Outspoken television presenter Piers Morgan caused ructions this year when he declared athletes who took bronze or silver at the Rio Olympics were losers. Morgan, who clearly sees himself as a winner, said anything less than gold was a loss.
He’d be hard pressed to pick a clear winner in this year’s Irish residential property market, though there are a few players who will end the year on a happier note. Undoubtedly, he would obliterate the losers in one of his sharp-tongued Twitter putdowns.
First-time buyers
First-time buyers were the Americans of the Olympic Games, raking in the most wins. First came the government’s help-to-buy scheme, which provided a tax rebate of 5% on the cost of new homes. It was backdated to July, which meant that those who had bought between July and budget day in October had outlapped others in the market.
In November, the Central Bank of Ireland announced the relaxing of its deposit rules for first-timers. Though the new regime won’t come in until July, first-timers can now borrow 90% of the value of a home, even above €220,000. It’s not all flowers and medals, however.
Pat Davitt, chief executive of the Institute of Professional Auctioneers and Valuers (Ipav), says: “You don’t need any magic to see that first-time buyers are the biggest winners because of the grant. I wouldn’t be too excited about the Central Bank’s relaxation of the rules because, at the end of the day, it kept the loan-to-income ratio of 3.5.”
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Rena O’Kelly, of Knight Frank, adds: “First-time buyers got a boost in the budget. However, credit finance is still difficult to obtain and this is creating difficulties in the sub-prime market.”
Developers
Like the British at the Olympics, developers made huge leaps in their gains, but feel there’s still more to do. They were celebrating after the introduction of the help-to-buy scheme. The new Central Bank rules can only boost interest in their developments, but the industry bemoaned the fact that VAT was not reduced in the budget. Costs are still too high, claim developers.
The Construction Industry Federation expects the building sector to grow 9% a year between now and 2020, but there is a skills shortage. Last week it launched the cifjobs.ie website to tackle it.
“The winners were the developers who really rolled up their sleeves and did their best to tackle the supply issue,” says Ken MacDonald of estate agent Hooke & MacDonald. “People such as Cosgrave, Cairn Homes and Flynn & O’Flaherty are producing top-quality homes for the market. They are contributing strongly to relieving the supply pressure.”
Eamonn Spratt, the chairman of Real Estate Alliance, says development finance is the key to solving the supply shortage “as home building becomes potentially profitable again for builders”.
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Renters
The year started with such promise for renters, as the Residential Tenancies (Amendment Act) was signed into law in December 2015. There were some protections put in place for the 700,000 people in private rented accommodation; including 90 days’ notice of rent reviews, 24-month rent-review cycles and a longer notice period for termination.
Commentators argued it didn’t go far enough, and crafty landlords, fearing rent reviews, hiked prices. Rents continued to skyrocket, pushing tenants to their limits.
At the start of this month, the Residential Tenancies Board reported that Dublin rents were 5% higher than the previous peak in 2007, up to €1.375 monthly. Nationally, rents were 8.6% higher at the end of the third quarter than they were at the end of the same period last year.
Last week, Simon Coveney introduced his rental strategy, with such initiatives as tenant safety being welcomed. There are fears the 4% cap could continue to drive up rents. Threshold, the housing charity, welcomed the measures towards rent certainty, but said it should be extended outside Dublin and security of tenure needed to be enhanced.
Investors
The Central Statistics Office launched its jazzy property price index in September and revealed that cash buyers made up half of the market — and paid less for properties. Private equity companies and Real Estate Investment Trusts had become a big feature of the market, accounting for almost a fifth of transactions in Dublin in 2014 and 2015.
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O’Kelly says: “The winners this year were very much the cash buyers, who continue to drive the upper end of the market. In Dublin, there were 335 transactions in excess of €1m by the end of the third quarter, compared with 271 at the same time last year. This represents an uplift of 24%.”
The trepidation caused by Brexit and Trump taking office seems to have dissipated. However, some investors could be feeling like the Russians at the Olympics, willing to play but being excluded.
“With the latest proposals from the government on the rental market, it’s just a pity that the incentives for suppliers of rental accommodation have been pushed down the road with just another committee,” says MacDonald.
“There was a derisory incentive in the budget for investors where the mortgage interest relief was up by a mere 5% after it had come down by 25%. VAT on new homes is just much too high at 9.5% where it’s zero in the UK,” he adds.
Landlords
For the most part, landlords had a good year. They benefited from rising rents, but had to deal with increased regulation. As the year ends, smaller landlords may be feeling like the French gymnast Samir Ait Said, who had a nasty leg break at the Olympics. Some will see the rental controls as a step too far.
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John McCartney, head of research at Savills Ireland, pointed out that city landlords who negotiated leases with their tenants in October last year — before Alan Kelly’s two-year rent- review cycle — could be the big losers.
“They would have been entitled to have their first review in October 2017. They’re probably already under-rented and will be able to up their rent by only 4% per annum. It will be hard for them to catch up.”
The rental strategy could drive landlords from the market, according to Spratt: “The introduction of rent controls in the capital may see many landlords look at exiting the market, reducing the amount of available stock.”
Mortgage Holders
The European Central Bank kept mortgage rates low, which meant that mortgage holders throughout Ireland could continue paying off their debt. Latest figures from the Central Bank show that the number of mortgage accounts for homes fell for the 13th consecutive quarter, in the third quarter, and 79,562 accounts are still in arrears. The government is introducing legislation that will cap variable mortgage rates, so that is another bonus.
Mortgage holders are like the Chinese, with some positive outcomes from the year, but outshone by Team GB’s successes. People in negative equity saw their home values rise, but in many places they are still 40% off what they were in 2006.
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Homeowners in negative equity who would like to trade up felt most hard done by. They were ignored when the Central Bank relaxed its rules.
Sourcing finance is difficult and it is equally difficult to line up your ducks in a row so that you can sell and buy at the same time. Like all buyers, negative- equity purchasers are losing out to those with the cash.
Simon Coveney
Simon Coveney took on the unenviable task of sorting out the housing crisis when he was appointed to the new post of housing minister in May. He promised us efficiency and he must have been feeling like the silver medal-winning O’Donovan brothers when he published the Rebuilding Ireland programme in July.
The five-pillar strategy promised to tackle homelessness, accelerate social housing, increase construction and to improve the rental sector. Coveney has promised 47,000 new social houses over the next six years, with a target of 25,000 homes. It was an impressive start.
The rental strategy would come later in the year, he told us, and true to his word it did. Had Fianna Fail got its way, Coveney would have been left feeling like the Irish boxing team, walking away with no medals after such a successful event four years ago, but it looks as though he’s put the opposition party in its place and his rental strategy will go ahead. Could a Katie Taylor-style comeback be on the cards?
Low-income earners
The Central Bank’s failure to change the loan-to-value ratio of 3.5 times to 4 was seen as a wasted opportunity by Ipav, and left low-income earners finding it difficult to get onto the property ladder.
The real losers of the year were the people who are still homeless. By November, there were 1,200 families living in homeless accommodation.
Society is the overall loser, according to McCartney. “There is no real sign that the social housing model, which relies so heavily on the private sector, is changing. We are going to get more activity.
“Developers will make money, which is good for them. People will get housing, but it’ll be achieved at higher prices, which leaves families with a bigger financial burden and creates a less competitive economy.”