Investors continue to leave rental market
A period of high price inflation appears to be drawing to a close and the property market looks set for a period of price stabilisation as we head into a new decade.
That’s according to the Society of Chartered Surveyors Ireland (SCSI) whose members believe Munster property prices will rise by three per cent in 2020 while rents are expected to rise by five per cent. Chartered agents and auctioneers in the province say the price stabilisation is being driven by more realistic price expectations, affordability constraints and increased supply in some urban areas.
Agents working in the Munster region reported that 2019 was stable with increased activity in the first half of the year but that there was a significant decline in both instructions and transactions in the second half.
This reflected a pattern seen in other regions and was caused by a reduction in consumer sentiment, uncertainty about interest rates and other macroeconomic policies as well as the unavailability of bank discretions about mortgages. Going forward, agents said the Munster market would be dominated by those wanting or needing to trade up and while it was expected that there will be an increased supply of apartments in Cork and other urban areas, there would continue to be a shortage of new homes, particularly in rural areas where new developments are not yet financially viable.
The President of the SCSI, Johanna Gill said the move towards more realistic pricing was to be welcomed.
She said: “The double-digit price inflation we saw in recent years was not sustainable and a return to a more stable market with modest price increases will enable buyers and sellers to plan for the future with more certainty.
“While we knew Brexit had an effect on the market, the extent to which it undermined consumer confidence around the country did come as something of a surprise. From Donegal to Cork and from Dublin to Galway our members said Brexit and the uncertainty it caused played a greater role than any other issue in shaping the residential property market in 2019.”
“While we may need to temper our expectations about when a new trading arrangement between the UK and EU is announced, our members believe the greater clarity around Brexit has already led to a renewal of confidence.”
Rental market
According to the report, rents are set to increase by five per cent in Munster. 64 per cent of Munster agents reported an increase in demand for accommodation from tenants, but only 17 per cent received an increased volume of instructions from landlords.
Indeed, 54 per cent of Munster agents experienced reduced instructions from landlords during the year. Several agents described the shortage of properties to rent in Cork as acute, particularly in the student housing sector.
Nationally, chartered agents consider that there will be a significant lack of rental properties of all sizes in 2020, with 58 per cent of respondents experiencing an increase in rental demand by tenants in the last 12 months. Only nine per cent saw a reduction while 33 per cent said there had been no change.
According to the report, the greatest mismatch between supply and demand for housing will be in the private rented sector.
Agents say 30 per cent of sales are from investors selling rental properties while this group only accounts for 15 per cent of purchasers. Johanna Gill said the fact that twice as many landlords were exiting the rental market as entering was worrying.
“While the cap may have had some success in moderating the level of rent inflation, the departure of so many landlords due to the cap and increased regulation ensures rents will remain high. The move away from individual to institutional landlords is driving the long-term rental sector. In light of the limited supply, the impact this trend will have on the market needs to be monitored so as to ensure there is an adequate mix of property types on the market,” she said.
Conveyancing delays
According to the findings, the average time for a home sale to close is five and a half months. Agents expressed concern about the continued existence of paper-based conveyances. The society said this is an issue which needs to be addressed urgently, and it is keen to engage with the various stakeholders on this matter to help find a solution.
“It is totally unreasonable in this day and age that the sale of a home is taking this long to complete. We all know that time delays and drawn out practices are not good for either side in the transaction and can lead to increased costs. This is a further and unnecessary burden for buyers and sellers which needs to be resolved urgently,” said Ms Gill.
The SCSI’s Annual Residential Property Review and Outlook Report 2020 is available at scsi.ie.