Thursday 23 May 2019

Paul Melia: In 2016, it appears only the wealthy can afford to buy a home

Dublin's house building shortfall
Dublin's house building shortfall

Paul Melia

key to the operation of any well-functioning property market is its ability to deliver homes when needed. Back in 2010, around one in four homes sold were new builds. Today, that's reduced by half, with figures from the Property Price Register showing that just 12.8pc of all properties trading hands last year were new.

The lack of supply presents an enormous societal problem. The shortage of properties is fuelling price hikes, while Central Bank lending rules restrict the ability of people to borrow to meet those soaring costs.

But there is no shortage of planning permissions in place. So why aren't homes being built?

The high cost of building, coupled with a lack of bank finance, is a large part of the problem. While the market has responded to demand, it appears only a select group is being catered for.

The Property Price Register shows that last year, 15,283 properties traded hands in Dublin, of which 2,158 were new-build. Hundreds were bought in 'bulk buys' by investors, leaving around 1,500 or so which were likely sold on the open market.

A home costing up to €300,000 in Dublin is considered 'affordable', but almost 800 of the 1,500 offered for sale were above this figure. That suggests there is little being built for first-time buyers.

While Nama plans to address the shortfall at the lower end of the market over the next five years, it has largely focused on financing homes it knows will sell - hardly surprising, given its commercial remit.

As one well-placed source noted, only at the upper end are homes being built, where buyers are not concerned about lending restrictions. Banks know these expensive properties will sell, and so provide finance.

There's a very stark message here - people holding down relatively well-paid jobs haven't a hope of buying a home any time soon.

While some measures have been taken by the Government to reduce prices, including a rebate of development levies and finally a review of building costs here compared with our neighbours, it has to address the State's tax take on new homes.

The Society of Chartered Surveyors says, excluding land, it costs around €130,000 to build a three-bed home, of which some €18,000 is made up of VAT.

While there's an argument that cutting VAT could add to costs, presumably the great minds within the Department of Finance could target such a tax break, and limit it to a defined period of time and direct it to homebuyers.

A home is more than just bricks and mortar. But right now, it appears that only the wealthy are entitled to one.

Irish Independent

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