Pensions

Pensions in Ireland is paid to people from the age of 66 who have enough social insurance contributions. People who qualify for a state pension are also allowed to have other incomes and still receive the State pension. The State pension is taxable, but if the pension is the only source of income it is not likely to be taxed.

In order to qualify for the State pension an individual must have started paying social insurance before the age of 56 and have paid at least 520 full rate social insurance contributions. An individual must also have at least 48 paid or credited full rate contributions from the year they started insurable employment until reaching 66 years of age.

Recent research has shown that only 32% of people would like to continuing to work after the age of 66. This is concerning due to the increasing financial pressure leading to delay in retirement. Another recent statistic gathered from 1,000 employers revealed that only 61% of employees believe that they will have no choice but to work past the age of …

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Mortgage Rates – comparison to Europe

High mortgage rates and strict mortgage regulations are greatly effecting borrowers. According to the Independent, Ireland’s high mortgage rates are costing borrowers up to  €60,000.

Although Irish mortgage rates have dropped in May according to data from the Central Bank, the rate remains the second highest in all of the eurozone. The only country that has higher mortgage rates than Ireland is Greece.

The average rate on all new mortgages averaged to 3.01% in May. The rate decreased by two basis points since April. However, the average rate in the european area amounts to only 1.68%. However, in comparison to the United States, the average rate is around 3.5%. The lowest mortgage rate in the eurozone is Finland. The rate defined in Finland is less than 1%.

According to the Banking and Payments Federation, the average first time buyer mortgage is now defined as €225,000. This means that the typical first time home buyer who is borrowing €225,000 over 30 years will pay about €143 more per month for their mortgage. If the average first time was able to borrow under the eurozone average rate, …

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Fast-Track Planning System

The fast-track planning system was introduced in 2017 by the Housing Minister Eoghan Murphy. The program was aimed at expediting large scale developments and introduced the system for strategic housing development legislation. The fast track planning system is now subject to undergo public review.

The strategic housing scheme allowed fast track decision making for large scale housing schemes. The legislation allowed developers planning to build large scale housing schemes to make their case directly to the An Bord Pleanala. This allowed developers to by pass local authority decision making processes and thus, the planning  process is expedited. With out the fast track planning system, large scale developments would have to be approved by local authorities and then could be appealed to An Bord Pleanala.

The Strategic Housing Development system gave effect to the commitment in Rebuilding Ireland. This commitment is defined as “fast-track” devision making for large scale housing and student accommodation schemes.

According to the rules of the fast track housing planning system, developers building sites with 100 or more housing units or 200 or more student housing units …

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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 …

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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 …

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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 …

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Energy Prices

Consumers have been warned about rising energy prices. Many have been urged to beat immense energy price hikes by switching suppliers. According to new research from the energy regulator shows that house holders who actively switched electricity providers over the last four years have saved more than €1,000.

According to the Commission for the Regulation of Utilities, seven electricity suppliers announced that energy prices will rise in the next few months. The average increase in energy costs amounted to 5 percent for electricity and 13 percent for gas according to the commission for regulation and utilities.

Across the last four years, those who choose not to switch their suppliers for both electricity and gas suppliers over the last four years could have saved €1,700. The CRU claimed that savings made through changing electricity and gas suppliers 0r negotiating with a current supplier could have helped customers save on the recent raises in price. The CRU further described switching rates by consumers last year as “robust”. In other words consumers who took the advice to switch providers or negotiate with their current supplier …

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High land prices keeps developers from supplying homes that are demanded

High costs of land is making developers unable to supply homes that are truly needed to solve the housing crisis. According to a leading developer, land prices specifically need to be reduced by 25% to 35% to meet Ireland’s real demand for housing.

The development company, O’Flynn Group is currently developing 1,600  new housing units across 11 sites in Dublin and Cork. O’Flynn Group’s chief executive, Michael Flynn stated that Ireland’s residential construction activity may be nearing a plateau. He reasons his statement because of restricting limits of supplying homes, ranging from mortgage lending limits to skill shortages in construction. Regulation serves as another limiting factor in supplying homes.

According to O’Flynn, the real demand for housing is twice the amount developers are able to deliver. He continues to denote that if artificial restrictions are not limited, and demand for affordable housing is not met than the housing crisis will only continue. Lastly, he noted that more households will be forced into the rental sector with out the hope of saving if the trends previously described continue.

O’Flynn was prompted …

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Vulture funds and Ulster Bank

Ulster Bank has recently created a portfolio of €900 million of problem mortgages for sale. This portfolio includes an immense number in which borrowers had short term forbearance deals with Ulster Bank. Forbearance is a special agreement formed with a lender and borrower to delay a foreclosure. This occurs when mortgage borrowers are unable to repay according to terms and lender may choose to foreclose the property or asset.

Many of the affected borrowers for loan sales were engaged with the bank to secure least short term debt deals. However, Ulster Bank has claims that past customers who engages with the bank to make repayments of loans even on loans in the past are far less likely to see their loan sold to a vulture fund.

Vulture funds are generally private equity firms or a form of financing that is provided by firms to invest in properties that are performing poorly. These poor performance properties are likely to be undervalued and thus the vulture funds take advantage of the underestimated properties.

Private home mortgages on average in the current sale have …

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Housing and the Changing Demographics of Ireland

In order to solve the housing crisis, policy makers must consider changing demographics and plan for long term methods to resolve the housing crisis. According to Engineer’s Ireland review of housing in the The state of Ireland 2019, projections of future Irish population is increasing in number, age and diversity. The population is expected to grow from 2.78 people in 2017 to between 5.6 to 6.7 million people in 2051. The median forecast was defined as approximately 6.2 million people. An additional 1.48 million people must be housed in the next 32 years.

Future demographic projections are essential in forming adequate long term planning in regard to housing in Ireland. Due to the significant projected increase in population size, there is great demand to increase housing supply and plan accordingly.  The current average size of an Irish household is 2.7 people per home. If the average household size remains the same, the number of homes supplied must amount to at least 548,148 additional units by 2051. This amounts to an average of 15,661 additional housing units must supplied each year …

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