[…] « Construction, not rent control, the solution to the housing crisis […]
Kevin Timoney
,
This is an interesting analysis of factors affecting construction profitability. I fully concur with the case made here against rent controls.
Maybe the main reason for the slow recovery in construction is less related to cost/revenue factors, and more so to the extremely low risk appetite and market participation by construction firms in recent years? In light of this friction and the sustained fall in prices that lasted until mid-2013, some lag in return to activity seems reasonable, notwithstanding the less recent return to growth in rents.
I also wonder whether labour costs are a significant deterrant in these circumstances. The comparison with West Germany doesn’t tell us much given the price level in Ireland is higher; in real terms the difference is much smaller.
The comparison with disposable income doesn’t account for the impact of significant tax increases over the same period. EHECS (and CPI) data show that nominal (real) average hourly earnings in construction fell by 9.9 (11.8) per cent between 2008 and 2011; to 2013 they remain 7.4 (11.5) per cent lower.
Regulatory changes would be welcome provided they are framed with a view to medium-term goals. When one considers the strengthening signals from the sector (e.g. the last Ulster Bank Construction PMI), the short-term prospects for recovery seems reasonably strong.
Sporthog
,
Ronan,
Good analysis… however you are leaving out one important point.
Costs for landlords have increased a lot over the last number of years… some of which are listed below.
PRTB charge
LPT,
Govt Levies on Insurance
NPPR (discontinued)
Household Charge (discontinued)
25% of Mortgage interest not allowed
Variable mortgage rates increased now at 5-6%
Bank charges are up.
VAT increased to 23%.
Coming next..
Water charges,
Broadcasting charge
The Irish Media/ Political Establishment will never understand that the more charges which are put onto Landlords… the higher rents have to go to break even.
We are talking about basic addition and subtraction economics here… not rocket science… and yet no understanding of this fact seems to be visible in Ireland.
My estimates of costs excluding mortgage repayment is 4000 euro / annum just to put a 2 bed apartment on the market for rental.
[…] suggests restrictions on the supply of credit to builders as well as a raft of cost-increasing building regulations are at least partly responsible for this lack of supply […]
Rent allowance filters and the curse of good intentions | Ronan Lyons ,
[…] « Construction, not rent control, the solution to the housing crisis […]
Kevin Timoney ,
This is an interesting analysis of factors affecting construction profitability. I fully concur with the case made here against rent controls.
Maybe the main reason for the slow recovery in construction is less related to cost/revenue factors, and more so to the extremely low risk appetite and market participation by construction firms in recent years? In light of this friction and the sustained fall in prices that lasted until mid-2013, some lag in return to activity seems reasonable, notwithstanding the less recent return to growth in rents.
I also wonder whether labour costs are a significant deterrant in these circumstances. The comparison with West Germany doesn’t tell us much given the price level in Ireland is higher; in real terms the difference is much smaller.
The comparison with disposable income doesn’t account for the impact of significant tax increases over the same period. EHECS (and CPI) data show that nominal (real) average hourly earnings in construction fell by 9.9 (11.8) per cent between 2008 and 2011; to 2013 they remain 7.4 (11.5) per cent lower.
Regulatory changes would be welcome provided they are framed with a view to medium-term goals. When one considers the strengthening signals from the sector (e.g. the last Ulster Bank Construction PMI), the short-term prospects for recovery seems reasonably strong.
Sporthog ,
Ronan,
Good analysis… however you are leaving out one important point.
Costs for landlords have increased a lot over the last number of years… some of which are listed below.
PRTB charge
LPT,
Govt Levies on Insurance
NPPR (discontinued)
Household Charge (discontinued)
25% of Mortgage interest not allowed
Variable mortgage rates increased now at 5-6%
Bank charges are up.
VAT increased to 23%.
Coming next..
Water charges,
Broadcasting charge
The Irish Media/ Political Establishment will never understand that the more charges which are put onto Landlords… the higher rents have to go to break even.
We are talking about basic addition and subtraction economics here… not rocket science… and yet no understanding of this fact seems to be visible in Ireland.
My estimates of costs excluding mortgage repayment is 4000 euro / annum just to put a 2 bed apartment on the market for rental.
The Central Bank and the Irish Property Market | Karl Whelan ,
[…] suggests restrictions on the supply of credit to builders as well as a raft of cost-increasing building regulations are at least partly responsible for this lack of supply […]