Most years, August is a quiet month on the housing front, with focus tending to shift to student accommodation issues in the cities and college towns around the country. But this is no ordinary year. The season of contradictions continues.
Earlier this week Davy more than doubled its projection for Irish GDP this year from 4.8 percent to 10 percent. This upward revision has been attributed to “the contraction in early 2021 [being] shallower than feared, and a clear rapid bounce-back in the third quarter…”, according to the organisation’s chief economist, Conall MacCoille. Housing inflation is expected to jump to 8 percent in 2021, which is a massive hike up from the 2.2 percent experienced last year. Davy’s latest report cautions that the Government’s new shared equity loan scheme could pose “an upside risk to the forecast”, meaning the growth in property values could be even stronger than the expected 8 percent.
This comes less than a week after the news that Irish renters already pay the sixth highest proportion of their income on rent when compared with their global counterparts. Tenants in the Republic spend 37.2 percent of their monthly outgoings on rent, a proportion that is higher only in Hong Kong, Singapore, Qatar, UAE and Kuwait, according to a report by Money.co.uk. This is well beyond the levels that might be considered sustainable. In fact, servicing a mortgage for the average three-bedroom home is now less expensive than paying rent in nearly every region in the country, with the exception of Dublin 4 and Dublin 6.
These rising rents are being blamed on an “exodus of private landlords from the sector”, according to The Irish Times. This is something that was inevitable, given the increasingly onerous regulations and taxation regime emerging in Ireland over the past decade for private landlords. Speaking on the Inside Business podcast, managing director of residential at Sherry FitzGerald, Marian Finnegan called for the Government to adopt a multi-decade plan to tackle the housing crisis, targeting new stock to the areas of the country where it is most needed and where employment opportunities are located, explaining that “In the past 10 years we’ve been seeing an exodus of private investors out of the marketplace. For every one investor who is coming in we’re losing two, and that exodus of stock is particularly evident outside of Dublin…”. This comment is supported by the latest RTB data, which reveals that 498 notices of termination were issued between April and June from landlords intending to sell (it must be noted that political opposition has called for a three-year rent freeze and a ban on evictions for sales). Critically, the Sherry Fitzgerald chief pointed out that institutional investors will focus on big cities rather than rural areas of the country, therefore – rather than feigning outrage and surprise – Government policy needs to anticipate and reflect that.
Lotus Investment Group