Banks eager to give out 'a lot more' loans for house building as billions available

AIB and Bank of Ireland stuggling to find projects to access building funds

Bank of Ireland and AIB are not receiving enough demand from housebuilders to use all the funds they have earmarked for housing projects, executives said on Tuesday. Picture: Getty

Ireland's two dominant banks are not receiving enough demand from housebuilders to use all the funds they have earmarked for housing projects, executives said on Tuesday, highlighting the challenges Ireland faces in ramping up much needed supply.

The lack of supply has pushed house prices up 162% from a 2013 trough and roughly doubling rents.

Bank of Ireland, the primary lender to the sector alongside main rival AIB, last year increased its pool of funding for housing developments by 40% to €2.5bn, saying it wanted to play a bigger role in the Government's plan to see an average 50,000 new homes built annually over six years.

On Tuesday, Bank of Ireland's head of corporate and commercial banking said the lender is struggling to find enough projects beyond the €1.2bn already committed that will be drawn from the €2.5bn funding pool. "We're not seeing the number of projects coming at us that we would love to be seeing to get to a point where banking capacity is a challenge," John Feeney told the BPFI National Banking Conference at the Mansion House.

AIB managing director for capital markets, Cathy Bryce, told the same conference that her bank would also like to be lending "a lot more" into the sector than it currently is.

Ms Bryce highlighted the limitations of a highly fragmented construction sector and issues around the predictability of returns for equity investors linked to planning delays, land availability, affordability and rental regulations.

The Government is considering amending regulations that cap rent increases at a maximum of 2% a year after a collapse in privately funded apartment building pushed the number of homes built last year down 7% to a little more than 30,000.

The Central Bank expects the Government to fall short of its target over the next three years to boost housing supply by 50,000 a year. House completions rose 2% year on year in the first quarter but were down 10% on the same period in 2023.

"We haven't seen any sort of spike up in the level of applications or activities, so that's a harbinger that we're not yet on track to get up to the much larger numbers that have been mooted," Mr Feeney said.

Reuters