Archives 2023

Easing of mortgage borrowing rules for first-time buyers and ongoing Government supports are underpinning prices, says report

Mon Jul 10 2023 – 05:00

Asking prices for Irish homes picked up in the three months to the end of June following three quarter-on-quarter declines in a row, as the market showed signs of stabilising even as interest rates continued to climb, according to MyHome.ie.

The average asking price for a home increased by 4.3 per cent in the second quarter compared with the first three months of 2023, and are now 2.2 per cent higher than the same time last year, at €325,000, according to MyHome, which is part of The Irish Times group.

That compared to a 0.4 per cent quarter-on-quarter drop in the first three months of the year.

[ Does the Government really want house prices to fall? ]

[ Sherry FitzGerald flags thousands of properties lost to rental market ]

Dublin prices rose 3.3 per cent in the period to the end of June and at an annual rate of 0.6 per cent, according to the latest data. Homes outside the capital increased by 4.6 per cent on the quarter and by 3.5 per cent year-on-year.

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The report also points to more realistic pricing by sellers as homes are now being sold for 1.4 per cent over the asking price, on average, down from between 5 and 6 per cent in the middle of last year.

MyHome.ie said prices are being underpinned by an easing of Central Bank borrowing rules for first-time buyers at the start of the year and by ongoing Government supports for people looking to get a foot on the property ladder, as well as a shortage of properties on the market.

This has more than offset the impact of the European Central Bank (ECB) continuing to raise official rates this year. Its main lending rate moved from zero to 2.5 per cent between last July and December, and has since risen to 4 per cent.

“The stabilisation of the market is to be welcomed,” said Joanne Geary, managing director of MyHome.ie. “The Government’s demand-side initiatives and looser Central Bank lending rules appear to be negating the effects of rising interest rates, but we also need to see available properties on MyHome.ie approach the pre-pandemic figure of 20,000 to make a meaningful difference.”

There are currently just 14,000 properties listed for sale on the company’s website.

Conall Mac Coille, chief economist at Davy and author of MyHome.ie’s latest quarterly report, said an overall decline in Irish house prices this year still “cannot be ruled out, given the prospect of further ECB rate hikes”. However, he said an annual drop in values now appears less likely.

“We have left our forecast for asking price inflation unchanged at 1.5 per cent through 2023 but have revised up our forecast for housing completions to 29,500,” he said. Davy previously estimated that completions would fall to 27,500 units this year from almost 30,000 in 2022.

Separately, a new report suggests activity in the Irish construction sector expanded in June for the first time since last September.

The BNB Paribas Real Estate Ireland construction purchasing managers’ index rose to 50.4 in June from 49.4 in May, the company said. A reading above 50 indicates that activity is growing.

John McCartney, head of research at BNP Paribas Real Estate Ireland, said the increase “has been coming for a while, with building firms consistently reporting increased new orders and staffing levels since the start of this year”.

Still, the subsector reading for housing activity was only 48.4, marking a ninth successive month of decline. Mr McCartney said the viability of apartment building amid higher constriction cost and interest rates in recent times “remains challenging” in particular. Still, he expected new home completions to reach 30,000 this year.

Source: The Irish Times 10/07/23

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https://www.gov.ie/en/publication/5568b-housing-for-all-available-supports/

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Property industry says prices will continue to grow as higher interest rates send global markets into reverse

The property industry here insists on Irish exceptionalism. Because of the mismatch between supply and demand, they insist the drag from higher interest rates won’t be enough to trigger a reversal in prices, like the ones we’re seeing in the UK, the United States, Canada, Australia, New Zealand (the list goes on).

In other words, the pressure on prices from the lack of supply is too strong to be trumped by higher mortgage costs (an obvious demand dampener). It’s a big call and maybe the industry is right. We’ll find out in a few months. The latest figures from the Central Statistics Office (CSO) show prices fell on a monthly basis by 0.6 per cent in January, anchoring the annual rate of inflation to 6.1 per cent, down from 7.7 per cent previously.

Year-on-year inflation in Dublin was put at just 4.3 per cent, while prices on a monthly basis in the capital fell by 1.1 per cent. And remember these figures stem from transactions that happened up to three months ago, in advance of the recent spate of mortgage rate hikes from providers here and in advance of the European Central Bank’s planned hikes this month and next. In other words, the dampening effects of higher borrowing costs have still to play out.

Many analysts believe the industry is underestimating the impact of these higher interest rates and that we will soon see a price correction of some sort.

“Some of the forecasts for growth this year seem wildly optimistic,” says Daragh Cassidy, head of communications at price comparison website Bonkers.ie. He suggests the affordability constraint imposed by higher rates will almost definitely send prices into reverse. His rationale is that those borrowing €300,000 over 30 years on a mortgage rate of about 2 per cent – the rate available at the beginning of last year – would have had a monthly repayment of €1,109 a month.

If rates go to say 5 per cent (they’re expected to go to at least 4 per cent) to keep the same monthly repayment of about €1,109, either the amount borrowed or property prices would need to fall by about 30 per cent. That strain on affordability will outweigh the current demand-supply dynamic, he says.

Source: The Irish Times, Thursday 16th March 2023

The level of mortgage drawdowns is now at its highest since the boomtime of the Celtic Tiger era.

Close to 53,000 mortgages were drawn down last year, with a value of more than €14bn, according to the Banking and Payments Federation Ireland (BPFI).

This is the highest number and value of mortgage drawdowns since 2008, the peak of the boom that ended in a property price crash. The number of new mortgages is up 21pc on the previous year.

The number of first-time buyers drawing down a mortgage had now hit levels last seen in 2007, the banking lobby group said in a report on home-lending activity last year.

The BPFI said that, over the past five years, first-time buyers had drawn down close to 108,000 home loans.

A total of 58,276 mortgages to the value of €15.8bn were approved last year, but not all of these ended up being issued, because home buyers could not find a property at a price they could afford.

The surge in the value and number of borrowers comes after a sustained period of double-digit property price growth and close to 30,000 homes being built last year.

In the last three months of 2022 alone, almost 16,000 new mortgages to the value of €4.3bn were drawn down by borrowers.

This is a jump of close to 20pc in the number of mortgages issued, and a rise of 31.5pc in the value of the home loans compared with the last three months of 2021.

First-time buyers are the biggest group getting a housing loan.

They represent almost half (47pc) of the number of drawdowns.

Chief executive of the banking body Brian Hayes said the figures showed what he called a significant number of both drawdowns and approvals, and it was a particularly strong year for first-time buyers.

“Drawdown volumes rose by 21pc to 52,634, while values rose by 34.3pc to almost €14.1bn. These were the highest levels since 2008,” he said.

Mr Hayes added that first-time property purchasers continued to drive the growth.

Around 25,000 of the mortgages drawn down last year were for first-time buyers.

Mr Hayes said the number of first-time buyer mortgages was at its highest level since 2007. It was 26pc higher than in 2008.

By contrast, mover-purchase volumes were 47pc lower than in 2008.

Mr Hayes said: “Looking to the year ahead, we expect housing and mortgage demand to remain strong despite the challenging economic environment.

“Almost 108,000 first-time buyer loans have been drawn down in the past five years and lenders will continue to support customers as they seek to buy or build a home.”

Figures for December show that 3,635 mortgages were approved in that month.

Close to half were for first-time buyers, while movers account for around a fifth of the approvals.

The number of mortgages approved in December fell by 33.1pc in the month when compared with November, and by 5.7pc when last December is compared with the same month in the previous year.

Mortgages approved in December were valued at €996m.

Meanwhile, research undertaken by the Irish League of Credit Unions has found that those considering upgrades to their home are focused on cost savings as well as other factors such as comfort and warmth, and to be more climate-friendly.

The survey of 1,000 people, undertaken by iReach, shows that three-quarters of people who are planning to carry out home energy upgrades are motivated by potential savings to their bills.

 

Source: Irish Independent. 1st February 2023

Bank of Ireland said today it will increase interest rates for a number of mortgage and deposit products.

It said this follows increases of 2.5% in European Central Bank rates since July of last year.

The bank has announced a 0.75% increase for fixed rates on new mortgages – effective from today.

It also announced a 0.5% increase for the fixed rates available to existing mortgage customers.

This includes customers who are coming to the end of their fixed rate period and are seeking to re-fix their mortgage, and tracker rate or variable rate customers who wish to move to a fixed rate.

Customers who already have credit approval and who draw down their mortgage by February 21 can still avail of the previous fixed rates, it added.

The bank had previously increased its fixed rates for new mortgages in November.

Bank of Ireland today also announced a 0.5% increase for “Regular Saver” personal deposit accounts, which will allow customers earn 0.75% on their “Mortgage Saver”, “Goal Saver” and “Child Save” accounts, capped at up to €15,000.

The increase takes effect from Friday January 27.

The bank also said it will launch a new one year term deposit account for personal customers at 0.5%, which is capped at €100,000.

According to recent Central Bank figures, Irish new mortgage rates are the third lowest in the euro area after Malta and France.

Source: RTÉ News, December 15 2022