Rents rise 10.4% as average price hits €1,227

A new all-time high for rents has now been set for the seventh quarter in a row, according to the latest report from the property website Daft.ie.

Its quarterly Rental Report says rents rose across the country by an average of 10.4% last year, while the mean monthly rent during the final quarter of 2017 was €1,227.

In Dublin, the increase in rents in the year to December was 10.9%. That is 26%, or almost €380 a month, higher than the previous peak in 2008.

In the cities of Galway and Waterford rents rose by just over 12% last year , while in Limerick city, the increase was nearly 15%.

In Cork, the rise in rents was almost 8%.

Year-on-year change in rents - Q4 2017

  • - Dublin: €1,822, up 10.9%
  • - Cork: €1,180, up 7.7%
  • - Galway: €1,096, up 12.4%
  • - Limerick: €1,004, up 14.8%
  • - Waterford: €835, up 12.1%
  • - Rest of the country: €860, up 9.8%

There were just over 3,100 properties available to rent at the beginning of February, which is the lowest since the series started in 2006.

Economist says rent pressure zones not working

Economist at Trinity College Dublin and author of the Daft report, Ronán Lyons said: "2017 marks the fourth consecutive year of double-digit gains in rents nationwide.

"The underlying pressure for rising rents remains due to a chronic shortage of available rental accommodation, at a time of strong demand."

Speaking on RTÉ's Morning Ireland, Mr Lyons said the report captures the market value of rents, but a tenant could end up paying more than the asking price if demand is high.

He said: "If market conditions are tight and a landlord posts a home for say, €1,200, it could very well be the case that the person who moves in is the person who offers €1,250 or €1,300, particularly when market conditions are tight.

"So there may actually be a downward bias in these figures. Rents could actually be higher than those figures."

He said it was clear that rent pressure zones were not working, adding that the shortage of accommodation must be addressed before the problem can be solved.

"If you want to stop rents rising, don't ban them from rising, tackle the underlying problem, which is a lack of supply," he said.

"I appreciate that if you limit rents from rising in the short term you protect some sitting tenants, but there are people who lose out because they can't move in somewhere. So, if you really want to solve this problem, rent pressure zones are not the way to do it. It's getting more supply."

Govt acknowledges rent prices likely to continue rising

In response to the report, the Government acknowledged that rental prices are likely to continue rising in the short term "until such time as the supply response helps to balance the current high demand, particularly in our cities".

It said it had "prioritised a range of further actions to ensure that existing rent predictability measures, such as the rent pressure zones and increased security of tenure, are fully respected and enforced".

However, a number of housing agencies, such as the Simon Communities and Focus Ireland, have said that the rent pressure zones were not working.

Focus Ireland Advocacy Director Mike Allen said: "The DAFT report clearly show that actions the Government has taken - such as rent pressure zones - have not been implemented effectively.

"Rents have now reached an all-time record of an average of €1,227. While the rent pressure zones have helped curtail rent increases for some sitting tenants there are so many loopholes in the legislation it is still far too easy for landlords to ignore."

Investors 'nervous' over interventions in market

The Irish Property Owners' Association, which represents the interests of private residential landlords, said the figures are rents being asked for on new tenancies and are not reflective of existing tenancies that are being renewed with the Residential Tenancies Board.

The association said every euro of rent received by landlords is significantly reduced by a variety of taxes, levies, charges and maintenance costs.

Margaret McCormack of the IPOA said keeping existing landlords in the sector is necessary to help deal with the problem of rising rent.

Also speaking on Morning Ireland, she said the constant intervention in the market is making investors nervous and it has been discouraging investment.

She said when there was a surplus of accommodation, rents went down and she said that landlords are being lost from the sector.  

She said in 2012, there was 212,000 landlords and now there are around 175,000.

"If we don't look at the fundamental problem and stop all the knee-jerk reactions, we have to get more properties out there, we have to keep our existing landlords and at the moment we're not," she said.

Rent increases 'absolutely' linked to homeless crisis

The National Spokesperson for the Simon Communities says it is clear that rent increases are "absolutely" linked to the homeless crisis.

Niamh Randall said rent pressure zones are clearly not working and intervention in the private rental sector is needed, in order to prevent more people from becoming homeless.

"We need to look at intervening in the private rental sector looking at HAP, look at rent supplement as prevention.

"This is about homeless prevention at this point in time. So unless we look at this as an emergency piece that we need to really intervene to keep people in the homes that they have, to prevent people from becoming homelessness and then look at how we support those trapped in emergency accommodation, to leave homelessness behind.

"Of course it's about supply, of course it's about affordable housing and it's about the State building home but as emergency intervention, we need to look at the private rental sector." 

She said the Residential Tenancies Board needs to be able to hold landlords to account and it is unfair to expect tenants to police the situation, adding that a register for all rents would be a good idea.

In addition, she said, any tax breaks given to landlords should be subject to conditionality such as the guarantee of rent certainty and high quality accommodation.

Elsewhere, the Social Democrats co-leader, Catherine Murphy, called on the Government to immediately introduce rent caps.

The Kildare North TD wants an immediate linking of rents to the Consumer Price Index until there is sufficient housing available to drive down costs.

Level of housing output needs to treble

The output of housing in Ireland needs to treble over the coming years in order to meet demand, according to the Goodbody housing tracker report.

Last year housing output grew by 77pc.

However, with medium-term housing demand running at around 35,000 houses per year, Goodbody said that it was likely that the Government will also need to significantly increase its housebuilding plans to ensure targets are met.

"New players such as Cairn and Glenveagh are expected to grow their output significantly over the coming years, but will only represent around 10pc of our estimated demand," Dermot O’Leary, chief economist at Goodbody, said.

Last year 9,513 new homes were issued with a Building Energy Rating (BER), up 77pc on the previous year, and it is estimated that between 1,000 and 1,500 homes were completed without at BER certificate.

This compares to the 19,271 electricity connections, which Goodbody believe is "significantly" overstating the level of new build in Ireland at the current time.

The Dublin area accounted for just over half of the new homes built last year, with a further 22pc completed in the commuter counties of Wicklow, Meath and Kildare.

Approximately 40pc of the population lives in these four counties, according to Census 2016.

Overall, the most popular type of unit built in Ireland in 2017 was a semi-detached house, accounting for almost four in ten of the total builds.

Detached units accounted for one in five of the units built, while apartments accounted for 16pc of the total.

Unsurprisingly apartments were the most popular type of new build in Dublin, where 1,477 units (31pc) were completed.

The capital city accounted for 95pc of the apartment units built in Ireland last year.

"This reflects the higher cost of building in this sector and the fact that it is uneconomical in the vast majority of the country to build apartments given current sales prices," Mr O’Leary said.

New guidelines to reduce the cost of apartment delivery are due to be implemented this year.

New council mortgage scheme to offer lower rates than most banks

  • Affordable Mortgage Scheme will begin on February 1
  • The loan can be used both for new and second-hand properties, or to build your own home
  • Income limits and maximum house price limits part of scheme

FIRST-time buyers will be able to get a loan worth up to €288,000 with an interest rate of 2.25pc for 30 years under the Government’s latest plan to tackle affordability in the housing market.

The new Affordable Mortgage Scheme offers lower rates than most banks – and significantly, the interest will be fixed for the duration of the loan.

Housing Minister Eoghan Murphy will today announce details of the scheme along with new proposals for building more mid-price homes and ensuring long-term affordable rents.

The Rebuilding Ireland Home Loan, which is likely to save homebuyers up to €10,000 over the lifetime of a mortgage, will be run by local authorities from February 1. It will be subject to the same lending rules as ordinary banks, which currently offer first-time buyers interest rates in excess of 3pc.

The Government loan can be used both for new and second-hand properties, or to build your own home.

But to qualify, an individual’s annual gross income cannot exceed €50,000, or in the case of a joint application €75,000.

There will also be a limit on the price of a home that can be bought from the scheme. In the Greater Dublin Area, Cork and Galway, the maximum market value is €320,000. In the rest of the country, it is €250,000.

House hunters looking to avail of the deal must also have had two insufficient offers or refusals for a mortgage from two lending institutions.

Mr Murphy said the scheme would offer buyers “absolute certainty of their repayments over the lifetime of the loan”.

“What this means essentially is that a person or couple can purchase a home, while ensuring that they can still keep their monthly repayments to one-third of their net disposable income – with no risk of their mortgage rate rising and so no threat to their ability to afford repayments, giving them certainty and security,” he said.

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The minister will also use a housing summit in Dublin today to announce an affordable purchase scheme that will see affordable homes built initially on State land.

 

The State will retain an equity in all discounted homes sold. For example, a house that costs €250,000 may be made available to purchase at €200,000. 

The equity share can be paid off, interest free, by the purchaser at a later date. Or if the owner wants to sell early, the State can take that portion back at the time of sale.

Details of the full qualifying criteria have yet to be finalised ahead of a launch next month, but it’s understood the same income limits as under the Rebuilding Ireland Home Loan will apply.

Mr Murphy said that there were four “major ready-to-go sites in Dublin being advanced through procurement with construction likely to start before year-end”.

The third element of the minister’s announcement today will be an affordable rental scheme.

This will be done using a model that sees rent charged based on the cost of building the property, together with ongoing management and maintenance charges, but with a minimal profit margin included.

A pilot project on this initiative is under way in Dún Laoghaire-Rathdown County Council, in conjunction with the Housing Agency and an approved housing body, using publicly owned land.

The minister is in discussions with the European Investment Bank about cost rental and other affordable models that could work in Ireland.

Where house price growth is highest and lowest as the average deposit for Dublin home tops €50k

The average first-time buyer had an income of €77,000 and a deposit of €52,800 saved up before buying a home in the capital during 2017.

Dublin home-buyers have been faced with taking on "higher levels of mortgage debt" despite strict Central Bank lending rules designed to cool the market.

House prices are expected to continue to rise in 2018 but at a slightly slower pace due to a tightening of the lending rules, according to the latest house price report from MyHome.ie.

The report, which is published in association with Davy, predicts house prices will rise by 8pc overall in 2018, split between double-digit growth outside the capital and a rise of 6pc or 7pc in Dublin.

The median asking price for new sales nationally was €242,000 in the final quarter of 2017. In Dublin, the median price was €330,000 (up 6.2pc), and €195,000 (up 6.3pc) in the rest of Ireland.

The report notes that the Central Bank of Ireland has tightened its mortgage lending rules for 2018, which will affect trader-uppers.

NEWS-Daft-house-price-Jan-2018.png

First-time buyers (FTB) and second and subsequent buyers (SSB) mortgages are capped at 3.5 times income, known as the loan-to-income (LTI) limit.Up to last year, banks or other credit institutions could issue loans with up to 20pc of the combined value of FTB and SSB mortgages allowed above the 3.5 LTI ratio.

Under the revised measures, the proportion of mortgages allowed above the cap is split into separate FTB and SSB categories.

As of yesterday, 20pc of the value of new mortgage lending to FTBs can be above the LTI cap, but only 10pc of the value of new mortgage lending to SSBs can be above the LTI cap.

Conall Mac Coille, chief economist at Davy, said the tighter Central Bank rules will serve to slow house price inflation in Dublin.

"Asking prices have fallen in the final quarter of each of the last five years before bouncing back in the spring and we see that pattern continuing in 2018.

"However, due to the Central Bank tightening its mortgage lending rules we believe house price inflation in more expensive areas, like Dublin, will slow somewhat to around 6pc or 7pc," he said.

"Homebuyers in Dublin have been taking out higher levels of mortgage debt, but with the availability of credit constrained, further price increases will also be curtailed slightly in 2018.

"However, double-digit price gains are likely to continue outside the capital where the recovery began later, prices are cheaper and there is still scope for leverage on mortgage lending to rise."

Turning to the average income and deposit required to buy a home, Mr Mac Coille said: "The median first-time-buyer in Dublin during the summer had an income of €77,000, a deposit of €52,800 and purchased a home worth €321,000.

"This meant in Dublin the median house price-to-income ratio for first-time buyers was 4.2 [times income]. However, prices are less stretched in other areas of the country.

"The median first-time-buyer in Leinster had an income of €56,000, deposit of €22,000 but purchased a house worth €179,000 - implying a house price-to-income ratio of just 3.2 [times income]."

He also noted that there was a positive side to rising house prices, in the reduction of people trapped in negative equity.

"Many Irish households have been unwilling to move home due to their stretched finances, specifically their lack of housing equity," said Mr Mac Coille.

Managing director of MyHome.ie Angela Keegan added that housing market transactions overall grew by 10pc in 2017 which also was a positive development.

"While the increase in transactions - it should come in around 55,000 for 2017 - is welcome the overall picture is that of an illiquid market hindered by the lack of fresh housing supply. If the Irish market was functioning properly we would be seeing around 90,000 transactions per year."

The average time to 'sale agreed' was just 3.8 months nationally and 2.8 months in Dublin.

"These figure show that whatever stock is for sale is sold ever more quickly," added Ms Keegan.

MyHome uses the median price or the 'middle price' as an average for its calculations.

How to make moving home easier on the children: 10 top tips

Are you looking to move house with young children? Here are some top tips on how to reassure them during the move

Whether you’re relocating to another part of the country or just moving around the corner, it can be an incredibly stressful time in your life, and adding young children into the mix can make it even more challenging.

Children can sometimes find it difficult to deal with change and moving house can be a huge step for them. However, if you take the time to prepare them for what to expect, listen to their concerns, and help them to see the move as an adventure, chances are they’ll come through with flying colours.

Ben Hudson, Director at Hudson Moody in York, shares his 10 top tips to help ease moving home with the children:

1. Prepare children for what to expect
Young children might not have a good understanding of what the term “moving” really means. Explain to them exactly what will happen and take the time to read some books about moving together. Also it’s important to make sure you visit the new property with them well in advance so you can point out all the positives before your moving day.

2. Let the children help you pack
If they’re old enough, let your children help you pack some of their personal belongings. Even at a young age, children can sort their toys and help you wrap objects in tissue paper or bubble wrap. If you’ll be putting some things into storage, ask them what they would like to keep and what they don’t mind parting with for a while.

3. Take children’s concerns seriously
Older children will probably have lots of questions and concerns. Always treat children’s feelings with respect, even when you can’t accommodate their requests. Moving away from friends can be a major concern. Why not buy your child an address book and ask their friends to write in their names and addresses so they don’t lose touch?

4. Time your move
Sometimes, circumstances dictate when you have to move. But, if you have a choice, try to time your move so that it occurs at a relatively calm period in your child’s life. School holidays may seem the perfect time but, bear in mind, the school routine can support your child as at least one aspect remains familiar. It also provides valuable, uninterrupted packing and unpacking time for you.

5. Pack a special bag of favourite toys and activities
Invest in a small backpack or overnight bag that will stay with your child through the entire move. Children can keep special items in this bag, in addition pack a few things that they can play with during the journey to their new home.

6. Label boxes of children’s things very clearly
The day will come when you find yourself digging through boxes looking for the toy that they ‘absolutely have to play with right now’. Don’t just label boxes with the word ‘toys’. Include as much detail as possible about what is in the box and who it belongs to. It also helps ensure boxes are delivered to the right room when your belongings are unloaded.

7. Make it an adventure
Moving creates upheaval in your life and wreaks havoc on your child’s normal routine. Let your children do things you normally wouldn’t on the special understanding it’s a ‘moving day’ treat. Why not provide a ‘treasure map’ for them to follow where ‘X‘ marks the spot? It will also help your child familiarise themselves with the locality of their new home.

8. Make a big deal about all the exciting new things you can do
A new home means new friends and new opportunities. Get out and explore new attractions that you can visit if you’re in a new city, or take advantage of all the things your new home has to offer that your old home didn’t.

9. Make it feel like home
Once you’re in your new home some things will have to change. But try to maintain the aspects of your life that are most important to your children. Stick as closely as you can to familiar daytime and bedtime routines. Ensure you hang or display some of your cherished and familiar personal items as soon as possible – this will help to make a new house feel like home, for both you and your children.

10. Don’t rush yourself
It’s hard to accomplish any task quickly with small children under foot. Give yourself lots of time to plan and execute your move and don’t be in a hurry to unpack. If you immediately start pulling everything out of boxes, you’ll have piles of stuff everywhere and the clutter will create unnecessary stress for everyone in the house. Take your time and unpack what you need slowly and gradually.

Once you’ve unpacked, if you can, keep the moving boxes for your children. They make wonderful tunnels and space rockets and will keep them entertained for hours!

Compensation to be paid 'by Christmas' for tracker victims

Over the course of the week, CEOs of eight other institutions that overcharged customers will be hauled in for meetings, including Ulster Bank tomorrow and AIB on Wednesday.

Sources told the Irish Independent the vast majority were expected to agree to a demand to begin compensating customers before the end of the year.

However, it is understood one bank is showing resistance to the Government’s intervention.

“There seems to be movement with all of them except one but we’ll see what the meetings bring. If they don’t co-operate, then we will insist on enforcement action immediately,” said a source familiar with the process.

The source pointed to the case of Springboard Mortgages which was last year fined €4.5m for overcharging customers for their tracker mortgages.

The lender agreed to pay the penalty, which had been imposed for breaches under the Central Bank’s consumer protection codes.

“The reality is enforcement isn’t about the fine. It’s about reputational damage for the bank,” a source said.

At least 20,000 customers are believed to have been wrongly denied a tracker mortgage in that they paid thousands of euro more in interest than they should have.

Fianna Fáil has estimated the ultimate cost of redress and compensation could amount to €500m.

Ahead of Mr Donohoe’s meeting, Junior Finance Minister Michael D’Arcy has offered the lending institutions “some friendly advice”, saying they need to fix the situation or they will be heavily affected by Government action.

He said “the well is empty” in terms of patience with the banks, and all options are on the table.

Mr Donohoe will brief the Cabinet on his discussions when ministers meet this evening. The meeting has been brought forward from tomorrow because Taoiseach Leo Varadkar is travelling to France to meet with President Emmanuel Macron.

Mr Varadkar said “less than half of people have been compensated”.

“That’s not good enough. We’d expect compensation to be under way at the very least by the end of the year.

“We’re very frustrated with the lack of progress to date. We’re certainly not ruling out further regulations, further sanctions or additional taxation of the banks.”

However, speaking at Fine Gael’s presidential dinner over the weekend, he refused to criticise Central Bank Governor Philip Lane for his performance at an Oireachtas committee last week.

Prof Lane said the Central Bank was asking banks to write to people they refuse to give trackers back to, and told victims they can either go to the courts or ombudsman. This is despite the fact the Central Bank has warned there will be “substantial” numbers in addition to the 20,000 tracker-denial cases already disclosed.

Asked whether Prof Lane’s statements failed to meet expectations, Mr Varadkar said he would “rather see the pressure and focus being put on the banks over the next week or so”.

But Environment Minister Denis Naughten last night told the Irish Independent that the Central Bank “must review its own handling of this entire issue from start to finish”.

He expects the banks’ CEOs to bring a “concrete timetable for the restoration, redress and compensation plans for customers”.

“These customers have been unfairly and unscrupulously targeted by financial institutions and, as a result, have exposed an underlying culture which clearly still exists within the financial services sector,” he said.

Vacant site levy may raise extra €16m for State

But councils and public agencies also liable

The increase in the vacant sites levy could result in at least an additional €16m for the State if property owners fail to develop the sites after the first year.

However, with the State itself owning significant properties on the register, at least €4m of this figure will be owed to the State by its own agencies.

In Tuesday's Budget, the levy was more than doubled from the current 3pc that applies in the first year to 7pc for all subsequent years.

Any owner of a vacant site included on the register who does not develop their land next year will pay an initial 3pc levy in January 2019.

The Budget increase announced this week will see that rise to 7pc from January 2019 onwards.

To date, only five local authorities in the country have included properties on the vacant sites register, which must be compiled by each of them since the beginning of this year.

Dublin City Council has the largest number of properties on its register; 65 are listed, with a total valuation of almost €230m.

However, of this, 11 sites with a valuation of over €58m are owned by State agencies, including Dublin City Council, Nama, the OPW and the HSE.

Nama has a vacant site in Sheriff Street Upper, valued at €12.5m. Dublin City Council owns vacant sites in O'Devaney Gardens, including St Bricin's Military Hospital, the corner of Marshal Lane and Bridgefoot Street, the corner of Russell Street and North Circular Road, Dominick Street, the Readymix site in East Wall, and the corner of Ashtown Grove and Ashtown Park.

The OPW has vacant sites at Military Road and St John's Road West, and the HSE has vacant sites at the former Donnelly Centre in Cork Street, Dublin 8.

Waterford City and County Council has the second largest number at 21, but it does not provide a property valuation for any of the sites listed on the register.

It is followed by South Dublin Council, with eight properties totalling a valuation of €7,075,000 on its register, and Donegal County Council, with four properties with a combined value of €475,315.

Wexford County Council has three properties on its register, with a combined value of €400,000. The remainder of the local authorities have either listed zero properties on their registers or failed to provide the register publicly.

A number of these stated that their registers remained empty as councils were in the process of documenting that the sites identified have been vacant for the past 12 months.

Legislation requires that a site has been vacant for the past 12 months in order for it to be placed on the Vacant Sites Register.

Other councils said that they were reviewing their county development plans to incorporate provisions to enable identification and inclusion of specific sites.

A spokesperson for the Department of Housing said it could not put a figure on what it expected to yield in tax from the levy increase.

"The department does not keep a database of vacant sites nationally. Each local authority is obliged to hold its own register.

"We wouldn't know until the register is compiled [what tax it would yield]. And there is also an appeals process, which is open to any property owner included on a register," said the spokesperson.

He added that he expected the registers to be fully compiled by early in the new year as the levies announced in the Budget will come into effect from January, 1, 2019.

Over 10,000 contact new empty houses database with vacant property data across Ireland

Over 10,000 people have contacted a new national database aimed at recording and utilising Ireland's stock of vacant houses.

The VacantHomes.ie was launched last month, a digital resource that invites submissions from local communities providing information on the empty properties in their area.

The Mayo County Council initiative then uses the data garnered from these anonymous submissions so that local authorities can get in touch with the owners and determine if the property can be re-used quickly and converted into social housing.

Borne out of the council’s commitment to the Government's vacant housing strategy, the initiative has seen a surge of interest with 1,000 properties countrywide registered to date.

According to Census 2016, 183,312 homes are currently vacant in Ireland, not including 62,148 vacant holiday homes.

Fianna Fáil leader, Micheál Martin has said that there are now 5,187 adults, 1,400 families, and over 3,000 children homeless here.

Tom Gilligan Director of Services, Mayo Co Council has called for Irish citizens to log onto vacanthomes.ie and list any property they think could be utilised to help tackle the housing crisis.

"We want to ensure that vacanthomes.ie is an on-going initiative and a relevant resource for local authorities, aiding them in getting as many of the 183,312 unoccupied properties back in use by the people that need them most," he said.

Some 58pc of properties logged on the new database are located in Leinster,  where demand is highest while other vacant properties were recorded in Munster (23pc), Connaught (15pc) and Ulster (4pc).

The most recorded property type is detached at 34pc, with semi detached accounting for 29pc of the submissions on the database. 

Housing Minister Eoghan Murphy has repeatedly said that more radical measures need to be taken to stem the flow of people into homelessness and to stimulate the housing market.

Following a housing summit with the heads of the country's local authorities the Government announced a new suite of measures to tackle the housing crisis.

The minister announced that government will offer homeless families from Dublin the chance of a house in rural counties, in a radical bid to ease the current crisis.

Those wishing to move to other parts of the country will be assisted under the first part of this new housing strategy. 'The Place Finder Service' was previously discussed in the Programme for Government talks.

The Housing Minister said an extra 200 extra emergency beds will be delivered for homeless people by December.

He also pledged to build an extra 800 social homes next year bringing the total from 3,000 to 3,800.

A further €10m in funding for more Family Hubs is being ring-fenced, as demand arises from Local Authorities, to be drawn this year.

Minister Simon Harris plans to increase his department's annual social inclusion budget for homelessness to €36m in 2018.

Mortgage wars: Rival banks expected to reduce rates in response to AIB cuts

Mortgage lenders will now have to cut their rates in response to AIB reducing its variable, fixed and loan-to-value rates, experts said.

Stockbroking analysts said AIB has now put huge pressure on Bank of Ireland and Permanent TSB, in particular.

AIB's move to cut its variable rates by 0.25pc to 3.15pc from November will mean a huge gap emerges with the Bank of Ireland variable rate.

From next month, AIB's variable rate will be 1.35 percentage points lower than the Bank of Ireland one.

Bank of Ireland has a strategy to win mortgage business by offering up to 3pc of the value of mortgages in cash-back to new customers. It may now decide to weather it out, or only slightly tweak its fixed rate offering, analysts said.

But Permanent TSB is likely to be under pressure to respond to AIB's rate cut.

The move by AIB to cut fixed rates, and reduce its overall interest rate margins, also means there is now no expectation of a rise in European Central Bank rates until 2019 at the earliest, analysts said.

"AIB's move potentially puts more pressure on the other banks to respond," analysts at Goodbody Stockbrokers wrote in a note to investors.

Experts also say that AIB's move to cut its fixed rates from Monday by up to 0.5pc will help it protect its leading market position in a growing market.

Cuts are expected in the coming weeks from EBS and Haven, which are both AIB subsidiaries.

And the reductions are also likely to raise further additional competitive pressures across the market in due course, Goodbody said.

Investec's Philip O'Sullivan said that the European Central Bank and wholesale market rates of zero are set to continue next year.

It will be 2019 or 2020 before the "interest rate environment begins to normalise", according to Mr O'Sullivan.

Fianna Fáil finance spokesperson Michael McGrath said the AIB move shows that banks can afford to cut rates and still achieve more than healthy profits.

The onus now is on other banks to introduce further rate cuts if they don't want to lose market share, Mr McGrath said.

He also called on Bank of Ireland, Ulster Bank, Permanent TSB and KBC to introduce rate cuts.

Meanwhile, the AIB Group has been called upon to immediately cut the mortgage rates at its EBS and Haven subsidiaries.

There are indications the banking group may lower EBS rates in coming weeks, but the failure to announce EBS reductions along with the AIB cuts has annoyed mortgage campaigners.

Brendan Burgess of the Fair Mortgage Rates campaign welcomed the AIB reductions, but said a large gap had now opened up with EBS.

The EBS variable rate is 3.7pc compared with AIB's, which is due to fall to 3.15pc at the start of next month.

"EBS customers are furious that they are not benefiting from these rate cuts. EBS is funding its cash-back offers to new customers by charging existing customers more. The quicker the Dáil bans these cash-back offers the better," Mr Burgess said.

Property prices are rising at the fastest pace in three years as supply hits a 'critical low'

RESIDENTIAL PROPERTY PRICES are increasing at the fastest pace in three years as the stock of properties available for sale nationwide hit a new “critical low”.

According to the CSO Residential Property Price Index, prices across Ireland increased by 12.3% in the 12 months to July. The 3% rise since June was the largest monthly jump in prices for three years.

Since last July, the price of residential property in Dublin has soared by 12.7%. The price of a house is up 12.6%, while the cost of an apartment in the capital has increased by 12%.

Residential property prices in the rest of the country, excluding Dublin, were 11.7% higher in the year to July.

The fastest rise in house prices was in the west of Ireland, where prices were up 15.8%, while the slowest rate of growth was in the mid-west region, where costs were up 8.2%.

Compared to the trough in early 2013, property prices nationwide have increased by 60.5%.

Over the past four years, residential property prices in the capital have increased by 77.4%, while property prices in all of Ireland when Dublin is excluded are 51.2% higher.

Last week, a Davy research note indicated that housing demand could be as high as 50,000 new units per year until 2021.

Source: CSO

Critical low

Meanwhile, analysis published today by Sherry FitzGerald said that the stock of properties on the market is now “critically low in all urban areas”.

Research by the real estate agent showed that property advertised for sale has fallen by 9% nationwide in the 12 months to July 2017.

There are now 25,100 housing units available for sale in Ireland, which is little more than half the number advertised for sale in July 2010.

“Such low stock will inevitably put increased upward pressure on prices,” said Sherry FitzGerald chief economist Marian Finnegan.

Each of Dublin’s four local authorities, and commuter counties such as Meath, Kildare and Wicklow, have experienced a drop in supply since July 2016. The largest decrease was in Dublin city, where supply fell by 19%.

There were 3,900 units advertised for sale in Dublin in July 2017, compared to 4,500 a year earlier.

There was a similar trend in regional hubs such as Galway, Cork and Limerick. The number of homes on the market dropped in all three of the cities.

Less than 1% of the total private housing stock in both Cork and Galway cities is available for sale, which translates to 271 units in Galway city and 451 in Cork city.

Source: Sam Boal

Competitive

Earlier this year, the National Competitiveness Council warned that soaring property prices pose a “significant threat” to the country’s economy.

The organisation said that it was “especially concerned” by the dramatic increase in residential rents, noting that prices in some locations have exceeded boom-time levels.

“Rising rents and increasing house prices will inevitably impact upon wage demands, increase the cost of living and will damage competitiveness.”

The council also warned that this could have “significant adverse consequences” for the entire economy.

Red flags and hidden costs: Need-to-know tips for the first-time buyer applying for a mortgage

Are you trying to save in the hope of securing a mortgage - but confused about what lies ahead?

In the year to date, mortgage approvals for first-time buyers are up 43pc year-on-year, but this doesn't mean it's an easy process.

Independent.ie spoke to the experts about what first-time buyers should be looking for:

What is the main thing to note when you’re shopping for a mortgage?

Managing Director at Bluewater Financial Planning Steven Barrett said the first thing a first-time buyer should look at is the interest rate that lenders are offering.

"It is so hard to get a mortgage these days, there are no myths really, it is actually a very difficult process," Steven told Independent.ie.

"The interest rate is the big thing to look out for, how much you’re going to repay.

"First-time buyers tend to look for the longer term which is better so you can borrow more money to get started. If you’re looking for the longest term, you’re looking to keep down repayments.

"This is new for people to hear, they’re not taught these things about finance or mortgages in school or college."

Independent financial advisor with 52Financial Ross Connolly said he would advise speaking to a mortgage broker.

"Obviously I'm biased but the benefits of having a broker are; we do the shopping around for the client, we build a file which would be neutral and throughout the process we think of which bank we think would be most suitable for the client," he said.

What are the red flags banks look for when you’re applying for a mortgage?

"Overdrafts that are not organised or arranged with any bank are also a big no-no," Ross Connolly said.

"We stay away from overdrafts. You don't want to paint a picture of someone who is living from pay cheque to pay cheque. You don't want to be seen to be gambling or any excessive spending. We would cut that down. The accounts need to be clean."

He said that they advise customers to do an Irish Credit Bureau check on themselves online at www.icb.ie to make sure they haven't missed any old credit card bills or supermarket clubcards they didn't realise they had signed up for.

"The aim is to catch any missed payments at all," Ross added, "just so you have any questions answered before the bank has to ask them."

Steven Barrett of Bluewater Financial Planning said the first thing a bank will do is look at someone's credit rating.

“I’d always advise people to get a copy of their own records so they know what they have, it is the first thing a bank will do," he said.

"My advice to first-time buyers is to make sure the minimum credit card payments are paid off each month because that will affect your credit card rating and make it more difficult to get a loan.

“Missed payments on your direct debts are a big no-no as well. Banks do go through statements line by line. These days, people do spend a lot with their debit card, so your whole lifestyle is showing up on bank statements. If you miss payments, the bank will say, ‘well this person isn’t paying their bills and it is a red flag’.

“You can get declined for repeated missed payments,” Steven added.

What if I have savings or debt in other accounts, like a Credit Union account?

There is no problem having savings in a different account, you can bank and save whatever and wherever you want, mortgage specialist with Mortgage Negotiators Shane Connole advised.

"You can bank and save wherever you want, and you can walk in to get a mortgage wherever you want. Just because you bank with Bank of Ireland doesn't mean you can't shop for a mortgage with KBC," he said.

"The debt on the other hand, you can have your loans wherever you want but this may have a negative impact on your loan approval.

"The debt will absolutely contribute to your credit rating, but it can also have an effect on how much you're borrowing."

Is it true online gambling accounts are a 'no-no' when applying for a mortgage?

The short answer is yes. Steven Barrett of Bluewater Financial Planning describes online betting accounts as a “big no-no”.

“It’s a big no-no if you’re using Paddy Power and other gambling websites on a regular basis.

“When people gamble regularly, they tend to leave the money in the online account if they win and this only goes one way. If they can see that you’re a regular gambler, they will refuse a loan.”

If I’m renting, will the bank take it into consideration for a credit rating?

Banks will take your monthly spend on rent into account for your repayment capacity, Ross Connolly advised.

"When it comes to the savings aspect, the repayment capacity would be the correct label to put on it.

"A couple paying €1,000 a month in rent need to know that this €1,000 will go towards their repayment capacity for a €1,200 a month mortgage, it will be considered savings for want of a better word.

"If you can get a car loan cleared coming up to the application, this can also be considered as repayment capacity."

Can I get a financial gift from a relative?

Mortgage specialist with Mortgage Negotiators Shane Connole said the simple answer is "yes".

"There are no rules around it," he said, "but there are areas to watch out for. No bank likes approving mortgages where your own contribution is a 100pc gift. They would expect for a 10pc deposit, that 5pc of the money is your own savings and the other 5pc could be your gift. An example, you're buying a house for €200,000 and need a €20,000 deposit. You will need to show that €10,000 of that is from your own funds."

The second aspect of receiving a gift is to watch out for tax, Shane Connole advised.

"It's better to receive the gift from a relative in a direct bloodline, based on the tax position. If you're getting a gift from an aunt or cousin, the bank will want to know how you will pay the tax and revenue on it.

"Finally, the bank will want to see the gift money in your own account at a certain stage of the process."

Are there any myths or misconceptions you've come across?

"I wouldn't come across a lot of misunderstandings," 52Financial's Ross Connolly said, "but some people don't understand the reason behind the saving.

"The main reason to save is so you can prove you have the repayment capacity when it comes to your mortgage.

"If your mortgage repayment is €1,000 a month, they may look for €1,200 in repayment capacity in case there is an increase in interest rates.

"People nowadays do seem to be more educated about applying for amortgage.

"It is rare that I come across an online betting shop in a bank statement. There is a high level of advice out there," he added.

If I'm buying a doer-upper, can I get any special treatment?

There are a few things to note if you're investing in a doer-upper, mortgage specialist Shane Connole said.

"The key areas are; do you need planning permission, you need invoices for the work you're doing to the property, and you need to ensure the loan you're applying for does not exceed 90pc of the total end value of the property.

"If you buy a house for €200,000 and do €50,000 worth of work, this does not mean the end value of the house if €250,000.

"The rule is it's 60pc of the value of works. So if I buy for €200,000 and I do €50,000 worth of work, the end value of the house would be €230,000.

"A lot of people fall flat on that. Banks cannot lend more than 90pc of the value per completion.

"You will also need invoices and typically you need a registered builder's invoice."

Shane added that there is not a 'scheme' asuch in place for those buying doer-uppers, but you can receive the money in stages.

"You get the first part of the loan paid down when buying the house, and then your value of works is split into two payments. You receive one payment when half the work is done on showing an invoice, and you receive the second payment when the works are completed."

So, you’ve saved for your deposit – are there any hidden costs?

As well as your deposit, financial experts advise that you have the money aside to pay for the extra costs which include stamp duty, solicitors’ fees and surveying fees.

“First-time buyers will have to have a 10pc deposit saved, but you will also need to show that you can pay for the associated costs,” Steven Barrett said.

“You could be paying up to €2,000 for a solicitor, and when it comes to conveyancing, it does need to be done properly by a qualified solicitor. Cheapest is not always best.

“You are talking another few hundred euro for a surveyor, and you have to be able to show the bank that you have that in addition to your deposit.”

Any expert tips for the first-time buyer?

Bluewater’s Steven Barrett believes a separate savings account is key to securing a mortgage.

“Having regular savings each month is a big plus, having an account where regular money goes in and you don’t touch it,” Steven said.

“If you’re putting in a thousand euro on a regular basis but then taking money out of it, they’ll just say, ‘well, this person isn’t really saving’, even if it’s just every quarter, they’ll discount it or they’ll average it out.”

He continued; “Regular saving is the key. If mortgage rates go up by 2pc you need to show you can afford the higher repayments. If you’re paying rent, you need to show that you’re also regular saving in an account you don’t touch.

“You need to have control over your finances and try not to have any debt.”

Householders told to fill up oil tank before price hikes

Householders have been warned to prepare for higher prices of electricity, gas and home-heating oil this winter.

A move to hike prices will reverse almost two years of energy cost reductions.

The return to price increases has prompted warnings to householders to lock into discount deals now, and those who use home heating oil are advised to get their tanks filled before prices start to surge.

It comes after the wholesale price of gas, a key component in the production of electricity and used for domestic gas supply, rose by 30pc in the year.

Wholesale gas prices are now back at levels not seen since last February, according to the Vayu energy report.

Oil production and refining facilities in the Gulf Coast region of the US have been shut down due to Hurricane Harvey, equating to almost 15pc of the US refining capacity.

"Oil markets are expected to keep the bullish tone as long as refining capacity remains impacted as a result of the hurricane," Vayu said.

Petrol and diesel retailers have already warned that they are putting up prices at the pumps this week, in a move that will cost drivers up to an extra €2 to fill up.

Experts also pointed out that although energy prices have been falling overall for two years, many suppliers have only cut them marginally.

Eoin Clarke of energy price comparison site Switcher.ie said that prices for consumers were now likely to rise.

"For anyone who heats their home using heating oil, if you can afford it, now could be a good time to fill the tank.

Market

"This means that, if prices do go up, you'll have a full tank to work through before you have to buy at the higher price. And if prices don't go up, you'll have one of those winter bills out of the way early."

He said there have been rises in the UK market, with the most recent one a rise of 12.5pc in electricity prices from British Gas. Energy providers here tend to follow what happens in the UK.

Mr Clarke added: "The increase in wholesale prices could signal that residential price rises are on the way for consumers."

Dermott Jewell of the Consumers' Association said commodity traders have been inching up their prices for wholesale oil and gas in the last few months. He warned that events like Hurricane Harvey may be used by suppliers to hike prices for consumers.

"This news could still be 'represented' by suppliers as the occasion to increase prices by a mile," Mr Jewell said.

He called for transparency in all energy pricing.

Mark Whelan of price comparison site Bonkers.ie said: "Consumers who use home heating oil, such as kerosene or gas oil, should also brace themselves for an uncertain winter."

Energy experts said most providers offer discounts for paying by direct debit and receiving bills online, and many offer retention deals to long-term customers.

The average dual-fuel customer can save up to €318 per year by switching from standard tariffs to the cheapest electricity and gas deals.

Anyone eligible for the State-paid fuel allowance was advised to check if they are entitled to receive it. For the first time this year, those getting the €585 allowance can opt to have it paid in two lump sums, instead of weekly.

How to save a fortune on a home by settling down in rural Ireland

As one rural town appeals to those sick of city prices to come and live there, John Cradden looks at the pros — and cons — of opting for country life

Amid soaring property prices and rents that are once again skewing the cost of living in urban centres, there's always the option of moving to the country where things seem considerably cheaper.

So instead of despairing at not being able to find a three-bed home in Dublin city for less than €400,000, or one to rent for less than €1,500 a month, you could move to an area where such a property could be bought for less than €100,000 or rented for less than a €100 a week.

In other words, perhaps a place like Kiltyclogher, Co Leitrim, a picturesque rural village with a population of 233 that recently started a campaign to attract new residents. The central purpose behind the KiltyLive campaign is to help prevent the loss of one of the two teachers at the local school, which has just 14 pupils registered for the coming year.

But while it's too early to say how successful the campaign will be, it could well spark off some serious thinking among those who, for whatever reason, are finding the financial pressures of city life just a bit much.

However, it can be difficult to find reliable data comparing the cost of living in urban vs rural areas. The CSO used to release figures comparing the cost of grocery shopping in Dublin vs outside Dublin, but this was stopped in 2009.

Property

At least as far as property prices and rents are concerned, there's no argument. According to figures from the monthly rental report of property website Daft.ie, the average mortgage repayment on a three-bed property in Co Leitrim during the first three months of this year was €310 a month compared with €2,015 for South Co Dublin.

In Co Kerry, a mortgage on a three-bed is averaging €446 while they can expect an average rental yield of €638. In Waterford city and county, three-bed homeowners pay an average of €515, while they could rent it out for between €680 and €764 a month.

It's only when you survey Ireland's fifth-largest city - Galway - that average rents start to hit the €1,000 mark, while the monthly mortgage on a three-bed will be around €830. Even the rebel city can't compete with the average rental yields or property prices in any part of Dublin city and county.

However, transport costs may well eat into some of the savings made by buying or renting outside the Pale. Decent public transport will be lacking in many regional towns, meaning a greater reliance on cars to get around. Many rural dwellers with school-going kids may not be able to benefit from the State's School Bus scheme because they are not close to any of the pick-up points.

On the plus side, you can still find some of the cheapest petrol stations in places like Dundalk, Waterford and Tralee, according to Pumps.ie, which lists the cheapest stations around the country. And car insurance is likely to be cheaper if you live in a rural area in Co Donegal or Cork, according to a survey by this newspaper a few years back.

But it's no surprise to find that childcare is cheaper outside Dublin, according to the CSO, which released figures last month showing that the average weekly cost of pre-school childcare in July to September last year was €150 in Dublin compared with €83 in the south-east and the mid-west regions. The national average cost per week is €118. Dublin also figured as the most expensive for non-parental childcare for pre-schoolers at €4.90 per hour compared with €3.50 for the mid-west and south-east.

In terms of utilities, rural dwellers can expect to pay as much as €54 a year more in electricity standing charges than their urban counterparts. Energia, for instance, charges rural customers with nightsaver meters €251.88 in standing charges, compared with €197.99 for urban-based dwellers.

But, of course, what constitutes value depends on who you ask, so all this data may only provide part of the picture for those looking for the cheapest places to live in Ireland. One website that has been collecting ratings and comments since 2009 about the cost of living in different parts of the country is Likeplace.ie.

Run by brothers Shane and Ronan Difily, it has a ranking of the cheapest to the most expensive places to live based on submissions from its users. Number one on the list is Letterkenny, Co Donegal, with a score of 3.4 out of five. "The higher the score the happier people are," said Shane. In other words, low costs equates to higher happiness and a high score, he adds.

Also in the top 10 for cost of living are Tuam, Dundalk, Youghal, Longford town, Carlingford, Bray, Schull, and Tralee. Not surprisingly, the place with the highest cost of living is Dublin city at 2.9 out of five, but there are quite a few urban places that rank quite highly.

"There is a good mix of rural-vs-urban in-between. In general though, you'll see that the spread is now very wide. All these scores come in at between 2.9 to 3.4-out-of-five," said Shane.

While these user ratings are entirely subjective (there are other ratings for things like law and order, sense of community, local services, and schools), the widening chasm in the cost of housing between and Dublin and almost everywhere else remains undoubtedly the biggest single factor that is prompting many a worker to up sticks to the country.

Unaffordable

Tralee man Shaun O'Shea used to live and work in Dublin before returning to live in his home town a few years ago, where he now heads up the local office of Sigmar Recruitment. Part of his motivation for moving home was the extent to which house prices and rents in Dublin were becoming unaffordable.

"A friend of mine bought a one-bed apartment in Dublin for €400k, but that would buy you sea views, and five bedrooms on an acre of land in Tralee."

While smaller towns like Tralee won't attract the numbers of regional urban centres like Waterford and Galway, it is definitely seeing an influx. "Up until 12 months ago, you wouldn't have been working in areas like Tralee or Waterford unless you're from that area. They don't have a natural pull but in the last year that has changed."

He says at least part of this is down to the growth in numbers of workers - many of them IT contractors - who are choosing to telecommute or become remote workers. One indication of this is the recently opening of a new shared office space with both one-person offices and a series of hot desks called HQ Tralee.

Lots of people living in Dublin are looking to return to places where they grew up," said O'Shea.

"With salaries, definitely in areas like IT, engineering and sales and marketing, there's not that much of a drop."

According to Sigmar Recruitment's salary guide, a Java software developer with three-five years' experience can expect to earn between €40,000 and €60,000 in Dublin, compared with €35,000 to €50,000 in the rest of the country. There seems little difference per region in the grades for sought-after jobs like a building site engineer, while a sales manager might only expect to earn a €5-€10,000 premium in earnings if he or she is based in Dublin.

But while swapping Kilmainham for Kiltyclogher might be a step too far for most of us, it is hoped that the new National Planning Framework will be more successful than the National Spatial Strategy in encouraging more Dublin-based families to consider migrating to other cities and regional towns.

Major German lender targets Ireland with new mortgage model

Home loans and SME credit part of bank's €200m Irish expansion plan

A major German community-oriented bank that wants to bring its model to Ireland believes it could play a role in solving the housing crisis.

Sparkasse, the biggest bank in Germany, wants to create an alternative to the major commercial banks, particularly in regional towns.

The European Investment Bank has indicated support for the €200m project, said Sparkasse. That support is conditional on the proposal receiving political backing in Ireland. So far, this has been slow to materialise, it is understood.

Sparkasse, which issues half of all German mortgages at rates well below standard Irish rates, believes Ireland is ideal for its municipality-owned, non-profit model.

The 200-year-old bank is aimed squarely at SMEs and the middle segment of the market. In Germany, where it has 300,000 staff in hundreds of branches, it is part-owned by each local authority. Each regional bank operates and lends in its own area but is backed by a central organisation providing shared services, IT and banking transaction support.

Supporters of the proposal believe it would provide an ideal middle ground between the troubled credit union sector and the two big Irish commercial banks.

Indeed, Sparkasse has proposed to the Irish League of Credit Unions that they could avail of the central shared services system if it is established.

But invitations issued by the German organisation to the Departments of Finance and Rural Affairs to see how it operates in Germany have so far been turned down. Both departments said that the idea - mentioned in the Programme for Government - will be dealt with in a report which is being prepared.

Sparkasse was asked by the German finance ministry in 2008 to establish a community focused banking model in Greece and was subsequently approached to do something similar in Ireland. It is currently dealing with the Greek government but has struggled to gain similar traction here.

Harald Felzen, project manager for Sparkasse, who is due to appear before the Oireachtas Finance committee in October to explain the model, said: "Our proposal is to establish up to 10 Sparkassen in Ireland as well as a central service provider to develop a very sustainable banking model."

The German bank would have no financial interest in the Irish off-shoot but would provide support for its establishment, he said.

Felzen added that the European Investment Bank (EIB) in Brussels had indicated a willingness to help to reduce the tier one capital requirements for this but it would “need the commitment of the Irish government”. To date this commitment has been slow to materialise.

The Departments of Finance and of Rural Affairs are investigating the German model for “the development of local public banks that operate within well-defined regions,” said a joint statement from both to this newspaper.

“That is part of a larger probe involving An Post and the League of Credit Unions in a new model of community banking “that would provide a suite of banking services through the post office network,” it said, with other models such as Kiwibank also under scrutiny.

“Both departments convened a project team in early 2017 to evaluate the Programme for a Partnership Government commitment and bring forward a report to both ministers,” said the statement.

“The report is now near completion and will be published shortly. It will set out the Irish banking context as well as analysing the responses to the consultation on public banking and its applicability in Ireland. It will then set out the findings and conclusions of the investigation of the Sparkasse model of local public banking.”

Promoting competition in banking is a key government priority, especially in the SME finance market. It “welcomes any potential new entrants to the banking market,” it said.

Sparkasse has earmarked the Midlands as an ideal place to establish the first of up to 10 Sparkassen in Ireland, each of which, Felzen estimated, would cost €15m to €20m. The idea is also gaining local political support in Fingal, where the county council is due to debate a Fine Gael-instigated motion.

Felzen said that although his organisation had not yet received the political backing it needs at national level, he remained optimistic: “We have to be like a Hoover salesman. If they close the front door, we come in the back door. I am optimistic because so many people in your country see the need for a sustainable banking model for all people in every region.”

Felzen said Sparkasse could fill a wide gap in the market between commercial banks such as AIB and Bank of Ireland and credit unions. Sparkasse is “the backbone of the German SME sector” and provides customers with a full range of banking products, as well as business loans to small companies, builders and farmers.

“It’s time our government stepped up to the plate and encouraged and facilitated the entry of Sparkasse,” said Fingal councillor Tom O’Leary, who has met representatives of the bank.

“I particularly welcome the opportunity that Sparkasse will present in the mortgage market, where it can offer hard-pressed first-time buyers European banking interest rates, which are a lot lower and cheaper than the rates offers by Irish mortgage providers.”