In a world of slower economic growth, very low interest rates, volatility in equity markets, property offers an attractive opportunity.
Recently we spoke about the possible effects of the current pandemic on the commercial rental sector and an uncertain 12-24 months ahead. But now let’s turn our attention to the residential rental sector.
Private Sector
A few days ago the Society of Chartered Surveyors in Ireland (SCSI) released it’s review for 2021 and it had some good news for property owners. Prices are tipped to increase as much as 6% over the next 12 months.
Obviously, this will be spread across the board with more rural areas looking to gain more than city locations due to the ‘working from home’ boom we’ve seen recently. With this option soon to be made law, attention in the property market will focus on fringe areas with access to public transport and local amenities, most importantly good broadband connectivity.
Rental Sector
The rental sector however is a bit of a different story. Recent figures from the Residential Tenancies Board show that 2020 had the lowest rate of growth since 2012. But not all is lost. Many agents believe the reason behind this slump is the increase in short term letting properties due to the pandemic. This is likely to sort itself out over the next 12 months and in any case, supply still far outstrips demand.
The simple facts are that due to failed housing policies of the past the situation is not expected to be resolved until 2031 at the earliest when the number of properties being constructed each year is in excess of 60,000 units. Until then, supply and demand will continue to control the market.
Outlook
In Q1 2021 expect to see a surge of activity in the sector. This anticipated surge in demand is expected to hold property values if supply cannot meet demand in 2021 and due to the last 12 months of relative inactivity we are already at a deficit of 14,000 units, so this is unlikely.
The sentiment amongst most agents is that developments with the current pandemic will dictate the levels of activity in the market in 2021.
Recent developments, including a shared equity scheme announced by the Government, are also likely to have a positive impact on those looking to step onto the property ladder.
There is now increasing interest from institutional investors in funding and purchasing social housing developments. Investors are showing increased interest in providing multiple social housing units on long-term leases to local authorities.
Any investment which increases supply should be welcomed wholeheartedly. However, one thing to remember is that with more and more attention being put on social housing, this will naturally lead to a decrease in the supply of labour for private residential housing as more and more developers focus on the former.
