Download what the future holds for property - Society of Chartered Surveyors

-1-
Circulation:
Area of Clip:
Page 1 of 12
Sunday Business Post-Property supplement*
Sunday, 6 December 2015
AVE: 37,742.56€
Page:
14,15
34322
300400mm²
WHAT THE FUTURE HOLDS FOR PROPERTY
Una-Marie
O’Neill
An expert panel, led by Central Bank
chief economist Gabriel Fagan,
discussed Ireland’s housing crisis at the
SundayBusinessPostProperty Summit
Pictures: Maura Hickey
the midst of the current, interminable
sector in Norway and Sweden however,
housing crisis, this
was faster than Japan, which took
year’s annual Sunday’BusinessPost five years. Nonetheless, it damaged this
property summit heard from a country the most. Ireland’s banking crisis
cost us more than 30 per cent of our
total of 18 property experts in the
guise of individual speakers and GDP,compared to 2.7 per cent of GDP in
collective panellists from various Norway, 3.6 per cent in Sweden, 12.8 per
cent in Finland and 14 per cent in Japan.
domains within the sector.
The Central Bank’s new chief economist,
Gabriel Fagan, led the summit
with his views on how lessons have been Fagan’s address was followed by the first
learned to reduce financial stability risks of our international speakers, Natalie
from the property sector. He cited a more Elphicke, chief executive and founding
cautious approach in lending from the director of the UK Housing & Finance
banking sector,, as well as a change from Institute, who was awarded an OBE this
year for her services to housing.
debt to equity type financing and improved
Elphicke and her compatriot, Simon
micro-prudential supervision and
Leask, head of the Advisory Team for
macro-prudential policies as stabilising Large (site) Applications, Atlas, both described
factors.
their roles as ‘enablers’ in accelerating
“Property investments are generally
the delivery of housing, finance
long-lived assets, while construction
and investment.
“The effects of a credit crunch are not
investment is more volatile,” he said.
“Property andbanking are interdependent.just financial and economic, but also political
and social, and have huge ramifications
Property is important to banking
for housing, ” said Elphicke.
because 55 per cent of our banks’ gross
“Ailhousing is local, soyouhavetolook
assets are in households.”
for local perspectives. You need to drive
Fagan offered a comparison between
delivery, not simply lead it. In areas that
Ireland’s systemic banking crisis between
we have identified community leadership,
2008 and 2014 and banking crises that
had strategic clarity and local partners
had occurred in Finland, Norway, Sweden
who knew what their area needed
and Japan in 1992,1991,1992 and 1998 and why, things got done. Knowing what
respectively.
institutional investors were looking for
Interestingly, despite Ireland suffering also accelerated delivery.”
Elphicke urged local councils and authorities
the highest losses as a percentage of GDP
to be more proactive in identifying
at peak - at 9 per cent compared to the
and realising the vast assets, resources
Nordics’, whichrangedbetween2.8
and
4.4 per cent and Japan at 2.7 per cent, it and skill sets that their members have
to offer in order to enable faster housing
has taken Irish banks four years to return
deliveries. She outlined a number of
from their crisis peak to profitability.
options, including suggesting councils
That recovery is on a par with Finland, look at deferred consideration [payment]
arrangements, selling fixed-term longlease
but took twice as long as the banking
In
All housing is local
interest now andretainingthe
value
-2-
Sunday Business Post-Property supplement*
Sunday, 6 December 2015
AVE: 37,742.56€
Page:
14,15
Circulation:
Area of Clip:
Page 2 of 12
34322
300400mm²
of the freehold interest, and being flexible ford to buy or rent, thus creating a return
in the planning process.
to unsustainable commuting patterns.
She also suggested councils fund their
The private rented sector was the topic
own housing organisations through pru
of debate after lunch, undertaken by Bill
dentialborrowing, settingup institutional Nowlan of WK Nolan Property and a director
investment partnerships whereby the
of Hibernia Reit; Andrew Nugent, Call for a Housing Minister
councils provide the land for developmentthe president of the Society of Chartered
Ireland needs a housing minister
while the investor pays for the Surveyors Ireland and Dr Peter Stafford, with sole responsibility for creating
the director of Property Industry Ireland and implementing a clear housing
development.
A bolder suggestion was that councils and a regular Property Plus columnist.
strategy and with the authority
enter guarantee purchase agreements
All three agreed that the lack of a to carry out that responsibility
whereby they agree to buy the completed comprehensive housing strategy and a efficiently and unencumbered by
homes fromadeveloperifabuyercan’tbe
dedicated housing minister role, as well political or electoral burdens.
found on the openmarket, which she said as planning delays and state interference
had experienced a 100 per cent success were driving up land and building costs Cost burdens
rate in cases she oversaw in Britain and and adding to the renting crisis.
Two cost bases were identified as
They were among a number of speakers stumbling blocks in the current
led to increased developer and market
confidence and a greater appetite to build. throughout the day that called for a root housing crisis. They include bureaucratic
“Central governments can’t do it all,” and branch review of Ireland’s current,
costs, including taxes,
Elphickesaid. “Faster housing deliveries complex planning system and restrictions.levies, application and appeal costs
“Rent caps will have absolutely no
are achievable, but remember, institutional
before building commences, and
and commercial investors have effect on the situation,” added Stafford.
the high land, labour and material
shorter committed borrowing windows,
costs of building.
so the process has to be time efficient.”
Key Property
Summit points
New housing trends
Officemarket
‘euphoria’
Nama's role
The role of Nama and its remit
Marie Hunt, head of research at CBRE must be identified more clearly.
Should the state agency, in its new
Ireland, and Aidan Flynn, head of corporate
role as developer with competitive
finance at Duff & Phelps, looked
advantages, be allowed to compete
at the commercial property market and
with private developers to deliver
commercial funding.
According to Hunt, 2015 has been anotherhomes?
The first panel discussion on why we
are not still not meeting the demand for
housing saw developer Michael O’Flynn
lock horns with Nama’s head of asset
management, Mary Birmingham. The
panel was joined by South Co Dublin
County Council chief executive Dan McLoughlin bumper year for the commercial
A housing strategy
and Trinity College’s Professor property market, but now that deleveraging
Current housing policy is
activity
is
winding
down,
next
year
of Economics, Ronan Lyons.
Closing the morning session, Hooke will bring a different market with more short-sighted and a result of kneejerk
reactions to critical needs. We
& MacDonald director David Cantwell secondary trading and more institutional
need a comprehensive and cohesive
discussed trends and influential factors buyers.
strategy based on both immediate
“All sectors are at different stages of
in the residential market. “We are seeing
and long-term sustainable
a growing number of single people who the cycle, and while the office market is
needs.
want to five alone so we need smaller, now in the midst of a development surge,
that hasn’t yet commenced to any great
single person households,” he said.
“We’re also seeing changing family degree in the retail or industrial sectors Planning
Experts resoundingly called for a
structures emerging, such as single parent yet,” she said.
Flynn went further and explained that root-and-branch review of Ireland’s
families; marital separations; multiple
generations in one household and many the office market is at the peak or ‘euphoria’ planning system.
stage of the cycle, while the hotel
empty nesters left with large houses that
sector was at the ‘excitement stage’ with
they under use but with very few alternatives
for them in terms of retirement further growth predicted; while retail
sector was at an ‘optimistic’ stage of the
accommodation. ”
Cantwell said more of the population cycle.
“There is potentially a lot of office stock
were making the choice to be long-term
renters rather than property owners, and in the development pipeline in 2016, but
families were being squeezed out of urban as long as this is delivered in a controlled
centres where they could neither af¬ way, which is likely to occur because of
-3-
Sunday Business Post-Property supplement*
Sunday, 6 December 2015
AVE: 37,742.56€
Page:
14,15
Circulation:
Area of Clip:
Page 3 of 12
Michael O’Flynn of The O'Flynn Group, Ronan Lyons of Daft.ie and Trinity College Dublin, and Daniel McLoughlin of South Dublin County Council
Tom Parlon of the Construction
Industry Federation; Ian Kehoe, editor, The Sunday
Business Post; and Paul Cooke, chief executive, The Sunday Business Post
34322
300400mm²
-4-
Circulation:
Area of Clip:
Page 4 of 12
Sunday Business Post-Property supplement*
Sunday, 6 December 2015
AVE: 37,742.56€
Page:
14,15
Tina-Marie
O’Neill, Property
Simon Leask of the Advisory
Communities Agency
Finance Institute
Editor, The Sunday Business Post
Team for Large Applications
in Britain,
with Natalie
Elphicke
(Atlas), Homes and
of Britain’s
Housing and
34322
300400mm²
-5-
Sunday Business Post-Property supplement*
Sunday, 6 December 2015
AVE: 37,742.56€
Page:
14,15
Circulation:
Area of Clip:
Page 5 of 12
34322
300400mm²
-6-
Sunday Business Post-Property supplement*
Sunday, 6 December 2015
AVE: 37,742.56€
Page:
14,15
Circulation:
Area of Clip:
Page 6 of 12
the scarcity of debt funding for speculativeIndustry Federation, Hubert Fitzpatrick;
Karl Deeter, compliance manager at Irish
development, there is no reason
Mortgage Brokers and another regular
to be concerned considering the strong
Property Plus columnist; Mary Hughes,
volumes of demand for office accommodation,”
president of the Irish Planning Institute,
said Hunt.
Retail and industrial sectors are expected and Ralph Montague, architect and managing
partner at BIM specialists, ArcDox.
to grow as office growth begins to slow.
The panel’s general topic of ‘politics,
“Pat Gunne recently said that by 2018,
policies and property’ honed in on the
there could be an oversupply of office
Irish planning system, the lack of a cohesive
space. But that is scaremongering, and
and effective housing and land
will only happen if all planned building
management strategy and the dual effect
goes ahead,” Hunt said. “However, applying
this has had on increasing costs.
or receiving planning permission
While acknowledging its failings, Mary
doesn’t mean there’s funding to proceed
Hughes defended the planning system.
with a project.”
She called for a more active land management,
A slowdown in the office sector could
particularly in response to the
see anincrease in rents, however. “Office
criticism of Bill Nowlan earlier in the
rents in Dublin are set to reach €55 per
day, in which he said: “No one should be
square foot by the end of the year. That
forced to live in substandard conditions,
could increase next year to €6 6 and peak
at €69 per square foot by 2017. That will
but on the other hand, the cost of providing
an en suite facilities with south facing
put off multinationals from setting up
balconies and basement car parking to
here,” she said.
someone without children on welfare is
“Returns will be strong again next year,
overegging that omelette.
but possibly not as strong as the phenomenal
“Likewise, providing an 800 square
growth we saw over the last
foot apartment for a 25 -year old transient
two-year period, particularly as yield
worker in Google is quite unnecessary,
compression stabilises,” said Hunt.
because he/she spends most of his/her
However, healthy levels of take-up
continue. “Morethanl73,000 square metres time either at work, or in a restaurant or
at recreation.
of lettings were completed in the first
“Such a person’s housing needs are
nine months of 2015, and more stock is
now coming into the pipeline with 21 somewhere to hang their clothes and
sleep. Yetour housing standards are set on
commercial schemes under construction,
the basis of old traditional family models,
eight of which are pre-let,” she said.
and not for the preference of miUennials. ”
Michael Walsh, head of property and
Nowlan also said that with 12 department
construction at legal firm Byrne Wallace,
reviewed the changing legal landscape for
agencies, 26 local authorities and
no planning strategy in place, project
property investment and development
and current legal trends (see adjoining
management is a problem.
panel).
“What are missing are leadership and
vision. We have the labour force and the
building experience. But space standards
have increased,” he said.
“Atthe same time, at least 25 per cent
of the price of a house is tax-related.
The planning system is too localised, and
The final panel discussion of the day included
the director of housing planning
takes far too long to approve applications.”
and development at the Construction
Theproblem with
planning
34322
300400mm²
-7-
Sunday Business Post-Property supplement*
Sunday, 6 December 2015
AVE: 37,742.56€
Page:
14,15
Circulation:
Area of Clip:
Page 7 of 12
34322
300400mm²
From left Tina-Marie O'Neill of The Sunday Business Post, Michael O’Flynn of The O'Flynn Group, Ronan Lyons of Daft.ie and Trinity College Dublin, Daniel
McLoughlin of South Dublin County Council, and Mary Birmingham of Nama at a panel discussion during the Property Summit
Simon Leask of the Advisory
Homes and Communities
Team for Large Applications
Agency
in Britain
(Atlas),
-8-
Sunday Business Post-Property supplement*
Sunday, 6 December 2015
AVE: 37,742.56€
Page:
14,15
Bill Nowlan of WK Nowlan Property and Hibernia Reit; Andrew Nugent
of the Society of Chartered Surveyors in Ireland; and Dr Peter Stafford
of Property Industry Ireland
Marie Hunt of CBRE in conversation with Aidan Flynn of Duff & Phelps
Circulation:
Area of Clip:
Page 8 of 12
34322
300400mm²
-9-
Circulation:
Area of Clip:
Page 9 of 12
Sunday Business Post-Property supplement*
Sunday, 6 December 2015
AVE: 37,742.56€
Page:
14,15
Karl Deeter of Irish Mortgage Brokers makes a point, observed
Fitzpatrick
of the Construction
Industry Federation
Gabriel Fagan, chief economist
of the Central Bank of Ireland
by Hubert
34322
300400mm²
-10-
Sunday Business Post-Property supplement*
Sunday, 6 December 2015
AVE: 37,742.56€
Page:
14,15
David Cantwell
of Hooke & MacDonald
delivers
Circulation:
Area of Clip:
Page 10 of 12
his address
Michael Walsh of ByrneWallace,
Mary Hughes of the Irish Planning Institute and
HRA Planning, Ralph Montague of ArcDox, Hubert Fitzpatrick of the Construction
Industry Federation and Karl Deeter of Irish Mortgage Brokers
34322
300400mm²
-11-
Sunday Business Post-Property supplement*
Sunday, 6 December 2015
AVE: 37,742.56€
Page:
14,15
Circulation:
Area of Clip:
Page 11 of 12
Mary Birmingham of Nama speaks at the Property Summit’s first panel discussion
Key legal trends in
the
property
world
Michael Walsh, a partner and head of
property and construction at Byrne Wallace,
reviewed the changing landscape for property
investment and development and analysed
current legal trends, ffere are some of his key
points
With the main established lenders,
enforcement activity linked to the recession
era appears to be at or close to
its peak. However, some of the private
equity firms who recently bought loans
may only be beginning to work through
the process of asset realisation. It appears
there may be two to three years left to
run in the ‘unravelling’ from the recession
years.
The importance and impact of
the Persona] Insolvency Act
The proposal to amend the personal
insolvency legislation to reduce the
bankruptcy term from three years to 12
months is to be welcomed at a number
of levels. If adopted, it may attract more
debtors to invoke the personal insolvency
process, moving debtors out of the
doldrums and unclogging encumbered
assets. In time, as a result, we should see
34322
300400mm²
-12-
Sunday Business Post-Property supplement*
Sunday, 6 December 2015
AVE: 37,742.56€
Page:
14,15
market to be traded and put to use.
The practicalities of transactions
and their completion
Regulatory and legal developments have
changed aspects of the conveyancing
process in recent years. Two are worth
particular mention because they render
the system more robust and progressive,
although they may have cost implications.
The first relates to the extension in
20U to the entire country of compulsory
registration of unregistered land. The
second is the effective prohibition on a
firm of solicitors acting on both sides of
a conveyancing transaction, even with
appropriate ‘ethical walls’. So, in a typical
commercial lending transaction, there
will be at least three firms of solicitors
involved: one for the seller, the buyer and
the lender.
The importance of access to
info, electronification and the
improvements in this area
Circulation:
Area of Clip:
Page 12 of 12
Often, lawyers rely on judicial interpretation
or the common law or the law
of equity for guidance as to outcome.
Our judicial system builds in an appeals
process for error correction as well
as a process of clarifying and better interpreting
law.
How upward only rent reviews
are still a factor
Upwards only rent reviews have not gone
away. For agreements for lease entered
into from February 28,2010, each lease
with an upward only rent review provision
will be interpreted as providing an
upward or downward review. For earlier
leases, ‘upward only’ provisions function
as they did before.
With an eye to potential change of law
in the future, some leases still contain
‘upward only’ wording. This is permitted
by the current law, but the law dis-applies
its effect.
The importance of the
The establishment of the Property Ser
Construction Contracts Act
vices Regulatory Authority, following
Although enacted in 2013 the Construction
enabling legislation in 2011, is most welcome.
Contracts Act has not yet been commenced;
The business community and the
however, it is expected to come
public alike can now access a Residential
into operation in 2015. It should provide
Property Price Register and Commercial
increased confidence in the construction
Leases Register, two searchable registers
industry by introducing a statutory
with key property information. This will
regime for resolving payment disputes.
help property protagonists to make more
The Act will apply only to contracts entered
informed decisions.
into following its commencement.
I understand that appointments to the
The lost opportunity for capital
Ministerial Panel of Adjudicators are underway.
gains tax reform in Budget 2016
My personal view is that that Budget
2016 was a missed the opportunity in
CGTterms.
I think the tax revenue lost from a
modest reduction in GGT rate (33 per
cent, recently increased from 30 per
cent) could have been made up by an
increase number of disposals, given the
recent recovery in asset values and an
apparent willingness to sell assets at an
acceptable tax rate.
Litigation risk as a cause of
instability
While 1 don’t think litigation risk is a
contributor to market instability per se,
in an ideal world one would have black
and white certainty when it comes to
dispute resolution. However, neither life
nor law are black and white, so that is
not realistic.
Applying the available law to individual
circumstances can be challenging,
particularly where the law is not explicit
on a topic.
34322
300400mm²