The Irish property market is increasingly being dominated by a new dynamic—parental gifts of up to €100,000 playing a pivotal role in determining who can buy a home. Often referred to as ‘The Bank of Mum and Dad’, these contributions are tipping the scales in favour of those whose parents can afford to help, further inflating housing prices and fuelling inequality. For first-time buyers and young professionals, navigating this reality can feel like an uphill battle.
This blog will explore how parental financial assistance is reshaping the Irish housing market, its effects on both buyers and sellers, and strategies you can adopt to improve your home-buying prospects in this challenging landscape.
The Rise of the ‘Bank of Mum and Dad’
Parental financial support for housing isn’t a new concept, but in recent years it has grown almost indispensable for many buyers. Families are injecting more than half a billion euros annually into the Irish property market, according to industry experts. From Dublin to Cork, receiving a gift or loan from parents has become the norm rather than the exception.
How Widespread is the Trend?
A study by Dowling Financial indicates that seven out of ten buyers in Dublin alone are receiving financial help from family. Typical gifts average around €50,000 – €60,000, but there are instances where parents contribute over €100,000. With housing stock already limited, this surge of “free money” is creating a highly competitive – and unequal – playing field for prospective homeowners.
Martina Hennessy, CEO of mortgage brokerage Doddl.ie, adds that nearly 85% of gifted amounts are under €100,000. However, the remaining 15% receive gifts averaging a staggering €198,000, enabling wealthier buyers to secure larger, more desirable properties with ease.
The Impact of Parental Gifts on the Housing Market
The generosity of the Bank of Mum and Dad comes with significant implications for the property market and Irish society.
1. Inflated Housing Prices
When buyers armed with parental gifts bid against those without such advantages, it drives prices higher and higher. Sellers obviously favour offers bolstered by such financial backing, leaving buyers without family support struggling to compete. For instance, the median house price in Dublin has surged to €470,000, up from €299,500 just two years prior.
2. Reduced Loan-to-Value Ratios
Many buyers now enter the market with larger down payments thanks to gifts, which lowers their loan-to-value (LTV) ratios. The average LTV for first-time buyers is now less than 80%, while for second-time buyers, it’s just 66%. This means rather than reducing borrowing, gifted buyers use family funds to secure bigger or better homes, further inflating demand at higher price points.
3. Social Divide and Inequality
Stephen Kinsella, economist and chair of the University of Limerick’s new housing economics centre, explains that this trend exacerbates inequality. Those with financially secure families climb the property ladder with relative ease, while others face insurmountable barriers. The result? Increased segregation between the “haves” and “have-nots.”
Navigating the Market as a First-Time Buyer
Feeling discouraged? It’s understandable, but there are steps you can take to improve your chances of buying a home.
1. Maximise Government Schemes
Take advantage of schemes such as:
- Help to Buy (HTB): Provides a tax rebate of up to €30,000 for first-time buyers purchasing newly built homes.
- First Home Scheme: Offers an equity loan to help pay for a property.
These incentives might not completely close the affordability gap, but they can bridge the gap for deposits.
2. Save Strategically
If parental assistance isn’t an option, focus on long-term savings. Set aside a fixed percentage of your salary each month in a high-yield savings account or investment fund designed for homebuyers.
3. Be Willing to Consider Alternatives
You might not be able to buy in your preferred neighbourhood or afford a three-bedroom detached home right away. Start with a modest fixer-upper or even a more affordable apartment in a neighbouring area.
4. Engage Professional Support
Navigating the property market is complicated. This is where a property solicitor experienced in conveyancing, like HOMS Assist, can be invaluable. They will guide you through the legal and logistical complexities of buying your first home while avoiding common pitfalls.
You can learn about property services provided by HOMS Assist here.
The Emotional Impact on Parents
The financial strain isn’t just felt by buyers. Many parents feel extreme pressure to help their children onto the property ladder, often at the expense of their own financial security.
Brian Dempsey, a property expert, notes that parents frequently give more than they initially planned. Some commit to gifting €20,000 but end up parting with €50,000 or more to meet rising property demands. This can deplete retirement savings or create financial stress.
Additionally, complications may arise when gifting to couples. Differing gift sizes from each set of parents can lead to tension, especially if a couple splits up and questions over entitlement arise.
Closing the Inequality Gap in the Irish Housing Market
While parental gifts are making waves, they also underline deeper systemic issues within the housing market. Increased housing supply, stricter bidding regulations, and expanded government supports are essential to balance the scales for first-time buyers. Initiatives to tackle inequality in property ownership must be prioritised.
For now, the property market may remain tilted in favour of the privileged, but armed with the right strategies, you can improve your odds of homeownership.
Facing the Future Together
At HOMS Assist, we understand how overwhelming it can be to enter the property market for the first time. That’s why our expert team of property solicitors are here to guide you through the process with empathy and expertise.
Whether you’re buying your first home, remortgaging, or transferring property, we’re here to help you every step of the way. If you’re ready to take the first step toward homeownership, get in touch with us or explore our conveyancing services here.
