Mortgage lending up as property prices rise 6.6%

Mortgage lending by Irish banks rose €105 million in June, the largest increase since early 2010, new figures from the Central Bank reveal.

However, in annual terms, lending for house purchased declined by 2 per cent with household repaying €1.6 billion more than was advanced in new loans.

The figures comes as new figures from the Central Statistics Office (CSO) show residential property prices across the country rose 6.6 per cent in the year to June .

While prices dipped last month in Dublin, they rose everywhere else, according to the data.

Overall, prices in the capital are now 33.5 per cent lower than their zenith in early 2007. In the same time frame, apartments in Dublin are 41.8 per cent lower.

The Residential Property Price Index for June showed the 6.6 per cent increase for the year to June compared with 6.9 per cent for May and by 10.7 per cent in the year to June 2015.

June decrease

Prices decreased by 0.1 per cent during the month and by 0.7 per cent in Dublin, but were 4.5 per cent higher than a year ago.

Dublin house prices decreased by 1 per cent during the month and were 5 per cent higher compared with a year earlier, while apartment prices were 0.5 per cent lower when compared with the same month in 2015.

“However, it should be noted that the sub-indices for apartments are based on low volumes of observed transactions and consequently suffer from greater volatility than other series,” the CSO said in a statement.

Nationally, residential prices are 35.4 per cent lower than at their highest point in 2007.

Housing market crisis

Property Industry Ireland (PII), an-Ibec affiliated group that represents businesses working in the property and construction sector, said house price data did not properly reflect the crisis occurring in the housing market.

“While house prices increased by 6.6 per cent in the last year, rents grew by 10 per cent in the same period. The displacement of the housing crisis into the rented sector is largely driven by the continued exodus of landlords and an increased cohort of tenants, many of whom are renting longer than they expected because of the deposit rules introduced by the Central Bank last year,” said PII director Peter Stafford.

Merrion chief economist Alan McQuaid said that after average house price rises of 12.9 per cent in 2014 and 10.6 per cent last year we would likely see a more modest increase of between 6 per cent and 6.5 per cent for 2016, based on current data.

Elsewhere, Davy analyst David McNamara said Brexit brings a potential headwind in the near term for property demand but the stockbrokers still expect house price inflation to settle at 5 per cent by year end.