Recent data reveals that the percentage of home buyers with mortgages have surpassed that of those who buy in cash. This is the first time this has happened since the property bubble and subsequent crash. On July 26th 2016, an Irish Independent/Real Estate Alliance survey reported that 60% of houses are bought with cash, now, roughly a year later, the same survey concluded that less than 30% of homes are purchased by cash buyers.
During the years after the housing crash, the high percentages of cash buyers was caused by higher interest rates, stricter restrictions on lending, higher rates of unemployment, and the large amount of speculators purchasing properties as assets after the original home owners have defaulted on their loans. This indicated a general distrust in the market and the squeezing out of mortgage buyers who have defaulted on their homes.
Central Bank economist Dermot Coates predicted in 2016 that the proportion of cash buyers was “neither sustainable nor likely to continue into the future”. He believed that increased construction and rises in lending would soon increase the percentage of buyers buying with mortgages. His prediction certainly has come true in the first half of 2017. Several banks have recently lowered interest rate and the central bank has relaxed several regulations included pushing up the maximum loan to value ratios for first time buyers, leading to the greater percentage of mortgage buyers today.
However, despite increased lending, the amount of construction still has yet to pick up to an appropriate level, the result is a upwards pressure on property prices. The average house price in Ireland has risen 11.2% over the past year, and prices in 8 counties are currently rising faster than that during the property bubble and before the crash. Before the crash, over 75% of buyers purchased with mortgages, and now the number has risen to more than 78% in Dublin and the greater Dublin area. But market watchers shouldn’t be worry yet, as long as construction picks up to mitigate the intense competition for homes caused increases in lending, both housing prices and the proportion of buyers with mortgages will likely soon stabilize.