Philip Slattery, a 35-year-old accountant living on the outskirts of Dublin, has been looking for accommodation for three years, first alone, then with his partner and their family’s three children.
A severe housing shortage in their area has fueled a spike in house prices, with properties often going for € 20,000 or € 30,000 above their asking price – a significant premium given that Dublin’s average selling price is approximately € 396,000.
“I think I will have to win the Lotto,” Slattery said of his chances of owning a house.
Dysfunction has been the defining feature of the Irish property market for decades, most dramatically during the boom to collapse of 2000-2010, as prices spiraled out of control and fell sharply in the crash that followed.
Today, the country is going through a crisis of a different kind.
Ireland expects to build just 21,000 homes and apartments this year, as tighter lending terms, coupled with coronavirus-related delays, push supply well below the more than 90,000 homes a year built in stronger of 2006.
The result is a shortage homes that could last for years in everything from one-bed apartments in Dublin city center to family homes in suburbs and regions. Meanwhile, until their luck turns, Slattery lives with her parents and partner and the children live with his.
The current situation is a far cry from the easy money days of the mid-2000s that presaged the 2008 financial crisis, said Dermot O’Leary, chief economist at Goodbody, a stockbroker.
Today, the ceilings on mortgages leave buyers with budgets “so low.” . . that excludes a significant cohort of people from buying a home, ”he said. As for builders, access to credit and the high cost of construction in Ireland compared to selling prices make it difficult for them to increase production to the 35,000 units per year that the market needs.
In suburban towns near Dublin, the housing shortage was not helped by a U.S. investment fund, Round Hill Capital, which in April grabbed 135 of 170 homes for sale in a single development. It was the final straw for the general public, the government and the many families, couples and individuals struggling to find suitable housing.
Pushed into action, the government coalition responded by imposing a 10% stamp duty on anyone buying 10 or more homes in a 12-month period.
The Ministry of Finance mentionned this would offer a “significant deterrent effect” to investors who “denied first-time buyers the possibility of buying a house”.
Whether this is the best approach to the problem remains an open question and a hotly debated political question. “You had a media fury on a certain subject, in less than two weeks, you formulated a policy. This is not how housing policy should work, ”said O’Leary.
The problem is not unique to Ireland. In Germany, the scarcity of supply and the sharp rise in rents have made housing one of the most controversial issues in Berlin, as recently pointed out Vonovia, Germany’s largest residential landlord, teamed up with a rival in a € 18 billion merger.
To help secure the deal politically, the companies pledged to sell some apartments to local authorities without a premium, commit to certain rent freezes, and build additional apartments.
Meanwhile, the Irish housing market is in full swing, said Andrea Whelan, a Dublin-based real estate agent with Sherry FitzGerald.
She said she had “never had a more solid database of qualified and ready to go buyers” in her 23 years with the business, but the mood among them was “a sense of anxiety.. frustration ”.
A by-election in the Dublin area of South Bay on July 8 gives politicians yet another incentive to weigh in on the issue.
The stakes are highest for Fine Gael, the third party in parliament and second in the ruling coalition, which could lose its seat in the vote.
Simon Harris, Irish Minister for Education and Chief Electoral Officer of the Fine Gael Party in Dublin Bay South, said it was “really important” for the government to act on investment funds to deal with the housing market.
Left wing Sinn Féin, the largest opposition party and the second largest party in the Irish parliament, meanwhile argues that the government should generally do a lot more, including additional capital gains taxes for real estate investors and more social and affordable housing.
“If you sincerely believe that the elections are an opportunity to send a signal to the government. . . so let’s make this election a referendum on the failure of our housing policy, ”said Eoin Ó Broin, Sinn Féin Chief Electoral Officer for Dublin Bay South.
One question is whether stamp duty investment funds now have to pay on pooled house purchases could be extended to apartments, the sector where international institutional investors are typically most involved, accounting for nearly a fifth of sales in 2018.
“The only people who build apartments are people backed by international capital,” according to a senior executive at a large real estate investment company.
If so, the prospect of further government action bodes ill for both investment funds and future apartment construction.
Jim O’Callaghan, who heads the Dublin South Bay partial election campaign for Fianna Fail, the largest party in Ireland’s governing coalition, said extending the tax to apartment sales was what many wanted. party members. “We may have to revisit the matter,” he said.