New property survey reveals little impact on the market of recent stamp duty reform while availability of finance is a key constraint
The results of the 2008 property survey, launched today at the Irish Independent Property Developers’ Conference by PricewaterhouseCoopers (PwC) and Amárach Consulting, reveals mixed views on the future of the Irish economy, with 43% expecting no change or some improvement in the overall business climate in Ireland. However, over half (57%) of survey respondents expect a disimprovement in the overall business climate.
Key findings from the survey include:
- Slightly more than half of respondents anticipate commercial property values to rise; however, three quarters of respondents anticipate residential property values to fall;
- Of those who predict a rise in property values, the majority feel this will be in line with inflation;
- Of those who predict a fall in property values, one third believe this will be 7% or more, with this fall being more pronounced for residential property;
- An overwhelming majority expect the number of completed residential units to be 50,000 or less during 2008;
- The recent Stamp Duty reform announced in the Budget is having little impact so far on activity in the property sector;
- The availability of finance and reduced consumer confidence are seen as the main constraining factors for future growth.
Speaking at the survey launch, Michael McLoughlin, Chief Executive, Amárach Research said:
“With the majority of survey participants expecting the number of completed residential units to be less than 50,000 for 2008, our survey confirms a return to more sustainable levels of property activity compared to recent years”.
Speaking at the Survey launch, Eamon Ryan, T.D., Minister for Communications, Energy and Natural Resources said:
“I am glad of the confirmation in this survey that green issues have moved up the business agenda. Going green makes clear business sense.
There needs to be greater understanding, however, of the real rather than perceived costs involved. Positive building energy regulation (BER) certification, for example, will be a clear competitive advantage for those selling houses into the future. It is widely accepted that development should be alongside public transport and other facilities. This is simply common sense.”
Enda Faughnan, Tax Partner, Real Estate Practice, PricewaterhouseCoopers said:
“There continues to be significant opportunities when investing abroad in property. However, in this changing economic environment proper tax structuring and advance planning are even more critical. We urge investors to do their homework and get the right advice on all aspects in order to limit exposure to Capital Gains Tax and to maximise return on investment.”
Timothy O’Rahilly, Tax Partner, Real Estate Practice, PricewaterhouseCoopers added:
“The Stamp Duty reform in the recent Budget is welcome and it appears to have removed any related uncertainty from the property market but its impact has yet to be felt. Three quarters (75%) of survey respondents believe that the reform will have little or no impact on the residential property market in 2008 as more fundamental influencing factors remain unresolved such as the difficulty in obtaining finance and reduced consumer confidence.”
While survey respondents expect positive activity in certain sectors such as commercial property and public sector contracts, very few expect a great deal of activity in the residential sector. However, half of survey respondents expect their investment in property as an asset class for 2008 to be less than in 2007. The survey reveals that around half of respondents anticipate a fall in commercial property values with three-quarters feeling that residential property values will fall in 2008.
Of those who predict a rise in property values (residential and commercial), the majority feel that property will just rise in line with inflation. Of those who predict a decline in commercial property values – a majority (54%) believe this will be more than 4%, with 7% predicting declines of 7% or more. Where residential property is concerned, the majority (77%) expect declines of more than 4% and 40% see a decline of 7% or more.
According to survey participants, the number of residential units to be completed is forecast to drop from 77,000 in 2007. An overwhelming majority (84%) felt that the output would be less than 50,000 units with one third expecting this to be less than 40,000.
The survey reveals that the key constraining factor for growth in the Irish property market is availability of finance. Survey participants feel that the attitudes of banks to lending and the difficulty in raising finance are the most important factors influencing the Irish commercial property in 2008. For residential property, the key constraining factor is reducing consumer confidence.
While Stamp Duty has been removed as a key uncertainty and does not rank high on the list of constraints, nevertheless, the Stamp Duty reform announced in the recent Budget was seen to have little impact so far. Three-quarters of survey participants believe that it would have little or no impact on residential property development in 2008. A majority (61%) believe that Stamp Duty plays a key role in driving property investment abroad.
An overwhelming majority of survey participant (86%) feel that a reduction in interest rates is critical to the recovery of the property market in 2008.
The survey reveals a continued trend towards overseas investment. Over three quarters (87%) of survey participants feel that there are far better opportunities in the overseas property market than in the Irish market. This is borne out by some 60% of survey respondents who intend to invest in property saying that they would now be more prepared to invest in property assets abroad compared to in Ireland. Survey participants feel that India and the UK are attracting increasing interest for property investment while China and Poland are preferred locations for property development.
Green issues
An overwhelming 82% of survey respondents said that Green Issues have moved up the agenda in their business. Green issues, however, are primarily seen to be adding to the cost and regulatory burden of doing business rather than resulting in a perceived benefit such as ‘enhancing the organisation’s good corporate citizen goals’ or being ‘a vital market differentiator’ .
DDDA
An overwhelming majority (72%) of survey respondents said that the Dublin Docklands Development Authority model should be extended to other urban areas.
ENDS
About the Survey:
The survey was conducted in January 2008 amongst leading Irish property developers, investors and other stakeholders having 100 participants.
About the Conference:
The Irish Property Developers Conference is the biggest annual gathering of the Irish property developer community. The conference is sponsored by the Irish Independent and PricewaterhouseCoopers. It is now in its third year, attracts almost 300 delegates and enjoys the support of the major developers and related financial and professional service sectors.
About Amárach Research
Amárach Research is one of the best known market research companies in Ireland. One of its areas of speciality is stakeholder research. Amárach has offices in Dublin and Edinburgh.
PricewaterhouseCoopers provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 146,000 people in 150 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.
