As property prices show glimmers of recovery, a national plan is needed for sustainable growth
EVIDENCE THAT Ireland’s residential property market is turning a corner is slowly beginning to emerge. Agents report an upturn in activity and the latest Central Statistics Office figures for May, released earlier this week, showed the first monthly rise in house prices since 2007.
Recently published census figures show a doubling in five years of the number of households living in private rented accommodation, from 145,000 in 2006 to 305,000 in 2011. This suggests a significant level of pent-up demand for family homes which will inevitably put further pressure on prices.
Another interesting figure, not captured in official data, is the level of cash purchasing taking place in the market.
In Dublin, agents suggest cash accounts for up to 40 per cent of purchases; regionally the figure is slightly lower but still significant.
What the industry now requires is a national property strategy: a coherent, medium- to long-term plan for the sector that would ensure we meet current and future needs without getting back to the unsustainable and economically dangerous levels of activity seen in the past decade.
An appropriate policy framework from Government, with input from the various professionals across the industry, would provide the required road map by which measured recovery could happen.
We have seen the devastating results of an unplanned, unfettered approach to property and it will take a number of years to resolve the legacy issues created by the boom. However, while tackling the aftermath of past mistakes we must also plan for the future because, believe it or not, we probably need more property and we need it within a reasonably short time frame.
There is a widely held view that Ireland has a vast oversupply of stock that will take many years to fill. However, while there is vacant stock throughout the country, some of which may never be used, we are seeing shortages of appropriate housing supply in certain urban centres and, on the commercial front, we are fast running out of the large modern office buildings that indigenous and multinational companies require.
These problems should be addressed before we reach a crunch, but first we need to agree exactly how much stock we have, where it is, whether it is suited to future needs and how it is priced.
We cannot continue to argue conflicting and sometimes baseless opinions on the numbers. Only a rigorous data collection exercise will put to bed the somewhat unhelpful debate about vacancy rates and price trends. Until we get the numbers right we will not be able to take a strategic approach to property that veers away from the speculative activity of the past. We will also struggle to encourage buyers and investors back on to the pitch.
Property is neither portable nor homogenous and we should be careful about making broad-brush assertions about oversupply that conceal niche shortages in the overall picture. We cannot ignore the build-up of demand in certain areas in the vain hope that redundant or poorly located stock will meet our pressing needs.
We must also keep an eye on critical infrastructure requirements and property needs in the areas of health and education.
A national property strategy based on sound data and projections would ensure we put the appropriate policy framework in place to allow the industry achieve a more robust and sustainable future scale. It would also support short-term normalisation of activity in the marketplace by introducing the level of confidence and certainty that buyers and investors seek.
A comprehensive strategy would set out future needs based on robust demographic and growth projections; set an appropriate regulatory and planning framework around development and construction, bearing cost elements in mind; address the need for new investment vehicles such as real estate investment trusts and other proven mechanisms to channel international and institutional investment into the sector; and ensure industry capacity and professionalism are retained and enhanced so we deliver quality product and service in future.
All of this would sit within a wider Government approach to relevant banking issues and the introduction of a suitable property tax regime.
Finally, of course, a property strategy would clarify the critical role of Nama in the market.
We haven’t had such a strategy before. We really need one now.
There is no identified Government champion for property. No single department takes ownership of the sector, with functions spread across disparate departments and agencies. This makes it difficult to shape an approach to property that meets Ireland’s genuine economic and social needs.
As it strives to expedite recovery and deliver economic growth, the Department of Finance may be just the place in which to shape a business plan for property. The industry will support with relevant data and expertise.
Finola McDonnell is director of Property Industry Ireland