13 Jan 2005

Bank of Ireland announces new appointment to Court of Directors

Bank of Ireland predicts buoyant residential property market and
15% growth in commercial property market in 2005

Following a decade of headline-making house price growth and record levels of new house completions, the Irish residential property market will continue to perform well in 2005, albeit at a slower pace, according to Bank of Ireland's Irish Property Review which was published today (Friday 18th March).

The Review states that the housing market may have reached a watershed in 2004 in terms of capital inflation and housing supply. With successive annual rises in house completions over the past eleven years, from a cyclical low of 21,500 in 1993 to 77,000 in 2004, supply is finally impacting on house price inflation. The evidence suggests that over the past year there has been a gradual slowdown in the monthly rate of price gains on the average house in Ireland. The Irish Property Review predicts that house prices will increase by an average of 5% during 2005, on the back of the completion of 74,000 new houses.

"House prices in Ireland are finally responding to the scale of supply, and the era of double digit house price inflation may well be over. Demand for housing in 2005 is likely to remain strong, underpinned by strong employment growth and solid wage inflation, so a sustained price decline remains a low probability", according to Dr. Dan McLaughlin, Chief Economist, Bank of Ireland Global Markets.

The mortgage market continues to perform ahead of other economic sectors with gross new lending activity particularly strong. Based on Department of the Environment data to last September, indications are that 2004 was the first year that the number of new mortgages exceeded the 100,000 mark - an increase of 19% on the previous year. The Review estimates that in 2005 gross mortgage lending will value €19bn, exceeding last year's levels by some 11%.

Mr. Joe Larkin, Director, Personal Lending, Bank of Ireland, commented on the outlook for the property market, "Current demand for housing is unparalleled and all indicators are pointing to continued market growth. For instance, average earnings in Ireland are rising sharply, gross migration is running at around 60,000 per annum and job creation figures have been particularly impressive this last year. It is clear that there is still a substantial requirement for new housing and mortgage lending."

A key factor supporting affordability is interest rates which remain at a fifty year low. In terms of rate movement, Dr. McLaughlin writes in the Review that "a half point increase is possible this year, but that will be contingent on first quarter GDP growth in the euro area and a well behaved oil market". The Irish Property Review makes the case for fixing and notes that ECB rates have averaged 3% since the euro's inception, consistent with a variable mortgage rate in Ireland of around 4.5%.

The Irish Property Review reveals evidence of increased trading up activity in the market. A decline in the average loan-to-value ratio, while house prices continue to rise, indicates that people may be using the equity built up in previous homes to trade up. Investor interest in the market, although high in real terms, seems to have cooled somewhat with rents softening by approximately 5% in 2004.

With another record number of new properties coming on the market in 2004, the Irish Property Review examined the changing mix in the make up of new house completions. Dublin outpaced that of the rest of the country accounting for 22% of all completions, against 21% in 2003 and only 18% in 2001. Apartments continue to increase as a share of overall completions, rising to over 22% of the total in 2004 but it is the 'semi-d' that has emerged as the most popular new build - accounting for one in two houses built in the first nine months of 2004, up from one in four in 2001.

Returns in the commercial property sector rose to 11.5% in 2004, outperforming the residential sector for the first year since 2000, and this year are expected to increase to 15%. The Irish Property Review predicts a recovery of the office sector in 2005, intimating that returns may well push on into double digits, strengthened by high business spending. The retail sector continues to perform well, underpinned by steady consumer spending and demand for retail sites from foreign retailers.

The Bank of Ireland's Irish Property Review is published by Bank of Ireland Mortgages and the Economic Research Unit of Bank of Ireland Global Markets, led by Dr. Dan McLaughlin. It is the only publicly available property market report to source data from the Department of the Environment's housing statistics bulletins, compiled from data from all mortgage lending institutions.

Ends

To access PDF:
Please note that the complete findings of the Irish Property Review can be accessed and/or downloaded directly from Bank of Ireland's website as follows:
Log on to www.bankofireland.ie
Click Personal Banking
Click Buying a home
Click Download our brochures
Click Property Review

Alternatively, if you would prefer to receive a copy by return mail, please click on the button at the top of this email marked, 'Request PDF of IPR by return mail'

For information contact:

Anne Mathews
Media Relations Manager
Bank of Ireland Group
Tel: 6043836 /087 246 0358

For information contact:

Olive Moran
Marketing Manager
Bank of Ireland Mortgages
Tel: 6113525 /086 6622333

Anne Mathews
Media Relations
Bank of Ireland
Tel: (01) 6043836