Wednesday 22 November 2017

The business of Property by Philip Farrell

Real Deal

Elon Musk’s company will produce a revolutionary new type of solar-powered roof tile
Elon Musk’s company will produce a revolutionary new type of solar-powered roof tile

Philip Farrell

It seems as if figures are released with such regularity on Irish property values these days, that it takes a report compiled by an international body to make us sit up and take note.

According to the CSO, house values are up an average of 7.3pc nationally over the last 12 months, but they are still 33pc off the inflated numbers we reached 10 years ago before the transition from Celtic Tiger to Celtic Kitten.

This week, the European Commission released a report based on 2015 Irish property values. It suggested that values are still up to 15pc short of what they actually should be. Assuming these statistics are correct, and taking into account the increases this year to date, that leaves potential for further increases to the tune of 9pc.

As we all know, there is a crisis in both the sales and rental sector. The Central Bank pulled a rabbit from the hat this week, eliminating the €220,000 price ceiling for the FTBs (first-time buyers) from January. The likely impacts are explored in depth elsewhere on this page. It means we may see double digit increases in 2017, primarily with starter homes.

Solar-powered merger

Is this the next big thing in modern house construction? Tesla, the company that brought you the high-end electric car, now proposes to bring our homes the solar-powered roof.

This week, Tesla completed a $2bn merger with SolarCity, the biggest US-based provider of solar powered panels. The product which is soon to be rolled out to the market, is a solar-powered roof constructed with textured glass tiles which look identical to traditional tiles and will last a lifetime. Combining solar cells with traditional roof tiles, these tiles allow light to pass through creating solar energy which can be stored in batteries.

According to Tesla's founder Elon Musk: "The tiles are comparable to existing high efficiency solar panels." It is proposed to introduce a variety of tile types to complement different house designs. In effect, the entire roof of the house becomes one large solar panel providing water and space heating with the potential to provide a surplus to be used elsewhere or presumably sold back to the national grid.

But perhaps the best indicator of the innovative design is that it will be extremely cost effective. Prices are expected to be lower than the combined cost of a traditional roof plus solar panels.

According to Enda Gunnell, CEO of energy provider Pinergy: "It's an extremely interesting development in the renewable space. What the announcement and product have done is make the whole discussion around sustainability and self supply of energy to be extremely customer friendly."

Further down the line? Another merger - introducing a solar roof to an electric car.

Outlook for 2017

No sooner had the Government planned to address the housing crisis than Brexit landed on our doorstep. Five months on uncertainty still reigns - and markets don't like uncertainty. It will be another five months at least before the repercussions of the UK's decision become clear.

Currently, the volume of property transactions is down 30pc in the UK, year on year. There is no way to sugar-coat this pill despite efforts to do so. The other cause of this dramatic fall-off in volume is the introduction of a 3pc stamp duty rate for second homes purchases which is helping to fuel a shortage of new homes in the UK.

The numbing result of the recent US presidential election has added fuel to the fire. With the inauguration date set for January 20, it will be early 2017 before we see how the new US president plays his card.

In terms of our economy, protecting our low corporation tax rate is of primary concern. However, it seems likely on both the US and EU front that it is only a matter of time before our competitiveness will be eroded. Only last week Hungary announced plans to reduce their rate to 9pc and it is unlikely to be the last EU country to do so.

For both the Government and the IDA, this development will be more of a concern for the next generation of FDI-type companies rather than the international firms that are already established here.

As we wind down for Christmas, the chat at this year's property parties looks like focusing on what an extraordinary year it has been. Still, for the Irish property market it has been, for the most part, a positive year with transactions likely to be in excess of 40,000 - not too far off those of 2015.

Predictions for 2017 have been in the order of increases in house prices of up to 10pc, following the somewhat surprising Central Bank announcement last week.

The fundamentals look strong for 2017 and, domestically at least, the outlook is bright. Interest rates remain low. Unemployment has fallen to 7.5pc, nearly half the figure of 15pc it hit in 2012.

However, if you look at what is evolving politically and economically both to the east and west of our small economy, you might guess that next year could be very unpredictable.

As a nation, our population comprises of less than 1pc of the total EU figure of 743 million. While the domestic market will ensure upward pressure on property prices, external factors may play an even greater role.

Up, up and away - new runway at Dublin Airport

Approval for a new runway at Dublin Airport - one of the fastest expanding in Europe - was granted to the DAA this year. The proposed runway will run parallel to the current main runway and construction is planned to commence in 2017 with a proposed completion date of 2020.

What, if any, effect will this have on the value of properties close to the new runway? Based on the experience of other airports around the world where additional runways are built, the values initially decrease slightly. But it's usually only a matter of time before much of the loss is regained and prices return close to local values.

Added to that, rental demand for properties near an airport is always strong, mainly from those employed in or near the airport or those who travel regularly by plane.

Certainly for estate agent Alan Redmond, President of the Institute of Professional Auctioneers & Valuers (IPAV), and resident in nearby Swords, 5km away, the impact is minimal. "After a while living in the area, you don't even notice the noise. People expect a certain level of noise when residing near an airport."

Giving good cheer

Christmas is a time for giving and it's great to see the property industry doing its bit for the most in need, especially when the housing crisis has seen so many become homeless.

The Society of Chartered Surveyors Ireland (SCSI) has launched a Christmas appeal this year in association with St Vincent de Paul's Giving Tree initiative.

A 3m-high Christmas tree sits in their headquarters at 38 Merrion Square and their 5,000 members have been invited to leave a Christmas gift underneath. All those who donate will have a Christmas decoration hung on the tree in their name. The gifts will be given to children and families in need, while the financial donations will be used to purchase much-needed gifts for children who might otherwise get none.

Not in Dublin? Then you can make a donation on the society's website, The deadline for gifts is December 14 while donations can be made in person, over the phone at (01) 644 5500 or online until December 19.

Philip Farrell is a market commentator and property consultant

Sunday Independent

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