FOR IMMEDIATE RELEASE
Curbing price volatility
in the housing market is an ongoing challenge for governments. Clearly, in order to stabilise house prices,
supply and demand must be brought into equilibrium. The difficulties inherent
in achieving this goal are illustrated by Ireland’s economic travails over the
past decade.
During the heady days of
the ‘Celtic Tiger’, property developers embarked on a building frenzy, their
expansionary drive fuelled by three factors: the availability of almost
limitless credit, the flow of cheap labour from Eastern Europe and an
apparently buoyant property market. However, too many of these building schemes
were not brought to fruition. The onset of the recession and the accompanying
credit crunch which it triggered forced many developers to abandon their
projects. The landscape of Ireland is now littered with ‘ghost estates’, abandoned,
unoccupied or unfinished. They have been declared economically unviable and
have consequently been flagged for demolition. Compounding the difficulties in the
housing sector, the lax mortgage credit criteria have also led to a cascade of
defaults amongst existing mortgage holders, thus creating an unprecedented wave
of house repossessions.
A priority of paramount
importance for governments in shaping social policy these days is, undeniably,
the provision of quality housing for its citizens. One legacy of the 2008 financial crisis,
however, is an acute shortage of housing.
As a supply shortage inevitably drives an upward spiral in prices, this
is reflected in the housing market. During 2014, house price inflation across
Ireland has vacillated between 8% and 20%.
Galloping ahead of the rest of the country, house prices in Dublin increased by 20%, whilst
nationally the rate averaged out at 13% to 14%.
These increases in prices show marked variations from county to
county. In the last quarter of 2014, the
year-on-year changes recorded per county were: Donegal 0.1%; Cavan 1.5%;
Monaghan 5.2%; Louth 11.4%; Longford 12.2%; Roscommon 9.7%; Wicklow 18.8%: Cork
City 12.2%; Limerick City 2.8%; Dublin City Centre 27.1%; South County Dublin
17.9% and North County Dublin 15.9%.
According to analysts,
the five factors impacting on house prices are credit, expectation, income,
supply and demographics. Of these
variables, changes in credit and expectation are most likely to induce changes
in house prices. Harnessing this recognition, the Central Bank has established
new regulations that place quantitative ceilings on the proportion of mortgages
at high loan-to-value ratio and on the proportion of mortgage lending at high
loan-to-income ratio. According to the Central Bank, this change in
macro-prudential policy in the real estate sector will have a dual effect:
increasing the resilience of the banking and household sectors to financial
shocks, and dampening the pro-cyclical dynamics between property lending and housing
prices.
In practical terms, the
new regulations mean that first-time residential buyers can borrow as much as
80% of the property price or even 90%, up to a limit of €220,000, plus 80% of
any amount beyond it. The scope of these
caps also extends to housing loans secured on residential property in the
state, as well as to equity-release/top-up mortgages. What it does not cover is the refinancing of
a house loan or loans that have been negotiated for the purpose of addressing
arrears of payments.
Although the regulations
have been welcomed by property analysts, there has been a current of dissent.
Opponents of the restrictions, whilst conceding that they may have the desired
effect of moderating house inflation, argue that the measures may also foster a
concomitant escalation of rental prices.
They predict that a rising demand curve for rented accommodation will
have the inevitable consequence of luring speculators into the market thereby
destabilising house prices and posing a threat to first-time buyers.
About the Author
Luigi Wewege is the founder of Vivier Group and the Managing Director of Vivier Mortgages (a Dublin, Ireland based home
loan company), as well as CEO of its Auckland based financial services arm, Vivier
& Co, a boutique Financial Service Provider in New
Zealand, offering no-cost, above
average returns for investors.
Vivier Mortgages
Vivier Mortgages is a Dublin, Ireland
based home loan company that has specialised in secured property lending,
principally for domestic mortgages and building projects, for nearly twenty
years. The company, having recently become part of Vivier Group,
is currently looking for new opportunities in Ireland, in the areas of property
acquisition, redevelopment and regeneration.
Vivier Group
Vivier
Group is the global umbrella organisation of the
Auckland based Vivier & Co and Vivier
Investments, the London based Vivier
Developments & Vivier Home Loans, and the Dublin based Vivier
Mortgages.
Media Contact
Company Name: Vivier Mortgages
Contact Person: Media Relations Manager
Email: press@viviergroup.com
Phone: +353 1 697 1353
Country: Ireland
Website: http://www.viviermortgages.com
Contact Person: Media Relations Manager
Email: press@viviergroup.com
Phone: +353 1 697 1353
Country: Ireland
Website: http://www.viviermortgages.com
