House prices to rise 5% over next 18 months, reports Moody’s
In a report on Ireland’s housing and mortgage markets, published today, Moody’s said that while levels of mortgage arrears are declining, the number of borrowers in negative equity remains high and the amount of non-performing loans still on the books could pose problems for the banks.
“The favourable economic environment in Ireland and the related recovery in house prices have improved Irish banks’ asset quality.
“However, the level of non-performing mortgages remains high and loans in long-term arrears make up the majority of the total, posing tail risks for Irish banks,” the report said.
“We expect mortgage arrears to slowly decline and house prices to rise by up to 5% over the next 12-18 months,” said Moody’s, which added that the recently loosened Central Bank mortgage lending rules will, along with the ongoing house supply shortage, push up prices.
While arrears and negative equity levels are slowly declining, Moody’s also noted that loan restructuring moves by the banks has resulted in forborne, or extended, loans stacking up to represent 20% of total mortgage lending in Ireland.
“A larger part of these loans are currently performing but they have a higher risk of eventually re-defaulting compared to mortgages which have never been forborne,” said Moody’s.
That said, Moody’s sees loan restructuring methods continuing to help address the long-term arrears crisis “in a more efficient manner than through repossessions”.
The company stressed the report does not constitute a change to Ireland’s sovereign rating. Moody’s has an ‘A3’ investment rating on Ireland, which is the toughest stance of any of the big three ratings agencies.
Moody’s said, in the wake of last October’s budget, that it remained concerned about the State’s finances.
Meanwhile, new figures from the Construction Industry Federation (CIF) shows housebuilding activity increased by 31% last year, with 5,626 units registered.
In terms of actual building work, 11,320 house-builds were commenced in the first 11 months of 2016, 46.5% more than in the same period in 2015.
“Measures must be taken to provide finance to regional housebuilders in tandem with the recent measures taken at national level, such as the local infrastructure fund and the help-to-buy initiative,” said CIF director general Tom Parlon.
“A number of measures have been put in place that will help generate supply but pockets of the industry — particularly in the regions — can secure sources of finance to make building viable again.
This could potentially have a negative effect on regional growth and undermine job creation and spatial strategies such as the National Planning Framework,” he said.
