After a
number of false dawns in 2012 and 2013 the property market improved
significantly in 2014, much to the relief of everybody involved in the
industry. The number of property transactions improved markedly over previous
years, albeit from a low base, and agents found that properties that had been
on the market for a number of years were suddenly getting offers. The second
half of 2014 was particularly good as investors tried to secure deals before
the expiration of the Capital Gains Tax incentive and many first time buyers acquired
houses before the imposition of new deposit requirements.
Going
forward, in the short to medium term, it is clear now that a lack of supply,
which has been a problem in Dublin for a couple of years, is now a significant
problem in Waterford city and county.
The ‘run’ on houses in the second half of 2014 has resulted in agents’
overhang of stock from the dark days of 2009 to 2012 being cleared. The lack of
new houses coming on the market is due to a number of reasons such as negative
equity and the requirement for second time buyers to have a 20% deposit. Also a
lack of supply accentuates the supply problem itself because if owners don’t
see a house that that want to trade up or down to then they won’t put their own
house on the market.
One way
to solve the problem is to get builders building again. With many solvent
builders in operation, more finance on offer and cheap development land
available why are we not seeing housing developments under construction? The
simple answer is that it’s just not viable to build at the moment. Whilst
prices increased in Waterford last year the rate of price growth in the medium
term will probably not be sufficient to get builders building. What is required
is a reduction in the cost of building. It’s estimated that almost 45% of the
cost of a new home goes in taxes. These taxes include VAT on the sale price of
13.5%, development contributions to the local authority and the cost of Part 5
(Social and Affordable Housing). In addition, the new building regulations that
came into force last year are estimated to add up to €18,000 to the cost of
building a house. All these costs are ultimately passed on to the buyer, the
consequence of which is that the price that a builder would have to set for a
new house is unaffordable.
When the
Government talk about strategies at solving the housing shortage, the reality
is they don’t have to look too far to find the solution.
Barry Herterich BA MIPAV REV
Barry Herterich BA MIPAV REV
