LAST WEEK, WE heard from economist Ronan Lyons on the key trends that emerged from the property market in 2016. (TLDR: it wasn’t good.) Today we’re looking to the coming year. We asked Lyons for his take on what we can expect in the housing market in 2017… and what this might mean for those of us trying to buy or rent a place to lay our heads. Here are the key trends he predicts:
This year, we’ll start to see the effects of the changes introduced by the Government during the autumn – namely the relaxation of deposit rules for mortgages and the first-time buyers grant. But Lyons isn’t optimistic about this. “We will see a bit of an upswing in house prices as a result of the change,” he says. “This gives more ammunition to first-time buyers, and not in a good way.” So what sort of scale is he predicting? “Maybe a 2017 increase of about 10 to 15 per cent in that first-time buyers bracket, in the Dublin area. Bearing in mind that Dublin has seen almost no increase in two years.”
But it’s not all bad news. Lyons expects more focused efforts from the Government to address the housing crisis in 2017. We now have a titled Minister for Housing for the first time in the history of the State, he notes, adding that the effect of this is already evident:
There’s a lot of activity now in the property department specifically on housing. There are new people being brought in, new expertise. So I’m a little bit more optimistic about the future.
Possible initiatives? The rollout of the rental strategy, and more effort to encourage local authorities to use the land under their control to serve the population. Oh, and also…
It’s one of the most common questions raised about the housing crisis: But what about all the homes that are lying empty? And it’s not without foundation, according to Lyons at least. “If we could lower the vacancy rate by another two points, that’s another 40,000 homes into the system,” he says. “That’s about two or three years’ supply.” Tweaks to the property tax, he says, could encourage owners of unused properties to move more quickly in putting them into use: “There could for example be a greater tax for owning a property and not using it. I’m not saying that’s coming down the tracks, but I think we’re moving in that direction.” He also predicts measures “at some point next year” to help with renovations of existing houses.
If there’s somewhere that needs doing up, that costs a lot of money – so perhaps there is a fund that you can borrow from at low interest rates, to do it up. And the quid pro quo is that you are doing it up to rent it out.
While the housing crisis gathers pace, commercial property is booming. “There’s something like half a million square metres being built in Dublin, with another half a million ready to be built if there is demand,” Lyons says.
That’s great, it shows that the problems affecting the residential side are not affecting the commercial side. Which makes it even more of a puzzle in a way.
But – and did you see this coming? – there’s a catch. Every square metre of office space requires about three of residential. “So adding a million square metres of office space will need, roughly speaking, three million of residential – that’s about 30,000 homes.”
Back to square one.
This is a longer-term measure that has actually already been announced: Simon Coveney told the Dáil in November that an audit of construction costs was on the way. The results are due to arrive early in 2017 – and should tell us, says Lyons, why building homes costs more here than it does in other high-income countries.
He has an opinion on this: “I think it’s a lack of innovation and competition in the sector.” But also notes that it may simply be more expensive to import materials here.
There is also a note of caution: even it is possible to address the high cost of construction, Lyons believes it would take “two to three years” for this to filter through in the supply of new homes.
- With reporting by Edel Corrigan
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