Mortgage Lending Is Falling
If laughter truly is the best medicine then today’s blogpost lies somewhere between snake oil and the fountain of youth. It’s just a question of who to believe…
We kick off with the latest quarterly figures from the Banking Federation. They show that mortgage lending is falling for Q1 2012 compared to the previous quarter, and Q1 in 2011. One of the reasons for this may be that mortgage arrears are rising with 15 percent of all mortgages either restructured or in arrears by 90 days.
The figures show that another 6,000 mortgages went into arrears in Q1 2012, though the pace of increase in arrears is slowing. One in every 13 mortgages is over 6 months in arrears, and this is length of time when it is considered that a mortgage will not be recovered.
Unemployment is one of the reasons for the mortgage arrears problems and there is no sign yet of any pickup in the economy in general. In fact, we may be in for another year or two of running along on the bottom before things start to pick up again.
Construction of Houses at an all-time low
The indications of a bottoming out of house prices in Dublin in the last two months will be of little comfort for the construction industry. The construction industry federation recently stated that it expects only about 7,000 homes to be completed this year. This figure is well down on the 10,000 units that were completed in 2011.
Most of the homes being built are of the “one off” variety for a person building their own home. A good proportion of these houses will be in rural Ireland where traditionally people get their home built to their own design.
It looks like the Government will have to wait longer before there is any sign of improvement for the construction industry unless it undertakes some large construction projects. Perhaps the building of a Children’s hospital would be a small start, if the experts can agree on a suitable site.
Are the Vested Interests starting to talk up the Property Market?
As Miley Byrne from Glenroe would have said, “Well Holy God!” The recent stats from the Central Statistics Office of house prices show that prices in Dublin are starting to increase slightly. This will be welcome news to people trying to sell property in the Dublin region, and mean nothing to everyone else.
The question is how will vested interests involved in the Irish property business spin it to their advantage? Would it even be remotely possible for them to (now don’t laugh)…hype up the market? Once the Banks and Building Societies start to provide funds for mortgages, there is a possibility that we could see a steep increase in property prices, like what happened in the 90’s and the years following.
OK you can laugh now.
If something as out of the blue as that did happen, it would be beneficial for the sellers and for the auctioneers who work off a percentage of the price. However, for the economy as a whole and the need to keep costs including wages low in order to keep the country competitive, there is a balance to achieve and maintain.
There is no doubt that a functioning property market is necessary for a healthy economy, but we must not have price increases of more than two or three percent per annum if we are to make a sound recovery. It is imperative for the economy in general that property prices remain affordable for the average industrial wage, otherwise wage demands from workers will threaten the recovery.
People who talk of very cheap prices now and who keep relating to 2007 prices are missing the point. Those prices were astonishingly dumb as we were on a fast-track to financial ruin. Going from one extreme tom another in decade-long cycles is a bad habit to get into. But some things never change.
If the good times suddenly arrived tomorrow, how many of us would have learned our lesson?
