Surveyors in Ireland expect residential property prices and rents to increase by 8% in 2018 with expectations up across the country.
Some 92% of chartered surveyors say sellers’ price expectations have increased, up from 86% in 2016, according to the annual property review from the Society of Chartered Surveyors Ireland (SCSI).
The survey predicts that despite the introduction of rental caps in Dublin and Cork, residential rents will rise on average by 8% nationally. Most surveyors believe the rental market is in crisis and that the rental cap has forced a significant number of landlords to exit the market.
Chartered surveyors in the Leinster region, excluding Dublin, anticipate the greatest increases across all housing unit types with an increase of 10% projected for two bed apartments and a rise of 9% forecast for three bed semis.
The report also shows that 71% said market activity increased during 2017, up from 60% the previous year. While it’s expected that the price of most properties types will increase by 8%, this year, surveyors believe the price of larger homes will rise at a slightly slower rate of 6 or 7%.
John O’Sullivan from the SCSI’s Residential Agency Group said that while the forecast of 8% was probably on the conservative side compared to other predictions, the figure was still too high and not sustainable in the long term. He suggested that until the supply situation was addressed, competition among buyers, a rising population and continuing economic growth would ensure price increases continued.
‘Surveyors around the country are hugely concerned at the low level of affordable housing which is being constructed for middle income earners. Many believe this is because it is simply not economically viable to build affordable new homes in urban areas, where demand is highest. While surveyors outside Dublin believe the Help to Buy scheme is boosting supply by encouraging housing construction, those in Dublin believe it has had less of an impact,’ he explained.
‘One of the main contributors to the cost of new housing, is the rising price of development land. Our report found the price of residential development land increased by 14% nationally in 2017 and predicts it will increase by a further 11% this year. A 25% increase in two years is simply not sustainable and one has to ask in light of that rate of increase if the changes made to the vacant site levy tax in the Budget will be sufficient,’ he pointed out.
‘As well as measures aimed at lowering site costs and building good quality higher density housing at scale in the right locations, the SCSI recommends a reform of the VAT regime and other public costs to encourage the construction of affordable housing,’ O’Sullivan added.
Surveyors believe the Government’s decision to introduce rental cap measures in certain parts of the country has encouraged a significant number of private landlords to exit the rental market and sell their property assets. While many consider this to have influenced the supply of second-hand properties in the market, there is also consensus that the measure has negatively impacted the supply of rental properties with half of Chartered Surveyors reporting a reduction in the number of landlord instructions to let residential property in 2017.
Despite the introduction of rent caps limiting increases to 4% per year for more than 50% of the private rented sector, chartered surveyors expect rents to increase beyond this level in all areas. The 4% cap does not apply to new tenancies or landlords who carry out a major refurbishment of their property.
Nationally, chartered surveyors consider that there will be a significant lack of rental properties of all sizes in 2018, with 81% experiencing an increase in rental demand by tenants in the last 12 months.
O’Sullivan said the rental crisis which is having such an adverse effect on tenants and landlords is also inhibiting business opportunities and job creation. ‘When the rent cap was introduced we warned that it would have a negative impact on the supply of rental properties and that has come to pass,’ he explained.
‘We estimate that for every three landlords who are selling their buy to let property in Dublin only one new landlord is entering the market. Two thirds of private landlords own just one property and increasingly they seem to be of the view that it’s simply more hassle than its worth. Whether it’s due to the rent cap, complex regulations, a punitive tax regime, or a combination of all three, they are voting with their feet,’ he added.
He also pointed out that while the cap may have had some success in moderating the level of rent inflation the departure of so many landlords ensures rents will remain high. ‘Those high rents are exacerbating tenants’ financial situations and their ability to save the large deposits now required to purchase their own home,’ he said.
‘In the absence of a coordinated programme to encourage landlords to remain in the sector or to facilitate Build to Rent schemes a negative outlook for residential tenants will persist into the future. This is clearly becoming a pressure point for businesses here while also having serious consequences for foreign direct investment,’ O’Sullivan concluded.
