Back to the grindstone
Real Deal - The business of property
Published 04/09/2016 | 02:30
The end of the summer is nigh and the beginning of a new school year heralds potential change - not just for the little ones. The autumn season traditionally marks the beginning of a busy time in the property market as both buyers and sellers look to make their move before year's end.
The property scene so far in 2016 has been very challenging with huge supply issues at play. The number of properties sold nationally in the first six months was down 15pc on the previous year, primarily due to lack of stock. Significant distractions of both the political and social kind have played their part of course, including a General Election, that unexpected Brexit result, the European soccer championships, the recent Olympic Games saga and now the Government biting off more than it can chew, so to speak, with Apple.
In the midst of all this we had the publication of the 115-page 'Rebuilding Ireland' housing document at the end of July which outlined the ambitious plan by Housing Minister Simon Coveney. Much of the content of this proposal had been leaked in advance. As a result, it contained few surprises.
On a positive note it highlighted just how seriously the Government is now taking the housing crisis. The minister promised that monthly updates would be provided by his department. It is vital that this happens to reconfirm the Government's commitment to the challenge and ensure that local authorities deliver on the proposed 47,000 social housing units by 2021. The reluctance of the local authorities to construct new social housing has been very evident over the last three years and the delivery of these homes is essential.
The Government has also confirmed it will be introducing a new tax-based incentive scheme for first-time buyers in the forthcoming budget. It is anticipated that this will be in the form of a potential tax break worth up to €10,000 for those buyers.
We are all familiar with the expression: location, location and location. But clearly, the most important current needs of the Irish property market are supply, supply, supply!
Digs back in vogue
About 81,000 CAO applicants have by now received their Leaving Cert results and CAO offers. Once an offer has been accepted, the pressure mounts to secure a base - somewhere to heat the frozen pizza and waffles for the next nine months. The provision of quality student accommodation has been slow to arrive to these shores. The market is playing catch-up, however, and 6,000 new bed spaces are proposed over the next three years.
A number of student accommodation specialists such as The Student Housing Company's Binary Hub and Ziggurat Students have now entered the market. The fact remains that there is still a big shortage of bed spaces for students in Irish cities, especially in Dublin and Cork. A quick glance at our demographics indicates that this number will increase year on year until 2024. This situation is being intensified by a lack of supply of mainstream rental properties nationally. Students find it difficult to compete with professional tenants as they can generally only commit to a term of nine months - in line with the college year. Also student accommodation generally brings higher ongoing maintenance costs thus encouraging landlords to focus on tenants who are in employment.
Costs of accommodation vary hugely depending on location but, according to the DIT Cost of Living Guide, the average weekly cost for renting a house is €115 per week and €200-€250 a week for specialist student all-inclusive accommodation. As a result of the shortage, living in digs is back in vogue with college authorities encouraging it as a quick and temporary solution to the shortfall. The advantage for home-owners is that, in most cases, tax is not payable on this type of income up to €12,000.
The return of digs also serves to highlight how under-developed the student market is in Ireland. Something else for Minister Coveney to add to his ever-growing to-do list.
New homes on the up
In the first half of 2016, according to the Property Price Register, 21,000 properties changed hands in Ireland - at only 1pc of the total housing stock, it is an unnaturally low figure. The lack of delivery of new homes has been a core problem with less than 50pc of the required number built in the first half of the year. However, the next quarter looks a little better. September is always a popular month for new launches and this year is no different. Sherry FitzGerald is expecting a busy few months with units launching in no less than 10 developments around the capital.
Marina Village in Greystones was launched only last weekend, the first major development of new homes in the town - bar the 25 units at Wood Group Homes' large development - for many years. According to Ivan Gaine, director of new homes at Sherry Fitz, there was a turnout of 3,500 at the launch, helped along by the sunshine, and 65pc of the available units were sold. September sees additional units in developments around Dublin including Clontarf, Rathfarnham, Knocklyon, Clonsilla, Castleknock, Walkinstown, Ashtown and Stepaside.
DNG are launching units over the coming weeks in six developments in commuter-friendly locations including Shankill, Kiltipper, Ballycullen, Leixlip and Celbridge. Next up is a mix of three-bed semi-detached and detached units, at Castlegrange, Castaheney on September 10. Prices have yet to be released. Knight Frank are launching a mix of three- and four-bed semis, from €295,000 at Hollywoodrath in Hollytown shortly.
What is encouraging is that we're finally seeing a flow of new homes at the size and price range where demand is greatest. While many launches involve a small number of units or large family homes not of interest to first-time buyers, it seems the market is at last moving in the right direction.
Philip Farrell is a property consultant and market commentator