Cushman & Wakefield and Sherry FitzGerald cautiously welcomed some of the measures introduced in Budget 2019. However, Marian Finnegan, Chief Economist said; "Despite the severity of the housing crisis, Budget 2019 was relatively benign from a property perspective and disappointingly it failed to address key issues relating to the residential rental market."
One of the most significant announcements in today’s Budget, with regard to property, was the increase in the rate mortgage interest relief from 80% to 100% for private investors. The effect of this measure will only increase the net yield of a private investor by less than 50 basis points and although positive, it is not significant enough to prevent the outflow of private investors from the market.
In the year to date, research by Sherry FitzGerald reveals a continued outflow of investors from the buy to let market. Reflecting the trends of recent years, 35% of vendors were selling their investment properties, while investors entering the market represented only 18% of purchasers. This trend continues to deepen the supply side crisis in the lettings market, and it is disappointing that this has not been addressed in today’s Budget measures.
On a positive note, Minister Donohoe announced the Government’s intention to increase the capital expenditure on social housing, which is to be welcomed. He announced the allocation of €1.25 billion for the delivery of 10,000 new social homes in 2019. These are proposed to be delivered through a combination of construction, acquisition and leasing.
The Minister also allocated an extra €121 million for the Housing Assistance Payment (HAP) in 2019 to provide an additional 16,760 new tenancies in 2019.
Further announcements include the establishment of a €310 million Serviced Sites Fund to support local authorities in bringing forward lands for more affordable housing over the next three years.
Disappointingly, there was no mention of the extension of the current Help to Buy scheme, which has positively enhanced the supply of new homes and is due to expire at the end of 2019.
Notably, also absent from today’s announcement was any reference to the much-discussed increase in stamp duty for private rental properties. There had been much speculation that this rate would increase in line with the commercial stamp duty rate. Other measures such as the ‘Help to Buy II", equally did not feature.
Finally, as predicted the VAT rate applicable to the leisure sector has increased from 9% to 13.5%. This is anticipated to yield €466 million in revenue to the economy.
Commenting on these measures, Ms. Finnegan said; "The announcements in relation to social and affordable housing are positive and a step in the right direction to increase stock levels in these vital sectors. However, the Government measures in relation to the private rental sector are disappointing. Thousands of private investors are leaving the market each year due to increased costs and regulation.. The initiatives announced today will only improve net yields by approximately 50 basis points, and as such are unlikely to have any significant impact on the available stock of rental property."