Irish Property in 2013 – the predictions

To quote from last year’s predictions blogpost on here

“There are three caveats that should accompany any forecast of property prices (1) none of us has a crystal ball and there are so many variables in how property prices change that, at best, you are getting an informed opinion and (2) when forecasting a “market”, you are not forecasting individual transactions, and property is not like milk – there will obviously be regional differences but even on the same street there will be individual properties and buyers and sellers, landlords and tenants, so a general price change might not affect a particular property and (3) to quote Upton Sinclair “it is difficult to get a man to understand something, when his salary depends upon his not understanding it” or to put it another way, you should always bear in mind the motivations of those providing forecasts, and given this is an anonymously-authored blog, that makes assessment difficult.”

Welcome to the 2013 predictions where you can cross palms with cyber silver and the tea leaves are scryed to help tell you what the year ahead will mean for property selling prices in Ireland, residential and commercial and for rents, also residential and commercial. You may care to take a look at the predictions here last year before taking any of this too seriously.

Firstly here is the summary of the predictions

And here are the seven areas taken into consideration

The general economy. Unemployment will remain elevated at 14% despite continuing emigration. The domestic economy will bounce along the bottom with the first half of the year stumbling as the effects of Budget 2013 sink in. The overall economy is difficult to predict, Europe including the UK and the US continue to teeter between the Rapture and the Abyss. Retail has had a good quarter four in 2012 by all accounts, both actual retail indices from the CSO and anecdote for December. Exports have not suffered the expected decline in quarter four seemingly, and both services and manufacturing are growing. Construction is still in the doldrums but credit appears to no longer be contracting.

Property taxes. For once the Government has stuck to a commitment and the mortgage relief for first time buyers has in fact been discontinued from the end of 2012. The new property tax kicks in from July 2013 but in 2013, there will be a 50% discount on the annual charge which will be €315 in a full year for a typical home. We will start to hear more about water charges which may kick in as early as 2014, and these are unlikely to be less than €200 per annum on average to make the cost of installation of meters and administration feasible on a cost basis.  Stamp duty may be increased if transactions start flowing again, and remember the Government has to produce a Budget in December 2013 which will adjust the economy by a further €3.1bn in 2014.

Transparency. We already have the Property Price Register which is prone to errors and only extends back to the start of 2010, but it does provide a basis for comparing values. We are set to have the new commercial leases register by the end of March 2013 so there should be far greater transparency on rental levels, but for the time being at least, there won’t be a commercial property price register and of course there are no plans to make available actual residential rents which are already captured by the Private Residential Tenancies Board.

NAMA. Contrary to popular belief, NAMA actually has little control over the residential market with about 12,000 homes remaining under its control with its borrowers and most of these are rented in rentable areas where rental prices are stable and modestly rising. However NAMA is about to unleash a lot of commercial property onto the market, and there will be €2bn-odd of staple finance to sweeten the deal, particularly on better quality properties with good tenants and where investors have a track record. NAMA has given €6m of rent reductions to commercial tenants in 2013 and the same is expected in 2014 as the domestic economy remains shaky. There will also be more evidence of NAMA investing in developments, so the perception there is an ever dwindling supply of property, particularly prime central Dublin office property, may diminish.

The banks. Deleveraging will continue apace and there is still a mountain of loans and property that non-NAMA banks in particular want to offload. Banks are lousy managers of property so there will continue to be an ample supply of property coming onto the market, courtesy of banks. On the other side of the transaction, there has been some recent stabilization in the provision of credit both to households and businesses and this should improve the general background music.

Bankruptcy laws and repossessions. We expect the new Personal Insolvency Bill to be given presidential assent any day now and it should be immediately commenced. Justice minister Alan Shatter has predicted that there will be 3,000 bankruptcies in Ireland in 2013, up from 30 in a typical year.  Banks are expected to enforce buy to let loans and the 600 repossessions per annum in Ireland may rocket, the prediction on here is that there will be 5,000 repossessions in 2013 and that is a considerable stock of what will be depressed property to be offloaded on the market.

Allsop Space. Another four or five Allsop Space auctions are expected in 2013 and there may be mega 200-Lot events. The successful venture between British auctioning giant Allsop and Dublin property company Space seems to have taken a new direction recently with a focus on commercial property. These auction events will provide finger-tip assessments of the market overall. There will be increased efforts to get more private vendors to sell their property at auction, and who knows, maybe NAMA will embrace the transparency of the auction especially after the Enda Farrell affair in 2012 and the constant prodding from Senator Mark Daly to make the selling process clearer.