Behind the mortgage draw down figures
WHAT can we deduce from the mortgage draw down figures released this week by the Banking and Payments Federation Ireland? The figures are the first opportunity to observe trends since the introduction of the help-tobuy scheme and removal of the 80pc loan-tovalue (LTV) requirement for first-time buyers (FTBs) in late 2016.
The headline figure is that lending to FTBs is up 41pc year on year. It is a stark reality, whether you agree with the Central Bank’s approach, the onerous mortgage deposit rules acted as real impediment throughout 2016, preventing many FTBs from purchasing. Based on these figures, it seems that the 3.5 times annual salary requirement was less of a deterrent than the initial 20pc deposit requirement. The Central Bank continues to maintain that these measures served their purpose in stemming house price increases, primarily by temporarily reducing demand.
What do these new figures indicate for the rest of 2017? It’s clear that the FTB is very much back in the market and once prices don’t exceed the industry forecast of 5-10pc increases for this year, there will continue to be an improved demand for 2017. Currently in Ireland, one in every two purchasers is an FTB. Increasing the supply and delivery of new homes, primarily in the starter sector, is the only game in town and must be the core focus of all Government initiatives for 2017. The commuter counties are again becoming the preferred places to live, mainly because of their relative affordability.
But the trader-upper is also more active in the market, a fact that can’t be attributed to the Government intervention. The 80pc LTV rule is still in place, yet figures are up 38.6pc on 2016. The reasons include an improvement in consumer confidence, better access to finance, and increased equity as property values rise which has lifted more people from the negative equity trap.
The most negative aspect seen in the figures is the paltry number of investors active in the market. Investor share of the market stood at 19.3pc of overall mortgages over the last 12 months, a figure that is wholly inadequate. In their Rebuilding Ireland project, the Government committed to the construction of 26,000 housing units over the next five years as opposed to the headline figure of 47,000 units. This figure included 21,000 refurbished houses and units purchased through housing associations.
The difference leaves a large space to be filled by both professional and amateur investors. There are 100,000 people on the social housing waiting lists, a figure that will only continue to rise over the coming years, especially in the main urban areas as a result of continued urbanisation and a predicted yearly increase of population by 40,000.