EU citizens could gain access to cheaper mortgages in member states
According to Moody's, population growth in Ireland is set to decelerate in the next five years, increasing by only 0.2%. However, Moody's predicts that there will be a strong demand for housing due to income increases, returning emigrants, and a stronger economy. Currently Dublin, Cork and Galway are all in short supply of housing, although there is an oversupply outside the main urban areas. The affordability of loans for house buyers is a problem since the rising population and strengthening economy is driving housing demands. As a result, the European Commission is now investigating how EU citizens can have greater access to cheaper mortgages in other member states, thus establishing a proper single market in financial services.     

Ireland, with its high fertility rate and growing population – where one in three is under 25 – remains different to many other European countries. These favourable demographics ensure a strong demand for housing, which is set to continue. Moody’s, a credit rating agency, which has reviewed the outlook for property markets in five European economies, expects population growth in Ireland to decelerate between 2015 and 2020, increasing by only 0.2 per cent compared with a 1.2 per cent rise over the past five years.

Nevertheless, the agency expects the benefits of a stronger than anticipated economic recovery to offset a slower rate of population increase, as employment and incomes rise, and emigrants return, attracted by improved economic prospects at home. All of which, Moody’s says, should mean strong demand for housing, which remains in short supply in Dublin and less so in Cork and Galway, but still in oversupply outside the main urban centres.

House price inflation in Dublin has declined in recent months, with prices in the capital last September 6.5 per cent higher than a year ago. Housing demand in Dublin has been deflated somewhat by two developments: by the Central Bank’s tight lending restrictions on borrowers, and by the expiry last year of a capital tax waiver for property purchases.

Moody’s concludes that in Ireland both a rising population and a strengthening economy will continue to drive housing demand, and property prices. What remains unresolved, and for a variety of reasons, is the lack of supply in the residential housing market, and the affordability of loans for house purchasers. In Ireland the average variable mortgage rate is, as MEP Brian Hayes has pointed out, almost twice the eurozone average.

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In that regard, the indications that the European Commission is now exploring how EU citizens can have greater access to the cheaper mortgage products in other member states, is welcome. It is a long-overdue development, and a belated attempt to begin to establish a proper single market in financial services.