New IBF Housing Market Monitor identifies risk of housing shortage in some areas

A new monitor of housing market activity, published today by the Irish Banking Federation (IBF), points to the need to ensure that a housing supply shortage does not arise in certain areas.  It also indicates what the future requirement for first-time buyer mortgages might be in light of household formation.

Compiled in collaboration with Ronan Lyons, Economist, who also provides a commentary, the IBF Housing Market Monitordraws on various published data on the residential housing market in order to provide a composite analysis on where the market is today and where it may be going.  IBF Chief Executive, Pat Farrell, states:

“While each piece of existing data is significant in itself, there is added value in looking at all of this data together to see what it is telling us in overall terms about the housing market.  We believe this will make an important contribution to policy formation and debate about the future housing market in Ireland.”

Analysing a range of statistics under the three key headings of housing supply, housing prices and housing transactions, and assessing these on a composite basis, Ronan Lyons concludes:

“Among the statistics presented here there are signs that in certain segments the time of a glut in houses is past and instead policymakers need to ensure no shortages emerge…… construction of new homes in urban areas is likely to be central in ensuring that first time buyers starting new homes over the next few years have somewhere to live.”

On the matter of mortgage supply and demand Ronan Lyons states:

“It is encouraging to see that the number of mortgages approved and the number drawn down increased in 2012.  The number of approvals was up by almost one quarter, while the number of drawdowns was up by roughly 28%.  The only concern is that the turnaround in activity may be temporary, as there were spikes in both approvals and drawdowns in Q4, just before the end of mortgage interest relief.  We will not know until the next issue of the IBF Housing Market Monitor whether the first half of 2013 will see a hangover from the end of mortgage interest relief.  But clearly the focus now must be on increasing the number of transactions from what is an unhealthily low level.  A country where there are roughly 25,000 new households forming every year will need a multiple of the 8,600 first-time buyer mortgages drawn down in 2012.  That, however, is as much about demand for mortgages – and thus confidence in the country’s economic future – as it is about supply.”

The IBF Housing Market Monitor will be published quarterly and can be viewed on the web here.

Note: The Irish Banking Federation (IBF) is the principal voice of the banking and financial services sector in Ireland, representing over 70 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.