Report: Investors, councils compete with families for homes

Families face “increasing competition” from local authorities and investors for new and secondhand homes, according to a report from Banking and Payments Federation Ireland.

Even as residential housing input rises, a “significant proportion” of new housing is being bought by “non-households” such as local authorities and investors.

In the 12 months to June, 22% of new homes were made to non-households, says the latest BPFI housing market monitor.

With local authorities and investors buying second-hand properties, couples and families face significant competition for the limited supply of new housing entering the market.

Non-households include local authorities, who acquired almost 2,900 houses in the past two years and built about 1,300 properties over the same period,” states the report states.

The housing market monitor covering the second quarter of 2018 presents unique loan-level data on the mortgage market as well as housing market trends.

BPFI chief economist Ali Ugur said there is a range of new factors at play in the housing market that could have a “significant bearing” on both demand and supply.

Chief amongst these includes an increase in competition for residential housing with home buyers now facing increasing competition from non-households such as local authorities for new and secondhand homes,” said Mr Ugur.

“Whereas private house hunters are well accustomed to having to compete with one another for their home, the most recent trends indicate that they are now increasingly having to also compete with non-household purchasers such as local authorities.”

There were 4,222 mortgages approved in July according to BPFI’s report on mortgage approvals, with 1,957 (46%) for first-time buyers.

Mortgages approved in July were valued at €931m, with first-time buyers accounting for €428m.

The continued growth in overall mortgage volumes has been driven by switching — it rose by more than 4% year on year.

Approvals for first-time buyers fell from 22,224 over the 12 months to February to 21,878 in the 12 months to July.

Brokers Ireland said the drop in the number of first-time buyers receiving mortgage approval is worrying.

This particular trend is out of sync with what should be happening in the market, particularly with rental levels that are higher than repaying a mortgage in most areas of the country,” said its director of financial services, Rachel McGovern.

Ms McGovern said the downward trend is due to the lack of availability of suitable homes, rapidly rising house prices, and an inability of first-time buyers to compete in the Dublin market, in particular.

Mr Ugur also warned about an increase in cost pressures as new building increases. Construction costs, by year-end, are expected to reach levels close to when prices peaked in 2007.

“The Tender Price Index published by the Society of Chartered Surveyors Ireland shows that construction tender prices are continuing to rise, and increased by 3.95% in the first half of 2018,” he said.

The society blames an increasing workload coupled with skills shortages, as well as the increasing cost of labour and materials, for the continuing increase in tender prices.