A surge in house construction in recent years could potentially provide some relief for first-time homebuyers. However, the freshest mortgage approval and disbursement statistics from the Banking and Payments Federation of Ireland (BPFI) expose another disturbing facet of Ireland’s distorted housing market, underlining the multifaceted nature of the overarching crisis.
The data displays a sharp decrease in both mortgage permissions and distributions early this year. Industry professionals cite that the latter, due to regular seasonal variances, is anticipated, as the latter part of the year is typically the period with the most activity in sales completions and disbursements. What’s disconcerting is the decrease in permissions, recorded at 16.4% less compared to the same month, March, last year.
A significant decline in refinancing and switching activities is most assuredly a contributory factor, noted at a 21.5% decrease year-on-year. However, the type of home loan that experienced the second largest decline in approvals over the year (17.5%) ending in March, was the mover mortgage. This fact illuminates a larger issue within the market this year: the insufficient number of second-hand homes available for sale.
“As the number of movers significantly reduced this year, we noted a decline,” says Martina Hennessy, the Managing Director of Doddl, an online mortgage broker. “It’s rather a struggle for home owners to upgrade due to the aggressive competition within the market.”
Mover-purchasers traditionally are people or families who opt for larger, second-hand homes in well-established suburban areas as opposed to first time buyers who usually choose to purchase a newly constructed house in less expensive counties which are commuter friendly. A lack of homeowners putting their properties on sale hinders those who want to sell their current property and upgrade, creating a self-perpetuating cycle.
In summary, the second-hand housing market is ‘illiquid’, as put by Davy Stockbrokers in a recent analyst note. Davy’s analysts, unsurprisingly, have revised their projections for new mortgage lending for Irish banks this year, now predicting a 3% decline by 2024.
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