Irish Housing Market Stabilising Claims Experts

May 27, 2010 Updated: May 28, 2010

Earlier this week the Irish Educational Building Society (EBS) and DKM Economic Consultants published their Affordability Index for mortgage repayments relating to the first quarter of 2010.

Their figures showed that on average a First Time Buyer (FTB) working couple is paying 12.6 percent of their joint income to service their mortgage compared to figures from 2008 where couples were paying over a quarter (26 percent) of their income.

The reports says that FTB house prices are now back to 2002 levels and if interest rates remain low, affordability will continue to improve for potential first time buyers.

The “Affordability Index”, is tracked on a monthly basis and measures the proportion of after tax income required to meet first year mortgage repayments for an ‘average’ FTB working couple, each on average earnings with a 90 percent mortgage.

According to EBSDKM current projections, net repayments for a national FTB working couple should fall further to 12.4 percent of net income.

Commenting on the latest Index Dara Deering, Director of Membership Business, EBS said: “The continuing improvement in affordability levels is very positive for First Time Buyers and seems to be encouraging activity from this segment.”

Ms Deering was also encouraged with figures released last week by the Irish Banking Federation (IBF). “The figures from the IBF mirror EBS’s own experience. So far in 2010 we have continued to see strong improvement in the number of First Time Buyers applying for a home loan,” said Ms Deering.

“The market is still contracting across the country as a whole, but there are pockets around Dublin that have seen house prices stabilise and certain properties in Galway are experiencing price increases. These kinds of trends are likely to become more commonplace as demand levels pick up,” concluded Ms Deering.

Annette Hughes, Director, DKM Economic Consultants was of the opinion that recent signs of stability in the market are unlikely to result in an immediate bottoming out of house prices, primarily due to the uncertainty in the employment outlook which will probably continue to act as dampener on the housing market.

“It’s important to remember that a key risk going forward comprises the possibility of further increases in mortgage rates, as a result of the international debt crisis. Any increase in mortgage rates could impact confidence further and delay the return to stable house prices,” said Ms Hughes

Resilience in market slowdown

The IBF/PwC Mortgage Market Profile also published this week shows that approximately 7,000 new mortgages to the value of €1.22 billion were issued during the first quarter of 2010 down 36.8 percent year on year.

All market segments record a decline, with FTBs segment recording the lowest rate of decline, remaining the single largest segment of the total mortgage market.

Commenting on the data, IBF Chief Executive, Pat Farrell, stated: “While the overall level of mortgage market activity has declined, the year-on-year comparison indicates that the rate of decline is continuing to ease.”

Mr Farrell said that it was reassuring to see that the first-time buyer segment was remaining “comparatively resilient".

AIB, supporting housing market activity

Allied Irish Bank (AIB)announced this week that it has provided finance for “38% of all residential property transactions in the first quarter of 2010.”

The statement on their website defined “residential property transactions” as first time buyer, mover and buy to let categories in the Republic of Ireland as taken from the IBF / PwC Mortgage Market Profile.

The same statements also noted that AIB has increased mortgage lending to first time buyers by 23 percent in comparison to the first quarter of 2009. “This level of new business activity is strong evidence of AIB’s ongoing commitment to the housing market and to the wider economy,” said AIB.

Michael Quirke, Head of Mortgage Products, AIB Bank said: “AIB is continuing to see a steady flow of good quality mortgage applications from both first time buyers and those moving home, despite lower levels of demand for mortgage finance.”

“We are open for business for home mortgages and have funds available to support those purchasing a property in 2010, both new and existing customers,” said Mr Quirke.

EBS market share

The EBS Building Society have also publicised their increase in market share of both the retail mortgage market and of the overall market as outlined in the Irish Banking Federation figures.

A statement from the EBS said their growth in share of the retail mortgage market rose to 28.1 percent. Commenting on the latest figures Dara Deering said that EBS’s “competitive products” and “genuine access to credit for those who are seeking to buy a new home” are commitments that are paying off for the society.

Bank of Ireland

The Bank Of Ireland BOI have informed The Epoch Times that they "are very much open for mortgage business." They said that In February, on the anniversary of their first 1 billion euro dedicated fund for first time buyers, they launched an additional 1 billion euro fund to underpin their commitment to the Irish mortgage market and the first time buyer segment in particular.

"We continue to take every opportunity to demonstrate to customers that we are open for business. We are currently approving an average of 100 mortgage applicants each day."