Annual Residential Property Report29 January 2020
SCSI Annual Residential Property Review & Outlook 2020
Chartered estate agents expect residential property prices to increase by 2% in 2020
Rents are predicted to rise by 5%
The main findings:
- More realistic price expectations have led to price stabilisation
- The number of chartered agents who say sellers’ price expectations have increased, has halved from 80% to 40%
- House values are expected to increase by 3% in Munster and Connacht but to remain static in Dublin
- Uncertainty caused by Brexit the dominant influence in 2019
- SCSI warns political parties not to jeopardise fragile recovery
- Investors are continuing to leave the rental market
- Average sale takes five and a half months – Agents say delays need to be addressed
Jan 2020. A period of high price inflation appears to be drawing to a close and the property market looks set for a period of price stabilisation as we head into a new decade according to the Society of Chartered Surveyors Ireland.
SCSI members believe national property prices are set to rise by an average of 2% in 2020 – down from 4% last year. A slightly higher increase of 3% increase is predicted for the Munster and Connacht/Ulster regions.
Chartered agents and auctioneers from all round the country say the price stabilisation is being driven by more realistic price expectations, affordability constraints and increased supply.
According to the SCSI’s annual Residential and Outlook report, which has been running since 1983, the number of chartered agents who said sellers’ price expectations have increased, halved from 80% to 40%
The President of the SCSI, Johanna Gill said the move towards more realistic pricing was to be welcomed.
“The double-digit price inflation we saw in recent years was not sustainable and a return to a more stable market with modest price increases will enable buyers and sellers to plan for the future with more certitude. While we knew ‘Brexit’ had an effect on the market, the extent to which it undermined consumer confidence around the country did come as something of a surprise. From Donegal to Cork and from Dublin to Galway our members said Brexit and the uncertainty it caused played a greater role than any other issue in shaping the residential property market in 2019.”
“While we may need to temper our expectations about when a new trading arrangement between the UK and EU is announced, our members believe the greater clarity around Brexit has already led to a renewal of confidence” Gill said.
Other issues cited by the 460 estate agents who took part in the survey was the lack of supply of affordable homes, especially in the €200 to €300,000 range, the continued flow of investors out of the rental market and delays in conveyancing.
Housing and the election
Sixty per cent of agents said they expected the supply of housing in 2020 to be less than demand with agents pointing in particular to the lack of supply of affordable homes.
While the number of new homes built in 2019 increased to 21,000 this is still far short of the 34,000 which many commentators believe are required.
The Society warned that while many solutions to the current housing crisis were being promoted in the run up to the election, it was vital that the fragile recovery should not be jeopardised through ill-advised interventions.
“There is no single solution to the current shortage in affordable housing. Our report indicates affordability is a major issue for many prospective buyers while on the other side we know the viability of constructing new homes is an issue for builders.
We would like to see much more emphasis on supply side measures and cost reduction. The cost of development land here is prohibitively expensive. We estimate the land costs of a new three-bed-semi is €60K or around 20% of the total cost. That is why we have called for a reduction in Capital Gains Tax for zoned serviced residential land for a defined period. In conjunction with that we have called for a reduction in VAT on new homes for a set period. There is no VAT on new homes in the UK and as a result construction costs there are much lower.”
The Rental Market
According to the report rents are set to increase by 5% this year around the country and by 4% in Dublin.
Although a rent cap of 4% is in force in Dublin and other cities and towns, Increases above 4% are possible as the cap does not apply to new units or landlords who carry out a major refurbishment of their property.
Nationally, chartered agents consider that there will be a significant lack of rental properties of all sizes in 2020, with 58% of respondents experiencing an increase in rental demand by tenants in the last 12 months. Only 9% saw a reduction while 33% said there had been no change. According to the report the greatest mismatch between supply and demand for housing will be in the private rented sector.
Agents say 30% of sales are from investors selling rental properties while this group only accounts for 15% of purchasers.
Johanna Gill said the fact that twice as many landlords were exiting the rental market as entering was worrying.
“While the cap may have had some success in moderating the level of rent inflation the departure of so many landlords due to the cap and increased regulation ensures rents will remain high. The move away from individual to institutional landlords is driving the build to rent sector. In light of the limited rental supply, the impact this trend will have on the market needs to be monitored”
Conveyancing delays – house sales taking 5 and a half months
According to the findings the average time for a house sale to close is five and a half months. Agents expressed concern about the continued existence of paper-based conveyances. The Society said this is an issue which needs to be addressed urgently.
“It is totally unreasonable in this day and age that the sale of a house is taking this long to complete. We all know that time equals money and this is a further and unnecessary burden for buyers and sellers which needs to be addressed urgently” Gill said..
The SCSI’s Annual Residential Property Review and Outlook Report 2020 is available here
For further information
Contact Kieran Garry
Note to Editor
The SCSI Annual Residential Property Review and Outlook Report 2020 by the Society of Chartered Surveyors Ireland was informed and guided by the responses of 460 SCSI members across the four SCSI regions which comprises Dublin, Leinster (excl. Dublin) Munster and Connacht/Ulster. The survey was carried out in ???. In addition the report’s authors conducted in-depth interviews with senior figures in the SCSI and other industry experts to ascertain their views on the opportunities and challenges facing the market. The Review is accompanied by an interactive, web based, report which features high end info graphics and commentary on all the results of the SCSI survey. It is available to view at www.scsi.ie
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