Housing crisis deepens as supply dries up

It was probably the last thing Minister for Housing Simon Coveney needed as he limbers up for a Fine Gael leadership contest, but a new report by property website Daft.ie this week lifted the lid on his efforts to solve the crisis in the housing sector.

The report, compiled by Trinity College economist Ronan Lyons, involved a survey of more than 4,000 tenants. It found the average cost of renting a home in the Republic has increased by €134 a month over the last year – with Dublin even worse off.

The 13.4 per cent annual increase was the second-highest jump on record. It landed in Coveney’s in-tray as supply across the State hit its lowest level in more than a decade.

The report puts the average monthly rent in the Republic at €1,131, with rents averaging €1,784 on the south side of Dublin city, €1,690 in the city centre and €1,553 north of the Liffey.

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It’s not just rents that are the problem. A study carried out by the Central Bank in conjunction with the Society of Chartered Surveyors Ireland found property professionals expect Dublin house prices to rise by an average of 8 per cent this year.

Nationally, expectations had moderated from 8 per cent to 7 per cent in the first quarter of 2017. The respondents pinpointed the lack of second-hand homes and new builds as the main driver of price.

Indeed, many will have been rubbing their eyes after reading that rents for two-bedroom apartments at Ires Reit’s latest development in Sandyford, south Dublin, are set from €2,570 a month. It could be a new record for the area.

Meanwhile, Permanent TSB chief executive Jeremy Masding expressed his satisfaction at the bank's mortgage-lending data in the first quarter, which rose by 63 per cent, well ahead of the 39 per cent rise in the overall market.

“I still say we’re leaving money on the table . . . we have plenty of opportunities,” Masding said. “We’re making good strides and I would hope to maintain that performance through the year and over the next few years to build out on it.”

Masding was speaking at the bank’s annual general meeting, at which he also said it would need “momentum” in dealing with its sizeable book of non-performing loans before it will be able to pay a dividend for the first time since the crash in late 2008.

AIB flotation decision imminent

Staying with the banks for a moment, Minister for Finance Michael Noonan said market conditions were favourable for the proposed flotation of AIB, with a decision due "in the coming weeks".

“As we look at stock markets today, conditions are encouraging, with bank stocks generally trading positively,” Noonan said. “My officials inform me that the Irish macroeconomic story is resonating well with international investors.”

That being said, Noonan is keeping his cards relatively close to his chest, adding that no decision had been made yet on whether to proceed with the sale, expected to initially involve about 25 per cent of the bank.

Earlier, Noonan said no bonuses or incentive payments would be paid to senior executives in the bank as part of the sale. The bank is to pick up the tab for any adviser fees, he said. The Department of Finance has estimated this bill will be between €10 million and €13 million.

It was a busy week for AIB as it also teamed up with global payments group Visa to introduce a rewards scheme that will offer cashback to customers whenever they shop with certain retailers.

Separately, German fund manager GLL Real Estate is to sell AIB’s branch office on Grafton Street, which also backs out on to Wicklow Street, in Dublin city centre. The fund is seeking €48 million for the premises it bought near the height of the crash for €28 million.

Davy predicts continued record growth

The Republic is on course to be the fastest-growing economy in the euro zone for a fourth straight year, according to Davy Stockbrokers, which is just as well following the publication of the public-service pay report this week.

Davy said in its latest economic outlook that gross domestic product (GDP) would grow 5 per cent in 2017, up from a previous forecast of 3.7 per cent. This is well ahead of the current consensus forecast for 1.7 per cent growth across the euro area.

The European Commission was slightly more modest in its projections, forecasting Irish GDP to grow by 4 per cent in 2017 and 3.6 per cent in 2018.

The Government will be glad of any bit of growth it can get, with talks on a new public-service pay agreement due to begin in the coming weeks, now that the Public Service Pay Commission has published its report.

The report found that Irish public-service workers were paid roughly the same as their private-sector counterparts on average – but that was before considering pensions.

The Government is expected to trade pay increases for additional pension contributions among middle-income public-service workers. The talks are likely to centre on the income threshold above which any new pension contribution will apply.

Minister for Public Expenditure Paschal Donohoe indicated the Government would consider job security "an important asset" in the negotiations, although the report was unable to place a monetary value on security of tenure for State employees.

Not all the signs are good for the economy either. Irish consumer sentiment fell in April 2017 compared with the same month last year. According to the KBC Bank/ESRI consumer sentiment index, only a quarter of people reported an improvement in their financial circumstances.

Separately, Retail Ireland was out to say the cost of goods, spread across dozens of categories, is in “freefall”, having returned to levels not seen in almost a decade. The group warned of significant pressure on retailers.

The value of retail sales grew by just over 3 per cent in the first three months of the year compared with the same period last year, but falling prices and weakening consumer and retailer confidence are growing concerns.

Jobs for Dublin and Cork

On the bright side, there were a number of jobs announcements for Dublin and Cork.

Alien Vault, a security management solutions provider, said it would add up to 50 highly skilled roles in the next two years to its existing team in the south. Elsewhere, global business software maker SAP is to create 150 jobs over the next 18 months.

US financial giant Citadel Securities, meanwhile, is to set up a base in the capital, trebling its Irish workforce within two years from 15 to 50. The company's global head of fixed-income, currencies and commodities, Paul Hamill, said the decision predated Brexit.

With these almost daily jobs announcements and unemployment falling, it was no surprise when Morgan McKinley Ireland said the number of professional job vacancies available in April increased 7 per cent compared to March. This was, however, down 6 per cent on the same month in 2016.

The recruitment consultancy also found there was a reduction of 15 per cent in the number of professionals seeking new roles in April compared to March, while there was a 2 per cent decrease compared to April 2016.