Pop­u­la­tion growth to boost hous­ing mar­kets in UK, Hol­land and Ire­land

Financial Mirror (Cyprus) - - FRONT PAGE -

In the UK, the Nether­lands and Ire­land, pop­u­la­tion growth will sup­port hous­ing de­mand and prop­erty prices, Moody’s In­vestors Ser­vice said in a spe­cial re­port.

“In our view, the ris­ing pop­u­la­tion in th­ese coun­tries com­bined with a hous­ing sup­ply short­age and ro­bust eco­nomic growth will sup­port house prices and there­fore help re­duce losses on res­i­den­tial mort­gage loans,” sais Gaby Trinkaus, an an­a­lyst at Moody’s.

“Ad­di­tion­ally, the size of the 25-35 age bracket, which forms the core of the first­time buyer seg­ment, is ex­pected to re­main largely sta­ble in the UK and the Nether­lands un­til 2020. While this de­mo­graphic is pro­jected to shrink in Ire­land based on Euro­stat data, the eco­nomic re­cov­ery and im­proved em­ploy­ment rates will sup­port the mar­ket,” ob­served Trinkaus.

The rat­ing agency’s re­search com­pares the im­pact of pop­u­la­tion fore­casts for the UK, Dutch, Span­ish, Ital­ian and Ir­ish res­i­den­tial mort­gage-backed se­cu­ri­ties (RMBS) mar­kets, Euro­stat.

The UK is pro­jected to ex­pe­ri­ence pop­u­la­tion growth of 3.2% un­til 2020, with 1.5% growth in the Nether­lands, which will sup­port hous­ing mar­kets in the con­text of a strong eco­nomic en­vi­ron­ment.

While Ire­land’s pop­u­la­tion growth is set to slow down to 0.2% over the next five years, Moody’s con­sid­ers that the strong eco­nomic re­cov­ery will draw re­cent ex­pa­tri­ates back and even­tu­ally sup­port a rise in pop­u­la­tion, sup­port­ing hous­ing de­mand. Moody’s says Spain’s eco­nomic re­cov­ery could coun­ter­act the ef­fect of a shrink­ing pop­u­la­tion (based on a -1.3% de­cline un­til 2020), re­duc­ing down­ward pres­sure on house prices. The econ­omy’s re­cov­ery will de­ter­mine how long house prices will stay flat and how long it will take to al­le­vi­ate the stock of un­sold new houses.

“A fall of the 25-35 seg­ment in Ire­land and Spain may weaken hous­ing de­mand in and of it­self. How­ever, this seg­ment will

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from ben­e­fit the most from im­proved in­come prospects in fu­ture and in­creased mort­gage lend­ing ac­tiv­ity, which could lighten the pres­sure on house prices and sub­se­quently RMBS col­lat­eral per­for­mance,” said Greg Davies, an As­sis­tant Vice Pres­i­dent at Moody’s.

“Bet­ter em­ploy­ment and in­come prospects in Spain and Ire­land will im­prove first-time buy­ers’ af­ford­abil­ity, while house prices are still low and banks are in­creas­ing their fo­cus on mort­gage lend­ing,” ob­served Davies.

Italy’s 1.7% pro­jected pop­u­la­tion in­crease (2015 to 2020) is markedly slower than the 3.0% rise over the past five years (2010 and 2015). A slower pop­u­la­tion in­crease and muted eco­nomic growth will weigh on hous­ing de­mand. Th­ese fac­tors, com­bined with Moody’s as­sess­ment of an over­sup­plied hous­ing mar­ket, in­di­cate that house prices will re­main steady in Italy, un­der­pin­ning sta­ble loss sever­i­ties and RMBS col­lat­eral per­for­mance.

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