Taylor Scott International News
Last year is generally regarded as having been one of growth for the residential property market in Ireland but a new analysis shows how Dublin experienced a slowdown towards the end of 2015. Overall sales increased by 10% compared to 2014 but a closer examination of the detailed monthly data from real estate firm Savills reveals a very different picture. Year on year growth in housing transactions fell continuously throughout 2015, slipping from a positive 75% in January to an outright decline of 18% in December. The report explains that this reflects two major policy changes which impacted on demand. Firstly, generous Capital Gains Tax (CGT) incentives for investors were removed on 31 December 2014. As this deadline approached investors rushed to complete deals, causing transactions to spike in late 2014 and early 2015 as some deals carried into the New Year. After that, however, investor numbers retreated to a more normalised level. The second important policy change was the introduction of new mortgage lending restrictions by the Central Bank. Following a preliminary announcement in October 2014 buyers rushed to secure old style loan approvals in late 2014 and the opening weeks of 2015. These were deployed in the first half of 2015, boosting sales. ‘However the true impact of the macro-prudential rules began to emerge in the second half of 2015 as some people were priced out by restrictions on how much they could borrow. Indeed, these dynamics can be seen in the regional pattern of transactions growth,’ the report says. Because investors were more focused on Dublin, this market saw the biggest uplift from the impending CGT deadline in late 2014 and early 2015. Subsequently, however, Dublin suffered the largest slowdown in sales as the frontloading of investment deals left a vacuum in 2015. ‘Similarly, because absolute price levels are higher in Dublin, the Central Bank rules are more binding in this location. This caused transactions to slow more sharply in Dublin than elsewhere when the rules impacted later in the year,’ the report adds. The analysis report also shows that the rate of house price growth in Dublin slowed quite dramatically during 2015 from 21.6% in January to just 2.6% by the end of the year. It says that part of this was due to base effects as the average Dublin property is now €87,000 more expensive than at the low point of the market in the fourth quarter of 2012. ‘Therefore the same absolute price increase is now gradually leading to a smaller and smaller percentage change,’ it explains. But part of the slowdown is also attributable to removal of the CGT incentive. ‘As investors had been more focused on Dublin than elsewhere, withdrawal of this tax break created a bigger vacuum in the capital,’ the report points out. But the most important factor has been the Central Bank mortgage rules. The average property in Dublin costs around 54% more than that outside the capital. ‘Without a… Taylor Scott International
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