THE PROPERTY MARKET has been much in the news over the past 12 months.
From the new dedicated housing minister to the first time buyers grant and the recent furore over the rent caps, there will be plenty to remember from 2016. We spoke to economist Ronan Lyons about the highs and lows, asking him: what were the most important things to happen in the property market this year?
What should have been a good news story – increased employment and population – has turned to a bad news story, Lyons said, with demand for housing completely unmatched by supply. This led to massive rent increases which continued to get bigger (and availability smaller) as the year continued.
If you look at the rental markets, rents rose dramatically and availability worsened. And as the year progressed it got even worse.
In the greater Dublin area alone there has been a ten per cent increase in demand for housing over the last five years, but only a one per cent increase in supply.
There are two reasons Ireland’s population has increased. Firstly, there are significantly more people being born than dying – and this will continue to be the case over the next 30-40 years. Lyons said:
Most European countries don’t have that, they have steady or even declining populations, so we’re a little bit unusual in this regard. We need more activity in construction than other European countries because of the nature of our population.
Secondly, the country has moved from net emigration to net immigration. If there are 10,000 new people coming to the country there are about 4,000 new homes required and disproportionately these tend to be apartments in urban areas.
Lyons said:
Ireland has created a very uniquely Irish problem, where the cost of building is very uncompetitive.
In Dublin building costs work out at approximately €2,000 per square metre, Lyons said, while in other high-income countries it’s closer to €1,200 per square metre excluding the cost of land. Contributing to the shortage of housing construction are the unintended consequences of other regulations, which Lyons thinks need to be reevaluated:
If you make it a requirement that every apartment has to have a car space or a lift – these are expensive additions to have and might not be required. Maybe if you’re central enough you don’t need car parking. Those regulations have contributed to making it very expensive to build in Ireland.
Regarding the housing crisis, and the cost of building which is limiting construction, Lyons said:
That’s not an easy thing to solve but it is a crucial thing to solve.
One solution he suggested is making vacant houses available again, possibly by placing a property tax on unused houses like in other countries. Lowering the vacancy rate by just two percentage points would mean another 40,000 homes in the system very quickly – which is one year’s demand, but two to three years’ supply.
Additionally, he said, there is an urgent need for a register of who owns what and who lives where. The current register will only be complete in 30-40 years, but it is required much sooner than that.
The biggest political change to occur around the property market is that we now have a housing minister who does seem serious about trying to understand the problem and solve it. It shows a willingness to take action, that I don’t think was there in the previous government.
The Government has brought in a number of initiatives over the last six months that Lyons said show an initiative that wasn’t there previously. Recent projects include the rent cap proposal and the Repair and Leasing Scheme, which allows local authorities to pay a grant to homeowners of vacant properties to renovate them and get them back into use.
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