Agent view: Disappointing season so far and more clouds gather
The opening half of 2016 has been disappointing for the Irish residential market, with a deepening of the crisis in terms of the lack of stock available to buy and rent across the country.
Despite the underlying strength of the economy and of consumer sentiment, the residential market has failed to respond. Data available from the Property Price Register (PPR) reveals that the level of transactions in the opening three months of 2016 was 9pc lower than the comparable period in 2015. Notably, a comparison between sales recorded in the PPR and the mortgage drawdown data suggests that cash buyers accounted for 48pc of all residential transactions in the opening months of 2016.
Secondly an analysis of the stock of property available to sell reveals that it has fallen to the lowest point on record, with only 26,800 units advertised for sale in Ireland in January. This represents 1.4pc of the private housing stock.
Equally disappointing is an analysis of commencement data, which suggests that the quantity of stock completed this year could well fall below the low levels of construction in 2015.
Furthermore, the mismatch between the quantity of private investors entering and leaving the market still persists. An analysis of the profile of vendors who sold their property through Sherry FitzGerald in the opening quarter of 2016 revealed that 34pc were selling investment properties, while the sales that occurred as a result of bank repossession stood at 12pc. This suggests that potentially 46pc of all sales were investors off-loading their investment properties. In contrast, only 19pc of properties were purchased by investors.
This trend suggests that for every one private investor who has bought into the market during the year to date, two have exited. This is not a new trend, it has been evident for over five years and it is having a debilitating impact on the rental sector. As such, the crisis in the housing market has deepened and this is placing a significant burden on our competitiveness, with rising rents damaging the viability of our cities for foreign direct investment (FDI).
It is vital that our new minister for housing addresses the barriers to activity and development in the market and seeks to halt the loss of rental accommodation from the market. If anything, this has become even more urgent, given the shocking result from the UK referendum.
Brexit is clearly not good news for the Irish economy in so many ways; however, there may be a small silver lining. There is a growing view that Ireland may see an uplift in occupier demand from the FDI sector. In particular, Dublin is likely to benefit from increased demand from financial services companies in need of an EU base. This will also lead to increased demand for housing.
As such, it is imperative that the Government takes immediate action to remove the barriers to both construction and activity in order to allow a more normally functioning and responsive market to re-emerge.