Real Estate has been saved
As we move through 2019, the key real estate talking point remains the ongoing crisis in the housing market.
We believe that any measures announced in Budget 2020 should support the viability of housing delivery to ensure an increase in the supply of all tenures; owner-occupation, rental and social, to facilitate housing that is accessible to all, that is affordable and sustainable.
Over the last few years and now in the final run up to Brexit, we have seen the detrimental effect that uncertainty can have on markets and for business. While we can be assured that Government is determined and will take all possible steps to alleviate the negative economic impacts, uncertainty around when and what form Brexit will take is having serious implications for businesses. The same can be said for the property market about uncertainty, and the same level of determination from Government is needed to allow the market to respond and contribute to solving the Housing crisis.
This certainty is particularly important for investment decisions given the long lead-in time for development. Viability remains a challenge in many locations, and this is a challenge to providing homes at an affordable price. We believe that the Minister should announce in his Budget speech the long-term commitment to policies which support housing delivery.
The main driver of demand in Dublin in particular, at present, is large scale institutional buyers who own rental residential units (“PRS”) throughout Europe and the world and these buyers see the market as evolving with reasonable yields on rental units. There have been rumours that a higher rate of stamp duty might be targeted at such buyers. If this were to happen, most experts believe it would deter investment and given all are agreed that the main level of activity we are seeing is in this sector, then one “to do” is not to change stamp rates for the foreseeable future.
In terms of viability, the cost of both land and building are making a lot of schemes unviable. Whilst a VAT decrease has been tabled in the past, it hasn’t been well received. However, changes will have to happen as it will take many years for the market to deliver the housing needed without some form of assistance through the tax system.
There are many smaller landlords in Ireland who in past years became landlords almost by default. Once prices began to correct, many of these landlords have sold up with a view to paying back debt and have exited the market. High personal tax rates don’t make it easy to remain so many have to consider exiting to minimise risk. The statistics show a significant shift in this cohort of landlord. We need to encourage such investors back to the market and a lower rate of tax should be considered to do this. The reality is that the fund investors and the Real Estate Investment Trusts (“REIT’s”) have an effective 20% rate so why not match that for those in the population who can afford to help rebuild and rehouse our fellow citizens. It would be a fair measure.
In terms of skills and labour, full employment makes it even more difficult to deliver the housing needed. A suggestion would be to introduce tax measures to encourage more apprenticeships and perhaps a short-term measure of funding of vocational or third-level courses in a property-related discipline to facilitate lower fees/greater grants for students undertaking these courses to address the critical shortfall in skills. There is a shortage of tradesmen and other professionals that we need to correct.
Another consideration would be the Introduction of a returning home moving expenses allowance (to partly offset costs of moving home) for Irish nationals returning to Ireland and working in a construction industry sector where there is a skills shortage.
Given representations by various industry bodies over the past couple of years , a limited amount of intervention has happened so given the demands this year it would be surprising to see significant changes. A final to do would be to announce in advance of the Budget 2020, the retention of the Help-to-Buy scheme which has successfully helped first time buyers invest in their future. This needs to be extended as it is working successfully.