Wednesday 21 March 2018

Property makes news

Property stories have been making the headlines over the last week, ranging from the tragedy associated with Priory Hall, worries about other apartment developments, bankers and talk of another bubble.

I would be amazed if there were many more problem schemes on the scale of Priory Hall, but that isn't much help to residents who are secretly worried about their homes.

The good news is that there has been a dramatic reduction in the number of vacant apartments. For example, in Dublin when the market began crashing there was much talk of 15,000 empty apartments which would have to be sold before the market could recover.

Effectively they are all now occupied, either rented or sold and partly helped by the emergence of a whole new market in large-scale residential investment by overseas funds like Kennedy Wilson.

I've also noticed that we are seeing the first new homes developments starting up in "commuter towns" with good transportation links like Naas, Navan and Mullingar.

Apparently these are being driven by purchasers who can't afford a house and garden in Dublin and are prepared to commute to get the extra space. Now where have we heard that before?

Evidence of rising house prices is also provided by John McCartney, head of research at Savills. His analysis of the Property Price Register shows that €4.86bn worth of properties were sold last year in 25,006 deals. In the first six months of this year, there were 14.4pc more sales and the total price was up 17.7pc, compared with the same period in 2012.

That means that this year we will probably see a 30pc increase in the number of residential properties sold over the 18,220 properties sold in 2011 for €3.92bn. And that looks like more than "green shoots" to me.

Those figures are for all types of property and all of Ireland. Taking Dublin alone, Ronan O'Driscoll, director of Sherry FitzGerald New Homes, also told me that rents and prices for city centre apartments are rising and are stable in the suburbs. My own view is that good family house prices have increased in value by about 25pc over the last year.

Supply remains tight and some investors are cashing in. I am aware of one house on Hainault Road, Foxrock, which was bought in 2012 and resold this year at a profit of over €200,000, after allowing for minor works.

By subtracting the numbers of mortgages granted, Savills showed that in Q1 this year, 62pc of purchases were made with cash.

This is an issue for the banks as this means that last year up to €3bn in cash may have been withdrawn from Irish bank deposits to buy houses. The banks should be funding this sector more positively, allowing apartment dwellers with families to trade-up.

For commercial and residential investors the CGT break is attractive and it has been interesting to watch the market dynamics this year. As prices have been rising, investors predicting further increases have been piling into property, fuelled by overseas money and now the buying power of the REITs (real estate investment trusts).

I predict there will be further strong price rises for good investment property over the next year and with so many investors taking that view, price rises become a self-fulfilling prophecy.

One issue is that with a record volume of property being sold in Ireland this year, at some stage concerns may develop about a glut of property coming on the market in 2020 when the CGT break first allows a resale. Let me be the first to call for an extension of the tax break into next year in the upcoming Budget.

NAMA and the banks have correctly sold a lot of the "low-hanging fruit" in London and Dublin. But this recovery is uneven and is largely Dublin based. Most of the problem properties in the NAMA basket are secondary and will need every tax break going or they will still be making the news in 20 years.

Correction A technical error changed the meaning of a sentence in last week's column. The sentence should have read "Because NAMA, the foreign owned banks and the Irish banks with bad loans under the €5m NAMA threshold are often selling at losses of 50-70pc, the client is less concerned with the last few per cent of the price achieved and more focused on achieving volumes of sales, not putting a foot wrong and keeping out of court."

Irish Independent

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