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“There is no action that doesn’t have repercussions”

It has been the busiest policy week for Irish property in more than a decade. It is difficult to know where to start; vacant property, affordability, investment funds, stamp duty hikes…

Section 28 guidelines on the Regulation of Commercial Institutional Investmentin Housing: By now, Housing Minister Darragh O’Brien will have issued the circular to all local authorities across Ireland mandating that, where permission is granted for more than five units, houses and duplexes in new developments must be made available for sale by individual, non-commercial buyers (with some exceptions). We understand at this stage that the condition will lapse for any units not sold in a two-year period. Purpose built BTR units are exempt from this.

Also, higher stamp duty of ten per cent will apply on purchases of ten or more houses or duplexes, not apartments.  Dermot O’Leary, Chief Economist with Goodbody, said in an interview on RTE that “The decision is a sensible one because it balances off the benefits that come about from investors internationally in funding these apartment developments”. He went on to explain how the funding of property has changed dramatically from the mid 2000s when 80,000 housing units were built. One of the more interesting figures shared in this interview was around private investors. Based on mortgage data, 11,500 mortgages were given out to individual investors of new residential units back in 2006. Fast forward a decade and a half and this figure drops to 300. This massive drop is indicative not only of changing ownership trends, but of funding sources and reliable buyer demand.

Let’s be real folks, funds are required in the market and, while it might not be popular to say so, the Government initiatives are actually an acknowledgement of this. The measures target how funds will operate, but it doesn’t make it prohibitive – only less  attractive. Institutional funding accounts for 4 per cent of Ireland’s marketplace, internationally, 8 to12 per cent  is the norm so, in reality, the Irish market has injured a crucial limb before it has even developed. Ireland needs that limb healthy and fully formed. Sustainable housing delivery depends upon this. Frustratingly, there was no effort made by the State or the sector to explain to critics that these institutional funds are made up of individual investors, who pay tax on personal income and gains. This is the underpinning of the current tax structures that exist today. No investor will knowingly choose to invest where double taxation is the norm. Why would they?

One of the main criticisms previously was the lack of housing policy cohesion and lack of joined up thinking across all of the property-related public functions.  Do this week’s knee-jerk reactionary measures solve this? In a word, no. The more helpful question to pose is: Will these property reforms and proposed initiatives actually help to tackle Ireland’s housing crisis? The short answer to this question is that these measures will likely improve some aspects that are causing public and political frustration, however, they are unlikely to address the fundamental challenges to housing delivery.  It is also important to point out that these new rules apply to new planning permissions only.

In a week where affordable housing was also targeted by policy-makers, MD of Sherry FitzGerald Marian Finnegan said it best: “There has been an awful lot of commentary about the needs of the first-time buyers, but they are not the only cohort in the market in need of housing, and there is no action that doesn’t have repercussions.

Ian Lawlor
086 3625482

Managing Director 
Lotus Investment Group