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Rental markets, savings and the accumulation of mortgage deposits

Author

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  • Kelly, Connor

    (Central Bank of Ireland)

  • McCann, Fergal

    (Central Bank of Ireland)

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.

Suggested Citation

  • Kelly, Connor & McCann, Fergal, 2016. "Rental markets, savings and the accumulation of mortgage deposits," Quarterly Bulletin Articles, Central Bank of Ireland, pages 56-70, October.
    • Handle: RePEc:cbi:qtbart:y:2016:m:10:p:56-70
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    File URL: https://centralbank.ie/docs/default-source/publications/quarterly-bulletins/qb-archive/2016/QB4-16/quarterly-bulletin-no-4-2016.pdf?sfvrsn=#page=58
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    References listed on IDEAS

    as
    1. Chen, Chien-Liang & Kuan, Chung-Ming & Lin, Chu-Chia, 2007. "Saving and housing of Taiwanese households: New evidence from quantile regression analyses," Journal of Housing Economics, Elsevier, vol. 16(2), pages 102-126, June.
    2. Kinghan, Christina & Lyons, Paul & McCarthy, Yvonne & O'Toole, Conor, 2016. "Macroprudential Measures and Irish Mortgage Lending: Insights from H1 2016," Economic Letters 06/EL/16, Central Bank of Ireland.
    3. Chiuri, Maria Concetta & Jappelli, Tullio, 2003. "Financial market imperfections and home ownership: A comparative study," European Economic Review, Elsevier, vol. 47(5), pages 857-875, October.
    4. Keenan, Enda & Kinghan, Christina & McCarthy, Yvonne & O'Toole, Conor, 2016. "Macroprudential Measures and Irish Mortgage Lending: A Review of Recent Data," Economic Letters 03/EL/16, Central Bank of Ireland.
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    Cited by:

    1. Slaymaker, Rachel & Roantree, Barra & Nolan, Anne & O'Toole, Conor, 2022. "Future trends in housing tenure and the adequacy of retirement income," Research Series, Economic and Social Research Institute (ESRI), number RS143.
    2. McQuinn, Kieran & O’Toole, Conor & Slaymaker, Rachel, 2021. "Credit access, macroprudential rules and policy interventions: Lessons for potential first time buyers," Journal of Policy Modeling, Elsevier, vol. 43(5), pages 944-963.
    3. McCann, Fergal, 2016. "Exploring developments in Ireland's regional rental markets," Economic Letters 13/EL/16, Central Bank of Ireland.

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