Real Deal: IPAV proposes funding scheme to tackle crisis
The business of property by Philip Farrell
The Institute for Professional Auctioneers & Valuers (IPAV) has outlined its proposals to address the housing crisis. The recommendations include a development contribution rebate scheme, vacant-site levy, reduction in VAT to 9pc, longer-term mortgages and a Building Initiative Scheme.
Access to finance is currently a major stumbling block for developers and the proposed Building Initiative Scheme would involve the Government making finance available to builders at rates of 1-3pc.
The Government could source this funding through the ECB and the monies would be repaid once the properties were sold. One potential problem with the proposal is how to ensure that reductions in costs are passed onto the consumer. IPAV suggests setting a pre-agreed building cost acceptable to all parties. A figure of €100 psf (excluding site costs) has been proposed with houses constructed to an A rated standard. According to Pat Davitt, CEO of IPAV, "This measure alone could reduce the cost of a new home by up to €25,000 and, in many cases, it would provide the necessary catalyst for developers to do what they do best - build houses." Food for thought.
Access to broadband must remain a priority
The fact that the country is experiencing a two-tier recovery has been shown clearly in the election result. If the recovery is to extend into rural areas, encouraging young people to stay or return home, a number of basic needs are essential, including a reasonable commuting distance to suitable employment, housing and access to public services.
Chief among these services is internet access, now almost as important as access to electricity or water. Richard Branson may be able to provide 360mg broadband in urban areas but for many parts of the country access to 1mg broadband is still not possible.
In November 2014 the Government announced the National Broadband Plan, which aimed to provide internet access to the 700,000 homes that are primarily in rural areas. Roll-out begins at the end of 2016, but there is no completion date. It's a little like the life-changing rural electrification scheme that was rolled out in the mid 20th Century.
The roll-out of high-speed broadband nationwide needs to be a government-led initiative and it needs to happen soon and be completed quickly. It's not something that commercial providers can be depended on to undertake, partly because in many areas the costs make it unviable.
With more and more of us choosing to work from home, all homeowners need connectivity. Trying to lure first-time buyers to stay in rural areas when all the jobs are based in the country's main cities is difficult enough, but it will be impossible if they can't access this essential facility. No doubt, lack of connectivity will soon affect property values and as a result, vendors without Wi-Fi will be passed over in favour of those that do.
Costs of moving home
One of the first and most significant costs involved in house-buying or selling is legal fees. Many firms charge a percentage of the purchase price, generally between 0.5pc and 0.7pc of a property's value. Others agree a set fee. All will charge a minimum fee, and this can range between €700 and €1,750, excluding VAT. Some firms employ a legal executive to deal with the work but most use a solicitor.
Other legal expenses, including Land Registry search fees, can add up to a further €1,000. Stamp duty currently stands at 1pc for homes up to €1m. If we take an example of a property with a value of €300,000, this would equate to €3,000. Other outlays to consider includes bank-valuation fees, brokers' fees, structural survey, if required, and moving costs, which can be anything up to €2,000.
Taking all of the above into account, the minimum figure you will need to allow for is roughly €8,000, excluding agents' fees.
Moving house is an expensive business. But to put it in perspective, according to globalpropertyguide.com, Ireland ranks only 22nd in a table of 36 countries highlighting the costs involved in buying and selling property.
UK's loss Ireland's gain?
Recent changes introduced to stamp duty rates in the UK by the chancellor of the exchequer George Osborne may have significant short-term implications for the Irish residential market. The two sectors most likely to be affected are prime residential properties and buy-to-let properties. A new stamp duty rate of 10pc for residential homes over £925,000 has been introduced, increasing to 12.5pc over £1.5m. This compares with rates of between 1-2pc in Ireland. In an effort to protect first-time buyers and their ability to compete with investors, an additional rate of 3pc has been introduced on all buy-to-let and second home properties.
According to Rena O'Kelly, head of Knight Frank Residential, the Irish prime residential market will now represent an attractive proposition for many UK-based investors.
Increased interest from UK buyers would be a significant boost to this sector of the Irish market which, after increases of up to 30pc, levelled off over the last nine months. The buy-to-let market remains extremely subdued with access to funding a real barrier. In 2015, total mortgage lending figures extended to €5bn. Only €100m of this was for the buy-to-let investor. It will be interesting to revisit this figure in 12 months time.