Strong uplift from low base in levels of mortgage approvals and drawdowns
Davy Chief Economist says:
Ireland needs a Help-to-Build, not Help-to-Buy scheme
Government policy should be focused on alleviating cost and supply constraints in construction, not loosening credit standards to first-time-buyers.
The IBF Housing Market Monitor Q1 2014, published today by the Irish Banking Federation (IBF), shows a number of recovery trends in the housing market including strong growth from a low base in both the level of mortgage approvals and drawdowns.
However, in his commentary accompanying the IBF Housing Market Monitor, Davy Chief Economist, Conall Mac Coille, characterises the market as “an illiquid housing market starved of new supply…..with Dublin’s housing market in the process of going from lukewarm to scalding hot”.
Drawing on various published data on the residential housing market to provide a composite analysis on where the market may be going, the Q1 2014 IBF Housing Market Monitor shows the following year-on-year trends:
29.3% increase in the level of mortgage approvals
65.6% increase in the level of drawdowns
23.6% increase in the number of dwellings completed
4.5% increase in the number of properties listed for sale
In his commentary Conall Mac Coille writes that, while housing market transactions are up in the first quarter of 2014, they are still at exceptionally low levels. And this situation could persist given that first-time buyers (FTBs) in particular are competing with cash buyers and investors and are increasingly failing to secure properties despite having approved mortgages.
“In this environment policy should be focused on alleviating supply constraints on the construction sector, while resisting efforts to loosen credit standards on mortgage lending to FTBs.”
But for now Mac Coille sees little sign of any supply response from the construction sector, prompting him to state: “While the renewed focus from the Government’s Construction 2020 strategy is welcome, the document is short on concrete proposals to address the key issues, namely cost pressures and supply constraints in the sector.”
And the Davy Chief Economist is upbeat on the availability of mortgage credit going forward:
“As existing mortgaged households continue to pay down mortgage debt built up during the bubble years, there will be ample funds within the banking sector to meet credit demand from FTBs. So efforts to loosen credit standards on lending to FTBs should be resisted. In any case, the Central Bank of Ireland is likely to ensure affordability is a credible anchor on Irish mortgage lending this time around, mindful of current exceptionally low levels of interest rates. In short, Ireland needs a Help to Build scheme, not Help to Buy.”
The IBF Housing Market Monitor is published quarterly. View the IBF Housing Market Monitor Q1 2014 on the IBF website.
Note: The Irish Banking Federation (IBF) is the principal voice of the banking and financial services sector in Ireland, representing over 70 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.
Further Information: Jillian Heffernan, IBF Marketing Communications Manager,
Ph: 01 474 8835 / 087 9016880