Construction BUSINESS

The very slight moderation in house price inflation in the latest CSO house price data – from 11.6pc in the year to October to 11.3pc in November in Dublin and from 12.8pc to 11.7pc in the rest of the country in the same period, comes as no surprise as housing supply is still a gulf away from the level of demand, and lenders now have less flexibility in terms of exemptions, according to Brokers Ireland.

Rachel McGovern, Director of Financial Services at the organisation which represents 1,300 impartial broker firms, said that current rules which treat second and subsequent buyers (SSBs) less favourably than first-time buyers was “adding to the supply problem.”  And she said tightening of regulations from January for such buyers was “exacerbating the issue.”

Rachel McGovern, Director of Financial Services at Brokers Ireland which represents 1,300 impartial broker firms throughout Ireland.

“If second and subsequent buyers were treated similarly to first-time buyers under the Central Bank mortgage lending rules, that is, being subject to a requirement to find a 10pc rather than a 20pc deposit, it would help improve the supply issue. Huge numbers of such people bought at or close to the height of the market over 10 years ago and they now need to move to fit their altered circumstances. While rising prices have the effect of diminishing or in some cases wiping out their negative equity, for many it is too big a mountain to climb to save a 20pc deposit so that they can move,” she said. “Before loose lending took hold a 10pc deposit was a standard practice that worked.”

Ms McGovern said, however, this is only part of the answer to the property shortage. It would create more movement and availability, and make their current properties available to first-time buyers.

She said Brokers Ireland believe the 3.5 times lending limit is also too restrictive and should have been increased to 4.5 times salary.  “There is no question of excessive lending on the horizon with mortgage lending for year-end likely to be well slack of the €10 billion that could be considered normal. The tragedy of the current situation is that generations are being locked out of the housing market. It may be some time before it is realised the negative impact that will have on their personal wealth over the longer term,” she said.

Ms McGovern said while the principle of macroprudential mortgage rules is good, in Ireland they were introduced far too early in the cycle and have had unintended consequences, such as rent inflation.

“However, it is the lack of supply of housing that is the main problem. The government needs to adapt more dramatic measures than heretofore to deal with the crisis,” she said.

Brokers Ireland says it is unfortunate that what has been prioritised in Ireland is the effects of the housing shortage rather than the cause – a lack of supply of new homes.