Ireland has an illiquid housing market starved of supply though there are some encouraging new figures showing the germ of a real recovery, according to the latest IBF Housing Market Monitor out today.
The Irish Banking Federation (IBF) said its survey shows a number of recovery trends in the housing market including strong growth from a low base in both the level of mortgage approvals and drawdowns.
However, in his commentary accompanying the IBF Housing Market Monitor, Davy Chief Economist, Conall Mac Coille, characterises the market as “an illiquid housing market starved of new supply… with Dublin’s housing market in the process of going from lukewarm to scalding hot”.
The figures show a 29.3pc increase in the level of mortgage approvals and a 65.6pc increase in the level of drawdowns with a 23.6pc increase in the number of dwellings completed and a 4.5pc increase in the number of properties listed for sale.
In his commentary Conall Mac Coille writes that, while housing market transactions are up in the first quarter of 2014, they are still at exceptionally low levels.
And this situation could persist given that first-time buyers (FTBs) in particular are competing with cash buyers and investors and are increasingly failing to secure properties despite having approved mortgages.
“In this environment policy should be focused on alleviating supply constraints on the construction sector, while resisting efforts to loosen credit standards on mortgage lending to FTBs.”
But for now Mac Coille sees little sign of any supply response from the construction sector, prompting him to state: “While the renewed focus from the Government’s Construction 2020 strategy is welcome, the document is short on concrete proposals to address the key issues, namely cost pressures and supply constraints in the sector.”
Meanwhile, Davy’s Chief Economist is upbeat on the availability of mortgage credit going forward.
“As existing mortgaged households continue to pay down mortgage debt built up during the bubble years, there will be ample funds within the banking sector to meet credit demand from FTBs. So efforts to loosen credit standards on lending to FTBs should be resisted. In any case, the Central Bank of Ireland is likely to ensure affordability is a credible anchor on Irish mortgage lending this time around, mindful of current exceptionally low levels of interest rates. In short, Ireland needs a Help to Build scheme, not Help to Buy.”