Housing Equity Withdrawal Trends in Ireland

Reamonn Lydon () and Brídín O'Leary
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Brídín O'Leary: Central Bank of Ireland

Quarterly Bulletin Articles, 2013, 90-103

Abstract: This article uses a unique data set to track changes in aggregate net housing equity withdrawal between 1978 and 2012. The analysis covers the peak years of the recent housing boom when it is estimated that net equity withdrawal reached a peak of €8 billion, or 10 per cent of disposable income. This was driven by three factors: first, there was a significant increase in the propensity for existing homeowners to take out top-up loans during this period; second, the combined effect of large numbers of transactions and booming house prices meant that sellers in the final link of a property-transaction chain, i.e. those not purchasing another property, withdrew substantial equity upon selling; and third, relative to equity withdrawals, the rate of equity injections declined due to a fall in deposits from first-time buyers and a decline in the rate of amortisation. The latter was driven by the increased prevalence of interest-only loans and significantly longer loan-terms. The dramatic collapse in the Irish property market means that all of these factors have been reversed, moving the household sector from one of net equity withdrawal to net equity injection.

Date: 2013-01
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