Budget 2018

(AKA: The weekend after the week before, a national economic hangover…)

 

As expected, the broadsheets are packed with budget analysis and post-mortems. Some of the main criticisms are that the numbers simply don’t add up and that there is an over reliance on potential tax take from new initiatives such as the trebling of stamp duty on commercial property deals  and other non-property related initiatives.

 

One example of this is the forecast yield of €376 million from the stamp duty bump. This is based on the Department of Finance assuming a €9.4 billion trade of commercial property for 2018,  however, Savills Ireland has forecast activity in the sector is likely to be just a quarter of that in reality.

 

The front page of the Sunday Business Post today carries the headline ‘Taxman on the prowl as developers eye stamp duty loophole’.

 

While stamp duty for the commercial property sector had been expected to rise, having been reduced from 9% in the early days of the crash,  it certainly had not been expected to treble with immediate effect. Gavin Daly writes about an Irish property group chief who received a call from a fund manager in London in the early hours of Wednesday morning looking for an explanation for this unexpectedly aggressive move.

 

Johnny Ronan is quoted as referring to the stamp duty hike as an “unwelcome and unwise” decision.

 

Hugh O’Connell writing in the Sunday Business Post today sums it up as follows “Murphy’s social housing version looks no different from Coveney’s: He likes rolling up his sleeves in public and making announcements to the media, but Eoghan Murphy is no closer to solving the housing crisis than his predecessor was”.

 

My own analysis for the delivery of new homes for the Irish Daily Mail can be found here: New-look Nama Tasked with Delivering Housing

 

 Commercial property

 

Grainne Rothery  has an interesting piece this week titled ‘Alternative lenders get in on the real state scene: With pillar banks unable and willing to offer debt finance, new kids on the block are filling the vacuum’, referring to the increase in the number of alternative development lenders entering the Irish market in recent years.  British real estate investment manager PMM group opened their Dublin office in recent weeks, announcing plans to provide more than €500 million of commercial property loans over the next three years. Other new lenders include Timbercreek, Bolt Capital, Origin Capital, Fairfield Real Estate Finance and Relm finance.  Of  course, this does not include the three property crowd-funding platforms  that have launched or are at pre-launch stage in Ireland right now, aiming to provide crow- sourced property development finance in Ireland.

 

 Other property news

 

• Ronan Lyons, in his column for the Sunday Independent today, writes ‘Why a simple Budget can be a good Budget’.   He describes budget 2018 as “by and large a simple budget with a few substantive changes”. He goes on to point out some missed opportunities; in particular, build-to-rent  he suggests should not attract VAT and that changing this in the Budget might improve the viability of urban rental apartments, where the shortage of housing is more acute.   He also suggests that “policymakers should look to tax stocks, not transactions. This means reforming commercial rates, not hiking stamp duty”.

 

 

• Writing in the Sunday Times today, Eithne Shortall, declares Irish house price increases the second highest in Europe, second only to the Czech Republic according to Eurostat, the EU statistical office. Prices here rose 10.6%  between the second Q2 2016 and Q2 2017, beating the average house price across the EU of just 4.4%.

 

• Valerie Flynn writes that ‘Housing is key to inward investment’. She notes that “the availability and cost of housing were raised regularly at meetings Dara Murphy, junior minister, held with technology multinationals in America last year”.  Technology companies in Ireland are increasingly dependent on skilled workers and professionals from overseas and a lack of accommodation and exceptionally high prices are certainly a barrier and make Ireland less attractive for overseas professionals.

 

• A proposed apartment complex in Castleknock, which had been opposed by Leo Varadkar, has now been granted approval by An Bord Pleanála.

 

• Valerie Flynn also has an excellent review on page 20 of the Sunday Times today titled ‘Brexit relocation race exposes Dublin’s weakness’. “The Irish capital had hoped to cash in on the accident in London but could it’s high rents among other things leave cities such as Frankfurt in the lead?”   She interviews one British IT worker who recently relocated to Ireland. When asked would he recommend Dublin to former colleagues looking for a gentler pace of life he responded “the worst thing about Dublin is how overpriced a lot of things are, especially rent. I feel like I’m paying London prices for flats that are poor quality by comparison. The government doesn’t seem to be doing anything about it, yet keeps welcoming  investment into Dublin and attracting more tech and finance workers like myself who are helping to bump up the already unjustifiably inflated rental market”.

 

• Irish American businessman John Mullen has reportedly paid 57 million Euro for the Carton house hotel and golf resort in County Kildare.

 

• In his agenda: Brian Carey writes that a flood of money may not solve housing crisis. He labels last Tuesday “super Tuesday” for the house building sector with Glenveagh Properties bounding onto the stock market raising €500 million on the same day that finance minister Paschal Donohoe unveils the Home Building Finance Ireland, or HBFI agency, a €750 million Nama-run fund providing loans to small developers. “Given Glenveagh’s capacity to take on debt,  here was a €1.25 billion liquidity boost in a single day. Our troubles are surely over.”   He goes on to describe a competing narrative, that is, increased liquidity in the development market will not build houses but is more likely to drive up the cost of development-ready sites.

 

• It now transpires that a Dublin businessman, Brian McDonough,, who objected to Apple’s plans for an €850 million data centre in County Galway tried to sell the US tech giant a site he owned in County Wicklow just days after lodging his legal proceedings. His objections were overruled by the High Court earlier this week, in fact, I was lucky enough to be at the CIF conference when the court judgement was announced as a breaking news event, interrupting one of the Q&A sessions. The support for the decision and relief in the room was palpable and it lent an air of optimism and potential to the proceedings.  The SBP on page 26 has a focus on the CIF annual conference which took place on Thursday.  There was a strong focus on technology, innovation and the future of the construction industry. Topics that came up included planning, tackling the housing crisis and diversity within the industry. In particular, the question arose as to how we can make the construction industry more attractive for women and how to increase the number of apprenticeships to deal with the looming skills shortage. [I will be writing on this further in the week ahead.]

 

• Bert and Lancelot Allen, beef processors, hoteliers and property developers, have reportedly taken a 50% stake in the Dublin residential development once controlled by former GPA executive, according to Brian Carey.

 

• In his column this week, Lorcan Sirr, reacts to last Tuesday’s Budget calling it “a ragbag mixture of reality and illusion, which is probably an accurate reflection of housing policy in general. On the reality side, an increase in the vacant site levy from 3%  to 7% in the second year (2020) was highly welcome…of course achieving ambitious housing output targets is dependent on the workforce being there. This is where things get delusional.”   He notes that there was little or nothing in the budget to incentivise owners of empty properties to put them back on the market.  Also, referring to the controversial help-to-buy scheme, he found there was no cost benefit evaluation of the scheme undertaken prior to its introduction and now that the scheme is being retained it would suggest “the scheme was always more about politics that housing”.

 

• Cian Molloy has a topical piece about using the space over shops for living.  This is a topic that has received media attention and certainly industry support over the last number of years; however, it fails to gain traction in any state initiatives.

 

• Roisin Burke has an article in the SBP today  about the Roche family’s €300 million property empire,  which includes substantial investments in retail property and offices in Sandyford Business Park. Apparently they are seeking to extend their office footprint in that area.

 

• Jack Horgan-Jones reports that Ires, the largest private landlord in the state, had a meeting with housing minister Eoghan Murphy to discuss apartment heights and no minutes for the meeting where recorded.

 

Proptech

 

Last week I mentioned that buyers are already trying to purchase Irish property with bitcoin and the role that blockchain will play in achieving this – which is leading to a number of questions re: citizenship restrictions and anti-money laundering compliance issues.  In any event, we have come across an Irish estate agency that allows sellers/clients to pay fees and marketing expenses via bitcoin and the first two property transactions using blockchain globally have taken place – I will be writing about this more over at http://www.prop-tech.ie/.

Also, thank you to the developers, builders and estate agents who have already contacted me about mentoring #proptech start-ups, I will confirm early start introductions over the next month.

To keep up-to-date on all things tech and innovation for the planning, construction and property industries, head over to http://www.prop-tech.ie, the national resource website for innovators, investors and mentors.

We have no more free mentoring sessions for #proptech start-ups  this month but the list for November and December is now open – after Christmas we will have dates in January, February and March before this CSR initiative ends, email  news@prop-tech.ie for details.

Property Insiders Guide

 

Oak Tree Press is launching the new ebook series for the Irish property market this week, here is a sneak preview before the official launch:   http://www.successstore.com/property-insiders-guides.html

Also, as regular readers will know, the Irish Property Buyers’ Handbook is being updated for 2018 and I would love to hear about any experiences in the market or new services, technology and trends for buyers.   As always, you are welcome to email me with any industry news and updates at Carol@CarolTallon.com.