Irish Times 16th December 2016
Property industry experts welcome help for first-time buyers and forecast busy 2017
Marian Finnegan Chief economist, Sherry FitzGerald
New dwelling sales encouragingly increased during the second quarter, totalling about 2,400 in the first six months. This represents an uplift of 9 per cent on the same period in 2015. Developers are focusing on more expensive property types for which demand is more secure. That said, budgetary and recent measures should begin to address this issue.
On an annual basis, average rents nationwide increased 9.9 per cent, with the growth in apartment rents continuing to outpace house rents. Notably, annual rental inflation for apartments outside Dublin was at a record high at the end of June 2016, at 12.7 per cent. The second quarter saw average rents in Dublin exceed the peak levels recorded in the final quarter of 2007 by 3.9 per cent.
On the supply side, in July residential units advertised for sale nationwide were down 14 per cent when compared to July 2015. In Dublin, available stock was down 18 per cent annually. This represents 1 per cent of the total private stock. All four local authorities saw supply levels decrease on an annual basis, with the highest reduction – 28 per cent – in south Co Dublin. Commuting counties around Dublin also recorded a decrease in supply during the 12 months, albeit a more moderate decline compared to Dublin.
Budget 2017 with its help-to-buy scheme and last week’s amendment to the lending policy for first-time buyers are to be welcomed. The previous restrictive lending policy towards first-time buyers had stifled the supply of new residential units and led to the exclusion of important cohorts from the market. The new policy is more in line with international practice and it should help underpin an increase in construction activity.
The preliminary census figures have revealed a greater increase in the State’s population than had been forecast. This, combined with the historically low construction levels of recent years, means the gap between the demand for housing and the supply has widened considerably. Our current forecasts suggest we need to deliver 35,000 units per annum over the next 10 years. It is essential that any barrier to delivering these be removed.
Keith Lowe Chief executive, DNG
Only 1,189 new home units were built and sold in Dublin in 2015 in new housing estates of three or more units. For the first six months of 2016 there were only 709. The new 5 per cent first-time buyer’s grant, which will be a strong selling point for houses priced at under €500,000, will assist in giving confidence to builders and ultimately will lead to more supply.
The percentage of new homes being bought for rental purposes is negligible due to high taxes and little funding being available for buy-to-let investors.
Despite rent certainty measures being introduced by the Government, rental levels have surpassed their previous height in the second quarter of 2006 and continue to move upwards as the number of houses and apartments rented out continues to go down due to many landlords leaving the sector.
This exodus is as a result of high taxes and the fact that many buy-to-let mortgages, which were originally interest-only, have reverted to capital and interest payments that are proving harder for landlords to service.
Many of these rental units when sold are tending to return to their original use as family homes. Few new landlords are entering the sector due to limited buy-to-let funding being available and the high tax regime in place. Landlords, who still cannot write off 100 per cent of their interest payments against rental income, are forced to pay USC on rental income and property tax, which makes renting properties in Ireland unattractive despite the record high rents.
Period houses in first-class south Dublin suburbs have sold well. Property sales in suburbs on the northside have been particularly strong and with the new Luas line under construction we predict that property price rises on the northside will exceed those on the southside in 2017.
Next year we would expect property prices to rise by 7.5 per cent to 10 per cent in Dublin – and by 10 per cent for properties priced below €220,000. Outside Dublin prices will rise 10 per cent and rents will increase at the same rate.