Move to restrict bulk-buying unlikely to increase supply, say industry figures

Threshold set too high, with over-emphasis on first-time buyers to the neglect of renters

New homes at Bay Meadows, Hollystown, Dublin 15. The entire estate of 112 houses was bought by Round Hill Capital earlier this month.  Photograph: Dara Mac Dónaill/The Irish Times

New homes at Bay Meadows, Hollystown, Dublin 15. The entire estate of 112 houses was bought by Round Hill Capital earlier this month. Photograph: Dara Mac Dónaill/The Irish Times

 

Government plans to restrict the bulk-buying of homes in housing estates are unlikely to result in significant supply increases for owner-occupiers, property industry figures have said.

The Government is to clamp down on house purchases by large investors by increasing stamp duty to 10 per cent on the purchase of more than 10 houses.

Pat Davitt, chief executive of the Institute of Professional Auctioneers and Valuers, said the move will be ineffective, because the threshold for bulk purchases had been set at too high a level.

“I don’t see why it is being set at 10 units or more. Why not bring it in at five units? Even 10 units in a housing estate is a very large number. What if three different investors want to buy 10 houses each in an estate of 100 houses?” he asked.

“No private person is going to want to buy more than one house in an estate, so why not set it at two houses? I don’t think it is going to have the desired effect.”

The Government was itself culpable when it came to deterring developers from selling or renting to individual owners, he said.

“At the end of the day the Government is still renting these properties from these investment firms for social housing.”

The State’s long-term leasing scheme was attractive for developers and investors because they received a guaranteed rent over an extended period and retained ownership of the properties.

Private renters

“The State gets a 20 per cent discount on a 25-year lease. The State should be looking for a 50 per cent discount for that length of a term, otherwise they are pricing private renters out of the market. Who is going to rent to Joe Bloggs when they have the guaranteed surety of a long-term lease?”

It is a view echoed by Rick Larkin, executive director of Dublin development company Twinlite.

“The single biggest bulk purchasers or renters are the approved housing bodies and local authorities. They account for one-third of purchases, and what the Government is proposing won’t do anything to change that.”

Mr Larkin said the forthcoming changes to planning legislation to prevent bulk buying were “welcome” as they would encourage diversity of tenure, but he said the prevailing negative attitude to international investors was worrying.

“What concerns me is the vilification of foreign investors over the last couple of weeks. They are providing very welcome and necessary streams of funding, but the discourse seems to be that they are the problem, when supply is the problem.”

It was “helpful”, he said, that the new rules would not apply to apartment purchases.

“The viability of apartment construction as it stands is on a knife-edge, with building regulations, planning delays and construction inflation. Any move to restrict institutional investment in apartments would mean there would be less investment,” he said. “I’m glad logic has won out there – it would have had a chaotic impact on the market. Apartments cannot be built for the price first-time buyers can afford.”

Backfire

Marian Finnegan, managing director at Sherry FitzGerald, said the Government’s move could backfire.

“I feel this is a bit of a knee-jerk reaction. There has been an awful lot of commentary about the needs of the first-time buyers, but they are not the only cohort in the market in need of housing, and there is no action that doesn’t have repercussions.”

The Government plans included no mention of how many rental properties were needed in the market each year.

“Across the country we are awfully deprived of rental properties and that has been forgotten. We also need to remember there are people who need to trade up and trade down.”

Landlords’ representative group the Irish Property Owners’ Association (IPOA) said the Government’s plans failed to address the “imbalance” in the tax regime for institutional investors and private landlords.

“The proposals ignored the fact that these funds are paying no income tax on sizeable rental portfolios whilst private landlords pay income tax at 51 per cent, Tom O’Brien, chairman of the IPOA finance committee, said.

“There is no basis or logic for the disparity in treatment, although the Government will point to supply as an excuse. Does the much greater supply provided by the private landlord not count in this regard?”