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Significant decline in buy-to-lets as Covid-19 continues to impact housing market

Buy-to-let investors now account for less than 1% of mortgages, compared to 20% in 2006, according to new figures.

THERE HAS BEEN a significant decline in buy-to-let investors in the housing market with these loans now accounting for less than 1% of mortgages, compared to 20% in 2006, according to new figures.

The Housing Market Monitor for the last quarter of 2020, published today by Banking & Payments Federation Ireland (BPFI), shows that the role of individual buy-to-let investors continues to decline, accounting for less than 1% of total mortgage drawdowns in 2020.

Non-household buyers – including private companies, charitable organisations and state institutions – now account for 23% of all market transactions.

The BPFI said the supply-demand imbalance in the housing market is set to continue in 2021 as the impact of the Covid-19 pandemic limits supply while demand remains strong.

A total of 35,617 mortgages, to a value of €8.4 billion, were drawn down in 2020. A total of 43,151 mortgages, to the value of €10.3 billion, were approved last year.

Narly 44% of total mortgage approvals in 2020 took place in the last four months of the year, which could result in a significant number of drawdowns early this year, the BPFI noted.

Screenshot 2021-03-08 at 14.45.12 BPFI BPFI

The latest mortgage approvals figures show continued year-on-year growth in January 2021, rising by 2.8% compared with the same period last year, reaching €823 million.

Impact of Covid-19

Speaking about the figures, Brian Hayes, Chief Executive of BPFI, said Covid-19 “has had a significant negative impact on the Irish housing and mortgage markets in 2020, however demand remains strong especially among households less affected by the pandemic and non-household investors”.

Hayes said that that while demand for housing remains strong, there is continued uncertainty around housing supply due to reduced capacity and output in construction caused by Level 5 restrictions so far this year.

“The pandemic will continue to have a negative impact on housing completions in 2021 because construction activity is not expected to fully start again until April 2021, at the earliest, assuming public health developments remain positive.

“However, the sector has gained more experience in terms of increasing output after the first lockdown last year, hence we expect completion numbers in 2021 to be at least similar to levels observed in 2020 at around 21,000 units.”

Hayes noted that while the number of employees on some sort of state support “increased significantly in early 2021 due to tightened strict public health measures”, earnings are not affected in sectors where people are “able to continue to work from home or in businesses categorised as essential and continuing to operate”.

“Given supply disruptions in the residential construction sector in the first quarter of 2021 and the expected continued demand for housing from certain cohorts of income earners as well as the non-household sector, it is likely that the supply-demand imbalance in the Irish housing market will continue during 2021,” he added.

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