bpfi housing market monitor · 2014-12-04 · commentary bpfi housing market monitor q3/2014...

www.bpfi.ie

BPFI HOUSING MARKET MONITOR Q3/2014

www.bpfi.ie

BPFI Housing Market Monitor

Q3/2014

With a commentary by Ali Uğur

Banking & Payments Federation Ireland

www.bpfi.ie


Indicator Latest quarter One year ago % change

Dwellings listed for sale 13,424 10,570 27.0%

Dwelling completions (Jul/Aug) 1,774 1,309 +35.5%

Yr/yr change in transaction prices 15.0% 3.6%

Yr/yr change in list prices 14.4% -1.5%

Mortgage approvals 7,717 5,293 46.0%

Mortgage drawdowns 6,308 4,482 40.7%

Transactions 8,815 7,952 10.9%

HOUSING SUPPLY

www.bpfi.ie

BPFI HOUSING MARKET MONITOR Q3/2014COMMENTARY

Mortgage Approvals and Drawdowns Record Ongoing GrowthAs with economic performance, there is significant regional difference with respect to the housing market across Ireland. Residential property prices at national level increased by 16.3% in the year to October 2014, according to Central Statistics Office data. On a regional basis prices in Dublin were 24.2% higher than a year ago. A higher than national average increase in Dublin perhaps reflects the fact that economic performance in terms of jobs created is much stronger than in the rest of the country as well as a limited supply of properties available in the capital.

It is important to view the significant increase in residential property prices in the past 12-18 months in the context of a market where prices declined by around 60% from peak to trough between 2007 and 2013.

The rate of housing completions since 2010 has been well below what would be needed to match the ongoing demographic pressures. According to CSO Census 2011 figures, the number of households in Dublin increased by over 90,000 between 2006 and 2011, but only around 50,000 housing units were built. As discussed in recent research by the Economic and Social Research Institute (ESRI), while some of this “under-supply” was met by the absorption of existing stock, this source of supply has already come under pressure in the Dublin area where current forecasts show that supply can only start

to match demographic demand in 2016 at the earliest. This research also suggests that over the next 15 years somewhere between 18,000 and 33,000 new households will be formed each year at a national level, with the central scenario suggesting around 25,000 new households a year.

The latest data from the Department of Environment, Community and Local Government show that there were nearly 1,800 new housing units completed in July and August 2014 (September figures are not available at the time of publication). This represents a 36% increase over the same two months in 2013. It brings the year to date completions (August 2014) to around 6,000 units, and assuming the same level of completions as during September - December 2013 period at a minimum, total completions should be over 11,000 units in 2014, which is the highest level achieved since 2011. As forward looking commencements data are not updated since February 2014, we have no visibility in terms of potential output for 2015 and onwards.

Housing market transactions in Q3 2014 were around 8,900, up nearly 11% compared to the same period last year and still showing signs of an illiquid market given the overall stock. Transactions in the Irish market are around one third of those in the UK as a ratio of total transactions to the total number of residential properties.

www.bpfi.ie


The limited availability of properties for sale has also led to pressure in the rental market with rents continuing to rise throughout the country between August and October, according to the figures published in the latest Daft.ie Rental report. In Dublin, rents are now almost 30% above their lowest point in 2012 and less than 10% below their 2007 peaks. In addition to the high rental levels, the lack of choice is becoming a significant concern for potential renters which can have negative effects for international companies located in Ireland trying to attract highly skilled staff for their operations here, and specifically in Dublin. The report notes that, unlike the sales market where rapidly rising prices have drawn out significant amounts of second-hand supply, rising rents have not seen any increase in listings.

Mortgage approvals are a good indicator of potential demand for housing and the latest mortgage approvals data shows another strong performance in the third quarter of 2014, with the number of mortgages approved up by 46% year-on-year. By the end of October, mortgage approvals had risen to around €3.7 billion in the first ten months of 2014, based on the three-month moving average, and they were up 48.3% year-on-year with an average mortgage approval value of €180,480 in the three months ending October 2014. It is estimated that, if

existing trends continue, the total value of mortgage approvals for 2014 will be €4.3 billion.

Mortgage drawdowns are a good indicator of current credit conditions and the latest figures show that the total value of new mortgage lending in the third quarter of 2014 was €1.1 billion, representing a 50% increase in total value of lending compared to the same period in 2013. The value of mortgages drawn down increased to their highest level since Q3 2010, which was also the last time that quarterly drawdowns exceeded €1 billion. It has to be noted that percentage increases should be interpreted in the context of a housing market recovering from a relatively low nominal base.

Proposals from the Central Bank of Ireland on macro prudential policy for residential mortgage lending could have a considerable impact on the future trends in the housing market. As currently structured, they will impact significantly on first-time buyers’ ability to purchase a home as well having indirect, and arguably unintended, consequences for construction activity. Proposals aside, the primary challenge remains the inadequate supply of housing in the current market, especially in Dublin, and this is likely to be reflected in rising house prices and rents.

Ali Uğur, Economist, Banking & Payments Federation Ireland

COMMENTARY

www.bpfi.ie


HOUSING SUPPLYProperties listed for saleThe third quarter of 2014 saw just over 13,400 properties listed for sale, the second largest total since the start of 2011. This is the sixth consecutive quarter of annual growth in listings. Of the nearly 2,900 extra properties put up for sale, 40% were in Dublin, while a further quarter were from the rest of Leinster. All regions saw some growth in listings in the third quarter of 2014.

Source: Daft.ie

2012 2013 2014

Q1 Q2 Q3 Q4

2,000

4,000

6,000

8,000

10,000

12,000

14,000

www.bpfi.ie


Source: DoECLG

500

1,000

1,500

2,000

2,500

3,000

Q1 Q2 Q3 Q4

2012 2013 2014HOUSING SUPPLYNew dwellings completedNearly 1,800 new homes were completed in July and August 2014 (September figures not yet being available at the time of publication). This represents a 36% increase on the same two months in 2013, and the volume is also higher than the same period in 2011 and 2012.

Growth in new completions was concentrated in Dublin, which accounted for over 60% of the increase of 465 units. For the year to end-August, Dublin saw 1,908 units built, compared with 761 in January-August 2013. The rest of the country saw an increase from 4,248 to 4,698.

www.bpfi.ie


Source: Daft.ie

-20%

-15%

-10%

-5%

0%

5%

10%

Connacht-Ulster

Munster

Other cities

Q2Q1 Q3 Q4 Q2 Q2 Q2Q1 Q1Q3 Q4

2012 2013 2014

15%

20%

25%Dublin

Leinster

National

Source: CSO

Q2Q1 Q3 Q4 Q2 Q2 Q3Q1 Q3 Q4 Q1

2012 2013 2014

Dublin

Ex-Dublin

National

20%

-20%

-16%

-12%

-8%

-4%

0%

4%

8%

12%

16%

24%

HOUSING PRICESTransaction PricesResidential property prices rose by 15% in the year to September 2014, according to official CSO figures, the strongest appreciation in prices since early 2007.

As in all recent quarters, these increases are being driven by trends in Dublin, where prices are 23% higher than a year ago. While this is higher than almost any previous reading for the CSO index, it is slightly less than the annual increase seen in the second quarter.

House price inflation outside Dublin has grown from 1.2% at the start of the year to 7% in the year to September.

List PricesList prices show a very similar trend to transaction prices, according to figures published by Daft.ie, with a national year-on-year increase of 14.4% being driven by increases of almost 25% in Dublin.

The Daft.ie figures also give a regional breakdown outside Dublin, and point to rapidly rising prices in the rest of Leinster (up 14.8% year-on-year) and rising prices in other cities (up 8.5% year-on-year). Elsewhere, however, house prices look more stable, rising by 1.7% in Munster and 1.3% in Connacht-Ulster.

www.bpfi.ie


Dublin LeinsterOther cities Munster Connacht - Ulster

400

800

1,200

1,600

2,000

2,400

2,800

3,200

2012 2013 2014Source: RPPR

* Note: These numbers are based on transactions registered with the Residential Property Price Register by mid-November 2014 and are subject to revision.

PROPERTY TRANSACTIONS & MORTGAGESProperty TransactionsIn the third quarter of 2014, the number of property transactions in Ireland increased to over 8,800, an 11% increase compared to the same period of last year. This was the twelfth consecutive quarter of annual growth in transaction numbers.

Growth in transactions was muted in Dublin (2.5%) and Munster and Connacht-Ulster (1.2% and 3.2% respectively). The bulk of growth was seen in the four other cities (up almost 40% year-on-year) and in the rest of Leinster (23%).

www.bpfi.ie


Q2Q1 Q3 Q4 Q2Q1 Q3 Q4

Approvals Drawdowns

2,000

4,000

6,000

8,000

1,000

3,000

5,000

7,000

2012 2013 2014Source: BPFIPROPERTY TRANSACTIONS

& MORTGAGESMortgage Approvals and DrawdownsMortgage approvals offer an early indicator of credit conditions in the mortgage market, which underpins the bulk of transactions in the housing market. The third quarter of 2014 saw the greatest volume of mortgage approvals since the start of 2011, with over 7,700 mortgages approved (7,100 relating to property purchase), 46% more than the same period last year.

Mortgage drawdowns generally reflect transactions and again offer an indicator of credit conditions. Just over 6,300 mortgages were drawn down between July and September (nearly 5,800 of which related to property purchase), up 41% from the level recorded in Q3 2013.

www.bpfi.ie


ABOUT THE REPORTThe information presented here is based on a range of publicly available reports and datasets and collated by Identify Consulting for Banking & Payments Federation Ireland. It is intended to bring together the range of housing and mortgage market data available and to constructively inform on-going analysis and assessment of the housing and mortgage market.

Figures are presented by quarter and by region, where possible. Unless otherwise specified, quantities given for particular quarters (and/or regions) are totals, while prices are averages for the entire quarter. The sources used for compiling the report are as follows:

• the Department of the Environment, Community & Local Government [dwelling completions]

• the Central Statistics Office [transactions price index]

• the Property Services Regulatory Authority [number of transactions]

• Daft.ie [properties listed for sale and asking price index]

• Banking & Payments Federation Ireland [mortgage approvals and draw-downs]

www.bpfi.ie


Des

ign

by

roo

mth

ree.

com

www.bpfi.ie

bpfi housing market monitor · 2014-12-04 · commentary bpfi housing market monitor q3/2014...

Documents