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.”
This is proof of anecdotal evidence from Estate Agents and mortgage brokers over the recent past. The majority of residential sales purchasers are now cash buyers.
Pat Farrell’s statement is so arrogant and full of hubris that he holds himself up to ridicule. He is defending the indefensible. If he had any pride or self esteem, he should leave the job and tell it like it is.
Your analysis shows that the market is in meltdown and that there is no sign of any upturn. Nor will there be until there is liquidity. In the meantime an ex-customs officer sits overseeing the demise of our economy. We are stuck with an “enforcer”, when we need a commercial merchant banker with distressed loan management experience. What sort of warped political appointment was this?
NAMA is proving itself to be a malignant influence on the financial system and is causing untold damage to the welfare and wealth of the citizens of this country. It needs to be privatised and commercialised ASAP, before the economy dies of atherosclerosis.
I don’t think the problem is NAMA per se, the problem is asking prices are still far too high to generate any demand.
If asking prices fall to 60-70% below peak the market will start to return to normal
[…] that has almost completely collapsed. NAMAWineLake provides his customary high quality analysis here. I’d note that the series seem to have a seasonal pattern so comparisons of 2011:Q1 with peak […]
I told ye so to within €6m but I always do don’t I!
@D_A
NAMA is hoarding property to support unsustainable price levels. It is affecting the supply side and will not allow the market to reach a base.
Also,if NAMA allowed sales at levels where demand exists (as per the BOSI model), it would create liquidity. Without liquidity, there is no real market.
To quote the immortal words of George W. Bush: “This sucker is going down.”
Wait until interest rates move up and then later the new currency, not a propitious time to buy. I would suggest conversion to Noway’s krone.
A lot of the out of kilter asking price’s have got a lot to do with what outstanding mortgage is outstanding on a property.
For example if my outstanding mortgage was €400K, I would have to ask for €400k even though the present market value may only be €200K. A lot of people who bought any time after
2002 would probably be in this position.
Very good analysis and figures. But it seems clear that even if prices fell another 50%, house sales would not increase. The banks are simply not giving mortgages.
The very interesting figure is ‘re-mortgage and top up’.
You are correctly adding these to the total, and clearly that is valid for the earlier years. But what are ‘re-mortgage and top up’ in 2010-2011 conditions?
Are they simply mortgages in deep trouble being refinanced and do they have anything at all to do with ‘genuine’ purchase activity. It could be of course the many State retirees with lump sum too heavy to hold doing up houses.
It might be worth digging a little on this figure.
Overall it is abysmal but so much resource was allocated to the housing sector that it is inevitable that the correction will continue to be made for a long time to come.
The real implication here is for continued and accelerated jobs decline in building sector.
Why can’t credit creation be directed towards productive assets with perhaps a low yield rather then Houses which when taken holistically need a outside source of revenue to justify their rent.
Start small but built up slowly using a State industrial bank – a sugar beat factory in Mallow would be a start.
Its pretty shocking to see such a lack of vision – the neo-liberalism is endemic – Ireland is not London – it no longer aggregates global plunder at the rate of the past.
It needs to build its own capital , Buccaneers need bounty – we have run out of prizes.
This is all irrelevant now that NAMA is going to be offering mortgages to both the residential and commercial sectors according to Frankie and Brendan this morning.
Soon everyone will be going to NAMA for a loan and they obviously have the manpower and infrastructure to undertake such an enterprise!
Will NAMA do overdrafts as well!!
I really think that NAMA this is like a dog whose digestive system is the wrong way wrong round.
Consume shite loans and serve up good mortgages from the rear end.
Sorry, I can’t get my head around this NAMA thing at all.
Since NAMA is now a bank, why does NAMA not loan money to the Pillars and they in turn can pay off the foreign bond holders? That way the debt is internalized.