In many ways, 2016 was an interesting but agitating one for estate and letting agents across Ireland. On one hand, we saw a strong economy continue to emerge, unemployment levels decrease, and consumer confidence and spending both expanding. On the other hand, mortgage regulation, building delivery costs, activity and development levels in the residential market remained stubbornly below market demand.
The severe shortage of private rental accommodation led to rents increasing quite drastically towards the end of 2016. There is no doubt that the challenges facing our market are significant but Property Button have compiled 10 compelling reasons to be optimistic in 2017:
- The Government’s action plan for Housing and Homelessness launched in summer 2016, reveals an understanding that our market is not a single entity, rather it is an amalgamation of many different components: social housing, private housing, student housing, to name a few, and each need to function correctly. In addition, a dedicated department of Housing, Planning, Community and Local Government, including a committed team with multiple years experience in these areas was also established thus giving further strategic direction to our industry.
- The ‘Help-to-Buy’ scheme announced in the budget is a positive measure with the aim of encouraging the delivery of much-needed starter homes into our key urban centres. This tax rebate scheme will certainly focus the minds of first-time buyers and tempt many to buy. In turn, this will ultimately lead to increased demand and give builders the confidence to ramp up construction, resulting in increased supply of housing and indeed movement within the residential rental market.
- Amendments to the Macro-prudential lending policy by the Central Bank. Up until these amendments, a first-time buyer would have needed to accumulate savings of €48,000 if they wished to buy a new house priced at €350,000. This figure is now down to €17,500. Up to 5 per cent of first-time buyers can also avail of over 90 percent mortgages if needed. This is likely to lead to a sharp increase in demand for new-build starter homes in any new sites launched in 2017 with movement in the rental market occurring as a direct result.
- Increased competition among existing mortgage suppliers as a result of the lack of available finance and demand in the existing mortgage market. This will drive increased competition, thus providing more flexibility and choice for buyers with downward pressure on high variable mortgage rates. These incentives will increase demand in house purchases and, you guessed it, more positive movement in the rental market.
- Establishment of the ‘strategy for the rental sector’ including incentives and initiatives for the new ‘build-to-rent’, ‘repair and leasing’, and ‘buy and renew’ sectors. This strategy also crucially addresses issues relating to the delivery costs, viability and includes an appreciation for rent stability thus ensuring rental accommodation affordability. These positive steps result in greater affordability and demand for rental accommodation which will attract more landlords and more build-to-rent developments.
- Rebuilding Ireland Action Plan: A number of measures have been taken to boost the supply of housing across Ireland. In addition to some of the factors outlined above, other measures include the fast-track planning process and the infrastructure fund which will give developers more confidence in terms of buying sites and avoiding planning risk.
- Reduction in the length of time to get planning permission will have a positive impact on housing developments in 2017. We can already see in areas deemed “Strategic Development Zones (SDZs) that there has been more activity because developers have avoided planning issues risk.
- NAMA now releasing sites under a licensing agreement whereby developers can now buy a site under a licensing agreement from NAMA and pay them back once the houses are sold. This takes away the funding issues for developers and gets things moving along faster. This process is one way NAMA can control the flow of property being built and not have developers running into difficulties. NAMA has stated its intentions to build 20,000 homes by the end of 2020.
- A survey conducted by Knight Frank revealed that 84 per cent of developers said they have plans to acquire sites for development in 2017 and 64 per cent said they believe that the proposal for direct planning applications to go directly to An Bord Pleanala will speed up the planning process significantly. An increase in housing and development will again create movement and increased supply of new and existing rental accommodation in Ireland.
- Ireland’s market fundamentals remain extremely robust with Ireland having among the brightest economic and population growth prospects in Europe. This will ensure a positive long term focus and trajectory for the new homes construction industry and, indeed, the residential rental industry in Ireland over the medium to long term.
While we at Property Button acknowledge that the above factors alone will not act as a silver bullet to fix our industry’s current difficulties, we remain optimistic and agree that they are positive steps in the right direction towards a residential rental market recovery.
Other factors we feel should be considered include: introducing incentives to help bring private landlords back into the market; freeing up more land for residential construction; a greater focus on supply led incentives and not just demand led incentives to build more houses (perhaps through grants or other cost reduction measures); and relaxing height restrictions on new developments.
Why not share our simple to read infographic which summarizes the above points with your colleagues. Nothing like sharing a bit of optimism: