Thursday 30 June 2016

House prices fall - but new buyers squeezed out of the market

Published 01/03/2016 | 02:30

Philip Lane, Governor of the Central Bank of Ireland. Pic Collins Photos
Philip Lane, Governor of the Central Bank of Ireland. Pic Collins Photos

First-time buyers are being pushed out of the property market, with just over 1,000 would-be buyers obtaining approval for a mortgage in January.

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The figure was down 321 on the same month last year, and is also lower than the figure for the previous month, banks said.

It is among a raft of new data that show the property and mortgage markets are under strain.

Restrictions on mortgage lending introduced by the Central Bank were cited by experts as contributing to the squeeze on new buyers and the decline in house prices.

The figures show:

• Property prices were down 0.5pc nationally in January, with prices in Dublin falling more than this.

• There was also a fall in the number of dwellings completed in the last three months of last year.

• The Central Bank said there was a decline of €227m in the value of loans for house purchases in January. This reversed an increase in mortgage drawdowns in the previous month.

• The number of house price transactions was down 13pc in the last three months of last year.

A shortage of properties to buy combined with the lending restrictions mean the property market will remain weak this year, said Juliet Tennent, economist with Goodbody Stockbrokers.

Banks said that a total of 1,067 first-time buyers got clearance to take out a mortgage in the first month of the year.

This number was down by 23pc on the same month last year, according to the Banking and Payments Federation. This is the lowest level of approvals since the data series began in September 2014, although new buyers still accounted for about 50pc of all mortgage approvals.

Overall, the number of approved mortgages dropped by 14.7pc in the three months to January of this year when compared with the same period last year.

A total of 2,133 mortgages were approved per month on average during the three-month period.

And property prices fell by 0.5pc nationally in the month of January, the Central Statistics Office said. They were up 7.6pc on a year ago. This is half the property inflation rate of a year ago.

Economists said prices have been fairly static for the past six months now.

In Dublin, residential property prices fell by 1.2pc in January, and were 3.4pc higher than a year ago.

Outside the capital, the price of residential properties rose by just 0.1pc in January compared with a decrease of 0.9pc in January of last year.

Prices were 11.4pc higher than in January last year.

The number of property transactions fell by 13pc in the last three months of last year, compared with a year earlier.

Just 3,752 homes were completed in the same period, a fall of 16pc, the banking federation said.

Ms Tennent said: "Annual price inflation in Dublin has slowed significantly over the past months as Central Bank mortgage rules are having a disproportionate impact.

"The impact of these rules is also being seen in the number of transactions and mortgage approvals."

The Central Bank, headed by Governor Philip Lane, introduced rules in February last year that restrict the amount that can be borrowed to 3.5 times a borrower's income. The rules also mean that most buyers have to have a deposit of 20pc of the value of the property, although exceptions are allowed.

Broker body PIBA (Professional Insurance Brokers Association) claimed that home ownership was now beyond the reach of many potential first-time buyers who are being forced into a very tight and increasingly expensive rental market.

Irish Independent

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