Interest Rates & Housing Supply

Raey

Registered User
Messages
10
I want to be careful here not get into the impact of interest rates on house prices / house price speculation.

Rather, I am keen to get peoples views on what an interest rate spike would do for housing supply.

It is widely expected that ECB rates will increases by 0.5% in 2022 and up to 2% by end 2023. The impact of this on Irish mortgage interest rates is not a sure thing given the high base we have relative to Europe. That said, I think it would be wise to expect rates to increase.

My view is that this will further reduce supply as those on low fixed rates will be incentivised to stay put and not trade up. I think this will exacerbate the housing crisis but nobody seems to be talking about it.

What do people think?
 

Raey

Registered User
Messages
10
Bumping this given recent news- does anyone have any thoughts? I think housing supply will further shrink exacerbating the crisis.
 

Leo

Moderator
Messages
13,867
My view is that this will further reduce supply as those on low fixed rates will be incentivised to stay put and not trade up.
Unless they have fixed for a long period, I doubt a .5% rise in rates would really put too many off an upgrade they've set their heart on. And don't forget many a housing decision is driven by the heart more so than the wallet.
 

peemac

Registered User
Messages
1,255
Bumping this given recent news- does anyone have any thoughts? I think housing supply will further shrink exacerbating the crisis.
Looking at the €18m profits that Park developments made last year and the €43m of Cairn homes, there will continue to be aggressive house building in Ireland.

The economy may see a slower growth rate, but this is not anything like 2007 when there was a massive credit bubble waiting to implode worldwide.

Commencements this year are already at multi year highs and expected to get higher still and I suspect there will be 35k+ completions this year
 

lff12

Registered User
Messages
556
Given that someone entering a mortgage now would probably still be able to find a rate that is reasonable, probably not immediately a huge effect. I don't know how many people have fixed rates so would think it would take a few hikes before this started to have a real impact. We already have rates well above the ECB so while I would expect most to rise, it would take at least 1-2% before you'd start seeing people struggling to get finance in the first place.
A lot of people on current fixed rates who would drip feed onto higher rates over time.
 

lff12

Registered User
Messages
556
Bumping this given recent news- does anyone have any thoughts? I think housing supply will further shrink exacerbating the crisis.
Sadly, yes. But there has been the slow drip exit of small landlords which has actually provided a lot of sales stock - there isn't a lot of reporting on exactly how many ex rentals become owner occupied when changing hands (or if the buyer was themselves an ex tenant which would make that a zero sum game).
 
Top