No matter from which angle you look at the Dublin mortgage market, there’s no getting away from the fact that three of the key influencing factors in what’s been happening and what’s happening right now are: confidence; supply and demand and the availability of finance.
Looking at this factor in the equation during the third quarter of 2014, there’s no getting away from the fact that consumer confidence seems to be on the up. We are seeing economic growth, a generally improving sentiment over bricks and mortar and a rise in demand. The fact that prices appear to have turned the corner and investors are looking to get a share of the action, all back up this notion that confidence in the residential sector in Dublin is on the rise. What’s more, with low savings interest rates, people are digging into their cash reserves to fund their purchases, with a reported 50% or so residential investments having been made in cash. Such is the confidence in Dublin that sales figures are significantly above those in other areas of the country.
Supply and demand
This growing confidence exacerbates the strong consensus amongst the surveying community in Dublin that demand is currently outstripping supply. With only a limited number of new builds in the capital, people are finding themselves unable to find what they’re looking. This, together with the chunk of the population who find themselves trapped in a negative equity situation and so are unable to release their house on to the market for that reason; means that the right properties are in short supply. Add to this, the fact that with an annual average residential rental of more than twice the national figure, Dublin is also attracting its fair share of residential property market investors. Once again, this is aggravating the supply/demand situation.These recent changes in supply and demand have also created a shift in the number of people who have no desire to buy, as well as those who are falling over themselves to do so. This has resulted in a growth in demand for rental properties and a corresponding rise in investment in residential property with the intention of renting. This is particularly evident in the emergence of a significant number of large, multi-unit investments being made within the city.
The availability of finance
There’s no getting away from the fact that lenders fingers are still tingling from the burning they had recently, which is one reason why more and more buyers seem to be digging into their cash reserves to fund their purchases. That said there is an encouraging 7 out of 10 chartered surveyors in Dublin who agree that there has been a recent increase in mortgage finance,compared to 5 out of 10 outside of Dublin. This would appear to suggest that lenders are feeling somewhat more confident as well as borrowers. Once again this is backed by the increase in mortgage drawdowns, albeit caution is still the name of the game.However, this week’s working paper from the Central Bank regarding an increased deposit rate of 20% per mortgage and a cap on the earnings multiple of 3.5 times salary, if introduced will decimate the mortgage market in he short to medium term.It will more than likely create a society which will make the rich get richer with the offspring of cash rich parents being able to come up with such a hefty deposit. This situation poses these questions:
1) What will happen to rent prices with that market growing?
2) What about the poor unfortunates in negative equity who have been offered an out with a 10% deposit on the new house?
3) What about those families cramped into apartments they bought in the boom who are not able to re-enter the property market?
Where do we go from here?
The answer is the obvious build more houses and do it quickly. And yes put restrictions in place, but make it fair and equitable, for example:
• 10% deposit for those who can prove they saved the full amount
• 15% deposit for those who require a gift to assist with their deposit
• 3.5 times multiples on loans in excess of €350k, but increase the multiple to 4 times for those looking to borrow lesser amounts
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Author: Fran Cooke