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Friday 20 October 2017

Paul McNeive: Tom has been There and Dunne That

Any discussion of the market must start with NAMA and Tom Dunne believes that the agency is fulfilling its mission effectively
Any discussion of the market must start with NAMA and Tom Dunne believes that the agency is fulfilling its mission effectively

Paul McNeive

Tom Dunne has seen several booms and busts and his experience as a top investment agent, and his position as Head of the School of Surveying and Construction Management at the Dublin Institute of Technology gives him a real insight into the property market.

A sought after analyst, he chaired the government commission which led to the establishment of the Private Rented Tenancy Board (PRTB). Until recently he was a member of the Governing Council of the Royal Institution of Chartered Surveyors.

A former President of the Society of Chartered Surveyors in Ireland, he also survived a few years as my boss, and it was a pleasure to debate the market with him this week.

Any discussion of the market must start with NAMA and Tom Dunne believes that the agency is fulfiling its mission effectively. Whilst some analysts have concerns over NAMA's omnipotence in the market, Tom draws an interesting comparison with the deep recession of the 1980's when the market was dominated by Irish Life and The Irish Pension Fund Property Unit Trust.

These bodies held large portfolios and could dictate the supply of property. Whilst rents were tumbling, they were strong enough to allow properties to remain vacant for long periods, rather than accept distressed rents which would reduce the values of their portfolios and damage the overall market.

Whilst this columnist is predicting further price increases for investment property, Tom Dunne cautions that simply betting on the future is fraught with risk and constitutes "speculation" rather than "investment".

"It is 'speculators' and not 'investors' that create bubbles and the overseas funds driving the market are rational investors," he said.

"Prices now are a mix of attractive yields and a bet on the Irish economy. The funds operate according to rigorous investment criteria and buy around the world where it makes sense. Right now, Ireland fits the bill – as soon as we don't, the funds will be gone."

Mr Dunne doesn't share concerns that there won't be enough Irish investors to buy all the property when the current crop of funds have moved on.

He told me that: "since the 70s overseas funds like Royal Liver, Friends First, British Land, MEPC and others have held property here. Dublin is well established as a global investment location." Indeed he suggests that the very winding down of NAMA will further boost the market as investment funds will regard the existence of a dominant state owned presence as a negative point.

On the residential side he say's that some of the prices being paid now for development sites "don't stack up".

"Many purchases are made in cash and the buyers are depending on house prices rising," he said.

His interest in the PRTB. sees him tracking the letting market closely and he believes the advent of a new class of professional commercial landlords like Kennedy Wilson is positive for the market.

"Tenants are staying in properties longer and need greater security of tenure. They don't want to move because landlords want their property back for personal reasons.

"The housing shortage could be alleviated by building a new form of housing e.g three storey houses of approximately 120sq metres with a rear garden only and this is beginning to happen in the market. Buyers, competing hard now for the existing three and four bed semi-detached houses with generous gardens will drive those properties values and they will out perform the market average," Mr Dunne said.

Fortunately, he reports the first increase in five years in CAO applications for the property economics course at DIT.

"Applications are up 36pc but this is from a low base and there will be a shortage of graduates in property disciplines for years to come," he said.

This column has been highlighting the opportunities in the business for some time. The students will be in good hands.

I was honoured to speak at the National Recruitment Federation Conference last week and the 350 delegates at Citywest were in upbeat mood. NRF Director Geraldine King said that turnover in the industry increased to €1.8bn in 2013.

The Citywest was bustling with activity and this reflects a pick-up in business I have noticed around the country.

Recently I spoke at an event at the Hodson Bay Hotel in Athlone where the manager, Mr Colm Gavin told me they were hosting five conferences that day.

It's not surprising that NAMA has announced they will be bringing another portfolio of hotels to the market in the coming weeks as confidence in the sector is rebounding.

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