By Ted Healy of DNG TED HEALY
According to the latest residential market review from leading property advisors DNG, house price inflation is now running at its highest level since 2017.
Prices are now 11.1% higher at a national level and are 11.3% higher in the South West than they were in June 2020, as a result of strong price inflation in the market during the first six months of 2021.
The DNG National Price Gauge, which tracks residential property price movements at a national level, excluding Dublin, shows that the average price of a home now stands at €233,582 up from €210,258 in June 2020. In the South West region the average price of a resale property now stands at €266,844 up from €239,671 in June 2020.
The report highlights the fact that in the year to December 2020 the annual rate of house price inflation was running at 1.4% nationally. However, strong demand, coupled with a scarcity of homes for sale in the market, has served to drive up residential property prices across the country in the first half of 2021. In the first six months of the year, an uptick in the rate of increase in house prices has been driven by the shortage of supply in the context of rising disposable income, elevated savings levels and demographic pressures.
At a national level, an analysis of the stock of homes currently for sale indicates that there are approximately 35% fewer homes listed for sale now, compared to the same time last year, and 45% fewer than at the same point in 2019.
The latest results of the DNG House Price and National Price Gauges show that residential property inflation has accelerated markedly in recent months, driven primarily by increased first time buyer demand on foot of record levels of mortgage approvals. Our analysis of purchasers during the second quarter shows that first time buyers continue to dominate the resale market accounting for 54% of purchases during the period. In addition, over two thirds (70%) of buyers rely on mortgage finance in order to complete their transaction.
The elevated level of demand in the current market is evident now because of the easing of the restrictions placed on the property sector and house hunters during the last lockdown. Buyers who had paused their property search during lockdown are now back in the market competing with those buyers with more recent loan approvals.
Lower tax rate will discourage private landlords leaving the market
By Ted Healy of DNG TED HEALY Property owner groups are pushing for a new tax rate of 25 percent for landlords to discourage them from selling up and leaving […]
By Ted Healy of DNG TED HEALY
Property owner groups are pushing for a new tax rate of 25 percent for landlords to discourage them from selling up and leaving the market.
Currently, landlords are paying over 50 percent tax on their rental income and the Government are looking at the possibility of reducing this in the upcoming Budget.
The Irish Property Owners Association (IPOA) and the Institute of Property Auctioneers and Valuers (IPAV) have called on TDs and senators in the Oireachtas Housing Committee to back a new tax rate of 25 percent.
This will incentivise landlords to stay in the rental market and “support new investment”, according to chairperson of the IPOA Mary Conway.
“The private investor is taxed at a marginal rate of up to 55 percent whilst the private equity fund/REIT pays zero percent tax on rental profit, once they exit the market within a defined period.”
Private non-developer landlords provide 94 percent of rental accommodation in the State with 70 percent of these landlords owning five properties or less.
Inheritance tax also plays a role in encouraging landlords to leave the rental market due to their age.
“75 percent of landlords are above the age of 50 and 48 percent are above the age of 60. This is important to note as taxation issues around inheritance are another contributor to landlords leaving the market.”
Meanwhile, Housing Minister Darragh O’Brien has said he wants to see measures in the Budget to help “good landlords” and keep property owners from quitting the private rental market.
Since 2016, there has been a loss of up to 8,000 landlords, representing around 44,000 tenancies, from the sector.
Mr O’Brien said landlords have been “demonised” and must be kept in the market while the State increases its stock of public housing. He said a record 25,000 social houses will be delivered this year.
The murmurings are that measures will be taken in the upcoming Budget that will help to maintain as many of those private tenancies as possible whilst building up the public housing stock, the mechanism remains to be seen.
Predicting the future
By Michael O’Connor I received some bad news over the last few weeks, and it has changed my perspective on a few things. One thing I realised is that it’s […]
By Michael O’Connor
I received some bad news over the last few weeks, and it has changed my perspective on a few things.
One thing I realised is that it’s the things you never see coming that truly impact your life.
We spend our days worrying about the obvious risks, and then our lives are upended by an event we could never have predicted.
This is true across so many aspects of life.
Investing is no different.
Much of my day job is focused on what happens next.
Are we headed for a recession, will the stock market crash, and how much will property prices fall?
These are all pressing questions, but these attempts to predict the future can be soul-destroying when the future is so hard to predict.
History is an endless stream of reasonable predictions upended by unforeseeable surprises.
In 2001, as we focused on the debt crisis in Europe, two planes struck the Twin Towers. In less than 90 minutes, the world changed in a way that was simply impossible to predict.
In 2020, as we focused on the implications of Trade Wars, a virus shut down the global economy, and 20 million Americans lost their jobs in a single week.
And on and on.
Paying attention to the known unknowns is essential, but it’s risks that we don’t see coming that truly define us.
No preparation, no protection, maximum destruction.
So, if the surprises are what really move the needle, why do we spend so much time trying to predict the future?
Simple put, it helps us worry less.
Building a vision of the future and convincing ourselves it will play out offers unrivalled piece of mind – a sense of control in an entirely uncontrollable world.
The warm cozy hug of certainty is hard to resist.
Despite the allure, however, we must ask ourselves; why obsess over predicting the exact path when the probability of us getting it exactly right is so low? Surely this is an obvious waste of time and resources?
So how can we better allocate resources?
Focus on the bigger picture
Instead of arguing over the minutiae, we need to focus on the bigger picture.
So many risks could play out over the short term.
Inflation runs higher, and interest rates pull down stock market returns.
The real estate market falters, creating economic ripple effects;
A new COVID strain
The point is, there is always risk.
History is just one thing after another.
There is never a utopian state of calm, but over the long run, humans have prevailed.
In the face of wars, depressions and pandemics, people have become more productive.
We have continued to innovate and create products and companies that are more and more profitable over time.
This is the detail we often fail to see – the glimmer of light in a dark room.
Our ability to adapt and overcome over time is undisputed.
So, instead of trying to predict exactly what happens next, trust that we will prevail over time and focus on the larger trends.
What innovations will inspire the next generation of profitable companies? How will changing demographics change the world?
You will never get it 100% right but focusing on the stuff that really matters certainly improves your odds.
To learn what companies to invest in and to get direct access to my personal investment portfolio go to www.theislandinvestor.com.
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