DUBLIN (Reuters) - Mortgage drawdowns in Ireland grew 29 percent in value in the second quarter compared to a year earlier, official data showed on Wednesday, marking a slowdown from the previous quarter as a chronic housing shortage stalled some willing buyers.
Irish mortgage lending collapsed after a property bubble burst in 2007. A recovery over the past three years ago has picked up pace in recent months thanks to Ireland's rapidly growing economy, but is being held back in part by a widening gap between approvals and drawdowns widens.
House buyers in Ireland need formal mortgage approval in principle from a bank before they can make an offer on a house.
Mortage drawdowns in the second quarter grew to 1.65 billion euros, Ireland's Banking & Payments Federation said.
Dermot O'Leary, chief economist at Goodbody Stockbrokers, said this meant that of the 35,000 mortgages approved in the 12 months to the end of June, 27,000 were drawn down, the biggest gap in percentage terms since the data began in 2011.
"Both approvals and drawdowns are clearly rising, but a mismatch is now opening up as approvals grow at a faster pace," O'Leary wrote in a note.
"The scarcity of new supply coming to the market, relative to demand, is likely to be the main reason for this trend. In this environment it is inevitable that price inflation has accelerated."
Irish residential property prices climbed 11.9 percent in the year to the end of May, the highest annual growth rate in two years, although they are still 29.5 percent below the peak of the property boom a decade ago.
Analysts estimate that the mortgage market will grow to more than 7 billion euros of drawndowns this year from a low of 2.5 billion euros in 2011. This is still some way shy of the 13.5 billion euros O'Leary said would represent a "normal" functioning market.
Allied Irish Banks (I:ALBK) (AIB) said the gap between approvals and drawdowns had been a feature since last year.
"People are clearly having difficulty in getting the units even though they have financing and that's all back to the supply equation which is improving but there's a significant overhang," AIB chief financial officer Mark Bourke told Reuters.
"It is problematic from a buyer's point of view, particularly first-time buyers where they have a very keen price point and there is only a very small number of new developments, especially in the urban areas."