And so it begins… 2022.
As we head into a third year of global pandemic, Ireland kicks off the New Year with some surprisingly positive news from the Department of Finance, which has recorded the highest ever tax take of €68.4 billion. Tax receipts increased almost 20 percent last year, with growth described as “robust” across income tax, VAT and corporation tax.
So, how does that translate to the property industry? In real terms, house prices across Ireland are almost 10 percent higher than they were this time last year. Property editor at the Irish Examiner, Tommy Barker, said it best: ‘The pandemic has neither killed nor cured the property market. It’s as dysfunctional as ever’. That might be a bit harsh. Overall, the new housing output for 2021 was better than expected and the industry is on track to deliver over 25,000 new homes this year (getting closer to the Housing for All annual target of 30,000 per annum). Also, the Taoiseach has pledged not to shut down the sector again, voicing his regret about decisions taken last year and the impact of these decisions on Ireland’s housing crisis. But prices are still too high. Might 2022 finally be the year to consider VAT changes, even temporary ones? The affordability initiatives will need to come from somewhere as it is looking increasingly less likely that the Central Bank will row back on the macroprudential rules capping homebuyers’ mortgage lending at 3.5 times income, despite speculation in recent months that 4.5 times might be permissible for certain classes of home buyers. This is a problem, given that the most recent analysis by Davy and Myhome.ie shows house prices are now seven times average incomes: “The unwelcome message from this quarter’s MyHome report is that there is little sign of conditions easing”, according to Conall MacCoille, Chief Economist at Davy and report.
Entering 2022, average property prices across Ireland are now just 6 percent below the peak, with growth of between 5 and 10 percent forecast for this year. Price inflation in the second-hand homes market continues to outstrip that in the new homes sector, with regional areas experiencing an unprecedented buoyancy. Roscommon auctioneer John Earley articulates this well: “Rural Ireland has the wind in its sails — Dublin has priced itself out of the market”. Other rural estate agents agree and according to Michael H Daniels “2021 must contend as perhaps the strongest year for the country market since the 2006 bust in terms of sales completed and sales exceeding the €1m mark”.
For investors, it has been reported by the Independent that rental scarcity will underpin investor appetite for Irish apartments this year, with funds ready to ramp up residential investment through advance purchases in order to secure a pipeline of supply. In fact, earlier this week Ires Reit announced its intention to pursue opportunities in all the regional cities around Ireland (adding to the 4,000 units it owns in the capital).
With residential demand likely to outpace supply for another year, it will be interesting to see how investment strategies for the regional cities and market towns play out in 2022 and beyond.
Lotus Investment Group