Almost half of properties snapped up by cash buyers

 

Almost half of all the residential properties bought last year were purchased with cash or savings.

Some 25,000 properties were bought without the need to take out a mortgage.

This was not far off the level in the recession years, when numbers approved for a mortgage fell to an all-time low.

A total of 55,000 homes were bought last year, according to the latest quarterly Consumer Market Monitor from the Marketing Institute of Ireland and UCD Michael Smurfit Graduate Business School. This was an increase of 8pc on 2017.

Almost 25,000 were bought with cash, a figure which represents 45pc of total transactions.

Author of the report, Prof Mary Lambkin, said the numbers who were able to buy with cash was similar to the 2009 to 2013 period.

"In the absence of mortgage finance, almost half of the homes purchased relied on cash and savings, similar to the recession years when mortgage approvals were at an all-time low."

Separate research from the Central Bank last year found cash buyers more likely to snap up cheaper properties than dearer ones.

This meant modest homes are seeing the biggest price rises.

This is mainly because cash buyers are more active in the lower-end of the housing market, pushing up prices of smaller homes in less desirable areas.

This means there is a limit on the ability of the Central Bank's lending rules to control prices, a study by economist Edward Gaffney found.

Cash buyers include corporates and non-government agencies.

They also include householders using equity from their home, or a bank deposit, to finance the purchase of a buy-to-let.

The Consumer Market Monitor found the property market is growing, but the report shows the number of homes bought last year was about half the amount purchased during the height of the last boom in 2005.

Back then some 105,000 homes were sold.

Last year saw an increase of 12pc in the number of mortgages issued, with 30,629 drawn down.

This is way down on the 85,000 mortgages issued in 2005. The monitor also showed that while market growth was sluggish, demand remains high for housing.

Prof Lambkin said supply was failing to meet demand for properties, because 35,000 new homes are needed every year.

Over the next decade some 350,000 new homes will be needed to satisfy demand.

"The consumer economy is performing well in most areas, but the residential property market is still lagging behind.

"There were 55,000 homes sold in 2018, an increase of just 8pc year-on-year, a rate of growth that has remained consistently low over the past five years.

"This compares to the boom years of 2005-2007 when over 100,000 homes were sold each year."

Prof Lambkin said the property market's sluggish growth does not reflect the large increase in the working population and the rate of new household formation over the past five years.

The number of homes for sale has increased to approximately 23,500, but the level of property sales should be about double the current level.

The report said 15,000 new units were built in 2017, 18,000 in 2018 and another 20,000 and 23,000 new homes set to come on stream this year and next year.

The report said there would be 2.35 million housing units in the State if the needed 350,000 new housing units are built over the next year.

Irish Independent