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‘Uncertainty’ over commercial-property slump

The Governor of the Central Bank has said that the regulator believes that the Irish banks are “resilient” to a downturn in the global and domestic commercial-property markets.

Gabrial Makhlouf told a press conference (4 December) that, while commercial-property prices were showing some signs of stabilisation, there was still uncertainty over the full scale of the downturn in these markets.

“In Ireland, vacancy rates in the Dublin office market remain high and investment activity is subdued,” he stated.

Trade risks

The governor was speaking as the Central Bank published its bi-annual Financial Stability Review, which outlines its views of the main risks facing the financial system.

He said that the main risks to financial stability centred on uncertainty and rising geo-political tensions, which raised the prospect of lower trade and economic growth.

“A protectionist and fragmented world has negative implications for economic activity domestically and internationally, as well as for the resilience of households, firms and the financial sector,” he added.

On the housing market, the Central Bank says a continuing supply deficit is pushing prices higher, adding that around 52,000 new homes a year could be needed to meet demand. 

Mortgage lending ‘sustainable’

“Despite these imbalances, there are no signs of excessive risk-taking in mortgage credit, while aggregate mortgage credit growth remains moderate,” Makhlouf said.

He added that evidence suggested that the regulator’s latest mortgage limits, in place since early 2023, “continue to meet their aim of ensuring sustainable lending standards in the mortgage market”.

Governor Makhlouf said that domestic bank profits were likely to have reached their peak, but added that the sector was “well-placed” to deal with any fall in profits.

The Central Bank is maintaining the Countercyclical Capital Buffer (CcyB), which requires banks to set aside financial resources to act as a shock absorber, at 1.5%.