The housing market in Ireland right now is in a state of chaos. The latest Residential Property Price Index reflects this. It shows an increase from 166.90 points in June 2023 to 167.40 points in July 2023.
Now, RPPI measures the change in average prices paid for residential properties in a given year. It is transaction-based and takes into account only the ones funded by mortgages from the eight leading Mortgage Lending Institutions.
What does this data mean for a home buyer? Does that mean that home prices are going down? How to reduce the cost of buying a house in Ireland? Let’s find out.
Is the housing market in Ireland slowing down?
Even though house prices are increasing in Ireland, the rise is not as steep as before. Dublin is seeing the sharpest fall in the house price. The surrounding cities are less affected by this price fall. The cost of houses is rising steadily but at a much-reduced rate compared to last year and even last month.
Why does the RPPI show fewer transactions despite this fall in house prices?
The main reason for this is the hike in mortgage rates that elbows potential buyers out of the housing market. As a result, more homes are available for sale, but few buyers. It shows up as fewer transactions in RPPI.
However, RPPI is not all-inclusive. It does not include transactions from institutions other than the leading mortgage lenders. It also doesn’t comprise the transactions not funded by mortgages. Therefore, it may give a lop-sided picture of the housing market.
What should home buyers do?
Julie Delancey of the Walsh Group, one of the leading mortgage brokers in Ireland, says that 2023 is the best time for first-time home buyers to invest in residential property. This is because the Central Bank of Ireland raised the mortgage qualifying from 3.5 times the annual income to 4 times the income. It means you can qualify for a higher amount that compensates for the rise in mortgage rates. This relaxation in the Macroprudential Mortgage Measures allows home buyers to compete in the housing market and purchase their dream home.
Raising the qualifying mortgage limit does instill a sense of confidence in home buyers. However, it’s not enough to bring down the cost of buying a house in Ireland.
Understanding the different costs of buying a house in Ireland
Before we discuss how to buy a home for a reduced price, it’s crucial to understand the hidden costs of buying a house in Ireland. It will help you calculate the total cost of buying a house in Ireland.
These costs vary from the regular mortgage rate, deposit, and lender fee. The minimum deposit for a first-time home buyer is 10% of the home value. The closing costs of a home consist of several small or big charges that may send even the most seasoned home buyers into a tizzy. Therefore, it’s good to learn about the possible cost of buying a house in Ireland.
- Legal/Solicitor Fee
It covers the legal cost of a solicitor when they transfer the property in your name. A legal fee may be flat upfront, approximately €900 plus taxes, or 1% of the purchase price. Talk to your solicitor beforehand regarding their legal charges, with tax.
- Valuation fee
A lender may charge between €150-300 for the property valuation during mortgage processing. Valuation is a crucial step while purchasing a mortgage, and it determines all other parameters like LTV (loan-to-value ratio).
- Stamp Duty
If the property value does not exceed €1 million, stamp duty is 1%. If the house costs more than €1 million, stamp duty increases to 2% of the home value.
- Land Registry Fee
It’s a sliding scale charge that changes with an associated factor, in this case, the property value. The land registry fee for a home price of €50,000 is €400, and the rest of the slabs are as follows:
| Property Value
€51,000-€200,000 €201,000-€400,000 > €400,000 |
Land Registry Fee
€600 €700 €800 |
There is an additional charge of €40 for a certified title plan copy and a €175 fee on all mortgages.
- Commissioner of Oath Fee & Search Fee
It’s around €44 and €150 respectively.
- Property Tax
Apart from the purchase price of the property, the location of the property largely determines the applicable property tax. You can check for the property tax in your area from The Office of the Revenue Commissioners’ website.
- Mortgage Insurance
It’s separate from home insurance. Mortgage insurance is mandatory if:
- The down payment falls below the desired number.
- Any illness or health issue foresees the buyer dying while the mortgage stands unpaid.
What are the different ways to reduce the cost of buying a house in Ireland?
- Negotiate the purchase price. If you’re not a good negotiator, let your mortgage broker handle this.
- Shop around for mortgage rates. You may think that a point increase or decrease doesn’t amount to much, but if you crunch the numbers, you’ll see that it indeed does.
- Find a lender that allows you to make a lump sum deposit. It reduces your repayment liabilities and also lets you be mortgage-free sooner.
- Use the Help to Buy Scheme for first-time home buyers. The deadline for the Enhanced Help to Buy Scheme is 31st December 2024. Check out its qualifying criteria, and if you fit the bill, just go ahead and make the claim. The refunds given under this scheme are of great help.
- Compare closing costs and save where you can. If the flat rates are lower than the percentage-wise cost, opt for the former.
Wrapping Up:
Lowering the cost of buying a house in Ireland is becoming challenging. With rising home prices and increasing mortgage rates, the opportunity window for potential buyers is narrowing. Therefore, even a minor concession here and there makes a huge difference. You need an experienced and competent mortgage specialist who understands your home needs and provides personalised advice.