buyer (FTB) purchase of a three-bedroom property. We then utilise this down-payment requirement to estimate the number of years of saving required (Time to Save, TTS), given current prices, to purchase a three-bedroom property while renting a two-bedroom property, for a couple with no children. The Irish housing market can be divided into three segments: Dublin, where TTS as of 2016q2 is estimated between 2.5 and 4 years depending on the area; other urban areas with TTS of 1 to 1.5 years; non-Dublin, non-urban areas where TTS is estimated below one year. Finally we show that relative to mid-2014 TTS has increased in Dublin by between one and two years, and under one year in other areas.

Date: 2016-10
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Persistent link: https://EconPapers.repec.org/RePEc:cbi:qtbart:y:2016:m:10:p:56-70

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