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Average hotel room prices have increased by 19pc in Dublin over the last 12 months and there is a shortage of 5,000 bed spaces

Average hotel room prices have increased by 19pc in Dublin over the last 12 months and there is a shortage of 5,000 bed spaces

Average hotel room prices have increased by 19pc in Dublin over the last 12 months and there is a shortage of 5,000 bed spaces

Next Tuesday is Budget day. Often property receives little attention in the Budget but this year, because of the housing crisis, it is the number one priority - as Minister Coveney confirmed at the Construction Industry Federation (CIF)annual conference last week in Croke Park. The fundamental problem in the sector is a lack of supply of new homes for both the sales and rental markets. While Mr Coveney remained tight-lipped at the conference about the intended Budget measures, they are expected to come in the form of tax breaks and incentives for first-time buyers. So what is needed and what is likely?

Firstly, the cost of construction must be addressed. Our construction costs are some of the highest in Europe, as the recent report from the Society of Chartered Surveyors Ireland confirmed. It shows that the cost of building a 110sqm three-bed semi in Dublin, including site costs, is more than €330,000.

One possible Budget measure here would be a reduction in VAT from 13.5pc to 9pc, a move that worked well in the hospitality sector in the past and could save up to €13,000 on the three-bed semi. But it would need to be structured in such a manner that savings are not just transferred onto the developers' profit.

Separately, at the launch of the second pillar of 'Rebuilding Ireland' this week, an additional assistance to developers was announced with regard to plans for the provision of social housing. Currently, developers building new homes must set aside 10pc of every development for social housing. Up until now, builders were not paid for these units by the local authorities until after the properties were occupied. From now on they will receive payment for these Part V social housing units up front. This will improve cash flow and help developers in securing development finance.

The second likely measure to be announced in the Budget will assist the first-time buyer directly. It looks set to be in the form of a tax rebate and has been rumoured to be worth up to €20,000 on a €400,000 property. However, judging from Mr Coveney's speech at the CIF conference, I'd be surprised if the benefits were that high and expect them to be more in the region of €10,000-€15,000.

Finally, the rental sector needs support to increase supply - it has experienced 40pc increases in Dublin alone over the last three years and has further increases to come. Following the downturn, the private investor has all but left the residential investment market. In an effort to incentivise this type of investor, it looks as if there will be a measure to increase the amount of mortgage interest that investors can write off against tax from 75-100pc over the next five years.

There may be further announcements next week. But whatever initiatives are forthcoming, they must focus solely on increasing the supply of homes. However, it's naive to think, as Minister of State for Housing Damien English appear to, that the effect of these measures will be felt over the coming months. It will be the second half of 2017 at the earliest before we see the benefits.

Stats, stats and more stats ...

A MYRIAD of figures and statistics for Q3 were released this week by Myhome, Daft, DNG and SF. Two reports were based on asking prices and two were based on actual prices. These followed hot on the heels of two reports from the CSO and REA in recent weeks. What is incredible is the fact that there are six property reports in a country with a population of just 4.7 million. It highlights the passion we have for property as a nation.

So what can be deduced, apart from the obvious supply issues? Prices continue to rise across the country, with the biggest increases in the large urban areas outside Dublin including Cork, Galway, Limerick and Waterford. Average increases for the year are expected to be 6pc nationally. The cash buyer is still a major player, accounting for one in every two sales nationally. The number of properties sold in the first half of the year was down 5pc on the same period in 2015 and the number of houses on the market in Dublin down approximately 15pc on last year. The first-time buyer currently makes up one in every four purchasers (25pc). In a normally functioning market, this figure would be closer to 60pc. We are, obviously, a long way off.

Airbnb causing sleepless nights

October 31 is the deadline for self-assessment tax returns and, no doubt, many people are gathering their documentation for 2015. One issue causing sleepless nights for some landlords is Airbnb. It is allowing some landlords with property in prime locations in Dublin to secure up to three times the normal market rent. Average hotel room prices have increased by 19pc in Dublin over the last 12 months and there is a shortage of 5,000 bed spaces in the capital, with a gap of two to three years before the shortfall is addressed. On an average weekend night in Dublin, a room in a four-star hotel costs a minimum of €200 per night, while a quality two-bed (sleeping four) could be rented through Airbnb for the same price.

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For landlords, the bad news is that all of the income is taxable, less costs incurred. In most cases, the 'rent-a-room relief scheme' does not apply. The number of Dublin properties listed on Airbnb is increasing by 100-200pc every year and the market is becoming so popular that investors have started buying properties for full-time use as Airbnb rentals with city-centre agents reporting that potential buyers are asking whether the property is Airbnb-able. What's the problem? Well, it is adding even more pressure to the already squeezed supply in the rental market.

Philip Farrell is a property consultant and market commentator

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