This time it’s different
Over the past few months we have seen the rate of increase in residential property prices slow, they are still increasing, but at a slower rate. This mirrors the trend seen across much of North America, the UK and parts of the eurozone. Last weekend, the Irish Examiner reported that first time buyers and home buyers in Ireland are starting to pull out of properties that they have ‘sale agreed’. This is significant, given that anyone who is ‘sale agreed’ right now would have likely had an arduous search on their hands and will have likely battled other bidders to secure the home in the first place. It is difficult to know whether these instances are coincidental or the start of a trend – we will certainly keep a watching brief on this.
In his weekly property column for the Independent, market commentator Paul McNieve sums it up well: “In 40 years in property, I have not seen a market as hard to call as this”. And this is exactly right. The forces hindering construction activities and those driving home buying activity are almost at odds so there has never been a tougher time to predict where the property market is going. The columnist points out that the real test will be how the markets react to higher borrowing costs from the European Central Bank.
At a micro-level, would-be home buyers not buying homes has the same impact on the rental market as that same cohort not being able to to find or finance a home – it adds to the demand without increasing supply.
And so the rental crisis deepens.
Ireland badly needs to stimulate the supply of new homes. This is not news. Supply of all types and tenures is needed, both public and private. Can we have confidence in the State to attract new private investors into the market when it is struggling to stop the existing ones from exiting?
Earlier this week The Irish Times reported on options that the Government might consider to stem the flow of landlords out of the rental market, which include a review of the tax and fiscal treatment of landlords. This review is expected to be carried out by the Department of Finance this summer. Most here will remember a similar promise made about five years ago, which yielded little for private landlords. But this time it’s different. According to the report: “This time … there seems to be a greater commitment to bring about some change”.
One of the proposals on the table is that landlords could avail of a lower tax bill in return for charging cheaper rents, as happens in other jurisdictions for private landlords housing vulnerable tenants. This might involve cutting tax rates, allowing more deductible expenses, making pension income reckonable or offsetting losses. Frankly, there is plenty that could be done.
The wider message here is that the State is finally beginning to understand and value the critical role of private landlords in Ireland’s social and private rental markets. So, maybe this time it is different…
Lotus Investment Group