The city centre apartment market has had a very eventful year. It started on a high note, followed by the Bacon measures aimed at taking investors out of the running, and ended strongly in one key sector - tax incentive units approaching their termination date.
The spring sales were very busy, with demand for apartments strong from both owner-occupiers and investors. The Government measures introduced in April eliminating interest relief on borrowings by investors, while helpful to the suburban owner-occupier market, had the opposite effect in the city centre. The private rental market was destabilised and many new residential schemes were shelved, leading to a shortage of supply for both purchasers and tenants, with the knock-on effect of soaring rents.
There was hectic building activity in 1998 in order to get buildings in tax incentive designated areas completed before the 31st December cut-off-date - extended in the Budget to April 30th, 1999. There was very strong demand for the dwindling supply of Section 23 apartments and this is set to continue. Prices rose by over 25 per cent in the last year, mainly in the first quarter, and a rise of around 10 per cent can be anticipated in the coming year.
Apartments have been getting bigger and there is a continuing noticeable improvement in standards of design, construction and facilities. The industry is improving its product. A large number of city schemes are held up by unnecessary planning delays. Architecturally, some of these are world class. If and when they get through the planning and appeals minefield, Dublin is set for an era of architectural renaissance. This will bring tall buildings to key landmark sites in the docklands and will produce buildings of exceptional design quality throughout the city.
Temple Bar will be a focus of attention in the year ahead, as Temple Bar Properties unveils its piece de resistance - the 190 apartments in the West End, superbly designed by five of the top Irish architectural firms - with the benefit of owner-occupier and investor incentives which were extended in the Budget in this area up to the December 31st, 1999.
Other urban regeneration projects will progress strongly in the year ahead, including the Smithfield area, the improvements to O' Connell Street and the commencement of the conference centre and certain other developments in the Docklands, IFSC and some of the most derelict parts of the north city.
Regrettably, the supply of apartments in the city centre will fall in 1999, just as it did in the last 12 months when it came down by 20 per cent to just over 2,000 units. When the current crop of Section 23 developments are completed, the supply position will deteriorate. This is bad news for people who want to buy or rent apartments in the city. The scarcity will keep pressure on prices - but more particularly on rents.
The Government could solve this problem by introducing interest relief on borrowings for small investors in a targeted manner in traditional letting areas. The city could suffer from the emerging official policy of moving industrial and residential activity away from Dublin. Surely a twin-tracked approach would be more prudent - encourage city centre residential development and at the same time encourage provincial activity. Dublin is a capital city of Europe and any attempt to stifle its natural growth and renewal is fraught with danger. Inward investment could be jeopardised by this approach and by the decreasing stock of top quality rental accommodation for incoming staff.
The consultants appointed by the Government will give their recommendations on residential densities in January. They may propose increased densities in the suburbs but worries exist about how they will treat city densities. They need to be significantly increased if the usage of existing infrastructure and services is to be maximised. However, this is being resisted in some quarters.
First-time buyers have to get a better deal and initiatives can be expected to help them. The outdated lending restriction of 2.5 times a person's salary is keeping most of them off the housing ladder. They are often paying more in rental than their mortgage repayments would be. The criteria should be based on ability to repay.
The increasingly high building costs are forcing home prices out of the reach of many first-time buyers. Skills shortages and wage demands are making it increasingly difficult for builders to provide affordable homes. Added to this are the huge construction costs associated with the building of city apartments - particularly if the units are larger and the structures taller than previously.
The outlook for the year ahead in the city is, therefore, mixed. This need not be the case, but when artificial measures are introduced which interfere with the free market, then the consequences are inevitable. Demand will remain strong in Dublin but supply will not match it.
Back in 1990, when the heart of Dublin was a wasteland, people with courage and vision started to do something about it, beginning with the re-building of a major part of Gardiner Street and then the Quays and Christchurch - but the same people are now being discouraged from completing the rejuvenation of the city. Obstacles are being placed in the way of innovative renewal projects.
Sadly, the people who are most affected by this policy are those wishing to aspire to home ownership at an affordable price and those who, by necessity or choice, need an apartment to rent, also at an affordable level.
Ken MacDonald is Managing Director of Hooke & MacDonald, estate agents specialising in the sale of apartments
