Investors, first-timers likely to buy

 

INVESTORS as well as first-time buyers are likely to get off the fence and start buying following Budget 2012’s surprise boost for the property market, residential property agents said yesterday.

While the measures were targeted very much at getting the commercial property market moving, the Budget’s concessions to first-time buyers are designed to get potential residential property buyers off the fence. After 2012, new buyers will get no mortgage interest relief.

The property industry reads the Budget measures as a real acknowledgement that an active property market is essential to economic recovery.

The provision to exempt properties bought within the next two and a half years from capital gains tax for seven years, along with increases in mortgage interest reliefs until the end of 2012, should boost sales.

However most agents are saying that banks will have to start lending on bricks and mortar again before many first-time buyers can get into the housing market.

Most did not expect prices to rise as a result of the measures and most agreed with DNG chairman Keith Lowe who said “It should slow the rate of price falls, and sharp drops in residential prices should stop.”

Savills residential property director Ronan O’Driscoll said “We feel that house – but not apartment – prices are already close to bottom, and these measures won’t affect that.”

Angela Keegan of MyHome.ie said she didn’t think the measures announced in the Budget would have any impact on prices in the short to medium term.

“First-time buyers drive the market and there is no doubt that the measures on mortgage interest relief are to be welcomed. However, the prospect of three more harsh budgets together with high unemployment levels and the euro crisis mean any rise in house prices is a long way off.

Roland O’Connell, vice-president of The Society of Chartered Surveyors Ireland (SCSI) said “We hope that bank lending targets will be reached to assist qualified buyers and investors in accessing credit which will create transactions in the market and tax revenue for the exchequer.”

The most important aspect of the Budget was the Government’s underlying assumption that Ireland needs a properly functioning property market for economic recovery, said Sherry FitzGerald chief executive Mark FitzGerald. “The Minister’s innovations should inspire confidence in consumers and investors.”

All the agents believe that there are cash-rich investors who will not be deterred from buying by household and second home charges and the proposed property tax, as well as the 5 per cent surcharge on investors with annual gross income of over €100,000.

Investors hade already been tiptoeing back into the market said Sherry FitzGerald managing director Michael Grehan and the exemption on CGT would encourage that. The majority of such investors would be cash buyers attracted by residential properties with yields of from 7 to 10 per cent, and some capital appreciation between now and 2018.

Minister for Finance Michael Noonan’s one-year offer to first-time buyers of mortage interest tax relief at a rate of 25 per cent will encourage people off the fence, said Ronan O’Driscoll of Savills.

(After 2012, mortage interest relief won’t be available to people who buy after 2012 and will be fully abolished by 2018.)

“There are a signifant number of people with good jobs who will be able to get loans,” he said.

Investors compete with first-time buyers to buy residential property during the property boom, one of the factors blamed for spiralling prices.

But those investors have left the market, say agents.

“They are a different kind of investor,” says Grehan, using cash, not money leveraged against the value of their own property. and like other agents, he believes the most important thing is to encourage any activity in a market now in the doldrums.

Every property market needs investors, said Mark FitzGerald, who believes the Budget took a balanced approach to enoucraging both first-time buyers and investors.

Cash buyers account for between a third and a quarter of sales at the moment, according to agents, but real activity in the housing market won’t start until buyers can get loans.

Moneycoach.ie’s Frank Conway believes that the Government should explore creating “a diaspora fund”, some mechanism whereby people favourable to Ireland abroad could create some kind of fund given that Irish banks are nto lending at present.

Ironically, first-time buyers who are tempted to dip their toe in the market by Budget 2012 might realize it’s hard to get what they’re looking for.

Michael Grehan says that there is a shortage of the three and four-bedroom houses in traditional inner suburbs in northside and southside Dublin – the kind of properties its clients are lookign for – on the market.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
GO BACK
Error Image
The account details entered are not currently associated with an Irish Times subscription. Please subscribe to sign in to comment.
Comment Sign In

Forgot password?
The Irish Times Logo
Thank you
You should receive instructions for resetting your password. When you have reset your password, you can Sign In.
The Irish Times Logo
Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.
Screen Name Selection

Hello

Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
Forgot Password
Please enter your email address so we can send you a link to reset your password.

Sign In

Your Comments
We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Standards. We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or by filling out this form. New comments are only accepted for 3 days from the date of publication.