The lingering of Covid-19 and the unknowns over its eventual economic fallout, tightened supply, and the real impact of Brexit will make for a turbulent year in property. To clarify where the industry believes we are headed in 2021, we put the big questions to a panel of five experts who, between them, represent most of Ireland’s property professionals.
Keith is the long-serving CEO of DNG, a national estate agency network of 75 branches nationwide, including franchises. He has 36 years of experience in the property sector, having joined the firm in 1984.
Marian Finnegan
The Managing Director of Residential at Sherry FitzGerald, a 66-branch nationwide network, including franchises. Marian, who long served as the group’s chief economist, has spent 24 years analysing trends in Ireland’s property sector.
Pat Davitt
CEO of the Institute of Professional Auctioneers and Valuers (IPAV), which represents 1,100 estate agents nationwide, Pat has 36 years’ experience in the sector, much of it spent running the family auctioneering firm in Mullingar, Co Westmeath.
TJ Cronin
TJ is the Vice President of the Society of Chartered Surveyors Ireland (SCSI), representing 5,000 property and construction professionals. With 25 years’ experience, he is Residential Manager with the Cork-based Irish & European agency.
Barry McDonald
Barry is the National Spokesperson for the Real Estate Alliance (REA), which represents 50 businesses around Ireland. With 19 years in property, he is also Director of REA McDonald based in Lucan, Co Dublin.
By how much do you think property prices will rise or fall in the coming year?
Barry McDonald: To rise by somewhere in the region of 5pc. Lending restrictions (Central Bank rules) and Brexit uncertainty will prevent runaway growth, but shortage of supply will continue to put upward pressure on prices over the coming 12 months.
Marian Finnegan: Despite the fallout from the pandemic, residential property prices have demonstrated a remarkable degree of resilience. Prices have been underpinned by the release of pent-up demand following the spring lockdown and by the ongoing supply-side crisis, which has been exacerbated by Covid-19. We expect this to continue in 2021, with modest price inflation of 0.5pc.
Keith Lowe: House prices are likely to rise by 3pc-5pc this year. It is probable that the majority of these price increases will be front-loaded to quarters one and two as the market continues to perform as well as it had in the latter part of last year. This will be further aided by mortgage exceptions, which become available in March. Pent-up demand fuelled by the first lockdown and limited supply levels, together with a fundamental demand and supply imbalance, are still the main driving factors. Lending restrictions (Central Bank rules) and Brexit uncertainty will prevent runaway growth, however shortage of supply will continue to put upward pressure on prices over the coming 12 months.
Pat Davitt: Minus a shock, prices can only increase; I’d say by 5pc to 10pc thanks to supply issues, many more qualified purchasers being around, lower interest rates (due to the entrance of new lender Avant Money), and many buyers seeing the value of fixed-rate mortgages available for longer terms of up to 10 years.
Where do you see rents going in 2021?
Pat Davitt: Rents are likely to remain flat. Many properties are over-rented at the moment and froth rents will become more probable in the market because institutional landlords in particular have the ability to charge these froth rents based on the sheer number of properties they control.
Keith Lowe: Rents in the main cities and larger urban areas softened over the course of 2020 and this is set to continue into 2021. However, outside these locations and in more rural areas, rents have remained largely unaffected with little change anticipated.
City rents were negatively impacted by Covid-19. This will be a relatively short-term phenomenon. College students are studying at home, a high proportion of employees are working remotely (especially for international firms) and the short-term Airbnb market has been severely affected. It’s positive for our housing crisis, but it’s temporary as cities will return to the way they were when the vaccine is made widely available.
Marian Finnegan: With the onset of Covid-19, the stock of available rental accommodation increased as former short-let properties in the Airbnb market were released and tenants left accommodation to move ‘home’. The increase in supply will be short lived and we can expect to see that normalising in the year ahead. Rental inflation of 1pc-3pc seems likely.
Barry McDonald: I expect no change. Rents took a knock due to shifting work dynamics, with many tenants moving back in with parents, or people returning to other countries. This badly affected the short-term rental market, resulting in increased long-term letting supply. The housing shortage continues to affect the market and rents are likely to hold firm.
What impact has Covid-19 had on the Irish property market?
TJ Cronin: Covid-19 has highlighted the importance of having functional/flexible space for home working and, of course, a reliable high-speed broadband connection. We have seen a significant migration of people moving to smaller towns and villages and a resulting upturn in demand for property in these locations. Colleagues in Dublin report strong demand at the upper end of the market from Irish people returning home from the UK due to a combination of Brexit and Covid-19.
Barry McDonald: Buyers showed urgency to draw down on their mortgage approvals for fear they may not get the same level of financial assistance in the future. The lockdown provided many with an opportunity to escape the rent trap and save (in some cases on childcare, rent and transport costs) for a mortgage.
Marian Finnegan: The pandemic is reshaping buyer demand. A shift toward more remote working has boosted demand for houses in walk-in condition. The stock of second-hand homes for sale is extremely low and the supply of new homes has been hampered by Covid-19, with supply forecasted for 2021 expected to fall well short of demand.
Keith Lowe: Lockdown 1 led to a fall in house prices of 2.6pc in the capital. Prices since rebounded by 3pc. The number of house sales was down 25pc. Developers are considering larger floor plans for new homes to include home office space, anticipating a change in work practices going forward. The lockdown periods were a time of reflection, encouraging some to make significant lifestyle decisions which hinged around property. For some, the time was right to leave cities for more spacious accommodation or to locate closer to family.
Can you rate the new Government’s performance on housing out of 10?
Marian Finnegan: I’d go for 7/10. I have been very encouraged by the approach taken by the new Minister for Housing, Darragh O’Brien. He appears to be very capable and decisive, both necessary qualities for this portfolio. The recent announcement about a Shared Equity Scheme is hugely welcome, albeit we are still awaiting full details and clarifications. This scheme has the potential to assist in the delivery of 3,000 – 5,000 additional new homes annually. The enhancement of the Help-to-Buy scheme in July has helped buyers. That said, it is set to expire next year and a more long-term approach to this incentive would be beneficial.
Pat Davitt: I’d say 8/10. From here on in, it’s all about improving supply and delivering affordable homes. In this regard, it’s worrying to see senior civil servants who serve and advise the Government arguing, this time publicly (which is unusual), about what the actual cost of building a home is. It’s incredulous that this is where public policy is at over a decade on from the housing crash. It doesn’t augur well for the future.
Barry McDonald: I’m going to have to say just 3/10. There is no denying the fact that the housing issue remains a crisis, with homeless numbers still too high and many families living in unsuitable and cramped conditions. While there is no quick fix, I believe the Government continues to rely too heavily on the private sector to solve the problem. Positive steps have been taken to improve the situation, most notably the recent ban on co-living developments, however, any improvement is incremental and Covid-19 has provided the Government with a distraction to the chronic shortage of social housing. It is easy to forget that this very issue dominated the general election of February 2020.
Do you think the Central Bank’s macroprudential lending rules on mortgage lending should be reviewed to reflect change in the market?
TJ Cronin: Whilst unpopular to some, the CBOI rules are proving to be successful in achieving their intended purpose. I am certain that few people wish to return to the boom-and-bust scenario we experienced in the recent past.
Keith Lowe: I am possibly one of only a handful of estate agents in Ireland who is broadly supportive of the Central Bank’s Macro Prudential rules as I believe they are achieving what they were set up to do, which was to control house prices and reduce the risk of the market overheating.
However, I would like to see 5pc more exceptions aimed specifically at first-time buyers, but aside from that small change, I believe it is wise to leave good alone. The rules will reduce the risk of a boom-to-bust scenario re-occurring.
Marian Finnegan: The Central Bank’s rules are somewhat of a blunt instrument, but they are effective in controlling lending and therefore price inflation. The stability of house prices owes much to the impact of MPPR. That said, it is always good to look beyond the obvious. The very restrictive nature of lending is hampering demand and forcing people to remain in rental accommodation for longer, a factor in the upward pressure of rents. As such, we do need to review the overall policy and adapt as appropriate to ensure both affordable and stable prices and rents.
Pat Davitt: Yes, particularly for those on average incomes. The severity of the rules has resulted in a locking out of aspiring buyers on average incomes who have the capacity to repay a mortgage.
What type of property is toughest to sell at the moment and why?
Keith Lowe: City apartments have seen some softening in prices due to the effects of Covid-19, but with the prospect of vaccines about to be rolled out, this is likely to be temporary. Therefore, this is the segment of the market to buy into now as there appears to be good value and examples are likely to rise in value from 2022 onwards as hopefully much of the negative aspects of Covid-19 will be behind us by then.
TJ Cronin: Properties requiring major refurbishment are proving harder to sell than other property types. While there is certainly demand for ‘doer uppers’ in the market, financing the purchase along with the subsequent refurb costs seems to be problematic for some purchasers. Similarly, one-off sites are proving challenging.
Marian Finnegan: Apartments are probably not trading as well as pre Covid-19, as the demand for larger living space impacts the attractiveness of apartment living. Furthermore, overall investor activity is more subdued and, in particular, demand from overseas investors.
Barry McDonald: Houses needing refurbishment continue to be the hardest to sell. Buyers are very conscious of the efficiency of a house and the cost savings and environment benefits of a well-insulated house. Busy day-to-day lives, financing difficulties, increasing build costs and difficulties in getting builders are also negative factors for houses that need modernisation.
Pat Davitt: We are currently finding that there is good interest in every property from many different strands of purchasers.
Supply of property to market tightened in 2020. How do you see the supply of both second-hand and new property panning out in the coming year?
Barry McDonald: Tight supply will continue in 2021. Hopefully, the rollout of the vaccine will result in those who were too concerned to put their properties on the market in 2020 listing in the second half of 2021. New-build completions will likely increase slightly next year to somewhere in the region of 25,000 units, however, this is still below the levels required to meet demand. Many new-home schemes are not coming to market and are instead being sold off to large institutional investors for the rental market.
Keith Lowe: Whilst planning permissions are up significantly, it seems commencement notices are down, so I do not anticipate more than 25,000 new homes being completed in 2021, well short of the 35,000 required. An increased number of new-homes schemes are being targeted at PRS long-term investors for letting and social housing purposes, further limiting the number of new homes available for individual buyers to purchase. The second-hand market will see a material increase in transactions this year compared to last, potentially back to 2019 levels.
Marian Finnegan: The stock of second-hand homes for sale is extremely low and the supply of new homes has been hampered by Covid-19, with supply forecasted for 2021 expected to fall well short of demand. Pending a successful vaccination rollout, we expect to see an increase in stock.
TJ Cronin: I do not see the supply increasing any time soon. The supply of new property relies on the supply of zoned, serviced land with planning permission. This is a costly and time-consuming process.
As an investor, what would you buy if spending (a) €250,000, (b) €350,000 and (c) €600,000 in the residential property market in 2021?
Keith Lowe
€250,000: I would be thinking of Metro North. A two-bedroom apartment in Northwood, Santry Demesne. Great value and will see good capital appreciation once the Metro comes online. My tip would be to buy now before the Metro commences construction.
€350,000: A refurbished townhouse or cottage on the outskirts of Dublin City centre, in or around Harold’s Cross Cottages. Easy to live in and just as easy to let out!
€600,000: A Pre 1963 (house in multiple residential units) on the northside of Dublin City near a Luas stop — 10pc-12pc yields can be obtained close to Phibsborough and the NCR.
Pat Davitt
€25,000: A second-hand home outside of Dublin or any good midland town.
€350,000: A new house in a town outside Dublin or Cork with train connectivity. Maybe Athlone, Galway or Limerick.
€600,000: The southside of Dublin beside the Luas.
Marian Finnegan
€250,000: A two-bed apartment in the vicinity of NUIG Hospital and College — very strong rental demand.
€350,000: A three/four-bed house in Limerick — strong capital appreciation.
€600,000: A three-bed apartment in a central business district (CBD) or along the Dart line in Dublin, capital appreciation in post-Covid environment.
Barry McDonald
€250,000: A two-bedroom terrace in Crumlin or Tallaght which has great transportation links and a hospital.
€350,000: A three-bed house in Marino or Walkinstown.
€600,00: Two suburban three-beds in Clondalkin, Lucan or Blanchardstown.
If in Government, what policy would you like to introduce within the property/housing sphere?
TJ Cronin: I would establish a Commission for Housing as quickly as possible. We are an island nation with a finite supply of land. We need to develop that land in the most effective and sustainable way possible and increase our supply of affordable housing to meet market demands. It would also be great to see e-conveyancing introduced as soon as possible.
Barry McDonald: I would like to see a return to the traditional approach to social housing, whereby the state, through local authorities, invests in the development of social housing, as opposed to funding rental payments for tenants renting from the private sector, in many cases large overseas investment funds.
Marian Finnegan: For housing, there is no silver bullet. We need to ensure there is adequate affordable housing for all our society. If I had one wish for housing in 2021, it is that all stakeholders would listen to alternative perspectives and work together to develop much more collaborative and imaginative solutions.
Pat Davitt: To extend the first-time buyers grant to second-hand homes and change the Stamp Duty rates for small shop properties in rural towns and encourage purchasers to buy such properties to convert to residential use.
Keith Lowe: Government already has a good plan of action, which it simply needs to implement. The shared equity scheme, which DNG has championed, is due to kick off this year. This is the most progressive move the Government has made on housing in recent times.
