The report from the Society of Chartered Surveyors Ireland (SCSI) predicts that the biggest prices rises are likely to be outside of Dublin with the Leinster region named as the location likely to be the hottest in 2017.
The price of three bed semi-detached houses, the most popular house type in the country, is predicted to rise by an average of 9.4% nationally with the greatest increases across all housing unit types likely to be 11% for one and two bed apartments.
The survey predicts that residential rents will rise on average by between 8 to 10% outside of the rent control areas of the four local authority areas of the Dublin Region and Cork City Council area.
Annual rent increases are capped at 4% in these designated zones. The Government is reported to be planning to extend these zones to 20 more towns.
A lack of supply, public policy and projected economic growth may continue to inflate house prices, according to Ronan O’Hara, chair of the SCSI’s residential agency group, but he warned that the latter could not be taken for granted given the uncertainty caused by the UK’s decision to leave the European Union.
Indeed, 78% of surveyors outside Dublin believe Brexit will have a negative impact on Ireland’s economic growth and 50% in Dublin also doing so while 36% of surveyors across the country believe that Brexit has already had a negative impact on property activity market levels.
O’Hara believes that the figure show that there is uncertainty for the coming year. ‘The drop in Sterling has reduced the buying power of people looking to move here,’ he said.
However, he pointed out that the changes which the Central Bank made to its lending rules and the introduction of the Help to buy scheme are likely to contribute to an increase in activity in the short to medium term.
Some 80% of surveyors said that Help to will lead to price increases in the coming year. ‘While this is good news for vendors, struggling first time buyers will be disheartened. While rising prices will probably encourage more builders to start building houses it really is up to Government to tackle some of the underlying issues, including high construction costs, and to make housing more affordable,’ said O’Hara.
The report anticipates continued and strong rental price growth over the coming 12 months across all regions, fuelled by a sustained demand combined with a continuing housing shortage particularly in and around the regional cities.
Overall the greatest increases are forecast for both two and three bed apartments and townhouses at over 10%. The survey took place before the new restriction on rent increases were announced so while increases of over 11.5% were predicted for two and three bed units in Dublin, these will clearly not be happening now.
O’Hara said that while the proposals to extend the designated pressure zones to 20 more towns might be well intentioned they were also short sighted and in the survey the introduction of permanent rent control measures was ranked as the highest negative measure that will impact upon the supply in the rental market.
‘If this goes ahead it will discourage landlord investment in the rental market. Similarly anyone involved in buy to let properties will exit the market and it’s likely a lot of owner occupiers will purchase them. That might be good news for them but not for those renting as rents will continue to rise. The Government may be putting out one fire, but they are simply starting another,’ he added.
According to the report the estimated figure for new builds at the end of 2016 will be 14,800 which falls significantly short of the 20,000 to 30,000 required. O’Hara said that while demand for housing is greatest in Dublin the fact that commencements outside the capital are running three times higher is a concern.
‘This is a huge issue for first time buyers hoping to get on the property ladder. But given the concerns raised by our members over Brexit, it is also a huge issue for the country as a whole,’ O’Hara explained.
He added that the SCSI is urging the Government to cut the Vat rate on new houses. ‘It has worked for the hospitality sector, it would also work for the construction and property market,’ he said.
