This morning the Irish Banking Federation (IBF), which represents more than 95% of mortgage lending in the State, released mortgage lending date for quarter one of 2011 – the data is here and the press release is here. The figures paint a picture of a property market that is seizing up. Superlatives come in abundance : €577m was advanced during the quarter which is 94.74% down (CORRECTION: 96.71% was previously incorrectly shown) from the peak in Q3, 2006; the average investment mortgage is now €144,000 which is 56% down from peak and indeed 24% down from the previous quarter which is indicative of fire sales or tightening in lending criteria; just 15 mortgages a day were advanced to First Time Buyers (FTBs) during the quarter. The numbers are pretty bad. Of course the stress test and bank restructuring announcements were made at the end of March 2011 so any positive effects of these announcements will not be captured in the figures released today.
As for the outlook, there is a commitment by the incoming government to ensure there is €10bn of new lending per annum in the economy over the next three years and NAMA has flown a kite that it may part-fund purchases of property from its portfolio. The economy remains decidedly weak though the ESRI broke ranks last week and suggested GDP might grow by 2% in 2011. The Allsop/Space auction on 15th April, 2011 laid bare the extent of the decline in Irish property prices with achieved results suggesting we were (unscientifically) 60% off peak actual prices. Generally falling wages, stagnant population due to emigration and the market-distorting effects of NAMA, restraint on repossessions and bank foreclosure sales are all making for a dysfunctional market at present and it is hard to see any significant recovery in lending figures in quarter two.
The IBF numbers are significant though in their implication on the rental market. If potential buyers are sitting on their funds or are unable to get loans, then renting is really the only alternative which might strengthen demand and stabilise prices. Recent data from DAFT.ie and the CSO suggests that rent levels are stabilising.
And here are the numbers. First up, loan volumes (that is, number of new mortgages advanced) – RIL means Residential Investment Loan.
Next up, the value of new lending
And lastly the average of each loan advanced. You CAN’T equate this with average house price because we don’t know the proportion of the purchase price accounted for by the mortgage (was 100% and more during the peak, is typically 70-92% now).
Commenting on the data this morning, IBF Chief Executive, Pat Farrell, stated: “The economic situation remains challenging and prudence remains the order of the day. For customers that means manageable borrowing and for financial institutions it means prudent lending.”
NAMA Wine Lake 