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First published 14.40
THE IRISH HOUSING market is going from luke-warm to scalding hot in record time, with shortages of supply now a major cause for concern.
That’s the warning issued today by Davy chief economist Conall Mac Coille in the Irish Banking Federation’s first quarterly housing market monitor of the year.
The report said that with house prices in Dublin forecast to rise 20 per cent in the next year, first time buyers are in danger of getting in over their heads in pursuit of property.
The danger (is) that first-time buyers will desperately stretch their finances unsustainably, competing for a small pool of available property.
The Government should focus its policy efforts on alleviating supply constraints – that is, building more houses and freeing up some of the existing stock – rather than loosening credit standards by allowing buyers access to bigger mortgages.
A new plan to allow first-time buyers to borrow up to 95 per cent of the value of a new home, backed by the Government, was leaked in the run up to last week’s elections.
Warning
However, the report warns that such a policy is likely lead to higher levels of indebtedness as prices for a limited supply of houses are driven to nosebleed levels by competition.
Mac Coille cites the experience of the UK, where a help-to-buy scheme was announced last year to allow buyers more credit when purchasing homes, and loan-to-value rates have climbed as high as they were during the boom.
First-time-buyers are struggling to compete against cash buyers, who made up 50 per cent of transactions in the early part of this year.
Investors are being “enticed” back into the market by capital gains tax exemptions, again competing against FTBs, the report finds.
While there has been a 24 per cent rise in house completions in the first quarter of the year, the total of 2,090 new houses is still some way short of the 20,000 annual completions necessary to keep a lid on demand, the report finds.
While the Government’s Construction 2020 strategy is “welcome”, Mac Coille argues that the document is “short on concrete proposals to address the key issues, namely cost pressures and supply constraints in the sector.”
He warns that it must be a priority to resist any efforts to loosen credit standards on lending to first time buyers.
Price rise
Separately, new figures from the Central Statistics Office found that house prices climbed by 8.5 per cent in the year to April.
This compares to an increase of 7.8 per cent in March.
In Dublin, prices climbed by 17.8 per cent compared to a year ago, with a 3.1 per cent increase during April alone. Apartment prices climbed by 17.5 per cent in the capital.
Despite the recent increases in Dublin, prices are still 48.5 per cent lower than the peak of the housing market in 2007, with apartment prices lower still at 54.2 per cent.
In the rest of the country, prices are 47.4 per cent lower than their highest level.
Updated 14.51
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and around we go again!!!!
Except we know how it will end.
A stockjockey outfit
that was basically a bit that fell off Bank of Ireland calls the “new boom”.
Roll up suckers!!!
So anyone buying now is a sucker, but those who did the same during the boom should get write offs, you know the 200,000 in arrears that you so often defend?
Stop it…Stop it now.
The ones in the boom got trackers, so their repayments are cheaper…
Grand so. Its great that we control our own interest rates and they’re never going to rise. Oh, wait…. we don’t control them do we?
Does NOBODY ever feckin learn….. Before you know it FF will be in power….. Oh, what we’re the results from last weeks election?!
Not all of us had that great snippet of advise and are now paying for it !
@Patlyndo
“So anyone buying now is a sucker, but those who did the same during the boom should get write offs, you know the 200,000 in arrears that you so often defend?”
Did I say that Patlyndo?
No, the ending won’t be the same. THIS time is different! THIS time is based on sound economic principles! Ohh wait, we heard this before!!!
These Bankers could give a damn about the man in the street. As long as they can make a Buck!! Same as the Government, as long as they can squeeze for every cent we have and they can line their own pockets. Except, this time around we don’t have any money or jobs. So Bankers & the government, stop trying to talk yourself into a housing boom
7 or 8 times the average wage at moment for a decent gaff and it’s going up 20%. Jesus H Christ , do we ever learn lessons in this country.
Average industrial wage is €43,000. A 3 bed semi in Dublin suburbs can be bought for 5 times this figure therefore house prices are still very affordable.
Water amd house taxes aka banker taxes and people still buying over priced and poorly constructed houses
people stop watching RTE.
Isn’t that average wage gross? So net its approx 31k. It’s about affordability and that’s based on disposable income.
Yeh 5 times your wage was what got us in trouble!
Like what’s take home a month on 43k wage? Can’t be much over 2k nd over half that goes on just a mortgage… It’s crazy trying to scrape by! You get no real happy comfort by going out to work in this country in an average job always worrying to make bills etc, childcare etc…
New mortgage lending to FTBs is now at similar loan-to-income multiples to those seen during the height of the boom in 2007.
WTF ?
Sorry, I’m a bit confused: is this article from the archives or what…?
Capital gains tax exemptions for investors. 50% of purchasers are cash buyers.
Sounds like a money launderers dream.
Yup 90% mortgages followed by 100% on a 35 year scam, Insanity the sequel shot on location in Ireland, directed by the Leprechaun Inda Kinney of ‘I write my own speeches’ fame.
No sympathy for people who are buying over priced sh*t. The obsession at owning a house no matter the cost to standard of living, disposable income and quality of life is perverse.
I do agree with you that owning your own house is overrated but at the same time renting is severely impacting on people’s standard of living. Me and my two housemates worked out that if we bought a house for 300k we’d be paying less a month than we are currently paying in rent. How does that make any sense
Houses in my area are up €110000 in 2 years . Well asking price anyway
Good news for people in negative equity.
Yes, they get to finally sell their houses, trade up. They just have to try not to laugh in the faces of the poor sods, who they sell to.
What do you mean “trade-up”? If they trade up then the house they want to buy has also gone up in price too.
People in negative equity will only benefit if they are trading down (and the house price of that house will have gone up again) or getting rid of a second house.
How do you figure that Bobby?
It’s not bubbles I hate: it’s missing the feckers I hate !!
Sounds familiar!
The true value of housing in Ireland won’t be know till MAMA unloads what it is holding.
Might flip my Dublin property so and buy a fully finished estate down the country, probably in Cavan. I’ll change my status to the Breffni Baron and become a superhero!
Loan-to-value ratio is the wrong metric. Loan-to-cost ratio is the correct metric.
Mortar is sand, cement and water …. no platinum in it.
Banks Max Your Debt and Political Parties Max your Tax by passing Pro-Lobby Laws not Pro-Citizen.
Irish need to learn how to vote.
looks like most of the posters on here today don’t own property. Ha ha!!
Yes indeed ciaran, ignore the actual discussion, of course we’re mad jealous of you, by the way, how much do you have to pay along with your rental incomega to pay your mortgage every month?
The nice people in the bank would like to thank you, you’re their role model and they’re looking to recruit?more exactly lIke you……
Here we go again Jesus will anyone not learn !
We should save all these ‘good news’ property articles for the next crash. They will make for one great ‘told you so’ when the whinging starts over negative equity and the ‘banks forced me to borrow 7 times my salary.’
I just went to an open house today and — unless the auctioneer was totally feeding me a line – he had three offers already on the house. In driving around the town where we want to buy a house, the ones that are advertised on Daft, etc. have “sale agreed” signs on them. There’s not a lot of great housing in the area where we live…so people are throwing money around they (maybe) don’t have to get something that’s decent.
Can’t believe we’re in this cycle again…..
I well believe it – decent property is as rare as hens teeth so when it comes on the market you have the same people interested, add the hype and spin and you get a bidding war and people are overpaying for property yet again.
It will all end in tears yet again.
have your say