Cash deals still make up half of home sales
Published 15/08/2015 | 02:30
Cash buyers are still accounting for 50pc of all property purchases, despite a 30pc increase in mortgage lending drawdowns and the removal of significant incentives for investors.
According to Savills, which combined results from the Property Price Register with data released yesterday by the Banking and Payments Federation of Ireland, there were 11,113 transactions in the second quarter of this year.
Of these, 5,604 involved borrowing to some extent, but an almost equal 5,509 were paid for outright with cash - or 49.6pc of all deals.
"This means that cash buyers have consistently accounted for around 50pc or more of purchases since the final quarter of 2012," said analyst Dr John McCartney.
He predicts that cash purchases are likely to remain at these levels for at least another year. Dr McCartney cites likely low interest rates, rampant increases in rent and the unlikelihood that shortages in the housing market will be addressed any time soon.
He said: "Following the withdrawal of tax incentives last December, many people expected investors to exit the residential market. However, we predicted that cash investors would remain active and this has proved to be the case.
"Their continued appetite for property reflects rent increases which have supported buy-to-let returns and low deposit rates, which are driving money into better-yielding assets.
"The most recent Central Bank figures show that households have €93bn on deposit in the Irish banks. Given the differential between deposit rates and residential yields, some of this money is surely going to find its way into buy-to-let investments."
Since the last quarter of 2012, cash buyer participation has ranged consistently from 49.2pc to 54pc. Price growth has eased, but transactions continue to increase rapidly.
Dr McCartney predicts that prices will again begin rising based on increasing rents and continued shortage.
"We are in the middle of a European-wide quantitative easing process which is not due to conclude until September 2016 at the earliest. Interest rates are unlikely to rise until then."