Fall off in Residential mortgage borrowing, precursor to a property crash?

Latest figures from the Central Bank show that residential mortgage borrowing in the first half of the year has slowed by up to 25%, compared with the previous year. Residential mortgages increased by €8.6 billion in the 6 month period to June, which is over 25% lower than for the same period in 2006. This is indicative of the dampened confidence of potential buyers and displays their current reluctance to engage in capital investment. Many investors are wary about taking on loans such as mortgages, given the relative uncertainty of the current climate. In total, the monthly increase in mortgage borrowing (inclusive of securitisations) grew by over €1.6 billion.

There was a considerable increase in the level of outstanding private sector credit in the period Jan-June. This brought the annual rate of increase in private sector credit to just over 20%. There are numerous components affecting this. Residential mortgage lending (not inclusive of securitisations) was seen to increase by €307 million. Term loans increased on average by €2.7 billion. Loans taken out for periods up to and including one …

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House prices 2007, Current Housing Market Summary

It has been well documented that house prices deflated somewhat in the first half of 2007. The thriving rental market is being driven primarily by the large influx of Eastern European workers to Ireland, since EU expansion. However, these demographic factors may not have the same positive effects on the housing market. The large majority of these workers are on the lower end of the wage scale. As a result of this, they may not be in a position to afford to purchase housing here, with the average asking price for a property in Ireland reportedly at just over €370,000. It is thought that a basic estimate of the average amount that consumers can afford to spend on property today is in the region of €380,000 – €400,000, which stands above the current average asking price of a house. Most of these workers are working in the greater Dublin area where the average price of a 3 bed unit stands at approximately €501,500. These workers are consequently being kept within the constraints of the rental market, having been priced out …

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Booming rental market brings good news for buy to let investors

The fact that the Irish rental market is currently experiencing the highest levels of year-on-year growth it has seen in the last five years, is comforting news to many Irish investors. It is likely that recent EU expansion and the influx of immigrant workers seeking rental accommodation is partly responsible for this. There has been a reported 11.9% increase in income being received by landlords in the twelve months to date. The eight increases in interest rates that were introduced are also responsible to some extent, with many tenants choosing to extend their leases instead of taking out mortgages on properties themselves.

The figure for average rent nationwide is somewhere in the region of €1,382 according to recent figures, having grown by €150 since the same time last year. Yields on rental properties have also experienced growth, and currently stand at an average figure of 4%. This is excellent news for buy-to-let investors as the rental market continues to grow while many lose confidence in the housing market.

The highest yields proportionately are from two bed properties, …

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Section 50 Tax Relief Explained

Many of us have heard of Section 23 incentives, but not as many of us are familiar with Section 50 tax relief. This is a ‘section 23 type relief’ that was introduced under Section 50 of the Finance Act, 1999. It covers relief on expenses incurred on construction, conversion or refurbishment of residential accommodation for third level students in full time education. This relief was primarily introduced in order to increase the supply of quality residential accommodation for students, but also provides attractive terms for long-term investors. To qualify for Section 50 relief, accommodation must adhere to the guidelines as issued by the Minister for Education and Science, Minister for the Environment and Minister for Finance. As usual, full advice should be sought from your local authority before undertaking any such projects.

As a rule, generally 90% of the price of section 50 units is eligible for rental deduction. For example, a unit costing €200,000 can earn up to €180,000 in rental income over 10 years before becoming liable for tax. Deductions left over can be carried forward after …

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First Time Buyers reaping the reward of a property crash.

You might think that being a first time buyer now would be a risky situation to be in, however in this article I think it will point out some aspects of a slowing property market that are actually to their advantage. We’ll look at some of the aspects for this.

Firstly there are 100% mortgages, some people say that if your property price goes down and you have a 100% mortgage you owe money that you don’t have the equity for eg: buy for 200k house goes to a value of 190k and you are down by €10,000. However is that really true? For a start look at the situation it would have been if you had had to save that €10,000? If you were earning at the 41% bracket that €10,000 would have meant you had to earn nearly 17,000 to come up with it, so 100% mortgages actually help a first time buyers cash flow, had you gone the other way and saved a deposit you’d be down €17,000 instead of €10,000! The idea is that you …

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Affordable Housing, a practical alternative…

Affordable housing is a term commonly thought to have been synonymous with ‘social housing’. It is possible that this common misconception is partially responsible for many people not availing of the scheme. Affordable housing, a scheme first introduced in 1999, was designed to help first time buyers (FTBs) buy into private developments at less than the full market value of the property. Initially, land owned by local authorities was developed and the housing then sold on under the scheme. In 2000 and 2002, reforms were introduced under Part V of the Planning and Development Acts, which required that up to 20% of each new residential development must be set aside for social and affordable housing. However, developers often offer money in lieu or sites elsewhere instead of 20% of every development. This situation is less than ideal since building the houses themselves is costly and time consuming for local authorities and results in a backlog of people waiting for housing units to become available. There is also a lack of consistency between the various local authorities involved, with criteria …

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Consumer Spending Fuels the Economy

Recent speculation in relation to the immediate future of the Irish economy has been largely pessimistic in content. This is mainly due to falling house prices, increasing interest rates and a slowdown in the construction sector, a pending property crash is often cited as well. Despite this lack of confidence however, latest figures show that the future may be looking brighter for the economy and the housing market. Central Statistics Office figures show that in 2002, GDP growth reached a peak of 6.4%. 2006 by comparison showed GDP growth levels at a 6 year low of 5.7%. At this present time, 6% is a healthy level of growth to achieve.

It is well known that consumption has a strong, direct correlation with GDP, as aggregate consumption is a major determinant of economic output. Many feared that with the maturation of SSIA’s this year, spending would increase rapidly. This sudden injection was also expected to be followed by a sharp fall in growth levels and an increase in borrowing to finance spending. This theory was in keeping with US and …

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Why buy an Investment Property?

Capital Appreciation Potential Property has always been an excellent long term investment and although there are no guarantees to future gains currently prices are still rising and rental income is strong for quality units in good locations

Rental Income Monthly income which meets the mortgage repayment and also generates a new income for the Investor

Costs to consider

Stamp Duty Legal Fees Structural Survey Fit out costs Letting fees and Management fees (if an apartment) Insurances

Choosing a good Investment property Location is vital, is the property close to where tenants might work? Good transport links? Good area?

Is the property in a good state of repair? Tenants have high expectations and strong rental income will only be achieved with a high spec property!

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Ways to cope with raising rates…

There have been eight consecutive interest rate hikes and that is making loans, to say the least, very damn expensive! However, that doesn’t mean you have to sit back and take it. Mortgages, like all debt are affected by movements in the European Central Bank base rate which is now 4%. Two years ago the rate was half this amount so the interest portion of loans has doubled!

The good news is that Mortgage Interest Relief, or ‘Tax relief at source’ has also doubled for first time buyers since the last budget, and its up by 20% for non-first time buyers. An important note is that you are a first time buyer for the first seven years, if you sold your first house and moved into another one within the first seven years you still qualify as a first time buyer.

So how do you hedge yourself against rising rates? The simplest means of doing it are as follows:

Refinance to a better deal – this means moving your present loan to get one at a cheaper …

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Stagnation in the Irish Property and Mortgage Market

As I write this news has just flashed saying that the Dollar has weakened on the basis of new woes in the sub-prime market in the USA and the other stories of the day are of property melt-downs, negative equity and other doom and gloom forecasts.

Firstly I’d like to say that people have been predicting a property bust for at least (well… this is how long I’ve given them any degree of attention) the last 8 years. And now it seems that because property didn’t miraculously rise in value that all of these tales of woe are in fact true. I don’t support this attitude though for several reasons. Quite frankly the first reason being that our firm Irish Mortgage Brokers is as busy as ever and if we are doing more mortgages than this time last year then it shows me that the market has not entered free fall, however, this is of course a micro-attitude, on the reverse side there are houses that are not selling and rates that are getting higher.

I just want to say …

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