Lack of mortgage finance one of the greatest barriers to stability
“Lack of mortgage finance, one of the greatest barriers to stability in the residential property market”
Statement by Marian Finnegan, Chief Economist, Sherry FitzGerald Group
- The latest IBF/PwC report on the mortgage market reveals that there was only €2,463 million of mortgage lending in 2011, representing a 35% reduction on lending levels in 2010.
- This compares to almost €40 billion of residential mortgages in 2006.
- In volume terms, 14,273 mortgages were drawn down in the twelve month period.
- This compares to over 200,000 mortgages drawn down in 2005 and 2006 respectively.
Commenting on the IBF report, Marian Finnegan, Chief Economist, Sherry FitzGerald Group said; “The incredibly low volume of mortgage lending in 2011, was one of the greatest barriers to stability in the residential market . That said, the uplift in activity in the fourth quarter, +2.6% in value and +6.9% in volume, when compared to quarter three is a hopefully an indicator of a change in sentiment towards residential mortgage lending.
The paucity of lending in the Irish market is best illustrated by comparison with our near neighbours the UK. In 2011, approximately 850,000 mortgages were drawn down in the UK market. This equates to approximately 3.9% of the private housing stock. In contrast, 14,273 mortgages in Ireland equates to approximately 0.8% of occupied residential property in the country.”
Interestingly, there are an increasing number of cash buyers entering the Irish market. An analysis of over 50 properties which have sold through our Dublin branches in opening weeks of 2012 , reveals that 29% of purchasers were cash purchasers. This is an indicator both of increasing confidence in the market and the consumer’s recognition of the very challenging financial market.
In conclusion Ms Finnegan said, “Rather than diminishing year on year, it is absolutely essential that the level of mortgage lending continues to increase notably. A normal functioning market would require lending in the order of €11 billion per annum. To this end, it is essential that the Government places lending targets on all Irish banks in a manner akin to the initiative introduced for the SME sector in Budget 2012, then and only then will activity levels in the residential market begin to stabilise.”