Outlook on the Irish Housing Market

Key issues regarding the stability of the Irish economy seen in the housing market. The key issue of the housing crisis can be defined as growing demand that is not meet by current supply.

Many current government policies are concerned with increasing the volume of supply of completing housing units. For example, Rebuilding Ireland is associated with increasing housing supply to reduce homelessness. However, over the past 3 years supply has increased but housing prices have increased at a rate higher than the increase in supply. Governmental policies focus too much on supplying more volume instead of focusing on the affordability of housing.

According to Goodbody BER Housebulding Tracker, it is estimated that an additional 18,855 new housing units were added in 2018. This estimation is in line with previous forecasts. The majority of new dwelling competitions in 2018 were located in the Greater Dublin Area. More specifically, housing completions in the Greater Dublin Area accounted for 60% of the total new housing schemes in 2018. Although there has been an increase in the supply of housing, many problems in …

Read More

Proving property tax exemptions

The Irish Revenue Commissioners, a government funded agency, is responsible for  a multitude of financially related activities; some of these include customs, excise, and overall taxation. In 2013, Revenue changed the way that Local Property Tax (LPT) was collected for all residential properties in Ireland. 

This tax is meant to hold the owners of residential or rental properties accountable for the payment of tax on all of their assets. Beyond just these two groups, people who have a lease of twenty years or greater, local authority/social housing organizations, or a person acting as a personal representative for a deceased owner are also responsible for paying the LPT. 

LPT can be charged on homes that are unoccupied or uninhabited, if it is a suitable place to be lived in. If it is not up to par with regular living standards, no LPTs will have to be paid on the property. There is a great deal of opinion that comes into play when deeming a property livable or not, which is why the  Irish Revenue Commissioners requires that some type of documentation …

Read More

Government Housing Fund is Collecting Dust

The Irish government has allocated a large portion of their budget to address the current housing shortage and crisis that is plaguing Ireland. However, due to red tape and many other impediments, much of the budget has not been used yet and is sitting and collecting dust at the moment. Approximately 8% of the 200 million Euro government housing fund has been spent and many people are not happy about this.

The Local Infrastructure Housing Activation Fund (LIHAF) was originally allocated 195 million Euros in 2016. Since then only 16 million has been spent and the majority of the budget has been sitting in an account. One of the major problems hindering efficient construction sites is Ireland’s outdated infrastructure. This fund was created to provide investment in public off-site infrastructure including; roads and water. This would cut down costs and time for delivering properties. This fund was created during the government’s creation of the Rebuilding Ireland policy to tackle homelessness and housing issues.

Infrastructure projects have been approved to begin under the fund, but not many have taken off. 30 …

Read More

Mortgage cuts are nearing

The anticipation of cuts in mortgage rates has been increased. Ulster Bank recently stunned the mortgage market with the first cut in its variable rate in more than a year. This recent decrease in its variable rates will increase savings for first time buyers. According to the Independent the typical first time buyer will be saving around €50 a month.

Tracker and fixed mortgage rates are also supposed to fall. There are increasing expectations that the European Central Bank (ECB) will also cut key rates. Cutting key rates will allow banks to reprice their mortgage books. Mortgage rates are being cut in response to weak growth within the Eurozone and inflation declining.

As of yesterday, the European Commission lowered its forecast for growth again. The lowering of growth forecasts contributes to greater pressure on the ECB to cut interest rates it charges banks.

Ulster bank is dropping one of its key variable rates by .4%. The new key variable rate is defined as 3.9% for those whose loan is less than 90% of the properties value. This has a huge impact …

Read More

Irish economy at risk

The National Competitiveness Council, or NCC, is an organization that collects, analyzes, and reports data and statistics about the Irish government. In general, it focuses on comparisons of the growth and sustainability across the European Union. This organization has looked into the sustainability of economic health across a multitude of different scenarios. 

As of late, this organization has noted that the Irish economy is becoming too dependent on a small number of domestic firms that fall within similar sectors of the business market. Although it is always a positive to support your home companies, there are some major issues that may come from this increased reliance. 

To begin, Ireland’s economic dependence has been primarily within the goods and services export sectors. There has been a huge focus on pharmaceutical and chemicals being exported, with around 58pc of total exports in 2018 being in this sector; in 2017 it was at 45pc. Computer services are also dominating the market, making up 43pc in 2018, which was 3pc lower than in 2017. These bulk exports make up a huge part of the …

Read More

Slowing of Building Development

The rate of development in Ireland’s construction sector has slowed to an all time low in June spanning across the last 8 months. Although the rate of expansion is declining, the construction sector remains at a solid growth rate.

The declining growth was caused by the weaker activity in the civil an commercial segments. This contrasts the housebuilding sector that according to the Ulster Bank Construction Purchasing Managers’ Index displays signs of constant and strong expansion.

The construction index amounted to 53.1 for the month of June, 2019. This number decreased from May amounting to 54.9. The index defines that any number above 50 indicates expansion in the construction sector. Any readings below 50 indicate contraction.

Simon Barry, Ulster Bank’s chief economist for the Republic of Ireland, claimed that although commercial activity is still expanding, the decline in pace of expansion in June reached the weakest expansion rate in six years. This trend of declining construction expansion rates denotes that the housing crisis is far from being solved. The amount of construction needed to meet demand falls far below current …

Read More

Inflation Rates Return to Normal

 

The current housing prices in Dublin have been talked about extensively recently. The newest trend shows that housing prices have reached peak affordability and now some of the wealthy classes of people are having trouble affording homes. Current house prices in Dublin are more than nine times the average salary making them unattainable for the majority of people because mortgages can only be 3.5 times your salary. Additionally, these numbers have not been seen since the Celtic Tiger Era, however, the central bank has been more careful this time and increased borrowing rules unlike during the Celtic Tiger Era. Prices are now beginning to slow down because simply nobody is able to afford them.

Inflation has also cooled off recently with a decrease from 12.4% last May to 2.8% a year later. Dublin has seen a significantly smaller inflation rate with an increase of prices from the current year to May of .6%.

The region of Dublin had the highest median price of 366,000 Euros which is just over 9 times more than its average salary of 40,000 Euros. …

Read More

SME debt rises

Debt can come from a variety of places, especially when you are working within the confines of a business and it’s very specific budget. Many times, debt for these institutions is in the form of owed money; this owed money was usually a loan from the bank. 

Within the recent years, the prices of these loans, or borrowing costs, have increased. The first three months of 2019 have seen significant growth in this area, despite economist’s predictions that interest rates would be falling within the year. 

SME’s, or small-to-medium enterprises, saw these high borrowing costs as a sign that they should proceed with extreme caution when working within the borrowing market. These businesses already pay some of the highest interest rates in the European Union and have made sure to be well educated on the possibilities of economic changes or interest hikes on their finances. 

Small-to-medium enterprises are extremely important to have in any market, given that they play a key role in employment. Small enterprises are defined as having less than 50 employees and have an annual turnover or …

Read More

Mortgage lending trends

Bank’s lending practices have been on a rollercoaster ride that has yet to have slowed down. Due to many different economic factors, the trends tend to increase and then decrease with ease over short periods of time. The factor that has the most influence on these decisions by the bank is Brexit. Behind this name, there lies an endless amount of disruptions that are unpredictable in categorical and economic related areas and loom over every decision that the bank makes.

In general, Brexit has slowed down the lending process. That being said, there are some times in which Brexit brings about significant positive changes in the market. After the Brexit deadline was extended to October 31, 2019, there was a significant rise in the amount of lending. This change in some ways rebooted the market, given that the beginning of 2019 had a slow start. 

After the extension, approvals for mortgages increased by 10pc for the year on year comparisons. There were 4,926 loans that had been approved, totaling up to €1.14 billion according to the Banking and Payments Federation …

Read More

Institutional Investors not to Blame

Institutional investors have commonly been credited with causing the rise in property prices. However, stockbroker Davy, claims otherwise and says they are not to blame. The report by Davy credits the inflation in house prices to be caused by the Bank of Ireland’s strict mortgage-lending rules. The pressure on the housing market has caused many people to become interested in the rental market causing pressure there too and a 7% rise in rentals.

Institutional investment has been rising exponentially in Ireland. It has grown in sales to a total of 1.1 billion Euros in 2018 up 200 million Euros from the previous year. These figures may seem high, but only account for 30% of total property investments in 2018 and do not have a big enough impact on the market to make a tremendous impact. Additionally, most of those investment occurred in Dublin where the top 25 transactions account for 2,370 units worth 954 million Euros in 2018.

Davy analyst Conall Mac Coille commented, “People have, however, confused the chicken with the egg,” and “Institutional investors have been attracted here …

Read More