Irish property lending growth slows

Growth of property-related lending in Ireland slowed down in the final months of 2007, figures from the Irish central bank show. The central bank's sector breakdown indicates that lending for commercial property and construction reached EUR 105.8 bn at the end of 2007, up EUR 22.5 bn on the year. Taking mortgage lending into account, total property-related lending in Ireland at the end of 2007 amounted to EUR 246 bn.

Ireland's central bank said that at end-December construction lending had risen by 24.9% on an annualised rate, compared with a 48.5% annual growth rate a year earlier. Growth in the fourth quarter alone was 3.3%. At the same time, annual growth in lending for real estate activities reached its lowest rate in over five years, at 27.7%. Nonetheless, Ireland’s property sector has proven to be relatively resistant, with 7.1% growth in the fourth quarter alone for commercial real estate lending. Mortgage lending rose 13.5% on an annual rate and 3% in the fourth quarter of 2007.

Property-related lending represented 62.1% of the growth in credit over the year, down from 82% a year earlier. Ireland's central bank noted that its share of total outstanding credit had continued to fall after declining in the third quarter of 2007 for the first time since 2001.

Meanwhile, the Fitch ratings agency cautioned that the high exposure of Irish banks to real estate could make them vulnerable to significant market weakness. 'If the Irish economy achieves a soft landing, which Fitch regards as the most likely scenario, most Irish institutions should be capable of rising to the challenge without the need for rating action,’ Matthew Taylor, senior director with Fitch's financial institutions group, said in a statement. 'In the case of a more severe contraction in economic growth, a wider range of rating actions on Irish banks may be required.'