Scsi Residentialpropertyreview 2014

Annual Residential Property Review & Outlook 2014
iv SCSI Annual Residential Property Review & Outlook 2014
SCSI Annual Residential Property Review & Outlook 2014 1
Contents
1. Introduction 2. Key Results Summary 3. Key Opportunities & Challenges Summary 4. Outlook 2014 Summary
2 4 6 7
5 Key Opportunities & Challenges Affecting the Property Market 9 5.1 Consumer Condence 5.2 Demand versus Supply 5.3 Availability of Finance 6. Residential Property Market Activity and Values
10 12 18 21
6.1 Estimated Average Sales Prices for Residential Properties 24 26 6.2 Residential Rental Market 28 6.3 Residential Investment Market 7. Interviews with SCSI Chairs 7.1 Dublin 7.2 Leinster 7.3 Munster 7.4 Connaught/Ulster
29 30 31 32 32
2 SCSI Annual Residential Property Review & Outlook 2014
1: Introduction
Dermot OLeary Chief Economist, Goodbody Stockbrokers
Given the countrys pre-occupation with all aspects of the housing market, there is no shortage of reports, data, commentary and analysis on the sector. None are as insightful as the opinions of those at the coal-face. This is the value of the annual residential property survey from the SCSI. Not only does the survey provide evidence on the movement in the market over the past twelve months, it gives expert opinions on the reasons for these developments, as well as identifying some of the issues that need to be addressed from a policy point of view. What does the latest survey of SCSI members tell us about the residential property market? While it is difficult to identify a simple narrative from the survey responses, the one clear conclusion is that 2013 can go down as the year of recovery in residential property prices. While the recovery in the Dublin market has been broadly recognised for some time, the SCSI survey suggests that prices grew in all regions and in almost all categories in 2013. The main differences lie in the scale of the recovery in the market. It could be said the market is in the midst of a creditless recovery, with the survey revealing that roughly half of transactions in 2013 occurred without the use of a mortgage, with cash being particularly prevalent in the Leinster region. One interpretation of this phenomenon is that banks have not been providing credit at reasonable terms and conditions, thus leading to a situation whereby the number of mortgages issued in the country is still at levels last seen in the early 1970s. Another interpretation is that the banks are approving loans, but this credit is not being drawn down. There is reason to believe that cash buyers are being prioritised over mortgage buyers by sellers, thus contributing to the very low levels of mortgage drawdowns. The debate on the supply of credit versus the demand for it will rumble on, but one important nding of the survey, and one that provides some room for optimism in 2014, is that professionals are saying that mortgage nance became more available in 2013. Although not consistent across the country, some respondents cited evidence of more active engagement by the banks on lending, although the credit standards that must be met are unsurprisingly much tighter than prior to the bust.
If credit was not the trigger for the market recovery in 2013, what has been? Condence has undoubtedly been key. It is interesting to note that respondents believe that positive media reports played a big role, but the media can only report more positive news if there is more positive news to report! The surprisingly strong rebound in employment, as well as the successful return of condence in Ireland Inc. undoubtedly contributed here. The key issue for the market in 2014 is supply, both of new builds and of properties on the market. To some degree, the market will help resolve this problem. Higher prices will increase the incentive for developers and it will encourage mover-purchasers as those homeowners climb out of negative equity and nd the condence to move. But it would be naive to think that the market will cure all the markets ills. On the development side, the survey suggests that while development nancing is available, a 35%-40% equity gap is an issue. One cannot and should not expect banks to nance speculative development with only a small equity buffer. Given the amount of interest in investment into Ireland, the industry should try to tap into this potential, rather than purely relying on old-fashioned debt nanced development. The survey suggests that negative equity and tracker mortgages are a barrier to liquidity. Rising prices will change this but only gradually. Some products have been made available for tracker mortgage holders and those in negative equity to move, but more should be done to facilitate those people, thus beneting the market overall. Property market cycles are a feature of almost all developed economies across history. In this regard, Ireland is no different. The only difference with the cycle over the past decade was its scale. It is our belief that the property market has entered a new cycle. This is undoubtedly a positive for the property industry, the banks and the wider economy. One must remember though that prices in Ireland cannot be described as cheap in general. It is best to avoid a repeat of the past decade. To do so, increasing condence, an improving labour market and a growing economy must be accompanied by the right policy choices around nancing, development and planning. Dermot OLeary is chief economist with Goodbody Stockbrokers
Signs of an urban-led stabalisation in property prices but regional outlook more uncertain
The latest survey of SCSI members shows improvements in activity levels across the country, although the picture varies considerably by location. Over 8 in 10 chartered surveyors said that the volume of sales activity increased in 2013, particularly in Dublin where there has been an increase in property values of around 15.7%. It should be noted, however, that the changes in values are coming from a very low base and are highly localised. 91% of chartered surveyors who responded reported that there has been an increase in the residential investment sector from buy to let landlords/investors and identied an increasing trend of international investors purchasing blocks of residential units, also known as multifamily investments, particularly in Dublin. Increases in rents, improvements in yields and the extension of the Capital Gains Tax relief in Budget 2014 were cited as key drivers of further investment in this sector although the costs and charges associated with residential investment remained an issue. The upturn in activity is good news for the property market, buoyed up by condence in the wider economy. Employment levels have stabalised, inward investment has increased and growth prospects for the economy are expected to improve moderately throughout 2014. There are a number of challenges facing the market including a lack of supply of family homes due to very low levels of construction over the past 5 years, a lack of mobility among homeowners who may wish to trade up/down due to negative equity and the availability of mortgage nance and products for people on tracker mortgages enabling them to move, to name but a few. The Irish construction sector is operating at around 6% of GNP, half of what it should be for an economy the size of Ireland which is causing capacity constraints. In Dublin, over 55% of respondents stated that a lack of supply will be a key factor affecting the property market. The availability of development nance to the construction sector and the economic viability of building residential family homes, which according to respondents of the survey, is what many prospective purchasers want, must improve in order for house building volumes to increase again.
Simon Stokes SCSI Residential Professional Group Chair
According to the ESRI, we will need approximately 20,000 25,000 units per annum for 2016 onwards. In 2013, 7,500 units were built (January to November), a large proportion of which was once off housing. SCSI members surveyed pointed to possible solutions to some of the current issues affecting the market: Consideration should be given to existing planning and density requirements as the demand is largely for family homes and not apartments per se Measures should be introduced to ensure existing stock held by NAMA and the banks is released onto the market Supply of mortgage nance should be increased in a measured and rigorous way to assist people who meet the requirements to get a mortgage but credit provisions should be closely monitored to avoid overlending Mortgage decisions should be quicker and provisional mortgage approvals should be standardised to 6 months Increase supply of Development Finance in a controlled and measured way through alternative sources Review planning costs and development levies to facilitate development in areas where there are supply decits The outlook for the property market in 2014 according to survey respondents varies signicantly by region as you would expect. In Dublin, prices are expected to continue to increase moderately unless solutions to the supply issue are found quickly. Rental prices are also expected to increase as the residential investment market continues to improve. The expectations outside of Dublin and the regional cities, however, are far more subdued and are likely to take some time to fully stabalise. Simon Stokes, Residential Professional Group Chair, Society of Chartered Surveyors Ireland
2: Key Results Summary
MARKET ACTIVITY IS UP
8 in 10
Chartered Surveyors said that volume of Residential Sales have increased
55%
PRICES HAVE TURNED A CORNER
Average Sales Price change Dublin +15.7% Outside Dublin +5.7%
SHORTAGE OF SUPPLY
of Chartered Surveyors surveyed in Dublin said a lack of supply is a key issue
FINANCE
Around half of all residential property transactions are being made in cash
INVESTMENT
Increased interest in Dublins residential property market from investors
RENTAL PROPERTIES
Average Residential Rentals Dublin 1,290 Outside Dublin 613
89% of Chartered Surveyors expect rental price increases in 2014
Market Activity is Up
Over 8 in 10 chartered surveyors said that the Volume of Sales have increased, particularly in Dublin (92%) in 2013 75% of chartered surveyors in Dublin said that Sales Instructions from Vendors have increased during 2013 versus 50% outside Dublin Over two thirds of chartered surveyors said that Sales Instructions from Receivers/Banks have increased
Composition of Finance is Changing

Around half of all residential property transactions are being made in cash although this is starting to reduce 7 in 10 chartered surveyors in Dublin see an increase in the availability of mortgage nance versus 5 in 10 outside Dublin which is key to the market
Rental Properties
Average residential rentals in Dublin (1,290) are twice those outside Dublin (613) The PRTB/ESRI Rent Index indicates that residential rental prices in Dublin are increasing There is a lack of supply of quality rental property coming onto the market. Nine in ten chartered surveyors expect the supply of 3 and 4 bed semi-detached houses for rental in Dublin to either remain the same or decrease 89% of chartered surveyors surveyed expect the rental price of 3 bedroom semi-detached houses to increase in 2014
Shortage of Supply
55% of chartered surveyors surveyed in Dublin said a lack of supply and increased demand were the most signicant issues that will affect the market Almost two thirds of chartered surveyors said that Residential Stock for Sale has remained the same or decreased and this is a key concern in the market In 2013 (January to November) around 7,500 new houses were built nationwide versus 93,419 in 20061. Just over 1,000 new houses were built in Dublin Negative equity and a lack of mortgage nance are hampering release of existing stock
Residential Property Prices have turned a corner

Increased demand and a shortage of supply are having an impact on residential property prices, particularly in Dublin Estimated Average Sales Price2 change Dublin +15.7% Outside Dublin +5.7% Urban driven stabalisation and increase in prices but coming from a very low base and low levels of transactions in the market.
The residential rental market is a bigger factor now. The population base is changing and some people have no desire to purchase. The major rental websites of Daft.ie and Myhome.ie are showing that the number of properties available for rent has reduced over the year and rents have increased. Ray Hanley, SCSI Valuations Professional Group Chair
Changes in Residential Investment

9 in 10 chartered surveyors in Dublin have seen increased investment in the residential market in comparison to 36% in Connaught/Ulster Large multi-unit investors are more active in Dublin (23%) versus outside Dublin (14%)
1 2
Source: Department of the Environment, Community & Local Government Source: SCSI Survey of Members, Dec 2013
3: Key Opportunities & Challenges Affecting the Property Market Summary
DEMAND VERSUS SUPPLY CONSUMER CONFIDENCE

Economic Growth Consumer Demand Improving Sentiment Positive Media Reports
Around 1,000 new houses built in Dublin in 2013 Around 8,000 new houses are needed in Dublin per year Chartered Surveyors do not expect supply to increase Prices stabilising/increasing Planning permission/zoning Supply of repossessed properties from NAMA/Banks
AVAILABILITY OF FINANCE
Cash Buyers Mortgage drawdowns increasing But difficulties accessing mortgage nance still exist People in bad debt/negative equity unable to get mortgage nance Construction nance critical for supply Need for greater monitoring of credit provision
OPPORTUNITIES TO MEET DEMAND

Changes to planning permission/zoning in urban areas Increased availability of construction/ development nance Increased availability of mortgage nance Banks to increase awareness of mortgage products for those in negative equity to release existing stock Viability of construction costs
4:
Outlook 2014 Summary

In 2014, Irelands economy is poised for growth with consumer demand, trade and investment driving growth in the year ahead. Additionally, consumer condence is at its highest level since the economic crisis hit. This bodes well for the property market as improvements in consumer sentiment are likely to lead to increased demand for property. The ESRI estimates that 10,000 to 12,000 new homes are needed nationwide per year up to 2015 and 20,000-25,000 from 2016 onwards. Others predict that 8,000 new homes are needed in Dublin alone in 2014. Less than 1,500 new homes were built in Dublin in 2013. A signicant cohort of chartered surveyors do not expect the supply of residential properties in Dublin to increase over the next 12 months, particularly family homes e.g. 56% expect the supply of 3 and 4 bedroom second hand homes to decrease or stay the same in 2014 The vast majority of chartered surveyors do not anticipate an increase in supply in the residential rental market in Dublin over the next 12 months. Chartered surveyors also expect rental prices to increase over the next 12 months, mainly due to increased demand and a lack of supply. There is some evidence that competitive bidding is taking place in Dublin. However, there are fears that this could increase further unless something is done to increase the supply of residential property in order to meet demand. Respondents to the survey recommend that the current planning permission for high density apartments be re-designated to family homes such as three and four bed semi-detached houses and 4/5 bed detached houses, to accommodate demand.
6.1: Overview
In Dublin, over 55% of respondents stated that a lack of supply will be a key factor affecting the property market
Residential property prices have already started to increase and chartered surveyors expect this trend to continue into 2014. While 70% of respondents expect prices of second hand homes in Dublin to increase, the outlook for property values around the rest of the country remains more subdued
Outside Dublin, chartered surveyors anticipate that the availability of mortgage nance and increased consumer condence will be the main drivers of demand. They also predict that First Time Buyers will be the main source of demand, while in Munster, movers e.g. those trading up or down, are also expected to be key. Buy to Let investment is expected to be weak in the regions.
6.2: Urban Homes
They also feel that negative equity is hampering mobility and hampering the release of existing stock onto the market. There is a call for banks to start addressing this by increasing awareness of mortgage products for those who are in this negative equity situation and want to move. There are mixed views on the impact that NAMA and the banks will have by releasing residential properties onto the market. Some chartered surveyors feel that an aggressive approach will depress prices while others anticipate that any release of NAMA/bank properties will not be sufficient enough to have any impact on the market. Greater mortgage availability is also felt to be key to increasing demand for property. There is evidence that the availability of mortgage nance is starting to increase, however there are concerns that mortgages will only be available to those with the most secure jobs. There are also calls for robust measures to encourage the building industry to start building this new supply of homes. The increased availability of development nance as well as increasing this from the current threshold of 50% to 60% are felt to be critical to kickstarting the construction of new homes. Additionally, it is felt that ways to reduce development costs in certain urban areas need to be considered to help increase the supply of residential properties i.e. development levies. However, any increase in the availability of mortgage nance and development nance needs to be closely monitored as there are fears that the market could overheat and spiral out of control if there is too much lending. The market will continue to grow and prices will increase, as the economy xes itself, people will engage more positively in the market but we need to ensure that the market does not get out of hand. Its a delicate balancing act. We can quickly go the other way if there is overlending Kieran McQuinn4
Any comments from Kieran McQuinn are made on a personal basis rather than as a representative of the Central Bank.
5: Key Opportunities & Challenges Affecting the Property Market
5: Key Opportunities & Challenges Affecting the Property Market

2013 represented a turning point for the property market. Sentiment levels have improved among home owners and prospective purchasers and this has translated into higher levels of activity and values, particularly in Dublin and other regional cities. The picture in the regional areas, however, remains more subdued. Improvements in economic growth, a stabilisation of unemployment levels and the exiting of the EU/ IMF bailout have resulted in increased condence and demand both domestically among prospective purchasers as well as from international investors looking at the Irish property market. However, a number of challenges remain on the horizon before a properly functioning property market can be realised. These challenges range from a shortage of supply of new builds to a shortage of existing stock with sellers adopting a wait and see approach and negative equity and difficulties accessing mortgage nance hampering mobility. There is also uncertainty around the impact of mortgage arrears, repossessions and debt restructuring on the market. This section of the report addresses some of the key opportunities and challenges affecting the market.
5.1: Consumer Condence

Irelands exit from the bailout has boosted consumer condence about Irelands economic performance and prospects: for the third month in a row Amrach Researchs Economic Recovery Index has reached a record high level up to 31.2. The improvements in consumer intentions for spending and borrowing noted in November 2013 have been sustained into December 2013. Amrach Researchs tracking research (and qualitative research) conrm a growing anticipation of recovery and a better alignment between peoples views on the economy and their own personal nancial plans. Of course, sentiment is just that an emotional reaction to changing circumstances and information: 2014 will show us whether the hoped for recovery can nally become reality. This improvement in consumer condence is supported by the ESRIs latest quarterly economic commentary5 which states that the Irish economy appears to have turned a corner as domestic demand has increased by 0.9% in 2013, the rst increase since the crisis began.
The Economic Recovery Index

Using the answers to the question on stages of recovery we have created the Economic Recovery Index, which ranges from 0 to 100 (0 = deep recession; 100 = back to peak). Our Index continues to improve: reaching 31.2 in December 2013, the third record breaking performance in row: 35 30 25 20 15 10 5 0
2009 April 2010 January 2011 January 2012 January 2013 January 2013 December
Source: Amrach Research, December 2013 Source: Amrach Research, December 2013
ESRI December 2013

Output (Real Annual Growth %)
Private Consumer Expenditure Public Net Expenditure Investment Exports Imports Gross Domestic Product (GDP) Gross National Product (GNP)
2010
0.9 -6.9 -22.6 6.4 3.6 -1.1 0.5
2011
-1.6 -2.8 -9.5 5.4 -0.4 2.2 -1.6
2012
-0.3 -3.7 -1.0 1.6 0.0 0.2 1.8
2013
-0.3 0.3 2.1 0.3 0.9 0.3 2.0
2014
1.5 -1.3 4.5 4.6 3.9 2.7 2.7 Source: ESRI Quarterly Economic Commentary Winter 2013
The ESRI says that Irelands economy will experience relatively balanced growth in 2014, with consumer spending, trade and investment driving growth in the year ahead. Only public expenditure is expected to contract further. The SCSI survey of members also reects this optimism as chartered surveyors feel that an improvement in sentiment has led to increased activity in the market, as well as a perception that the market has stabilised in some areas. There has also been a stablisation in employment levels and this has given people more condence and certainty to consider purchasing their own home. An increase in the number of loan approved house hunters with the ability to draw down mortgages combined with a decrease in the supply of desirable properties is leading to competitive bidding and an increase in consumer condence in relation to house prices Chartered Surveyor, Dublin Improved sentiment and expectation that market is at the bottom Chartered Surveyor, Munster The more activity buyers see on the ground the more it encourages them to buy Chartered Surveyor, Leinster Chartered surveyors also believe that there is a pent-up demand for property from people who have been renting for the past number of years who were taking a wait and see approach to the market and whether property prices would continue to fall.
In a recent SCSI/Red C survey of renters, almost one fth of renters say that they are likely to buy in the next year, up from 12% in 2012. Furthermore, one in eight of all nonhomeowners, currently renting or living at home, say they are likely to buy a home in the next year. Furthermore, there has been interest from people with investments/pensions that matured over the last 5 years as well as cash buyers from abroad who now take a view that there is value in the market. General feeling of optimism not experienced for last 5/6 years. Huge volume of incoming cash buyers from abroad. Huge pent up demand from owner occupiers who had cash from sales back 5/6 years ago and who have since been renting / from people who had various investments / pensions which matured during the past 5/6 years and who left the funds sitting rather than invest in property coupled with somewhat greater availability of bank nance. Additionally as the bank interest rates are at an all-time low, and returns of 5-8% on average can be achieved from property it makes more sense Chartered Surveyor, Dublin Clear indication that prices have stabilised bringing buyers who had deferred purchase back into the market with some zeal Chartered Surveyor, Dublin Increases in consumer condence is positive news for the property sector. However, it is largely reliant on stability in the wider economy and Eurozone and any upsets there could have a knock-on negative impact on the property market.
Likelihood to Buy a Property in Next 12 Months

18% 12%
2012 Renters Source: SCSI/Red C Nov 2013. 2013
10%
2012
13%
2013
Non Home Owners

5
ESRI Quarterly Economic Commentary, Winter 2013
5.2: Demand versus Supply

Demand Challenges
According to the CSO, Dublins population is set to spiral between 2016 and 2031. It is projected to increase by between 96,000 and 286,000, indicating a growth rate of 20,000 a year through a combination of births and people migrating from other parts of the country. The ESRI6 estimates that around 10,000 12,000 new houses are needed per year up to 2015 and that between 20,000 to 25,000 new houses are needed per year from 2016 onwards if the ongoing demographic change in Ireland is to be accommodated. Demographics are key to the economy. Continued increases in population and job creation in the greater Dublin area leads to demand for new homes Hubert Fitzpatrick, Director of Housing Planning & Policy, CIF This is supported by Ronan Lyons in the Daft.ie House Price Report7 where he states that around 8,000 new units are needed in Dublin each year into the medium term. This will not just put pressure on housing supply but it will also put pressure on city services such as roads, sewerage and water supply. There are already some concerns about the capacity of Dublins infrastructure to handle an increase in housing supply and all of these issues need to be considered in terms of their impact.
Water is a huge problem in Dublin, and the problem is totally underestimated Hubert Fitzpatrick Director of Housing Planning & Policy, CIF
Factors that will Impact Demand

SCSI members were asked about the main factors that will have a signicant impact on demand in the residential property market. The results vary by region and support the emerging multi-speed market which is in evidence across the country. In Dublin, over 55% of respondents stated that a lack of supply will be a key factor affecting the property market. Lack of stock has created an increase in bidding and prices being achieved Chartered Surveyor, Dublin The lack of available stock though is creating issues with availability and driving prices up, where most properties in our region are starting to see competitive bidding scenarios again - which is becoming alarming as it makes you wonder how sustainable this is and are we back where we were pre bust Chartered Surveyor, Dublin A decrease in the supply of desirable properties is leading to competitive bidding Chartered Surveyor, Dublin
Factors that will have a Significant Impact on Demand in the Residential Property Market
Dublin Lack of supply / Increased demand Better consumer condence and sentiment in property market Increase in prices Availability of nance / Bank Lending again Investor and cash buyers entering the market again CGT exemption High tax rates / property tax Lack of mortgage nance still a threat Increase positive media Source: SCSI Survey of Members, Dec 2013. 55% 36% 20% 20% 12% 6% 4% 4% 3% Rest of Leinster 27% 33% 4% 17% 4% 7% 1% 20% 6% Munster 15% 34% 11% 36% 4% 4% 4% 9% 9% Connaught / Ulster 24% 0% 0% 8% 8% 0% 8% 12% 0%
6 7
ESRI Medium Term Review Daft.ie House Price Report 2013 Q4
In Dublin, this lack of supply is already putting pressure on prices, with competitive bidding in evidence. In the regions, we can see that the supply issue is not as pronounced and it is likely that there is still oversupply in certain regional areas. In Leinster 27% of respondents said that a lack of supply will be an issue, 15% in Munster and 24% in Connaught/Ulster. The importance of better condence and sentiment in the property market was broadly recognised as a key factor in the market with 36% of respondents in Dublin, 33% in Leinster and 34% in Munster agreeing. The availability of nance was also reported as a key issue, particularly in Munster with 36% of respondents stating it will affect the market, along with 20% in Dublin and 17% in Leinster. Just 8% in Connaught/Ulster felt it would signicantly impact the market. One fth of chartered surveyors in Leinster say that the lack of mortgage nance is an actual threat to demand.
Demand Outside Dublin

Outside Dublin, the SCSI survey of members reveals that chartered surveyors expect that demand for residential property will be strong amongst rst time buyers (FTBs) albeit this is likely to be primarily in the urban areas close to places of employment and good transport infrastructure Additionally in Munster, movers e.g. those trading up or down, are also expected to stimulate demand. A higher proportion of chartered surveyors in all regions are more likely to say that Buy to Let/investor demand will be weak rather than strong over next 12 months. Demand for holiday homes is also expected to be relatively weak in all regions. Chartered surveyors outside Dublin anticipate that the main demand for residential property will be in urban centres such as Cork, Limerick and Galway, and that oversupply will still be an issue in rural areas. Urban properties have increased in value while rural remains challenged Chartered Surveyor, Leinster
Expected Demand in Residential Market

< Weakest <1 19 First Time Buyer 16 10 Mover 25 Buy to Let / Investor 39 Holiday Home 50 47 Rest of Leinster Other Munster Connaught / Ulster Source: SCSI Survey of Members, Dec 2013. 39 27 11 42 22 11 17 13 36 33 18 7 11 8 11 15 44 33 25 7 26 3 17 22 25 15 19 17 11 14 15 19 26 8 14 6 2 15 10 2 21 22 22 15 13 45 20 33 4 33 43 Strongest > 5> Mean Score 3.3 0 3.3 2.9 3.7 2.7 2.8 2.7 3.1 2.2 2 2.5 2.7 2.7 2.4 3.6 3 12 10 6 38 18 38 37 42 36 6 21 7 7 14 8 11
There is an imbalance in the region between supply and demand and a further softening of prices is needed. While CSO data shows that prices have stabilised throughout the country, they have not bottomed out in parts of Connaught/Ulster and they wont until next year Gerard O Toole, SCSI Chair Western Regional Branch Chair Activity is up in Munster in the last 12 months, but a lot of this is focused in the urban areas of Cork and Limerick Trevor McCarthy, SCSI Rural Professional Group Chair Munster Region
increased signicantly in Dublin (959 in 2013 vs 562 in 2012). Furthermore new house registrations have more than doubled in the last year (1,217 vs 602 in 2012), though they are still well below the registrations recorded in 2006 (63,552)8 which represents a 98% decrease. However, CSO planning permission data shows a decrease in planning permissions granted in the third quarter of 2013 with a decrease of 14% on an annual basis. Planning permissions were granted for a total of 1,409 dwellings in the second quarter (1,252 houses and 157 apartments). With such a low level of new homes being built, the main source of housing supply is existing stock for sale. The latest Sherry Fitzgerald report9 on the residential market indicates that 46,200 residential properties nationwide were for sale in 2013, 4,500 of which were in Dublin. This represents 2.5% of estimated private housing stock. International standards indicate that a market availability rate of approximately 6% is needed to represent equilibrium.
Supply Challenges
The latest gures from the Department of the Environment, Community & Local Government indicate that 7,425 housing completions were recorded up to November 2013. This is a 3% decline compared to the same period in 2012. Dublin only accounted for 16% of housing completions (1,179). On the other hand, while 3,709 commencement notices were recorded for the rst 10 months of 2013, this represents a 9% increase for the same time period in 2012. House commencements
Housing Completions
100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 *(Q1-Q3)
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013*
Source: Department of Enviroment, Community & Local Government
8 9
Source: Department of the Environment, Community & Local Government Sherry Fitzgerald, Irish Residential Market, Q3 2013
Expectations of Supply of SECOND HAND Urban Homes Dublin

61% 60% 54% 51% 56% 72% 78%
35%
35%
34%
35%
32% 23% 18% 4%

2 Bed Apartment
4%
2 Bed Townhouse Increase
5%
3 Bed Townhouse Remain Same
11%
3 Bed Semi Decrease
14%
4 Bed Semi
12%
4/5 Bed Detached
5%
1 Bed Apartment
Source: SCSI Survey of Members, Dec 2013.
Supply Expectations and Opportunities
As prices are expected to increase, it is likely that more vendors / landlords who have been holding off selling and renting their properties will start to bring them on One of the major issues according to respondents of the to the the market. Expectations of Supply of New Urban Homes Dublin survey was a lack of supply, particularly in urban areas. More supply in urban centres,37% family 55% 60% 63% 43% is required 37% 48% In the SCSI survey of members, chartered surveyors were homes are required as there is a cohort trapped in asked for their predictions on the supply of second hand apartments John McCartney, Director of Research, residential properties in Dublin and whether this would Savills 42% 42% increase or decrease over the next 12 months. 50% 43% There appears to be different expectations around the 41% 33% supply of semi-detached houses and the 30% and detached supply of apartments/townhouses. Half of chartered surveyors do not expect the supply of 4 bed semi21% 21% detached second hand urban houses to increase over the 7% 5% 7% next9% 12 months and around two fths 7% do not expect the 2 Bed 3 Bed 3 Bed 4 Bed 4/5 Bed 1 Bed 2 Bed supply of 3 bed semi-detached houses or Townhouse Townhouse Semi Semi Detached Apartment Apartment 4/5 bed detached houses to increase. On the other hand, chartered surveyors were much more positive about Increase Remain Same Decrease Source: SCSI Survey of Members, Dec 2013. the supply of 1 bed apartments and 2 bed apartments as around three quarters expect the supply of these properties to increase. Six in ten expect that supply of 2 bed and 3 bed townhouses will increase.
Supply of SECOND HAND Rural Homes Dublin

37% 32% 44% 44% 50% 41% 44%
58%
58% 50% 50% 53% 50%
9% 16
7%
7%
5%
7%
4/5 Bed Detached 1 Bed Apartment 2 Bed Apartment
2 Bed 3 Bed 3 Bed 4 Bed Townhouse Semi Townhouse SCSI Annual Residential Property Review & Outlook 2014 Semi Increase Remain Same Decrease
Supply of SECOND HAND Rural Homes Dublin

37% 32% 44% 44% 50% 41% 44%
58%
58% 50% 50% 53% 50% 50%
5%
2 Bed Townhouse Increase
10%
3 Bed Townhouse Remain Same
6%
3 Bed Semi Decrease
6%
4 Bed Semi 4/5 Bed Detached
6%
1 Bed Apartment
6%
2 Bed Apartment
Chartered surveyors were also downbeat about expected supply of second hand rural properties in Dublin e.g. properties on the outskirts of county Dublin. Over half of chartered surveyors do not expect the supply of these properties to increase over the next 12 months. Around two thirds of chartered surveyors do not expect the supply of new rural homes in Dublin e.g. new one off properties on the outskirts of county Dublin, to increase. With low expectations on the supply side, it is not surprising that the majority of chartered surveyors expect that the price of these homes to increase.
Expert Views on Supply Solutions

Planning
SCSI members and other stakeholders were asked to give their views on possible solutions to the supply issue affecting the market. A number of experts mention changes to planning/zoning as one of the main solutions to increasing supply. It has been suggested that more property and land could be made available if there were changes to planning policy around density. Planning has been granted/exists for high density apartments in certain areas around Dublin but demand is currently for 3 and 4 bed semi-detached family homes of which there are constraints on supply and which is putting more pressure on prices on the limited second hand stock of family homes that do become available. In the Residential market many of the sites which have the benet of planning permission are for high density schemes while demand is for lower density housing. Having sufficient zoned land with appropriate planning for houses in Dublin is an issue as the lack of supply of traditional houses has resulted in signicant increases in prices in the Dublin market Ray Hanley, SCSI Valuations Professional Group Chair
Expectations of New Rural Homes Dublin

36% 72%
45%
24% 18% 4%
Supply Increase Remain Same Prices Decrease
Local authorities need to explain and review their attitudes to density. It is a legacy of the boom times and not what the market is looking for John McCartney, Director of Research, Savills Some local authorities remain too rmly xed on high density residential development, even in less central locations. Demographic changes in particular a sharp decline in the number of people in their 20s - mean that the natural demand for apartments outside the city centre and locations close to good public transport links has diminished John McCartney, Director of Research, Savills There is also a concern that the current planning policy around density is impeding supply as there is no incentive for the industry to respond. Pent up demand is driving prices in the Greater Dublin Area but industry cannot respond in many cases because of planning policy seeking higher density. The current cost of construction remains ahead of attainable market value when completed, so the project cant be banked Hubert Fitzpatrick, Hubert Fitzpatrick, Director of Housing Planning & Policy, CIF The high cost of constructing apartments, make it difficult for developers to break-even on high density schemes in many locations. Ultimately, this curtails much needed new construction John McCartney, Director of Research, Savills
One of the barriers to greater supply is price, higher values are needed as people are in negative equity and are basically hungover. This is preventing them from moving as prices are still low relative to 5 years ago. Prices need to rise another 15% to 20% before people start selling Simon Stokes, SCSI Residential Professional Group Chair, Dublin Scarcity of stock in certain areas because some would be sellers are in negative equity trap Chartered Surveyor, Munster However the release of properties onto the market is expected to increase as the banks start to address negative equity. A signicant cohort of consumers now want to buy housing, from rst time buyers to people trading up as they now have kids/larger families. Negative equity is an issue here. The banks are beginning to address negative equity Kieran McQuinn10 The role that NAMA and the banks play in releasing properties on the market is also considered a factor in the supply and demand for property. There are fears that this could lead to an oversupply of properties and lower prices. The role that NAMA plays in the market remains to be seen. They are a substantial player with a huge weight of properties and they will play a signicant role. However they are under-resourced and they could possibly hinder recovery if they aggressively sell properties as this would add to stock and have an impact on value Gerard O Toole, SCSI Western Regional Branch Chair However, other experts believe that an increase in repossessed properties being released on the market will have little impact on the supply side. To date progress has been slow but the rate of progress should improve as the banks now have people to deal with resolution strategies. The rate of progress should increase and this will result in some properties being released on the market. But the expectation is that this will not have a huge impact on the supply side Kieran McQuinn
Release of Existing Stock
The lack of mobility is a key issue in the market at present and this is mainly due to people who are in negative equity and are not in a position to move or trade up/down. This means that less property is becoming available on the market as the traditional cycle is distorted. Some chartered surveyors feel that higher prices are needed to encourage people who are in negative equity to move e.g. trade up or down, so that properties can be released onto the market.
10
Any comments from Kieran McQuinn are made on a personal basis rather than as a representative of the Central Bank.
18 SCSI Annual Residential Property 13% Review & Outlook 2014 7% 9%

2%
18% 5%
Dublin
9%
Rest of Leinster Munster Connaught/ Ulster
Other Dont know
Dublin
Rest of Leinster
Munster
Connaught/ Ulster Decrease
Increase
Remain Same
Large Multi-Unit Investors
Buy to let Investors
5.3: Availability of Finance

The availability of nance is a key issue in terms of prospective purchasers able to purchase a home. In Type of Investorbeing Buying Residential recent years, due to difficulties in obtaining nance, cash Letting Properties transactions have begun to play a more prominent role in property transactions. 9% 9% 23% market 12% 50% 73% 78% The SCSI survey of members indicates that around half of all 72% property transactions were bought in cash. This varies by region with cash buyers more dominant in Leinster (54%) than in Dublin (47%) or Connaught/Ulster (42%). The market is equally split between cash and mortgage transactions in Munster. Over 50% of transactions are 41% bought via a mortgage in Dublin and Connaught/Ulster. This is supported by experts. However, according to some the cash buyer market is beginning to recede.18% 9% 5% Half of residential purchases Munster are cash buyers but Dublin Rest of Connaught/ Leinster Ulster this is now receding John McCartney, Director of Research, Savills
Large Multi-Unit Investors Buy to let Investors Other Dont know
Some of this optimism in Dublin is based on more banks competing for business. More lenders are more active in competing for business Chartered Surveyor, Dublin Increased banking activity is also evident in Munster.
Breakdown between Mortgage Some cases Buyers where purchasers were granted and Cash
nance this year were not in 2012. We feel this is due to EBS and PTSB re-entering 50% the mortgage 42% 47% 54% market and creating more competition again Chartered Surveyor, Munster
According to one chartered surveyor, banks are even promoting their increased lending activity amongst 55% chartered surveyors themselves. 51% 50% 41% Banks have started to lend and they have physically sent their representatives in to our office to inform us of this Chartered Surveyor, Leinster This is supported by the latest update from3% the Irish 2% 5% 11 Banking Federation which indicates that credit Dublin Rest of Munster Connaught/ Leinster Ulster conditions could be improving as over 4,000 mortgages were drawn down in the third quarter of 2013, signicantly up fromMortgage Q1 2013. Cash Dont know
Differences exist by region when it comes to the availability of mortgage nance, with seven in ten chartered surveyors in Dublin seeing an increase in the availability of mortgage nance, which may reect why there is a slightly higher proportion of mortgage buyers versus cash buyers in the Capital.
Breakdown between Mortgage and Cash Buyers

47% 54% 50% 42%
Availability of Mortgage Finance

70% 46% 57% 48%
51%
55% 41% 50% 24%
30%
52% 40%
17%
2%
5%
Rest of Leinster Munster
3% 3%
4%
Dublin Connaught/ Ulster
Dublin
Rest of Leinster
Munster
Connaught/ Ulster
Cash
Mortgage
Dont know
Increase
Remain Same
Decrease
Mortgage Drawdowns
7,000 6,000 5,000 4,000 3,000 2,000 1,000 0
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
Source: IBF
However, difficulties accessing mortgage nance still exist and according to some chartered surveyors only those with the lowest risk e.g. a secure job can get a mortgage. Applicants would need to be in very secure employment & have a substantial deposit Chartered Surveyor, Munster Furthermore, experts predict that difficulty accessing credit will continue due to a tightening of credit standards and bankers are changing their tone to borrowers. There are also concerns that existing bad debt, mortgage arrears or negative equity will have an adverse impact on the availability of mortgage nance. Despite the banks PR spiel about offering and selling mortgages, there are very few people that meet the stringent criteria or who dont have some form of debt considered a bad debt Chartered Surveyor, Leinster
There is a requirement for the banking sector to underpin the recovery of the residential market by developing, marketing and approving products which can address some of the structural issues. New products which can facilitate trading up and trading down with negative equity for example would be benecial. Real and attractive options for customers with tracker mortgages would increase mobility and availability of properties for sale John Hogan, Department of Finance There are also calls to improve the mortgage lending process from staff training to greater clarity around the application and qualication process, and quicker decision making. Front line staff need to be trained in prudent lending but the type of prudent lending which looks not just at the present income and position of the prospective homeowner but their future prospects. Greater transparency and clarity around the application and qualication process would be benecial for consumers and the market John Hogan, Department of Finance In order to get the residential property market moving, quicker decisions need to be made by receivers and bankers, for example, by getting their homework done such as getting title deeds sorted before properties are brought to market Peter Murtagh, SCSI North East Leinster Region Chair
Expert Views on Finance Solutions

Experts believe that the banking sector needs to address the availability of mortgage nance by providing products which address negative equity and those with tracker mortgages to help increase mobility. The banks need to provide products to address negative equity. Some banks are being innovative and are introducing these products already Kieran McQuinn
11
IBF Housing Market Monitor Q3 2013
Building Constraints Construction/Development Finance

The availability of construction nance is felt to be critical to improving supply. It is also felt that the level of nance available needs to be increased from the current level of 50-60% of construction costs. The availability of nance is key, if there is no bank there is no housing supply. There is a chronic shortage of housing in the region Michael Boyd, SCSI South East Leinster Region Chair Another barrier to supply is construction nance and the lack of nance to build. Banks need to lend to developers. The government tried to encourage this but it did not work Simon Stokes, SCSI Residential Professional Group Chair We cannot force developers to build houses we need to encourage them by reducing construction costs and by providing development nance and enabling the developer make a margin. Development nance is only available up to 50%-60% of construction costs. There is a requirement for a greater and higher level of development nance to be available in the marketplace Hubert Fitzpatrick, Director of Housing Planning & Policy, CIF The nance issue is two fold, both consumers and developers are unable to get nance. But this nancial issue is beginning to ease and this is indicated in the Central Bank /SCSI surveys and it should pick up in both sectors Kieran Mc Quinn However, development nance needs to be provided in a way that avoids repeating past mistakes such as speculative development. Development nance to support new building will also be necessary without repeating the mistakes of the past John Hogan, Department of Finance
The market has to rise and builders have to nd ways of reducing cost. The value of land has to be reduced and planning fees and construction costs have to come down for example block costs have to be reduced. The cost of producing houses has to be reduced. Local Authorities should change their fee models, for example, they should reduce planning fees in towns where there is demand Michael Boyd, SCSI South East Leinster Region Chair There is also a concern about the lack of supply and building/development costs. Building costs have not come down and increased housing regulations are also putting pressure on costs Kieran McQuinn The requirement for social and affordable housing is also an issue and the costs associated with this requirement. Developers obligations under the social and affordable housing requirements of Part V of the Planning Act have to be addressed, they are currently excessive and cannot be sustained in their current format Hubert Fitzpatrick, Director of Housing Planning & Policy, CIF
Monitoring of Credit Provision

The prospect of increased credit provision leads to some experts fearing strong price increases and overlending, similar to the levels witnessed in the celtic tiger days. The rate of credit provision is likely to rise and this could fuel price increases. We still have an impaired banking system yet we have strong price growth. This could feed into a mortgage spiral so we need to monitor and keep an eye on this Kieran McQuinn So there is a call for a more sustainable mortgage market and improved monitoring of banks on targets and LTVs. It is felt that there is an increased ability to monitor the LTVs of banks now. The actions of banks need to be regularly monitored on targets and LTVs, to ensure they dont return to the levels witnessed in the celtic tiger days. The situation now is very different. We now have more information on commercial banks so we can observe the LTVs of banks and monitor this Kieran McQuinn What we need to do here is build a sustainable, affordable mortgage market which participates in but does not drive economic recovery John Hogan, Department of Finance
Building Constraints Construction Costs

In tandem with concerns about the lack of development nance, high construction costs are also an issue and there are calls for these to reduce in order to increase housing supply. Examples given were changes to planning fees and reduced building costs.
6: Residential Property Market Activity & Values
6: Residential Property Market Activity & Values

The SCSI survey of members reveals that market activity has picked up nationwide in a number of areas such as the volume of sales agreed, sales instructions from receivers/banks and sales instructions from vendors. In Dublin and Connaught/Ulster, almost all chartered surveyors (92%) said that the volume of sales agreed had increased in 2013 and three quarters of chartered surveyors said this in Leinster and Munster. This is a strong indicator of increased activity in the residential property market. In Dublin, this is further supported by the high proportion of chartered surveyors (75%) who say that that sales instructions from vendors had increased. On the other hand the greater majority of chartered surveyors in all regions said that residential property stock for sale and the volume of lettings had either remained the same or decreased. The decrease in the volume of lettings may reect issues with the supply of properties to rent.
Residential Market Activity 2013

75% Sales Instructions (fromVendor) 50% 64% 56% 74% Sales Enquiries (from Receivers / Banks) 61% 66% 72% 92% Volume of Sales Agreed 74% 77% 92% 44% Residential Property Stock for sale 30% 38% 36% 22% Volume of Lettings 23% 42% 40% Dublin Rest of Leinster Munster Connaught / Ulster Source: SCSI Survey of Members, Dec 2013. 35% 33% 42% 44% 29% 32% 44% 23% 44% 16% 25% 30% 34% 30% 20% 15% 15% 8% 26% 23% 28% 24% 8% 7% 8% 4% 39% 28% 36% 20% 4% 4% 3% 22% 6% 8% 2%
Increase
Remain Same
Decrease
The latest12 CSO Residential Property Index13 also shows rising property prices with residential property prices at a national level, increasing by 5.6% at the end of November 2013. In Dublin residential property prices grew by 1.3% in November and were 13.8% higher than a year ago.
CSO Residential Property Price Index

150 140 130 120 110 100 90 80 70 60 50
2005
2006
2007
2008
2009
2010
2011
2012
2013
All Residential Properties
All Residential Excluding Dublin
All Residential Dublin
Source: CSO Residential Property Price Index
12 13
November 2013 The CSO Residential Property Index does not include cash sales
6.1: Estimated Average Sales Prices for Residential Properties

In the SCSI survey of members, chartered surveyors were asked to estimate the average sales price of residential properties in 2012 and 2013 based on transactions. It should be noted that the changes in values were coming from a very low base over a broad geographical base and that there were lower levels of transactions in 2013.
At an overall level, residential property prices increased by 15.7% in Dublin and by 5.7% outside Dublin. This is similar to the percentage changes indicated in the CSO Residential Property Price Index and would support the view that the stability in property prices is in urban areas and largely driven by a lack of supply in 2013. In Dublin the price of 3 bed semi-detached homes increased by 15% between 2012 and 2013. Similarly the average price of a 4 bed semi-detached home in Dublin increased by 14.64%. The average price of a 4/5 bed detached home increased by 17% in Dublin.
Estimated Average Sales Price 2013 by Property Type % Change 20122013 Dublin: +15.7% Outside Dublin: +5.7% Connaught/Ulster
Average Sales Price 2013 2 Bed Town House 82,684 3 Bed Town House 110,355 1 Bed Apartment 53,144 2 Bed Apartment 71,412 3 Bed Home 115,252 4 Bed Home 126,137 4/5 Bed Home 169,502
Dublin
Munster
Leinster
Source: SCSI Survey of Members, Dec 2013. 14
14
The gures contained in this map are based on a sample of average property value transactions from respondents and it is intended to be a guide to average sales prices over 2013 rather than a comprehensive listing of transactions. Variations occur throughout the regions depending on responses and transaction levels by member.
Increase
Remain Same
Decrease
Lack of supply of 3/4 bed properties has caused the market in south Dublin to increase by 20-25% Chartered Surveyor, Dublin Outside Dublin, residential property prices increased by an average of 8.1% in Munster, 4.6% in Leinster and 3.9% in Connaught/Ulster, according to SCSI members. There are expectations of even more price increases in Dublin over the next 12 months. The greater majority of chartered surveyors expect the price of second hand rural homes in Dublin to increase over the next 12 months. Three quarters of chartered surveyors expect the price of 4 bed detached bungalows to increase and six in ten expect the prices of 3 bed detached bungalows, 3 bed detached houses and 4 bed detached houses to increase. A separate SCSI/Central Bank survey indicates that residential property prices are expected to increase in Dublin as well as outside Dublin.
Expectations of Price Changes 2nd Hand Rural Homes in Dublin

65% 75% 60% 62%
35% 25%
40%
38%
3 Bed Detached Bungalow Increase
4 Bed Detached Bungalow
3 Bed Detached House
4 Bed Detached House Decrease
Remain Same
Expectations of Y-on-Y change in residential property prices 2013 Q3 - 2014 Q3 (regional): 2013 Q3
Border Dublin National West Midlands MidEast South-East South-West MidWest 0% 20% 40% 60% 80% 100%
Increase
Remain Same
Decrease
Source: Central Bank & SCSI Survey of Chartered Surveyors
6.2: Residential Rental Market

Rental Market
The PRTB / ESRI Rent Index shows rents for private accommodation in the Dublin region continued to increase strongly in the third quarter (July-September) of this year, but outside the capital there was more modest growth. Looking at rents on an annual basis, Dublin rents grew by 6.4%, year on year (Q3 this year versus Q3 last year), but elsewhere rents actually showed a slight decline (0.2%) over the same period.
Experts and chartered surveyors also concur that rental prices are on the increase. Residential rentals have also picked up in city and suburban areas in Munster. The right stock is moving and there is demand for good quality family homes and even a shortage of detached and semi-detached houses Trevor McCarthy, SCSI Rural Professional Group Chair Munster Region According to SCSI members, residential rents in Dublin vary from 878 per month for a 1 bed apartment to over 1,700 per month for a 4 bed semi-detached house. Average rental prices are much lower outside Dublin and vary from 450 per month for a 1 bed apartment to around 800 per month for a 4 bed semi-detached house, approximately half the rental prices charged in Dublin.
The PRTB Rent Index Dublin

110 100 90 80 70 60 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2007
2008
2009
2010
2011
2012
2013
Outside Dublin
Source: PRTB/ESRI
Outside Dublin Houses
Outside Dublin Apartments
Residential Rentals 2013

Dublin Average Rental Price
1 Bed Apartment 2 Bed Apartment 3 Bed Semi-Detached 4 Bed Semi Detached Source: SCSI Survey of Members, Dec 2013.
Rest of Leinster 2013

472 587 711 807
Munster 2013
450 563 659 747
Connaught/Ulster 2013
460 571 628 706
2013
878 1,151 1,424 1,707
SCSI 1Annual Residential Property Review Bed 2 Bed 3 Bed & Outlook 2014 4 Bed 27
Apartment Apartment Semi Semi
Increase
Remain Same
Decrease
Expectations of Supply of Properites for Rent Dublin

20% 51% 44% 29% 10% 46% 8% 48%
Expectations of Rental Prices of Property to Rent Dublin

82% 91% 89% 86%
42% 28% 27%
42%
15%
2%
6%
2 Bed Apartment
9%
2% 2%
9% 5%
4 Bed Semi Decrease
1 Bed Apartment Increase
2 Bed Apartment
3 Bed Semi
4 Bed Semi Decrease
3 Bed Semi
Remain Same
Remain Same
Nine in ten chartered surveyors expect the supply of 3 Expectations of Rental Prices of in Dublin to and 4 bed semi-detached houses for rental either remain the or decrease. Property tosame Rent Dublin The majority also expect this to be the case with 1 and 2 bed apartments. 86% 89% 91% 82% The rental shortage in Dublin is interlinked with the supply and demand for residential property. People who would buy are now renting. Multi-nationals are buying big blocks already on the market so its just a change of landowner rather than adding new supply Simon Stokes, SCSI Residential Professional Group Chair, Dublin
Given the expected lack of supply of rental properties Investment in Residential in Dublin it is not surprising that theMarket vast majority of chartered surveyors expect rental prices to increase 65% 36% 91% over the next further 12 months.45% Almost all chartered surveyors expect the rental price of 2 bed apartments, 3 bed semi-detached houses and 4 bed semi-detached houses will increase over the 55% next 12 months. 42% The residential rental market is a bigger factor now. The population 35% base is changing and some people have no desire to purchase. The major rental websites of Daft.ie and Myhome.ie are showing that the number of properties available for rent has 13% reduced over the year and rents have increased. 7% 9% 2% Ray Hanley, SCSI Valuations Professional Group Dublin Rest of Munster Connaught/ Chair Leinster Ulster
Increase Remain Same Decrease
The phasing-in period of the Housing (Standards for 15% 9%set of Rented Houses) Regulations 2008 9% and a further 6% 5% 2% 2% ended on 312% amended regulations in 2009 January 2013 1 Bedproperties 2 must Bed now meet 3 Bed 4 Bed so rental all the standards. Apartment Apartment Semi Semi Chartered surveyors are saying that this is taking pre 1963 stock out of the rental market putting further Increase Remain Same Decrease pressure on supply. The increased housing standards means that pre -1963 stock has generally been taken out of the system. Additionally no new apartments have been built. Ray Hanley, SCSI Valuations Professional Investment in Residential Market Group Chair 65% 45% 36% 91%
Type of Investor Buying Residential Letting Properties

23% 12% 78% 9% 50% 9% 73%
42% 42% 28 SCSI Annual Residential Property Review & Outlook 2014 28% 27% 15%
2%
6%
2 Bed Apartment
9%
2% 2%
9% 5%
4 Bed Semi Decrease
2 Bed Apartment
3 Bed Semi
4 Bed Semi Decrease
3 Bed Semi
6.3: Residential Investment Market
Remain Same
A recent Sherry Fitzgerald report15 indicates that there has been a notable increase in professional investor activity in the residential market with 232m invested in the multifamily sector of the property market during 2013.
Remain Same
The vast majority of SCSI members agree that investment Expectations of Rental Prices of in the residential market in Dublin has increased, while the Property greater majority say the market remains the same in to Rent Dublin Connaught/Ulster. 86% 89% 91% 82%
Investment in Capital Residential Market The extension of the Gains Tax relief in Budget 2014 was a key driver of further investment in this sector, 65% 45% 36% 91%
Recent SCSI /RED C research on the letting market suggests that tenure is changing and according to the results, just over 1 in 3 Private Renters (36%) strongly agree that they are happy renting and could see themselves 55% renting long-term rather than purchasing a home. 42% There are, however, fears that the high costs and taxes including management 35% charges, income and property taxes, reductions in mortgage interest relief and the costs associated with buy to let may threaten the provision of private rented accommodation in the longer term if it 13% becomes more unattractive for private investors 7% 9%to enter 2% the market.
Dublin
Type of Investor
There has been an increase in demand for residential investment properties, particularly in Dublin from investors seeking to take advantage of lower apartment prices and rising rents. Most of demand for residential investment is coming from buy to let investors and some of the nancial institutions have re-entered the residential investment market 15% 9% providing nance for investors. 9% 6% 2% 2% 2% 5%
1 Bed 2 in Bed 3 Bed An increasing trend 2013 was the number of 4 Bed Apartment Apartment Semi Semi international investors purchasing multi-unit or multifamily investments with almost a quarter of chartered Increase Remain Same Decrease surveyors reporting that large multi-unit investors are active in Dublin.
In relation to rents, there is restoration of the natural order in relation to Same yields John McCartney, Increase Remain Decrease Director of Research, Savills
Rest of Leinster
Munster
Connaught/ Ulster
Investment in Residential Market

91% 65% 45% 36%
Type of Investor Buying Residential Letting Properties

23% 12% 78% 9% 50% 9% 73%
55% 42% 35%
72%
41%
7%
Dublin
13%
2%
18% 9%
Connaught/ Ulster Decrease
5%
Dublin
9%
Rest of Leinster Munster Connaught/ Ulster
Other Dont know
Rest of Leinster
Munster
Increase
Remain Same
Large Multi-Unit Investors
Buy to let Investors
15
Sherry Fitzgerald House Prices increase for the rst time in 7 years 2nd January 2014
Type of Investor Buying Residential
7: Interviews with Regional SCSI Chairs
7.1: Dublin
Simon Stokes SCSI Residential Professional Group Chair
In South Dublin there is a property supply shortage and prices are rising, 15% year on year. Prices fell around 60% from their peak value, however, so recent increases are from a very low base. There is also a shortage of rental property in Dublin because there has been little or no construction in the last 5 years. Also, tax and PRSI changes have discouraged investors. The main barrier to greater supply is price; higher values are needed as many potential sellers are in negative equity and are basically hungover. This is preventing them from moving as prices are still too low relative to 5 years ago. Prices need to rise another 15% to 20% before many people can consider selling.
Another barrier to supply is the lack of construction nance. While the government promised to encourage banks to lend to developers, this has largely been unsuccessful. Demand is strong in Dublin 2, 4, 6 and 8 and some parts of Northside Dublin. There are very few new builds and prices need to rise further to make development attractive. Time will take care of this and in the end, the market will self-correct. The rental shortage is interlinked with the supply and demand for residential property. People who would normally buy are now renting. Additionally there is a shortage of residential investors. Multi-nationals are buying big blocks already on the market so its just a change of landlord rather than adding new supply. We expect further increases in 2014 and look forward to more normal market conditions.
Ray Hanley SCSI Valuations Professional Group Chair
In the Residential market many of the sites which have the benet of planning permission are for high density schemes, while the demand is for lower density housing. Having sufficient zoned land with appropriate planning for houses in Dublin is an issue as the lack of supply of traditional houses has resulted in signicant increases in prices in Dublin.
The residential rental market is a bigger factor now. The population base is changing and some people have no desire to purchase. The major rental websites of Daft.ie and Myhome.ie are showing that the number of properties available for rent has reduced over the year and rents have increased. The increased housing standards means that pre -1963 stock has generally been taken out of the system and not been replaced. Additionally no new apartments have been built. The overall picture is a gradual recovery with increasing employment and low interest rates. However the growth in house prices in certain parts of Dublin is a cause of concern - there needs to be a reasonable supply of family homes in the right locations in order to maintain an appropriate balance in the market place.
7.2: Leinster
Michael Boyd SCSI South East Leinster Region Chair
We are seeing a turn in the market and the Personal Insolvency legislation will free up the market further. In terms of economic growth, people are shrugging off the recession and spending growth is greater. The availability of nance is key, if there is no bank, there is no housing supply. There is a chronic shortage of housing in the South Eastern region.
The market has to rise and builders have to nd ways of reducing cost. The value of land has to be reduced and planning fees and construction costs need to come down, for example, block costs have to be reduced. The cost of producing houses has to be reduced. Local Authorities should change their fee models; they should reduce planning fees in towns where there is demand.
Peter Murtagh SCSI North East Leinster Region Chair
There is an adequate supply of residential property in the North East. The properties with banks and receivers has not been released yet but this will happen in the 2014. Demand will increase but there needs to be some incentive for sales to be completed before year end such as property tax exemptions. There will be increased activity in 2014, primarily in the residential market. However money needs to ow, there needs to be faster lending and quicker decisions and the torture needs to be taken out of the process of lending.
The market is hard work and there is no great recovery in the residential and commercial market in the North East region. In order to get the residential property market moving, quicker decisions need to be made by receivers and bankers, for example, by getting their homework done such as getting title deeds sorted before properties are brought to market. There needs to be a clear out of the glut of property and take a weight off peoples shoulders.
7.3: Munster
Trevor McCarthy SCSI Rural Professional Group Chair Munster Region
Activity is up in Munster in the last 12 months, but a lot of this is focused in the urban areas of Cork and Limerick. In residential property there is the same issue across the province, a shortage of proper stock e.g. 3 bed semi-detached, 4 bed semi-detached and 4/5 bed detached houses.
Demand is strong in the suburban areas of Cork and Limerick and it is starting to improve in the satellite towns but not to the extent of the urban areas. Residential rentals have also picked up in city and suburban areas. The right stock is moving and there is demand for good quality family homes and even a shortage of detached and semi-detached houses.
7.4: Connaught/Ulster
Gerard OToole SCSI Western Regional Branch Chair
At an overall level there is a greater activity within the market with growing levels of condence that the bottom of the market may have been reached in some localised markets. In the stronger locations there is certainly evidence that buyers are more active with increased competition for the better properties. Demand has remained strongest in larger population centres that have good infrastructure, amenities and employment opportunities. Conversely there are large parts of the region particularly in rural locations that has very limited property demand in the last 12 months.
A sizeable proportion of the residential stock is of a poor quality and much of it over priced. Accordingly, there is a lot of stock that is not actively on the market and is simply not attracting interest. There is also an increasing volume of distressed properties being brought to the market in the region and we anticipate that this process is likely to continue in the short to medium term. These properties are attracting price sensitive cash buyers for both owner occupation and increasingly investment. There is an imbalance in the region between supply and demand and a further softening of prices is needed in some locations. While CSO data shows that prices have stabilised throughout the country, they may not have bottomed out in parts of Connaught/Ulster and are unlikely to possibly until next year. In the interim, buyers will continue to seek out the better quality more central located properties, most of whom are buying with cash. I feel a modest recovery is imminent in many locations but this recovery needs to be underpinned by bank lending in the form of home and business loans.
Society of Chartered Surveyors Ireland Regional Structure

Members of the Society of Chartered Surveyors Ireland operate throughout Ireland. The Society has headquarters in Dublin and has four regional branches which are as follows:
Southern Region:
Cork, Kerry, Tipperary, Limerick, Clare
South Eastern Region:

Wicklow, Wexford, Waterford, Carlow, Kildare, Kilkenny, Laois, Offaly
North Eastern Region:

Meath, Westmeath, Louth, Monaghan, Cavan
Western Region:
Galway, Mayo, Roscommon, Longford, Sligo, Leitrim, Donegal
About the Research

This report is based on the views, perceptions and opinions of chartered surveyors and a range of leading experts in the property industry. The SCSI organised an online survey amongst 400 members (chartered surveyors) to determine average sales prices, expectations of price changes and supply issues Amrach Research conducted in-depth interviews with SCSI Chairs to capture their views on the opportunities and challenges in the property market Amrach Research conducted in-depth interviews with leading industry experts to capture their views on the opportunities and challenges in the property market This report includes quantitative results from the SCSI online survey of members. Members were asked to estimate the average sales prices of residential properties in their region based on transactions rather than asking prices. These average sales prices are based on estimates. In some cases the averages are based on very small base sizes e.g. due to the low level of transactions of new build homes, so some averages are indicative rather than denitive. Some percentages may not add up to 100%, this may be due to rounding or the exclusion of dont know responses.
For more information contact: Conor ODonovan Director of Policy & Communications Society of Chartered Surveyors Ireland T: +353 (0)1 644 5500 E: codonovan@scsi.ie
Dating back to 1895, the Society of Chartered Surveyors Ireland is the independent professional body for Chartered Surveyors working and practicing in Ireland. Working in partnership with RICS, the pre-eminent Chartered professional body for the construction, land and property sectors around the world, the Society and RICS act in the public interest: setting and maintaining the highest standards of competence and integrity among the profession; and providing impartial, authoritative advice on key issues for business, society and governments worldwide. Advancing standards in construction, land and property, the Chartered Surveyor professional qualication is the worlds leading qualication when it comes to professional standards. In a world where more and more people, governments, banks and commercial organisations demand greater certainty of professional standards and ethics, attaining the Chartered Surveyor qualication is the recognised mark of property professionalism. Members of the profession are typically employed in the construction, land and property markets through private practice, in central and local government, in state agencies, in academic institutions, in business organisations and in non-governmental organisations. Members services are diverse and can include offering strategic advice on the economics, valuation, law, technology, nance and management in all aspects of the construction, land and property industry. All aspects of the profession, from education through to qualication and the continuing maintenance of the highest professional standards are regulated and overseen through the partnership of the Society of Chartered Surveyors Ireland and RICS, in the public interest. This valuable partnership with RICS enables access to a worldwide network of research, experience and advice.
Society of Chartered Surveyors Ireland 38 Merrion Square Dublin 2, Ireland T: +353 (0)1 644 5500 E: info@scsi.ie
www.scsi.ie

Scsi Residentialpropertyreview 2014

Transféré par

Informations du document

Titre original

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

Scsi Residentialpropertyreview 2014

Transféré par

Droits d'auteur :

Formats disponibles

Annual Residential Property Review & Outlook 2014

iv SCSI Annual Residential Property Review & Outlook 2014

SCSI Annual Residential Property Review & Outlook 2014 1

2 SCSI Annual Residential Property Review & Outlook 2014

Dermot OLeary Chief Economist, Goodbody Stockbrokers

SCSI Annual Residential Property Review & Outlook 2014 3

Simon Stokes SCSI Residential Professional Group Chair

4 SCSI Annual Residential Property Review & Outlook 2014

2: Key Results Summary

Chartered Surveyors said that volume of Residential Sales have increased

SCSI Annual Residential Property Review & Outlook 2014 5

Composition of Finance is Changing

Residential Property Prices have turned a corner

Changes in Residential Investment

6 SCSI Annual Residential Property Review & Outlook 2014

3: Key Opportunities & Challenges Affecting the Property Market Summary

DEMAND VERSUS SUPPLY CONSUMER CONFIDENCE

OPPORTUNITIES TO MEET DEMAND

SCSI Annual Residential Property Review & Outlook 2014 7

Outlook 2014 Summary

6.2: Urban Homes

8 SCSI Annual Residential Property Review & Outlook 2014

SCSI Annual Residential Property Review & Outlook 2014 9

5: Key Opportunities & Challenges Affecting the Property Market

10 SCSI Annual Residential Property Review & Outlook 2014

5: Key Opportunities & Challenges Affecting the Property Market

5.1: Consumer Condence

The Economic Recovery Index

SCSI Annual Residential Property Review & Outlook 2014 11

ESRI December 2013

Likelihood to Buy a Property in Next 12 Months

Non Home Owners

ESRI Quarterly Economic Commentary, Winter 2013

12 SCSI Annual Residential Property Review & Outlook 2014

5.2: Demand versus Supply

Factors that will Impact Demand

ESRI Medium Term Review Daft.ie House Price Report 2013 Q4

SCSI Annual Residential Property Review & Outlook 2014 13

Demand Outside Dublin

Expected Demand in Residential Market

14 SCSI Annual Residential Property Review & Outlook 2014

Source: Department of Enviroment, Community & Local Government

SCSI Annual Residential Property Review & Outlook 2014 15

Expectations of Supply of SECOND HAND Urban Homes Dublin

32% 23% 18% 4%

Source: SCSI Survey of Members, Dec 2013.

Supply Expectations and Opportunities

Supply of SECOND HAND Rural Homes Dublin

58% 50% 50% 53% 50%

Source: SCSI Survey of Members, Dec 2013.

Supply of SECOND HAND Rural Homes Dublin

58% 50% 50% 53% 50% 50%

Source: SCSI Survey of Members, Dec 2013.

Expert Views on Supply Solutions

Expectations of New Rural Homes Dublin

Source: SCSI Survey of Members, Dec 2013.

SCSI Annual Residential Property Review & Outlook 2014 17

Release of Existing Stock

18 SCSI Annual Residential Property 13% Review & Outlook 2014 7% 9%

Connaught/ Ulster Decrease

Large Multi-Unit Investors

Buy to let Investors

5.3: Availability of Finance