DUBLIN May 4 The value of mortgage drawdowns in
Ireland grew 40 percent year-on-year in the first quarter, data
showed on Thursday, with surging demand likely to put further
pressure on house prices currently posting double-digit growth.
Irish mortgage lending collapsed following the bursting of a
property bubble in 2007 and a recovery over the last three years
that has picked up significantly in recent months has coincided
with a chronic housing shortage throughout the country.
House prices, which had stabilised at an annual growth rate
of 4 to 5 percent last year following an initial rebound, have
since accelerated above 10 percent as an easing of central bank
lending rules and a new government subsidy for first-time home
buyers added to the recovery.
Mortgage approvals also far outstripped drawdowns in the
first three months, with year-on-year growth of 78 percent to 2
billion euros pointing to further pent up demand among buyers in
the European Union's fastest growing economy.
"The biggest issue in terms of these approvals translating
into drawdowns is the low level of new supply," Goodbody chief
economist Dermot O'Leary said.
"Approvals for new entrants is substantially more than the
amount of new properties coming to the market thus the obvious
conclusion is that prices will continue to be bid up. Price
inflation is likely to continue to accelerate from here."
O'Leary said of the 20,000 mortgages approved for first time
buyers and investors in the past 12 months, only 10,000 would be
met by new supply available for sale with self-builds set to
account for almost half of the 18,500 homes forecast to be
completed in 2017.
House prices remain 31 percent below the 2007 peak and Irish
Central Bank governor Philip Lane said on Wednesday that he did
not think the market was showing the same dynamic as a decade
ago. He said the bank's rules limiting mortgages to 3.5 times a
borrower's income would act as self-correcting brake to prices.
Analysts also say the mortgage market is still shy of the 10
billion euros of lending a year that would be considered a
Davy Stockbrokers increased its forecast for lending this
year to 7.5 billion from 6.9 billion euros following Thursday's
date and both Goodbody and Investec said there was clear upside
risk to their forecasts of 7 billion euros.
(Reporting by Padraic Halpin; Editing by Toby Chopra)