Residential property prices to rise by 8%

The Society of Chartered Surveyors’ of Ireland’s (SCSI) Annual Review and Outlook always makes interesting reading. 

It gives a unique degree of insight on the thoughts and experiences of property professionals right across the country. 

More than 400 estate agents and chartered surveyors took part in the survey in late 2017.

The report’s headline concludes that surveyors expect residential property prices to increase by 8% in 2018, with a slightly lower 7% rise predicted for Munster. 

This is not great news for the growing glut of aspiring property owners failing to get a foot on the property ladder.

Median house prices for 2017 in Munster were at €163k, compared to €325k in Dublin and €129k across Connacht/Ulster.

John O’Sullivan of the SCSI’s Residential Agency Group claims the 8% forecast is “probably conservative” and conditions are “not sustainable in the long term”.

The lack of affordable housing for middle income earners is highlighted as a particularly problematic issue. Buyer competition, population growth and continuing economic expansion are cited as some of the factors driving price rises. 

A practically unanimous 92% of chartered surveyors say sellers’ price expectations have increased, up from 86% in 2017.

Residential development land prices were quoted as one of the main reasons for unaffordable housing in the past cycle, this one appears no different. 

Prices rose by 14% in 2017 with a further 11% increase expected in 2018.

“A 25% increase in two years is simply not sustainable and one has to ask if the changes made to the vacant site levy tax in the budget will be sufficient,” O’Sullivan concludes.

Surveyors believe the cost of development land means it is not economically viable to build affordable new homes in urban areas, where demand is highest.

The ‘Help to Buy’ scheme is believed to be boosting supply in areas outside Dublin, but not in the capital. On a more positive note, the number of planning permissions increased by 15% in the first three quarters of 2017. 

Almost half of residential surveyors in Munster say they will be marketing new schemes in 2018 — a rise of 10% on last year.

The rental crisis is well flagged, with half of the respondents reporting reduced landlord instructions and 81% seeing an increase in tenant demand. 

Despite the introduction of residential rental caps in Dublin and Cork, rates are predicted to rise by 8% nationally this year. 

Even in areas with a 4% cap, it excludes new tenancies or properties that have had major refurbishment. 

The rental cap is being highlighted as part of the problem, rather than a solution. It is seen as the main reason for rapidly reducing landlord numbers. 

The SCSI says that other factors such as complex regulations and a punitive tax regime are causing landlords to leave the market at record rates.

It is highlighted that rising rents are preventing prospective purchasers from saving the large deposits now required to purchase their own homes. 

The SCSI says that the absence of a coordinated programme to encourage landlords to remain in the sector will result in an ongoing negative outlook for residential tenants. 

It is also seen as a pressure point for businesses with knock-on consequences for Foreign Direct Investment (FDI).

To rectify the problems currently evident in the market the SCSI recommends measures aimed at lowering site costs, lowering the cost of building good quality higher density housing at scale, a reform of the VAT regime and reductions in other public costs.

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