Housing Watch Ireland

Transcription

1 Strong momentum in the market Housing has been front and centre of the national discourse in recent years and with prices and rents currently experiencing strong growth will remain so for some time to come. The market continues to be characterised by a gap between the amount of housing available to buy and rent and the amount that is required to accommodate Ireland s growing population. Rising economic activity, employment and incomes are also providing support and lending is ticking up. But while new homes are being built, keep pace with demand. supply is failing to There are various reasons for this. Uncertainty in general and about policies impacting the sector hasn t helped, while the Beast from the East and Storm Emma took a toll on activity earlier in the year. A more structural issue is the workers. shortage of construction The number of households who think it is a good time to sell has been increasing though and with negative equity reducing, we may see more second-hand homes coming on stream in the period ahead. The demand-supply mismatch is set to continue however and notwithstanding a slight cooling in house most households think prices and rents will increase in the next 12 months. price expectations lately, Economic Research Unit August 218 Housing Watch Ireland

2 Housing Pulse Good Time % To Buy 69% To Sell July 218 Planning to Buy/Build January 216 Next 12 Months 1 in 1 Definitely/Possibly Expectations Buy versus Rent Connacht/Ulster Munster Rest of Leinster Dublin National Next 12 Months > 5% 35% 49% 35% 33% 17% 1-5% 39% 3% 43% 42% 39% For Sale 69% Think it is cheaper to Buy To Let 19% Think it is cheaper to Rent Planning to Spend on Home Improvements July 218 Rents Next 12 Months > 5% 29% 36% 32% 29% 16% 1-5% 39% 41% 4% 38% 37% 27% Likely Note: Rest of Leinster refers to Leinster excluding Dublin, Ulster only refers to Cavan, Donegal and Monaghan Disclaimer: This document has been prepared by the Economic Research Unit at The Governor and Company of the Bank of Ireland ( BOI ) for information purposes only and BOI is not soliciting any action based upon it. BOI believes any information contained herein to be accurate but does not warrant its accuracy and accepts no responsibility, other than any responsibility it may owe to any party under the European Communities (Markets in Financial Instruments) Regulations 27 as may be amended from time to time, and under the Financial Conduct Authority rules (where the client is resident in the UK), for any loss or damage caused by any act or omission taken as a result of the information contained in this document. BOI acknowledge the financial contribution made by the European Union for carrying out the Irish element of the Joint Harmonised EU Programme of Business and Consumer Surveys. Any survey data communicated or published in this document reflects only the view of BOI and the European Commission is not responsible for any use that may be made of the information. Any decision made by a party after reading this document shall be on the basis of its own research and not be influenced or based on any view expressed by BOI either in this document or otherwise. This document does not address all risks and cannot be relied upon for any investment contract or decision. A party should obtain independent professional advice before making any investment decision. Expressions of opinion contained in this document reflect current opinion as at 27/7/218 and is based on information available to BOI before that date which is subject to change without notice. This document is the property of BOI and its contents may not be reproduced, either in whole or in part, without the express written consent of a suitably authorised member of BOI. By accepting this document, the recipient agrees to be bound by the foregoing limitations. Bank of Ireland is regulated by the Central Bank of Ireland. In the UK, Bank of Ireland is authorised by the Central Bank of Ireland and the Prudential Regulation Authority and subject to limited regulation by the Financial Conduct Authority and Prudential Regulation Authority. Details about the extent of our authorisation and regulation by the Prudential Regulation Authority and regulation by the Financial Conduct Authority are available from us on request. Bank of Ireland incorporated in Ireland with limited liability. Registered Office - Head Office, 4 Mespil Road, Dublin 4, Ireland. Registered Number - C-1.

3 Demand Growing population The latest estimate puts the population at 4.79 million in 217. With net migration back in positive territory and nearly 3% of people aged between 25 and 44, demographic drivers remain strong Population (millions of persons by age) Jobs being created 2.4 The economy is performing well, with employment increasing by 2.9% year-on-year in Q1 218 and the unemployment rate at 5.1% in July Employment (millions of persons) Income gains Hourly earnings were up 2.7% on an annual basis in the first quarter of the year, while the ratio of household debt to disposable income was down to 136.9% at the end of last year Average Hourly Earnings (annual % change) Transactions ticking up The number of properties being transacted has been on a broad upward trend since 21. At less than 3% of the housing stock last year, activity is still relatively subdued though House Transactions (number of units) Source: Property Services Regulatory Authority Lending on the rise The size of the mortgage market was just under 7.3bn in 217 so there is plenty of headroom for growth. Drawdowns were up 16.8% year-on-year in volume terms in Q2 218 and 22.2% higher in value terms Drawdowns (value, ebns) Source: BPFI FTBs leading the way 45 3 On the mortgage approvals front, there was an annual increase in both volume and value in the first half of the year. First time buyers remain the biggest segment First Time Buyers Mover Purchases Other Approvals (number) Source: BPFI

4 Supply Housebuilding rising Investment in residential dwellings (which includes new builds and improvements) is continuing to increase albeit from a low base - with strong annual growth of 13.2% recorded in the first quarter of Residential Dwellings Investment (annual % change, constant prices) Still shy of demand The new CSO measure puts completions at 14,446 in 217 (versus 19,271 on the old Department of Housing basis) and while they and starts advanced in early 218, supply is set to remain short of what is needed for some time. 6 3 Q1 Q2 Q3 Q4 Q New Dwelling Completions Housing Starts (number of units) & Department of Housing, Planning and Local Government Supply constraints While the bad weather took a toll on building activity in March and April, construction firms tend to mention a range of things when asked about the factors limiting their activity including a lack of labour and uncertainty. Labour Shortages Uncertainty about Economic Policy Demand Financing Weather Conditions Main Factors currently limiting Building Activity Labour shortages a key concern Over 2.2 million people are now at work, with close to 138, employed in the building industry. The number of construction workers is about 43% below its past peak however Construction Employment (thousands of persons) Properties for sale at a low ebb 7 5 The stock of properties for sale on Daft.ie stood at 23,55 at the start of June, up around 1, on the same time in 217 but still at a relatively low level Housing Stock for Sale (number of units) Source: Daft Good time to sell 8 Helped by rising prices, the share of households who think it is a good time to sell has increased significantly over the past two and a half years, which may lead to more second-hand homes coming onto the market Good Time to Sell (% of households)

5 Prices Double digit growth 4 House prices nationally rose by 12.4% year-on-year in May 218 but are still around 2% below their 27 peak National Residential Property Prices Dublin Ex Dublin (annual % change) More to come While price expectations have cooled a little since the start of the year, a majority of households think further increases are on the cards over the next 12 months Housing Pulse (Jan 216=1) Regional picture >5% 49% 35% 33% 17% House prices were up 1.7% in the year to May in Dublin and 14.1% higher elsewhere, with gains also expected in the period ahead in both the capital and around the country. 1%-5% 3% 43% 42% 39% Dublin ROL* Munster Connacht/Ulster* House Price Expectations Next 12 Months (% of households) *Rest of Leinster refers to Leinster excluding Dublin. Ulster only refers to Cavan, Donegal and Monaghan Rents Rents at a new peak 2 Private rents rose by 6.1% year-on-year in June and, unlike house prices, are now well above their previous peak Private Rents (annual % change) Looking ahead >5% 36% 32% 29% 16% Most households also expect rents to increase over the coming year, with Dublin ahead at the regional level and Connacht/Ulster bringing up the rear. 1%-5% 41% 4% 38% 37% Dublin ROL* Munster Connacht/Ulster* Rent Expectations Next 12 Months (% of households) *Rest of Leinster refers to Leinster excluding Dublin. Ulster only refers to Cavan, Donegal and Monaghan Buy or rent? Cheaper to Buy When comparing the typical monthly mortgage repayment and the typical monthly rent for similar properties, 69% think it is cheaper to buy than rent in their area. Buy versus Rent (% of households) Cheaper to Rent

6 Policy measures tweaked With effect from January 1st 218, the proportion of mortgage lending that credit institutions can do above the Central Bank s LTI cap of 3.5% has been split into separate FTB (2%) and SSB (1%) categories. First Time buyers 9% Loan to Value Source: Central Bank of Ireland Second & Subsequent Buyers 8% Loan to Income 3.5x Help to buy helping 4 Applications for the Government s Help to Buy incentive for first time buyers were a solid 1,84 last year, with the scheme set to run until the end of Q1 Q2 Help to Buy Incentive (number of applications) Source: Revenue Commissioners 217 Q3 Q4 Upcoming Events ECB Meeting 11 th Jul 14 th Planning Permissions Q2 13 th Housing Pulse Sept September October November 24 th Late Contact Us economics@boi.com Approvals Aug 9 th Aug ECB Meeting 9 th Budget th 3 th Housing Pulse Oct Late Approvals Sept 14 th Sept Mid Drawdowns Q3 26 th Housing Pulse Nov Late Approvals Oct Dr. Loretta O Sullivan Patrick Mullane Conn Creedon Natalie Tennyson Group Chief Economist Senior Economist Senior Economist Media Relations Manager +353 () () () () Disclaimer: This document has been prepared by the Economic Research Unit at The Governor and Company of the Bank of Ireland ( BOI ) for information purposes only and BOI is not soliciting any action based upon it. BOI believes the information contained herein to be accurate but does not warrant its accuracy nor accepts or assumes any responsibility or liability for such information other than any responsibility it may owe to any party under the European Union (Markets in Financial Instruments) Regulations 217 as may be amended from time to time, and under the Financial Conduct Authority rules (where the client is resident in the UK), for any loss or damage caused by any act or omission taken as a result of the information contained in this document. Any decision made by a party after reading this document shall be on the basis of its own research and not be influenced or based on any view or opinion expressed by BOI either in this document or otherwise. This document does not address all risks and cannot be relied on for any investment contract or decision. A party should obtain independent professional advice before making any investment decision. Expressions of opinion contained in this document reflect current opinion as at 1st August 218 and is based on information available to BOI before that date. This document is the property of BOI and its contents may not be reproduced, either in whole or in part, without the express written consent of a suitably authorised member of BOI. The Governor and Company of the Bank of Ireland is regulated by the Central Bank of Ireland. In the UK, The Governor and Company of the Bank of Ireland is authorised by the Central Bank of Ireland and the Prudential Regulation Authority and subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority. Details about the extent of our authorisation and regulation by the Prudential Regulation Authority and regulation by the Financial Conduct Authority are available from us on request. The Governor and Company of the Bank of Ireland is incorporated in Ireland with limited liability. Registered Office 4 - Mespil Road, Dublin 4, Ireland. Registered Number C1.