The most recent announcement by the ECB, slashing their interest rates by 75 basis points has been warmly welcomed by Healy Hynes of Hynes Real Estate Alliance. The ECB move now makes their benchmark rate almost half of what is was in October when it stood at 4.25 per cent.
The European Central Bank 0.75 per cent cut to its main lending rate brings the bank's rate down to 2.5 per cent. This decrease comes on top of two previous cuts of half a percentage point each over the past two months.
The reduction is aimed at reducing mortgage repayments, making borrowing cheaper and putting more money in the pockets of consumers. A number of Irish banks have already promised to pass the reduction on to their customers although not all of them.
Healy Hynes of Hynes Real Estate Alliance has welcomed the move saying it will help to bolster the property market. “It’s a buyers market out there and any move that makes housing more affordable to buyers has to be welcomed,” he said.
The next step according to Mr Hynes is for the banks to ensure that lending is made available to buyers who wish to take advantage of the massive improvement in housing affordability that has taken place in recent months.
“The move by the Government to introduce the Home Choice Loan scheme is a recognition that the banks are not lending as they should be – the credit market is constricted and needs to be freed up sooner rather than later. Low interest rates are of no material benefit if the banks do not lend. The Japanese economy had 0.5 per cent interest rates for seven years, which they have now dropped to 0.3 per cent. Japanese banks however have spent the last two decades repairing balance sheets and restricting lending. This is not what we want to experience here.”
Mr Hynes was quick to point out the material benefit that has accrued to househunters in the last while. “This is a very real and concrete improvement in the position of homebuyers. Between interest rate cuts, price reductions, and changes in mortgage interest relief, first time buyers are now better off to the tune of almost €500 a month, compared to just 18 months ago.” Mr Hynes commented.
According to Mr Hynes, there is now an unparalleled opportunity, particularly for first time buyers and families looking to trade up. “They are now in the driving seat, which they haven’t been for a number of years,” he said. “And it’s time for them to take advantage of that.”
Mr. Hynes expects that with building effectively curtailed for quite a while yet, 2009 will see the stock of homes now available drying up. “We do anticipate investors to be the first to pick these up,” he said “and by the time the media is reporting the market has improved, the real deals will already have been secured.”
According to Mr Hynes there is not as large an overhang of stock in the Athlone market as is being experienced in many other areas. This is particularly significant in the new home sector he believes and augers well for the future. “Building here was very generally very well balanced between supply and demand. So we are not seeing the phenomena of “ghost estates” that many other areas are reporting.”
According to Mr Hynes, the outcome of this is that the majority of the homes for sale in Athlone are being sold by families looking to move on to other homes, so every sale has a knock on effect to another sale. This should, in Mr. Hynes’ opinion, result in the overhang of homes being taken up faster than if they were predominantly new homes being bought by first time buyers with no existing occupiers. Mr.Hynes cautions that anyone who has been looking at buying and hesitates much longer will end up ruing the decision. To illustrate his point Mr. Hynes quoted an old adage, saying “you’ll never buy at the bottom of the market or sell at the top”, instead, look to buy when the reward is high and that’s exactly the situation we have right now. We’re closer to the bottom than the top of the market with the cost of financing continuing to fall, which is exactly where a buyer wants to be.”
Healy Hynes is director of Hynes Real Estate Alliance, Athlone and former chairman of national property group Real Estate Alliance.
