Property Wire 05/01/2016

Figures from the Central Statistics Office shows that in the year to November prices at a national level increased by 6.5%. This compares with an increase of 7.6% in October and an increase of 16.2% recorded in the 12 months to November 2014.

The data also show that prices actually fell on a national level month on month in November by 0.5%. This compares with an increase of 1.6% recorded in October and an increase of 0.5% recorded in November of last year.

In Dublin residential property prices decreased by 1.3% in November and were 3.3% higher than a year ago. Dublin house prices decreased by 1.2% in the month and were 3.1% higher compared to a year earlier.

Dublin apartment prices were 6.1% higher when compared with the same month of 2014. However, it should be noted that the sub-indices for apartments are based on low volumes of observed transactions and consequently suffer from greater volatility than other series.

The price of residential properties in the rest of Ireland rose by 0.2% in November compared with a rise of 1.2% in November of last year. Prices were 9.6% higher than in November 2014.

House prices in Dublin are now 33.8% lower than at their highest level in early 2007 while apartments in Dublin are 41% lower than they were in February 2007. Prices in Dublin are 35.8% lower than at their highest level in February 2007.

The price of residential properties in the rest of Ireland is 36.2% lower than their highest level in September 2007. Overall, the national index is 33.8% lower than its highest level in 2007.

However, experts think that prices will rise by around 6% in 2016 and point out that the decrease in prices in Dublin has more to do with new Central Bank rules on lending than a downturn in the real estate market.

‘Given that the Central Bank’s rules on high loan to value mortgages apply only to first time buyers in homes over €220,000, their impact has been felt most sharply in the capital where affordability is most stretched,’ said Conall MacCoille, an analyst with Davy Research.

‘The recovery outside the capital began almost one year later, so that affordability is less stretched, and there is probably more room for catch-up,’ he explained, adding that the firm expects property prices to rise by some 7% through 2016 as wages grow and tax cuts take hold.

Goodbody economist Juliet Tennant also believes that the Central Bank’s new lending restrictions, which limit banks from lending any more than 80% of a mortgage except in the case of first time buyers, have had an effect.

‘Macro prudential rules are continuing to have a dampening impact on the Irish housing market. However, the expiration of the Capital Gains Tax waiver at the end of 2014 also makes annual comparisons difficult. It will take some time for these distortions to wash through and it is likely that price growth will slow further before picking up again,’ she added.

My Home.ie 12/01/2016

Another year of robust house price growth is likely in 2016 with prices expected to rise by up to 5% according to the latest house price survey from MyHome.ie in association with Davy. While the latest data showed that the slowdown in house price inflation continued towards the end of 2015, the report predicts that rising incomes and ongoing economic recovery will lead to a single-digit gain in prices for the next 12 months. Asking prices on new instructions – which provide the best leading indicator for actual transaction prices – fell by 0.8% nationally in Q4 but were up 7.4% on the year. In Dublin asking prices fell for a second consecutive quarter, by 0.1% and were up 2.6% on the year. The report’s findings indicate that the house price inflation in 2016 will continue to be stronger outside the capital. For example prices in Meath were up 16%, in Galway it was 12%, while they were up 10% in Kildare, Clare and Louth and 8% in Cork and Laois. The mix adjusted asking price for new sales nationally is €215,100 while the corresponding figure for Dublin is €312,400. For the entire stock of properties listed for sale on the website the national mix adjusted figure remained unchanged at €205K while in Dublin the figure is €285,900. The author of the report, Conall MacCoille, Chief Economist at Davy, welcomed the fact that house price inflation had slowed from double digit levels – largely driven by an unsustainable pace of increase in Dublin prices – and that Ireland’s housing market had ‘normalised’ in the final quarter of 2015. “The Central Bank’s mortgage lending rules appear to have prevented home-buyers from taking out ever-higher leveraged mortgage loans, thus limiting the pace of house price inflation.” “Housing market activity was artificially inflated towards the end of both 2013 and 2014 by expiring mortgage interest reliefs, capital gains tax exemptions and a rush of transactions and mortgage approvals ahead of the Central Bank’s lending rules. In 2015 the usual summer peak for activity re-asserted itself with the result that both housing transactions and movements in asking prices in Q4 were always likely to be relatively modest.” Looking to the future MacCoille said he expected the growing divergence between the pace of price rises in Dublin and the rest of the country to continue. “The median asking price for a three bed semi in Dublin is €275K which is six times the average income of €45,600. In contrast, house price to income multiples in many other areas are still in the range of 3 – 4, so looking forward there is probably more room for prices to catch up outside Dublin”. “Having squeezed credit availability late last year, Irish banks will now have a fresh allocation of high LTV mortgage loans to given to customers, which could help give impetus to the housing market in early 2016.” “More generally, Ireland’s economic recovery has continued at a rapid pace and we expect to revise up our forecasts for GDP growth in 2016 towards 5%, up from 4% currently. So although affordability is stretched in some areas and households will be constrained from increasing their leverage by the Central Bank rules, rising incomes will help drive house prices upwards.” “Income growth is now accelerating, driven by public and private sector wage increases, tax cuts and the introduction of a higher minimum wage. The lack of supply in many urban areas also remains acute. So a single-digit gain in Irish house prices, close to 5% seems likely through 2016,” MacCoille concluded. Angela Keegan Managing Director of MyHome.ie said that while the low level of new house building was a concern it was encouraging to see the recovery in property prices spread to many parts of the country. “The Department of the Environment, Community and Local Government indicated that there were just 10,000 housing completions in the year to October with the final end-2015 figure set to be close to 12,000. This is well short of the 25,000 units per annum which are needed to meet demographic demand. At the moment the level of house building remains close to its weakest level since the 1970’s and this needs to be addressed as a matter of urgency.” “While it is encouraging to see property prices recovering around the country the low level of transactions and the exceptionally illiquid nature of the market here remains a concern The transactions figure for 2015 – at the time of writing – is over 45,000. This represents just 2.5% of the housing stock of 2m homes and means the average property is being sold just once every 44 years. In the UK the corresponding figure is 23 years, so we need to see the level of transactions increase to around the 80,000 or 4% level,” Keegan concluded. Full report available at www.myhome.ie/reports

10/11/2015 – Breaking News.ie

The OECD is warning that a strong rise in Ireland’s property prices recently may boost construction activity in the short-term, but risks a return to another property bubble.

In its latest global economic assessment, the international think-tank says the Irish economy will grow by 5.6% this year.

“Strong property price rises may boost construction activity further in the short run but also risk sparking another spiral of higher property prices and credit,” the report stated.

It also gave a broad backing to the €1.5bn stimulus package in the Budget, which it described as “reasonable as long as the public finances continue to progress towards the medium-term objective of eliminating the structural deficit.”

It also said that the Budget should help get more people back into work “as those remaining out of the labour market still account for a large share of the working-age population”.

But it has found “significant” risks remain, saying high debt levels leave the economy vulnerable.

“Debt repayment, however, is likely to keep the momentum of household consumption in check. Inflation will gradually rise on the back of the increasingly tight labour market,” it stated.

18/11/2015 – Daft Q3 2015 Report

Rents rose by an average of 3.2% between June and September, the largest three-month increase since early 2007

28/04/2015 – Breaking News.ie

Limerick Leader wrote 23/02/2015

MORE than €10.7m changed hands in house sales across the city and county last month, with 75 properties sold.

The latest figures from the Property Price Register, a national database of all house sales, show a buoyant January, with sales made above figures for the previous five years, as record began in 2010.

In all, 1,584 houses sold in Limerick last year, with the county witnessing the biggest increase in sales in the country.

No property in Limerick sold for over the half-million mark last month, however there was an increase in the number of properties selling in the €300,000 to €400,000 bracket.

No 2 The Cloisters on the North Circular Road sold for €400,000; 12 Carrinderry, Rivers, Castletroy, exchanged at €382,000; Avoca in Newtown, Castletroy, went for €380,000, and Annville in Ballyclough fetched €315,000.

By comparison, 64 houses sold in Kerry last month, with 51 in Tipperary, 59 in Clare, 107 in Galway, 236 in Cork, while 917 changed hands in Dublin, 18 of which broke the €1m mark.

According to the property website Daft.ie, there are currently some 2,030 properties available to buy in Limerick, with 1,300 priced up to €200,000, a further 257 are priced up the €300,000, 60 are valued at over €400,000, and just four are priced over €1m, and have remained on the market for a long time.

Meanwhile, in the rental market, rents in the city have risen by 6.2% in the last year and the average rent is now €702, according to the latest rental report from Daft.ie.

In County Limerick, rents were on average four per cent higher in the final quarter of 2014 than a year previously.

The average advertised rent in county Limerick is now €604, however it is still a fall of 21% from the peak. There are some 189 properties available to rent in Limerick, the most expensive of which is No 1 Rathlinn, Castleconnell, close by the Castle Oaks hotel.

The four-bedroom property is for rent at €2,395. Its rental price has been reduced from €2,500 in recent weeks.

Nationwide, year-on-year inflation in rents eased in the final three months of 2014. The national average rent between October and December was just under €950, that’s 9.7% higher than last year.

However, this is down from a 10.8% annual increase in the second and third quarters and marks the first time since mid-2009 that rental inflation has eased.

In Munster, rents rose by an average of 4.2% in the year to December 2014, compared to static rents a year previously. In the other city centres, rents continue to rise but at a slightly slower pace.

In Cork city, rents are 7.3% higher than last year. In Galway they are seven per cent higher while Waterford city rental inflation was at 5.1% in the final three months of 2014. Rents across the four commuter counties were 14.1% higher than a year previously.

IPAV 28/01/2014

The new Central Bank rules emerging this evening restricting mortgage lending to 80pc Loan to Value in most cases were described by IPAV, the Institute of Professional Auctioneers & Valuers as “devastating, coming at this time at the beginning of a recovery in the property market  –  recovery from the most severe of property crashes.”

Pat Davitt, Chief Executive of IPAV, which represents almost 1,000 auctioneers throughout the country said:

“As it was, the proposals had dented confidence in the property market.

“Now that they are going to be as severe as was feared, except for the 90pc LTV for first-time buyers up to a limit of €220,000, this major intervention in the market will lock many out of property for several years.

“The rules will favour better off families where parents have the financial strength to support their children and they will confine many, unwillingly, to renting for long periods, pushing up rental costs further.”

Mr Davitt said his organisation was deeply disappointed that the Central Bank did not consult in any meaningful way with stakeholders.

“If, as it appears, much of the import for these changes has come from international bodies, such as the International Monetary Fund, then we have to ask the question, is policy on property now largely outside of the control of the Irish people?” he said.

“These new rules could amount to the right idea at a different time but they are certainly coming at the wrong time.”

Mr Davitt said the property market outside the main urban centres is still extremely fragile with properties still selling below the cost of building in most parts of the country.

“It is evident from latest data from a number of sources involving actual transactions that the market is far from settled and far from spiralling out of control.”

Irish Times 28/01/2015

Banks to be able to lend 90% up to €220,000 as phase-in plans abandoned

New mortgage rules announced by the Central Bank will allow first-time buyers some relief from the new 80 per cent loan to value limit.

For first time buyers, banks will be able to lend 90 per cent up to a value of €220,000. Above that the 80 per cent limit will apply.

The new rules, which are effective immediately, have been announced this evening

The move will significantly reduce the amount of deposit which first-time buyers have to save when buying a home.

However, the 80 per cent limit will be introduced for most borrowers, in a significant tightening of the current regime, designed to protect banks and borrowers from getting into difficulties with future lending.

The Central Bank Commission decided on the new rules at a meeting on Tuesday. Non first-time home buyers will generally be restricted to borrowing 80 per cent of the property’s value.

A 70 per cent limit will apply for banks lending to investors purchasing buy-to-let properties.

Plans to phase in the new rules have been abandoned, with the higher limit on borrowings up to €220,000 designed to address concerns about the impact on first time buyers.

Under the existing rules – which normally allow a bank to lend 90 per cent of the value of the house – a first-time buyer would require a €35,000 deposit on a home valued at €350,000. Under the new rules this will rise to €48,000.

Had the 80 per cent limit applied to the entire loan, the deposit required would have been €70,000.

The changes follow a consultation period on the proposed new lending rules. Original proposals to impose an 80 per cent cap on all new home-buyers had met a wave of opposition.

The Central Bank said a certain number of loans – up to 15 per cent of loans by value for principal dwelling – could breach the new limits, offering some flexibility to lenders and borrowers.

Housing loans for borrowers who are in negative equity and who are obtaining a mortgage for a new property are not subject to the LTV limits and will be assessed separately.

The rules will also mean that people buying homes will face a limit that loans should not exceed 3.5 times income.

Again some exceptions will be allowed on this. Switcher mortgage loans and housing loans for the restructuring of mortgages in arrears are not covered by the regulations.

Central Bank governor Patrick Honohan said the measures would reduce financial vulnerabilities for lenders and borrowers.