Hopes for 2012 activity

Budget 2012 has offered a lifeline to the property market and has the potential to bring about much-needed stability and confidence to a sector which has been hard hit in recent years, writes PJ Power

ADEQUATE access to finance, transparency around real property prices and enhanced consumer protection and regulation of estate agents, coupled with the Budget 2012 incentives, have the potential to put our property market on a sound footing for the future.

The budget measures to increase mortgage interest relief of up to €5,000 per year for seven years for first-time buyers in 2012 was unexpected, and, along with historically-low interest rates, provides a compelling reason for first-time buyers to consider buying their own homes. However, access to finance remains the key issue.

According to the recent Irish Banking Federation/PwC Mortgage Market Profile, the volume of lending in quarter-three of 2011 was down 50% compared to the previous year. And while we welcome the recent announcement that Bank of Ireland will make €1.5bn in loans available for first-time buyers, it remains to be seen how many will be granted mortgages. While no one wants a repeat of the frenzied demand for mortgage and properties witnessed during the boom years, a return to normal levels of demand is necessary for any properly-functioning economy.

Transparency in the property market is clearly needed to provide consumers with confidence and certainty. The CSO Residential House Price Index for October, 2011 reported that property prices in Dublin were down 51% since the peak in 2007, and 42% throughout the rest of Ireland. The experience of many members of the Society of Chartered Surveyors Ireland, who are auctioneers, is that selling prices are even lower, at around 60%, and even further in some parts of the Munster region, where prices are down by up to 70% in some locations.

While we have many reports of property prices, some of which are based on asking prices, what consumers need is access to real transaction prices. The Property Services (Regulation) Bill, 2009, which is due to be enacted before the end of the year, will provide for the establishment of a National Property Price Register. This register will list actual property sales prices and will be available online for the public. This data is available in Britain and many other European countries and it is long overdue in Ireland. This information, when integrated with other spatial and economic data, should provide a better foundation for planning for future development in Ireland.

The Property Services Bill will also license and regulate auctioneers, estate agents, and, for the first time, property management agents. The bill, once passed into legislation, will establish the Property Services Regulatory Authority (PSRA) on a statutory basis. While the PSRA was set up several years ago, it did not have the statutory powers to regulate and investigate consumer complaints. The society welcomes this as it will require higher standards in the property services sector, which are needed more than ever.

The decision by the minister to reduce stamp duty on commercial property from 6% to 2%, and not to interfere with existing lease contracts, gives a strong signal to international investors that Ireland is open for business. Previously, the commercial property market was at a standstill compared to only a few years ago and this was largely due to the uncertainty around rent-review clauses in pre-2010 leases, as well as a lack of access to finance.

According to research by CBRE, investment levels dropped to about €180m in 2011, compared to €3bn in 2006. The SCSI expects the new measures will stimulate the market and boost investment and employment opportunities.

While the decision to retain upwards-only rent reviews in pre-2010 leases was not welcomed by retailers, we would encourage tenants who are in serious financial difficulties to engage with landlords. The new NAMA guidance note, available on its website, should also help.

The €100 household charge introduced in the budget was inevitable and well-flagged, and while it is another imposition on hard-pressed homeowners, it should provide a more sustainable and stable source of funding for the exchequer than that provided by stamp duty, which was dependent on the level of transactions.

Furthermore, the income from the levy should be ring-fenced for local government, and the public should see an improvement in the services delivered as a result.

At a regional level, we believe that it is essential that local authorities have adequate funding to support the delivery of local services and key developments. In Limerick, plans to redevelop the Opera site have been welcomed as a boost to the city, and the merger of Limerick city and county councils will ensure that the overall management of Limerick will be more progressive under one local authority.

In Cork, the final publication of the Local Area Plan is expected imminently and it is interesting to note that “de-zoning” of land has taken place in some peripheral locations, while flooding issues have also been addressed, to some degree, in accordance with recent government directives

Members of the Society of Chartered Surveyors in the mid-west region have made a formal submission in respect of the master plan presently being prepared by the Shannon Foynes Port Company in relation to the Shannon estuary. This includes a series of recommendations to put in place a definite land-use plan to accommodate further, future expansion and development of the estuary with a view to attracting investment and industry.

Environment Minister Phil Hogan recently addressed SCSI members and reiterated the need for higher standards in construction, and we welcome his announcements of measures to improve compliance with building regulations as part of a more rigorous inspection regime. British building pathology expert Professor Malcolm Hollis says regulation, developed for the protection of the consumer, should be enforced to the highest of standards and recommends that a system, similar to that used in Britain, be adopted in Ireland, whereby approved independent inspectors work with the developer before, during and after construction to ensure a stringent approach to compliance with building regulations.

While we appreciate the fact that local authorities are starved of resources, perhaps funds raised from the new household charge could finance their role in ensuring supervision and inspection of projects throughout the construction process. This is essential if situations like the one we have seen in Priory Hall recently are to be avoided in future.

PJ Power is chair of the southern region of the Society of Chartered Surveyors Ireland, recently formed as a result of a merger between the Society of Chartered Surveyors (SCS) and the Irish Auctioneers & Valuers Institute (IAVI). Its role is to enhance, advance and enforce professional standards in property, land and construction in Ireland.