Properties will continue to become less affordable for Irish buyers this year on the back of house price inflation and low wage growth, ratings agency Fitch has said.
In its 2018 global housing and mortgage outlook Fitch forecasts Irish house prices to rise 10 per cent this year, dropping to 5 per cent in 2019. In the year to November 2017, residential property prices increased by 11.3 per cent. Fitch's 10 per cent prediction comes as some Irish economists forecast slower growth with Sherry Fitzgerald economist Marian Finnegan expecting prices to rise 8 per cent this year.
Of the 22 markets analysed by Fitch, Ireland is the only one in which property prices are expected to rise in double digits. Norway is the only country in the survey where prices are expected to drop while in the UK, Fitch expects house prices to remain flat. In fact, growth in most markets is expected to slow while risks grow as the prospect of gradually rising mortgage rates come into view.
Arrears
"Arrears are at very low levels in most markets. They will only move in one direction as mortgage rates rise slowly due to higher policy rates and more expensive bank funding from the gradual unwinding of quantitative easing. Floating-rate loans and borrowers refinancing to new rates will be first affected," said Suzanne Albers, a senior director of structured finance at Fitch Ratings.
With house prices in Ireland expected to continue to rise, Fitch suggests fewer buyers to be able to afford to buy. New mortgage lending is expected to grow at a slower rate to previous year on the back of tight lending rules, sustained price rises and a shortage of homes.
However, it noted that “recent government initiatives aimed at encouraging supply, including stamp duty rebates on land bought for property development and vacant site levy increases may have a positive impact on lending in the long term”.
Fitch warns that all forecasts are subject to the economic fallout of Brexit, “in particular the decision regarding the eventual EU-UK trade agreement, which could have a considerable impact on the Irish economy given its reliance on the UK for exports”.
