Savills says no need for incentives on property purchase

Property agents Savills has cautioned the Government against providing supports or incentives for investor landlords in a bid to boost the supply of rental accommodation.

The group’s director of research, John McCartney, said there was no evidence that investment in the market here was being choked off by higher costs and rent controls, a claim made by rival agencies including Sherry Fitzgerald.

While a certain cohort of mortgage-financed landlords may have been “crowded out” by cash investors, Dr McCartney said there continued to be a strong inflow of investment into the sector, which is increasing the supply of rental accommodation.

This was evidenced by recent data from the Central Statistics Office, which showed the number people and households renting privately was continuing to rise.

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Dr McCartney said the data showed “that the average size of rental households hasn’t been increasing, which must mean there are more rental units in the system” . It was, therefore, questionable whether taxpayers’ money should be used to provide State supports for investors, including mortgage-financed landlords.

Rental property

“If their failure was causing a net reduction in the supply of rental property such a policy might be justified”, but there is no evidence of this, Dr McCartney said.

The Government has been considering the introduction of incentives to boost investment in the property market amid claims that out-of-pocket landlords were being forced to sell properties to owner-occupiers, which was reducing the supply of rental accommodation and driving up rents.

Marian Finnegan, chief economist with Sherry FitzGerald, said recently that the exodus of investors from the market was having "a debilitating impact on the rental sector".

However, Dr McCartney said the real driver of rents was the mismatch between supply and demand. He expects rents to rise by 5-6 per cent a year in Dublin until at least the end of 2019, and by 7.2 per cent across the State.

Dr McCartney said the continued activity of cash investors in the Irish property market explained why house prices continued to rise in an era of restricted mortgage lending.

Stable performance

His comments come as recently filed accounts for Savills Residential show the firm recorded a loss after-tax for 2016 of €379,478, down from €416,654 the previous year.

The agency said it had a “stable performance in a very competitive property market” with turnover up €200,000 to €1.8 million. The company employed 20 people and spent €1.3 million on employee costs, which was up from €1.2 million in 2015.

The results come on the back of recently-published accounts filed for Savills Commercial, which saw pre-tax profits fall in that business by 18 per cent from €5.9 million to €4.8 million. The drop in profit followed a 14.6 per cent drop in revenues from €32.6 million to €27.8 million. Numbers employed increased in 2016, going from 219 to 222.