The challenges of inadequate Housing Supply - Marian Finnegan, Chief Economist 24th May 2016 - Housing Agency
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The challenges of inadequate Housing Supply……… Marian Finnegan, Chief Economist 24th May 2016
A FUNCTIONING HOUSING MARKET?
People Economy
Property
Politics
2
ECONOMY… AN OVERVIEW
% Change 2011 2012 2013 2014 2015 2016f 2017f 2018f
Real GNP -0.8% 1.6% 4.6% 6.9% 5.7% 3.9% 3.2% 2.7%
Real GDP 2.6% 0.2% 1.4% 5.2% 7.8% 4.3% 3.5% 3.2%
Exports 2.1% 2.1% 2.5% 12.1% 13.8% 6.9% 4.9% 4.7%
Investment 3.2% 8.6% -6.6% 14.3% 28.2% 12.5% 8.9% 4.8%
Consumption -0.7% -0.8% -0.3% 2.0% 3.5% 3.5% 2.0% 1.8%
Unemployment
14.7% 14.7% 13.1% 11.3% 9.5% 8.3% 7.7% 7.2%
Rate
Consumer Prices 2.6% 1.7% 0.5% 0.2% -0.3% 1.2% 1.5% 1.7%
Source: Department of FinanceFUTURE DEMANDS
Demographic Projections
Population estimates for 2015: 4.64 Million
Year Population
2011 4.58 million
2016 4.69 million
2021 4.88 million
2026 5.04 million
4
Source: CSO/Sherry FitzGerald Research 4FUTURE DEMANDS
DEMOGRAPHIC PROJECTIONS
Housing Demand* Housing Demand
Year Ireland Dublin
2012-16 22,500 6,300
2016-21 33,500 11,700
2021-26 34,500 10,100
Average PA 30,000 9,700
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Source: Sherry FitzGerald Research * Ireland data includes Dublin 5CENTRAL BANK…
Loan to Value (LTV) for Loan to Value (LTV) for Buy Loan to Income (LTI) for
principal dwelling houses to Let mortgages (BTLs) PDH mortgages
(PDH) • BTL mortgages are subject to a limit • PDH mortgage loans are subject to
of 70 per cent LTV. a limit of 3.5 times loan to gross
• PDH mortgages for non-first time income.
buyers are subject to a limit of 80 • This limit can only be exceeded by
per cent LTV. no more than 10 per cent of the • This limit should not be exceeded
euro value of all housing loans for by more than 20 per cent of the
• For first time buyers of properties non PDH purposes during an euro value of all housing loans for
valued up to €220,000, a annual period. PDH purposes during an annual
maximum LTV of 90 per cent will period.
apply.
• For first time buyers of properties
over €220,000 a 90 per cent limit
will apply on the first €220,000
value of a property and an 80 per
cent limit will apply on any excess
value over this amount.
The cumulative monetary value of
loans for principal dwelling purposes
which breach either of these limits
should not exceed 15 per cent of the
euro value of all PDH loans on an
annual basis.
6RENT CERTAINTY…
Supply Side Reforms
• Increase rent reviews to once every two years;
• Increase notice of termination periods;
• Landlords must justify rent increases by reference to comparable market
data;
• Increase powers of PRTB as market regulator;
• Increase Mortgage Interest Relief from 75% to 100% for landlords, who rent
to tenants receiving housing benefit for a minimum of three years; and
• Increases in housing assistance payments of 50% over current rent
supplement in Dublin
Measures on supply
• New national apartment design standards enforceable by the Minister for
Environment to eliminate inconsistencies across planning authorities. New
apartment guidelines to be published in December
• Rebate on development levies charged by local authorities for developments
over 50 units and priced at under €300,000 per unit in Dublin and €250,000
in Cork
7Residential
MARKET ACTIVITY
44,700 Residential units transacted in 2015, excluding multi-family
9
Source: PPR/Sherry FitzGerald Research 9TRANSACTION ACTIVITY – UK
Sold vs. Private Stock
UK England
2013 4.7% 4.8%
2014 5.3% 5.4%
2015 n/a 5.4%
Source: GOV.UK
10HOUSING COMPLETIONS
1973 to 2015*
Completions up 15% in 2015
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
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Source: DoECLG 11COMPLETIONS IN EU COUNTRIES, 2014
Per 1,000 population
Average 2.2 completions per 1,000 population *
6.0
5.0
4.0
Ireland 2.4
3.0
2.0
1.0
0.0
Source: Eurostat, European Mortgage Federation
*For EU countries that data is available for
12-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Leitrim
Longford
Cavan
Carlow
Kildare
Wexford
Waterford
Mayo
Wicklow
Monaghan
Donegal
Roscommon
COMPLETIONS IN IRELAND, 2015
Kerry
Louth
Clare
Galway
Cork
Meath
Source:DoECLG, CSO
Offaly
Sligo
Limerick
Westmeath
Tipperary
Dublin
Dublin 2.3
Laois
Kilkenny
13-
10.0
20.0
30.0
40.0
50.0
60.0
Leitrim
Tipperary
Cavan
Longford
Sligo
Laois
Roscommon
Donegal
Kerry
Carlow
Kildare
Wexford
COMPLETIONS IN IRELAND, 2006
Monaghan
Galway
Mayo
Clare
Meath
Waterford
Source:DoECLG, CSO
Westmeath
Louth
Kilkenny
Cork
COMPARISON Ireland average 21.9 completions per 1,000 population
Dublin
Limerick
Dublin 16.4
Wicklow
Offaly
14Supply-Side Obstacles
COUNTY BY COUNTY ANALYSIS –
SECOND HAND PRIVATE STOCK JANUARY 2016
16
Source: Sherry FitzGerald Research 16MARKET CONCERNS;
Working Planning
Capital Process
SUPPLY
End User Infrastructure
Demand
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17MARKET CONCERNS;
Working Planning
Capital Process
SUPPLY
End User Infrastructure
Infrastructure
Demand
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18MORTGAGE DRAWDOWNS
2006 - 2015
24,105 mortgages with a value of €4.9 billion drawn down in 2015.
Cash buyers account for 46% of market
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Source: Banking Payments Federation Ireland 19MORTGAGE DRAWDOWNS
2006 - 2015
24,105 mortgages with a value of €4.9 billion drawn down in 2015.
Cash buyers account for 46% of market
Market need for a
€8-10 billion
Market
20
Source: Banking Payments Federation Ireland 20PROFILE OF PURCHASERS
Q1 2016
Ireland Dublin
Owner Occupation 70% 76%
Investment 19% 16%
Additional Residence 9% 7%
Development 1% 1%
19%
of Purchasers were Investors in Ireland
Source: Sherry FitzGerald Research
21End-User Demand
• Availability of Mortgages
– First time buyers
– Investors
• Cost of holding Investment property
– Mortgage Interest Relief
– USC/PSRI
– CGT?
• Decision on wider implications of current policy
– Impact of Macro – prudential policy on supply
22
22Other Measures
• Planning process;
– Perception that there is a greater emphasis on obstacles
– Motivated to support viable development
– Emergency policy to fast-track viable developments
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23Thank you
Any questions?
Marian Finnegan
Chief Economist,
Sherry FitzGerald Group
marian.finnegan@sherryfitz.ie
Marian Finnegan
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24CAVEATS
This report should not be relied upon as a basis for entering transactions without seeking specific, qualified, professional
advice. It is intended as a general guide only. This report has been prepared on the basis of publicly available information,
internally developed data and other sources believed to be reliable. While reasonable care has been taken in the preparation
of the report, neither Sherry FitzGerald / DTZ Sherry FitzGerald nor any of directors, employees or affiliates guarantees the
accuracy or completeness of the information contained in the report. Any opinion expressed (including estimates and
forecasts) may be subject to change without notice. No warranty or representation, express or implied, is or will be provided
by Sherry FitzGerald/ DTZ Sherry FitzGerald, its directors, employees or affiliates, all of whom expressly disclaim any and all
liability for the contents of, or omissions from, this document, the information or opinions on which it is based. Information
contained in this report should not, in whole or part, be published, reproduced or referred to without prior approval. Any such
reproduction should be credited to Sherry FitzGerald/ DTZ Sherry FitzGerald.
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