The dysfunctional property market – where not enough houses are being built to meet demand, where social housing lists lengthen by the day and where the price of many Dublin homes are beyond the means of most people – came into sharp focus at The Irish Times Property Forum last week.
Titled “Funding the Future - New Structures for Success”, the well-attended event brought together leading property professionals, financiers and developers so that they could thrash out “what we need now to drive the property economy’.
Minister for Housing, Planning and Local Government Simon Coveney kicked things off with a frank assessment: "New housing starts are nowhere near where they need to be," he said. "The Government's target is to get housing starts over 20,000 in two years, but 35,000 new houses a year is where we should be at. That's a sustainable level and it could take us 10 years to get up to that. But the property industry in Ireland can be three times the size it is now and still be sustainable. "
The Minister, who frequently departed from his prepared speech to display a keen grasp of his brief and an appetite to move things forward at pace, said the biggest change that he wanted to see in the industry was a renewal of confidence and appetite to take risk among developers so that they could meet the challenge of delivering the Government’s housing plan.
“Funding developments remains difficult and this is constraining the business of construction,” he said. “More finance options are needed for developers, like partnering with local authorities to tackle the severe shortage of social and affordable housing. Developers need to see social housing as an opportunity for development. The Government is also examining ways to co-fund housing via the Irish Strategic Infrastructure fund.”
Mr Coveney, to the surprise of some attending the event at the Kildare Street home of the Royal College of Physicians of Ireland, was particularly assertive about making mixed-tenure developments the norm. "The days of class divides when it comes to housing development are gone," he said.
The Minister hinted that further changes to the rental market are likely to be introduced before the end of the year. “We need a much calmer rental market where there is an appetite for investment and to rent for the long term. At the moment there is not enough building going on for the rental market.”
Mr Coveney said October’s budget will include measures to help first-time buyers as well as strategic initiatives aimed at the rental sector and landlords. There would also be design competitions launched shortly for major public housing schemes like O’Devaney Gardens in Dublin 7.
Greater flexibility was needed on housing density and sizes, according to the Minister, while developers must make design central to their schemes and make better use of the pre-planning process. Mr Coveney was prepared to increase numbers at An Bord Pleanála to deal with its inevitable increase in workload as the property industry continues to recover.
In one of the best-received contributions to the event, Paul Keogh, chief operations officer of Ballymore, recounted how the company managed to survive the crash. "We had 30 big projects on the go when Lehmans went wallop and then, all of a sudden, no bank would lend to us. It was an instant crash. We had to sell assets to keep things going but, by focusing on securing big-name tenants to anchor our large schemes, that was the key to getting things going again on the development front."
Mr Keogh recommended to the Minister that he consider a help-to-buy scheme, where the State takes an equity stake in housing to allow certain categories of workers to get on the property ladder. “This has worked wonderfully well in the UK outside of London,” he said.
On Ireland, Mr Keogh warned that building and land cost inflation would start to “hit us” in 2017 and that developers must “look for different sources of finance – no longer just the banks”.
He pointed out that it's "not easy to start off as young developer" these days and, as a result, asked "where's the next Sean Mulryan going to come from?" Land purchased by some property funds, he maintained, has inflated land costs while infrastructure costs were still too high.
In a thoughtful analysis, Davy’s chief economist Conall MacCoille dissected the property market to deliver a riposte to all those calling for a loosening of mortgage lending rules and more demand stimulus. “The lack of housing construction is now holding back the real economy,” he said. “But we must tackle supply, rather than demand, issues as this will have a greater effect on the market.”
The final speaker, Ardagh Group chairman Paul Coulson, gave an account of how a passive investment in the former Irish Glass Bottle Company in the 1990s turned into an active one that eventually led – "more by accident than design" – to the creation of a glass and metal products multinational with interests in Europe and north America.