Friday 22 March 2019

Central Bank mortgage exemptions squeeze buyers out of the market

Pat Davitt has seen a decline in cash buyers. Photo: Creative Photography
Pat Davitt has seen a decline in cash buyers. Photo: Creative Photography

Alan O'Keeffe and Fran Power

Mortgage exemptions are squeezing buyers out of the housing market, letting cash buyers pick up bargains in the second half of the year.

Central Bank lending rules limit the number of mortgages that are exempt from the usual 3.5 times income rule to qualify for home loans.

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This gives cash buyers an advantage in the second half of the year when the quotas allowed to financial institutions have dried up.

Pat Davitt, chief executive of the Institute of Professional Auctioneers and Valuers (IPAV), estimated the proportion of cash buyers in the residential market has fallen to around 50pc of all buyers.

He maintained that Central Bank lending rules were not stopping a rise in house prices outside the main cities. Although prices outside Dublin are still up to 50pc lower than they were in 2005-06.

He made the comments on publication of the latest IPAV Residential Property Price Barometer revealed exclusively to the Sunday Independent. It provides insights into residential property market during the second half of 2018.

In 2006 and 2007, cash buyers made up around 20pc of the market. But in the years after the economic crash, it seemed nearly all buyers were cash buyers, according to Mr Davitt.

That figure fell to around 70pc to 60pc and that remained the case for a long time. Now, around half of all house purchases are in cash with no mortgage sought.

Meanwhile, the price 'corrections' in some parts of Dublin have not continued.

"The prices of some of the more expensive properties that fell in the previous six months have not fallen further and the prices are now holding," he said.

A three-bedroom semi-detached house in Mullingar can be bought for around €180,000 in contrast to up to €315,000 in 2006.

In Naas, a three-bed semi on sale now for around €280,000 would have cost €380,000 in 2006, he said.

There are many parts of the country where people cannot find buyers and there are people who cannot afford to rent them either, while the opposite is the case in the capital city.

The price barometer reports that price 'corrections' in more expensive areas of Dublin in the first half of 2018 proved to be undramatic as prices mostly stabilised in the final six months of the year.

It stated: "A recent feature of the property market has been the very discernible slowing of mortgage approvals by lenders in the latter half of the year so as not to exceed Central Bank limits."

Donal Buckley stated that in Dublin 4, three-bedroom semis fell 1.84pc to €950,000 following on from a 2.07pc fall in the first half of the year. Falls were also seen in these house types in Dublin 15 - down 2.78pc to €360,000.

In Dublin 6, four-bedroom homes rose by 3.85pc to €866,600 to compensate for a setback of 4pc in the first half of the year.

Kilkenny had the highest increase for four bedroom semis with a 4.42pc rise to €282,500.

Buckley reported that three-bed semis in North County Dublin rose by 13.64pc in the first half, only to slip 1.54pc to €433,300.

In Dublin 24, which includes Tallaght, three-bedroom homes saw a 9.75pc rise in the first half of the year with a 1pc drop in the second half to €318,300.

Sunday Independent

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