Thursday 22 August 2019

KBC sees mortgage growth despite tightening market

KBC CEO Peter Roebben
KBC CEO Peter Roebben

Shawn Pogatchnik

KBC Bank Ireland reported an 18pc growth yesterday in its mortgage lending for the first six months of 2019 - but chief executive Peter Roebben said the group had expected at least double that.

"There is already a slowdown compared to what we were expecting. This is a fact," said Mr Roebben, who took the helm of the Belgian bank's Irish unit in April.

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"We were not alone in expecting stronger growth this year. This clearly is driven by affordability issues," he told the Irish Independent following the Irish unit's publication of lower second-quarter and first-half earnings, dampened by write-offs of residential debt and the June offloading of its commercial loan portfolio to Bank of Ireland.

He said Ireland's residential housing market was caught in "a tension point" between many buyers' inability to purchase homes at existing prices and developers' failure to deliver new units in sufficient volumes.

Mr Roebben defended the Central Bank's enforcement of tighter lending limits for residential mortgages as necessary to prevent any repeat of the debt crisis from a decade ago.

"There is a tempering of growth because of the lending restrictions involved in the market, and I think this is essentially good," he said, adding: "There has been an adjustment to reality.

"People are saying: I can't go to the market now because the prices are just too high and I can't afford it."

He said the "core question" for Ireland's housing market was how to spur output.

He added that the country produced barely 18,000 new units last year, is on course to produce 22,000 this year, "and we probably should be closer to 35,000 units a year for more balanced growth".

"You have a huge gap, of course, because in the years after the crisis, there was basically no construction. Now you have, after a number of years of growth, this pent-up demand. This is the tension point in the economy," he said.

Mr Roebben said while Ireland's strong growth and demographics should keep fuelling demand for property, rising global trade tensions and Brexit could spook would-be purchasers from taking the plunge, even if supply and affordability improve.

"It's going to be tough out there, but it doesn't have to be dramatic for Ireland. The single worst factor - everyone is bored of repeating this but it's a fact - is a hard Brexit," he said. "If that would happen, you'd have an immediate shock factor on the economy.

"Over the following 12 months or so, you'd see people postponing their buying decision, wondering how will it affect me? Structurally, the demand is there.

"We do believe Ireland is in a good position economically. It's a different economy than it was 10 years ago, but you might see a slowdown there."

In its results, KBC Bank Ireland reported that profits fell 25pc to €9m for the three months ending in June and fell 78pc to €24.9m for the first half of the year, versus the same period of 2018.

Irish Independent

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