Holiday home mortgages buck lending downturn (Sunday Tribune)

04 November 2011

Lending for the purchase of holiday homes and second houses rose by 7.9% in the second quarter, bucking a trend that saw lending in other segments of the residential property market fall to levels not seen since 1991, according to new figures published by the Central Bank last week.

Outstanding loans for second houses hit €1,483m, up from €1,375 in the first quarter, posting a rate of increase not seen since March 2006. Overall mortgage lending declined by 3.1% quarter-on-quarter, while the annual increase of just 4.2% was the lowest since the last quarter of 1991.

The Central Bank attributed the drop in activity to 16 months of falling house prices which resulted in just €5.5bn more in mortgages for the first half of 2008, roughly half the level of increase in early 2006, the last year of the property boom, when €11.4bn was added to the national mortgage book.

Mortgages for holiday and second homes make up just 1.2% of the overall market, which also includes primary dwelling (PDH) and buy-to-let (BTL) loans, respectively 72.8% and 26% of the pie. Lending growth in the second home segment had virtually stalled for the last year-and-a-half, even as residual demand moved the other segments ahead, but the figures have rebounded sharply since March, going against the overall trend in a generally shrinking market for home loans.

The fall in lending to the construction sector has been even more dramatic than the decline in residential lending, the Central Bank figures show. Credit to the construction sector grew at an annual rate of just 4.6% in the second quarter, down from 35.6% a year earlier. Lending rose only €1.1bn in the year to June, a fraction of the €6.4bn in the same period a year earlier.

Property's share of overall private sector credit growth reached just 50%, down from last year's proportion of 80%. This is against a background of generally sinking credit growth, with eight out of 15 sectors showing declines. The absolute growth figure fell quarter-on-quarter to a €15.3bn increase.