Ireland’s “most pressing issue”…
The lack of housing.
Economist Philip O’Sullivan is reported as saying that tens of thousands more houses need to be completed annually to meet current demand. Why is it that there’s such a shortage of homes?
It is on schedule right now that 21,500 homes were built this year and 24,000 for next year. Though, a good number in the race to meet demand needs, it is nothing near the needed 30-50,000 homes being built to sufficiently meet the demand.
The society of chartered survey of Ireland has predicted that this housing crisis could continue for another 10 years. Paul O’donoghue, a writer for Fora sad that drastic measures need to be taken immediately to push for the development of homes.
With too little of homes available to meet demand, it is the law of supply and demand that says the price of the homes will increase as well. Equilibrium is expected to be reached by 2026.
This, falling in line with the prediction of the housing crisis to continue for nearly another decade.
And that is exactly what is being seen in Dublin, with a 9% increase of the average house price in just the past year. It has even predicted that housing costs in Dublin city will continue to increase another 8% in the year coming.
How is it possible to slow down the fast increasing housing prices with the slowly increasing construction of homes? Unless the demand for new homes suddenly takes a hit, it is likely to just not be feasible.
Some economists have begun recommending that VAT is reduced from 13.5% to 0% in the building sector, as many are just finding it too expensive to build. Typical costs of builders to construct a single house in the Dublin area is 300,000 euro. When adding in all taxes and costs, the taxation on a new home could be close to 18 percent of the purchase price.
This, signaling that a decrease in the VAT could strongly influence the building of more homes and result in strengthening the economy and housing market as a whole. By nearly saving 18% on the construction of homes, it is suggested that builders would begin significantly increasing their production as it would be made much more worthwhile for them.
Recently, SCSI announced that the capital gains tax exemption introduced in 2012 could be partially at fault for causing some of the housing problems.
This exemption requires that investors hold onto the building or land for seven years. Seven years before builders are able to sell, and then they are due to receive their tax relief.
This exemption was originally passed with the goal to stimulate the economy but now could be the cause of many new developments being held onto, increasing the housing shortage.
In some cases, the houses being held onto under this legislation may not be released until 2019. It is then we should begin to see if this had a strong impact on the housing shortage and where the housing market can go from there.