CONOR O’DONOVAN takes us through the results of research recently commissioned by the Society.
The economic drivers affecting the property market appear to have improved compared to last year. Population growth, despite high emigration levels in recent years, continues to increase. Employment levels have also stabilised, household formations are increasing and GDP growth is back in positive territory, all of which is positive for the property market.
According to the latest Central Statistics Office (CSO) residential property price index, in the year to October, residential property prices at a national level increased by 6.1%. Dublin house prices grew by 2.3% in the month and were 14.6% higher compared to a year earlier. As the CSO figures do not include cash sales, the likelihood is that prices in Dublin, for certain types of properties in certain locations, may have increased further.
Consumer sentiment has also improved over the course of the year despite a dip in November according to the KBC Bank/ESRI Consumer Sentiment Index, and mortgage approvals increased by approximately 12.5% year on year according to the Irish Banking Federation.
Sales transaction levels have also increased gradually since 2010, albeit from a low base. Almost 2,100 additional properties were sold nationally to December 2013 compared to the same period last year, which represents a 9% year on year increase. This is particularly relevant given the ending of mortgage interest relief at the end of 2012, which was a key driver in the higher level of transactions at that time. However, a number of barriers to a sustainable recovery in the property market remain, including the lack of supply of suitable properties for sale in certain locations.
At the recent Society of Chartered Surveyors Ireland National Conference, the need for more data in the property market to predict future demand and inform required construction levels was highlighted on several occasions.
The Society recently commissioned RED C, the independent researcher, to investigate some of the trends likely to affect the demand for property in 2014.
The purpose of the research was to gauge the likelihood of non-homeowners, and people renting in particular, to purchase a property next year. It also assessed the attitudes of people renting towards long-term tenure, awareness of housing standards and issues around deposit retention.
Likelihood to rent or buy in the future
The Red C Research results showed that one in three non-homeowners (those private renters or living in their parents’/family house) are likely to move from their current home to another property in the next 12 months – a slight increase since 2012.
The results also suggested that 7% of the 1,000 people surveyed plan to buy a home in the next 12 months. This compares to 5% last year and, although coming from a low base, would indicate that consumer confidence is improving (Figures 1 and 2).
The survey also showed that while there has been a slight decline in the number who say they would be happy to rent for an extended
period, a long-term rental market does appear to be emerging. This is evidenced by the 36% of renters who ‘strongly agree’ that they are happy renting and could see themselves renting long term, rather than purchasing a home.
Approximately 13%, or one in eight, of all non-homeowners surveyed who are either renting or living at home are likely to buy a home in the next 12 months. This represents a 3% increase, up from 10% in 2012.
The results also show that 18%, or almost one in five of those currently renting, plan to buy a home in the next 12 months. This represents a 6% increase on last year, which is significant.
The market appears to remain cash reliant, with 5% surveyed claiming to be likely cash buyers in the next 12 months.
Attitudes towards renting
The second part of the RED C research aimed to understand attitudes towards renting a property. Approximately 75% of those surveyed agreed with the statement that they are strongly aware of recent changes in minimum standards legislation (Figure 3).
This legislation requires landlords to provide separate bathrooms, adequate cooking facilities including a microwave, a fire blanket and smoke alarms, and a fixed heating appliance in each room.
The research also asked questions in relation to the difficulties in getting deposits returned from landlords. Over one in three strongly agree that it is difficult to get deposits returned. While the number of disputes relating to deposits is low at just 0.31% of tenancies, according to a recent Indecon report for the PRTB, ambiguity remains about the exact protocol for retention and returning of deposits, which is causing confusion among landlords and tenants.
In relation to being aware of their rights as tenants, 59% said they were not fully aware of their rights. This is an issue that needs to be addressed given the emerging trends towards long-term renting.
To conclude, it would appear that sales activity is likely to increase in the residential property market in 2014 and the research also shows that there is likely to be a continued trend towards long-term renting, all of which will have implications for the property market. The Society is currently engaging with policy makers in relation to several issues affecting the market, including the lack of supply of property in certain areas, as well as issues affecting both landlords and tenants in the rental market, which were highlighted in the RED C research.
Society President Micheál O’Connor made a presentation to the Oireachtas Joint Committee on Finance, Public Expenditure & Reform on the Society’s Pre-Budget Submission recommendations, which included a VAT reduction on repairs, maintenance and improvements.
The Society of Chartered Surveyors Ireland welcomed the Budget announcement of the Home Renovation Incentive (HRI) to improve standards and compliance with building regulations, and boost the construction sector.
Upwards only rent reviews
Representatives of the Commercial Agency and Valuation Professional Groups recently met with Senator Feargal Quinn to discuss his Upwards Only Rent (Clauses & Review) Bill 2013. Members of the Society in attendance included representatives of both landlords and tenants, and the potential impact of the Bill on all parties was discussed.
The Society also highlighted the need for tenants to complete the Commercial Lease Returns to the Property Services Regulatory Authority, the importance of the publication of the Commercial Lease Database (this has since been launched), and the UK Business Premises Leasing Code.
Tenancy deposit protection schemes
The Property and Facilities Management Professional Group recently made a submission to Minister of State in the Department of Environment, Community and Local Government with special responsibility for Housing and Planning, Jan O’Sullivan TD, in relation to tenancy deposit protection schemes.
On foot of this, representatives of the Society will meet the Minister shortly to discuss this issue and others affecting the property market.
Local Government Bill 2013
The Valuation Professional Group of the Society recently made a submission to the Department of the Environment, Community and Local Government in relation to the measures proposed in the Local Government Bill 2013, which effectively are set to increase the vacancy relief rate on commercial property by 50% in certain areas.
The submission also highlighted a number of anomalies in the existing legislation, which the Society hopes will be rectified in the interests of all stakeholders.
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