SCSI Publishes RED C Poll on buyers’ reactions to Central Bank proposals

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Key Findings;

 

7 out of 10 believe that new 20% deposit rules would be too restrictive

80% believe the new rules would favour better off or cash buyers

Only 15% claim they would be able to afford it

Over half claim they would likely source some of the 20% through other lending

Tuesday 9th December 2014. Seven out of ten people believe that new 20% deposit rules for house buyers would be too restrictive for them personally if they were to buy a property according to a new survey.

The Central Bank is expected to introduce the new deposit rules for home buyers early in the New Year, although the Government in a submission to the Bank is reported to have described them as “unduly restrictive” and asked it to introduce a transition period for the changes.

Eighty per cent of people agree that the new rules will favour the better off or cash buyers according to the survey which was carried out by RED C on behalf of the Society of Chartered Surveyors Ireland.

Over half of the 1,000 people surveyed said they would be likely to source some of the 20% deposit through other lending, a finding which the SCSI described as extremely worrying.

Simon Stokes, the Chair of the Residential Agency Group of the SCSI said the findings showed in stark terms the limiting effect the 20% rule would have on the property market.

“The survey indicates that half of the population would be able to source a 5% deposit while 38% would be able to afford a 10% deposit. However only 15% say they would be able to source a 20% deposit.

Therefore it’s clear that while sourcing a 10% deposit – the normal deposit sought by banks – is already a real challenge for most people, sourcing a 20% deposit is likely to be very difficult for most prospective buyers. This would be particularly true of Dublin and some other urban areas where prices and rents have risen rapidly over the last two years. We now have a multi-tiered property market and a one size fits all approach won’t support the development of a more sustainable property market over the long term” Mr Stokes said.

As part of the new rules prospective buyers will only be able to borrow 3.5 times their income. According to the survey only when suggested with 4.5 times their income was there an increase in likelihood to achieve a mortgage.

Mr Stokes said that while the Society of Chartered Surveyors Ireland (SCSI) agreed with the principle of the new rules, the proposed limits were likely to put additional pressure on prospective buyers in trying to raise a deposit.

“The fact that 1 in 2 people polled by RED C for the SCSI said they would source the 20% deposit from unsecured lending sources including credit unions or through bank loans is a real concern as it could result in households taking on more credit risk – which is the opposite of what the Central Bank rules are intended to do”.

The SCSI said that the deposit limits should be between 10 and 15%, should be introduced on a phased basis in and that there should be some flexibility in relation to income level limits, particularly if the prospective buyers have a good track record of paying rent and credit history.

“We now need certainty around what the proposed limits are likely to be and when they are likely to be introduced to avoid further uncertainty in a property market that is already seeing price inflation due to low stock levels” concluded Mr Stokes.

The survey was based on phone interviews with 1,005 people using set quotas and weighting final data to ensure the age, gender, class, region and phone type of those interviewed are representative of the total Irish population over 18. The interviews were carried out between the 17th and 19th of November 2014.

To view the Central Bank Macro-Prudential Policy Proposals Submission, please click here.