Mortgage approvals up 45% in May

Data released by the Banking and Payments Federation Ireland revealed that mortgage approvals have gone up 35% May of this year in comparison to May of 2016.

 

There were a total of 4,124 mortgages approved in May, with a combined value of €884 million. This represents an increase of 1,078 mortgages and a €275 value compared to May of 2016.

 

This increase in mortgage approvals is likely caused by lower interest rates and by greater general confidence in the economy. It also represents a continuously growing demand in the housing market, and a supply that is slowly but surely catching up.

 

First time buyer mortgage approvals in particular are up 45.8%, the value of such mortgages also saw an even more dramatic increase of 60.7% compared to May of last year. This indicates growing confidence on the part of borrowers. First time buyers are purchasing more expensive housing and are seeing housing prices rise.

 

It is …

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Bank of China opens Dublin branch

On Tuesday, Bank of China opened its first branch in Dublin. The official ceremony was attended by Tian Guoli, Chairman of Bank of China, and by Taoiseach Leo Varadkar, symbolizing the strengthening relationship between China and Ireland, and their many joint trade and financial interests.

Bank of China is China’s most internationally active bank, and has locations in more than 51 countries. Prior to the opening of a branch, it’s presence was already felt in Ireland through BOC Aviation, a separate company that leases aircrafts carriers in Ireland. The Bank is 64% owned by the Chinese government, and  main focus in Ireland will be in corporate lending. It’s major customers will most likely be businesses with interests in China, multinationals, and Chinese firms with operations in Ireland.

Although it’s current interests are narrow, Bank of China hopes to build a diversified platform of services and products in Ireland within the next two years.

The official opening a location not only confirms the Bank’s commercial interests in Ireland, but also signals Irelands growing prominence as a destination for foreign investment.

Martin …

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Bank of England limits consumer lending & borrowing

Bank of England has voiced concerns over the increasing level of consumer credit in the UK, and has instituted various restrictions on banks regarding capital buffers, mortgage lending requirements and stress testing.

 

Levels of consumer debt have been rising rapidly, well beyond the rise in income, and bank lending has facilitated it’s growth. Since last April, personal lending has increased by 7% and credit card loans have risen by 9%.

 

The central bank expressed concerns in its most recent financial stability report that lends have grown used to benign economic conditions, and thus have loosened their lending standards. The Bank of England’s Financial Policy Committee warned that though current risks to the financial system remains low, banks should still remain watchful for shocks that could be caused by economic downturns.

 

It has asked banks to increase their capital by £11.4 billion over the next 18 months, thus having a greater buffer if an economic downturn causes a shock to occur, and …

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Mortgage market update: lenders have large margins

Dan White authored a piece published in the Irish Independent on June 18 titled: Are greedy mortgage lenders about to see enormous margins squeezed? The article analyses the current mortgage market and concludes that limited competition between lenders is a source of high interest rates in the market and the consequently high margins and profits achieved by lenders. White takes note of current changes in bank’s interest rates and of a paper published by the Competition and Consumer Protection Commission to predict the future of interest rates and margins in the mortgage market.

 

The author cites a paper published by The Competition and Consumer Protection Commission stating that the Irish mortgage market is “characterised by a high concentration of a small number of lenders, limited competition between these lenders and low levels of entry by new players”. This is in part due to the fact that many foreign lenders left the Irish market after the crash. Because of the limited competition, Irish banks had free range to dramatically increase their net …

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The new fast track planning law: will it help boost housing supply?

A new fast-track planning law officially came into effect last Friday. It was passed in December of 2016 as a part of The Planning and Development and Residential Tenancies Act. After months of delays in which officials debated over application fees, the law has now been officially be enacted.

The Planning and Development and Residential Tenancies Act 2016, introduced by former Minister for Housing Simon Coveney, introduced the idea of strategic housing developments. It was intended to provide greater stability for tenants and to help streamline the planning process. An important aspect of the Act is the new fast track planning procedures it introduced. The fast track planning procedure allows developers to bypass their local authority and apply directly to An Bórd Pleanála, an independent authority that previously only made decisions on appeals after plans have been rejected by local authorities. The Board was established by the Local Government Act of 1976, and now its responsibilities will expand to include taking and reviewing applications submitted through the …

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Warnings on Capital Gain Tax Exemptions

Recent emails obtained under Freedom of Information by Pearse Doherty, Sinn Fein’s Finance spokesman, revealed concerns the Revenue Commission has regarding the Department of Finance’s capital gain tax exemptions introduced in last year’s bill.

 

Revenue has warned the Department of finance that it’s tax exemption measures could cause property fund to hoard and sit on its properties instead of selling them, restricting supply and causing difficulties in the housing market.

 

The five year capital gains tax exemption applied to funds that invest in property for capital gain. It was implemented to encourage these funds to purchase and develop more land to boost housing supply in the market. The tax exemption allows the funds to be avoid any tax charged on the profit made when selling an asset during a five year period.

 

The problem is that due to the tax exemption, property funds are less likely to sell their assets before the five year term ends even through there is a …

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Help-to-buy incentive under scrutiny

This past Sunday, current Housing Minister Eoghan Murphy said on RTE’s The Week in Politics that the Help-to-Buy initiative introduced by his predecessor is currently under review. Since its introduction in January under former Finance Minister Michael Noonan and former Housing Minister Simon Coveney, the Help-to-Buy initiative has already received nearly 7,000 applicants and has successfully helped a great percentage of them with the purchase or building of their first home. However, the initiative has recently come under fire for exacerbating the problems it intended to solve, and there is speculation that it may be dissolved.

 

The purpose of the Help-to-Buy incentive was to encourage first buyers to enter the market by helping applicants with their deposit through the refund of applicants’ income tax and DIRT other the past 4 years. It applies to first time buyers who either purchase or build new residential properties, and allows them to receive 5% of the purchase price of their new home, with an upward limit of €20,000. It is hoped that the incentive would help more people climb the property ladder, …

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The mortgage market for returning expats

The government has pushed hard in recent years to bring professional workers back into Ireland, welcoming plenty of new construction and dozens of foreign tech companies into the docklands. With many talented workers finding jobs elsewhere in the EU and in countries such as USA and Australia in the aftermath of the financial crisis, it is essential to Ireland’s future as a highly advanced and modern nation that its own professional workforce be well employed at home. Well government initiatives have already seen great success, many returning expats are faced with various complications when attempting to bring their families back home. Amongst these complications is the difficult process these Irish citizens have to go through to get mortgages.

 

Expats currently working and paying tax in another country are considered non-residents. Thus in the books of most major lenders, they are segregated from all other Irish citizens and placed into similar categories as foreign nationals. Thus, returning expats face stricter limits on income and on Loan to Value ratios when apply for …

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Analyzing rental yields – what this means for investors and renters

An article was published by Fiona Reddan on the Irish Times early this morning examining and evaluating property investment options in and around Dublin today. The article uses the measure of rental yields, how much rental income a property generates as a percentage of its market value, to compare the worthiness of investment options.

 

The major finding in the article was a negative correlation between housing prices and rental yields, meaning that, in Ireland, higher priced properties generate lower investment yields on average. The worst places to invest includes areas such as Dublin 6, Dublin 4, and Dublin 14, where average sale prices are well above €500,000. The best places to invest includes Dublin 10 and Dublin 2, where the average market value of property is much lower. In Dublin 6 for example, the average sale price is €706,741, while rental yields are only 3.6%. On the other hand, in Dublin 10, the average sale price is €173,478, but the annual rental yield is 10.4%.

 

These …

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Mortgage Market Update

The Financial Broker gives readers an overview on currently property prices and mortgage market conditions.

The Central Statistics Office published a report showing price inflation on property had increased 10.7% in the past year up to February. A similar report reveal how the number of newly build housing last year was 14,932 units when estimates denote a demand of up to 50,000 units. These numbers illustrate a problem in the current mortgage market, which this article pinpoints the causes of. The author laments about rising property prices, arguing that many potential home buyers have missed out on the prime time to purchase property, and are currently no long capable of affording the housing of their choice at an acceptable price.

The author attributes the current housing price and rent inflation in Ireland as consequences of a lack of supply in urban areas instead of lax macro-prudential regulations. In fact, she argues that current Central Bank regulations are too restrictive, and thus have prevented demanders from being able to locate and buy affordable housing. While the prudential regulations have lowered the …

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