Cairn chief takes aim at mortgage rules and ‘irrational fear of apartments’

Cairn Homes chief executive Michael Stanley said on Thursday that the Central Bank’s mortgage-to-income lending rules and an “irrational” fear of apartment developments among the Irish public were exacerbating the housing crisis.

The comments came as the Dublin-listed homebuilder reported that its gross profit for the first half of the year jumped 86 per cent to €24.2 million, as home sales almost doubled to 402 units, despite a 13-week construction shutdown at the start of 2021.

Responding to reporters’ questions, Mr Stanley said that the mortgage rules, introduced in 2015 and currently under review, restricting lending to most borrowers to 3.5 times income, are keeping 500,000 would-be homeowners out of the market, and that the Government’s planned shared-equity scheme to help people buy 2,000 a year will have only a marginal impact.

With debt-reliant smaller builders responsible for most of the industry’s output in the Republic, the impact of the mortgage rules on affordability is affecting “realisable demand” and the viability of certain projects, he said.

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Mr Stanley stopped short of being specific on what the Central Bank should do as it continues a broad review of the mortgage rules into next year, but said the Government's new so-called Housing for All strategy, unveiled last week and targeting the delivery of 300,000 new homes in the Republic by 2030, "needs to be complemented by a prudent and appropriate lending environment".

“A framework that remains prudent but gives thousands of prospective customers earning good salaries a greater opportunity to qualify for a mortgage is urgently needed for the tens of thousands of first-time buyers who remain trapped in the affordability gap,” he said.

Mortgage payments

Cairn highlighted in a presentation for analysts that mortgage payments on an average house costing €372,000 for a first-time buyer who has borrowed 90 per cent of the cost amount to almost €1,300 a month. The market rent for an equivalent three-bed house in Lucan, Co Dublin, is €2,350.

Mr Stanley said a "massive, massive shortage" of well-located apartments for rent, with many planned schemes being challenged in the courts, is also fuelling the accommodation crisis. Property website Daft.ie currently has a fewer than 2,000 properties advertised for rent. "The irrational fear of apartment buildings in Ireland is unfortunate," he added.

Cairn’s revenue rose 61 per cent to €130.6 million for the first half of the year, while operating profit increased by 102 per cent to €11.7 million.

Looking ahead, the company said full-year operating profit is now expected to be about €52 million, increasing to €85 million in 2022, with the forecast for the cumulative two-year period up 14 per cent from what the company had guided in March.

“Cairn has never been better positioned to play a leading role in the recovery of the housing market in Ireland. We have grown our order book from €214 million in January to a current high for our business of €655 million and we will deliver 2,550 quality-built family homes between this year and next,” said Mr Stanley.

“We will continue to leverage our scale and capabilities to deliver competitively-priced starter homes for first-time buyers. As we report today, our average selling price for these starter homes has remained largely unchanged at €371,000, including VAT.”

Closed sales

Cairn’s 403 closed sales in the first half across 13 developments were made up of 167 houses and 236 apartments, with the multi-family developments geared towards international investors and pension funds targeting the rental market.

Cairn said that it had been able to offset 3-4 per cent build cost inflation over the past 12 months, amid soaring timber, aggregates and steel prices, with home price rises. The group’s long-term relationships with contractors has contained cost increases, it said.

Cairn, which scrapped dividend payments during the Covid-19 crisis, said it is recommencing shareholder payouts, with an interim payment of 2.66 cent per share set to be handed over next month.