Our love affair with property hots up

THE Irish love affair with property continues. A massive €1.64 billion in mortgages was taken out by house buyers in April as employment growth and the lowest interest rates in 60 years fuelled demand for property.

This was the second-largest monthly increase in mortgage advances since the Irish Central Bank (ICB) began recording the data series in 1996. The highest was in July 2004. Home owners have 78.5bn outstanding in mortgage debt. This compares with just €45.5 billion in April 2003.

The low interest rate regime is expected to be maintained by the European Central Bank, which has left its benchmark rate unchanged at 2% since June 2003. All 37 economists surveyed by Bloomberg said the ECB will probably hold borrowing costs at its next meeting on June 2.

The unabated demand for money to buy residential property follows similar robust growth in residential mortgages in March. The ICB said this suggests that the housing market has remained buoyant in 2005, despite some earlier indications that demand for credit had subsided somewhat.

“The underlying growth rate of residential mortgage lending remained unchanged in April at 25.8%,” the ICB said.

The ICB figures show that private sector credit surged 26.7% in the year to April. This was fuelled by the increase in mortgage lending, where the underlying growth rate was 25.4%.

However, the nominal rise in private sector credit was relatively low at €1.8bn in April, but the ICB said the figure was depressed by a dip of €1.3bn in lending to non-bank financial services firms. This fall was down to term loans that reached maturity.

Bank of Ireland, the country’s largest lender by assets, said that mortgage lending to first-time buyers rose 25% in the first quarter compared with a year earlier, after the government reduced taxes on property sales and the number of people at work increased.

House-price inflation slowed in April for a seventh month as supplies of new homes rose, according to Irish Life & Permanent.

Prices climbed 6.5% in April from a year earlier to an average €257,560, half the annual pace recorded in April 2004. Our rate of house building, at more than 19 per 1,000 people, is the highest in Europe.

Additional reporting Bloomberg and Reuters.

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