ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE .

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ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTERAnnual ResidentialMarket ReportReview & Outlook 2019Rest of1

KeyHighlightsSALESNational house prices toincrease by 4% in Dublin in2019, down from an averageof 8% last year.Rest of Leinster house prices to increase by 4%in 2019 compared to an 8% average 12 monthsago.80% of agents reported an increase in Vendorprice expectations, down from 96% in 12months.The ageing of the population will change theprofile of buyers and trading-down is likely tobecome a greater part of the market.In addition, the falling numbers in the key housebuying age category (25 – 34), could reduce thenumber of potential buyers in the market.40% of agents reported an increase in marketactivity, down considerably from the 82%reported 12 months previous.RENTSNational average rents areexpected to increase by 5%Rest of Leinster average rents expected to increaseby 6%An increase in new builds to market was rankednumber 1 by 33% of respondents and ranked inthe top 3 by 68% of respondents as a key factorimpacting on the market, landlords exiting therental sector, ranked in the top three by 59% ofrespondents and an increase in the availabilityof finance ranked in the top three by 54% ofrespondents.78% of agents across Ireland reported an increase intenant demand, which remains relatively consistantwith last year’s 81%.

I am delighted to launch our 36th AnnualResidential Property Review & OutlookReport, compiled on the expertise of ourauctioneering & estate agency membersacross the country. 2018 was a busy yearfor many, although not evenly experiencedacross the regions and we are encouragedto hear from members that activity has andis continuing to increase year-on-year.The Irish economy continued to grow strongly in 2018.Most of the key economic indicators which impact theresidential housing market point to continued positiveperformance in the sector. There are clear challengesin 2019 and, apart from obvious ones like Brexit, thethreat of higher interest rates, increasing mortgagepayments and general affordability may become afactor sooner rather than later.Nonetheless, the Central Bank, ESRI and othercommentators have optimistic outlooks for economicperformance of c. 4.5% GDP in 2019. All projections,however, are based on the assumption (or hope!)that an acceptable deal between the UK and EU willbe agreed to avoid a hard Brexit, as our economicwellbeing is highly dependent on a favourableoutcome.The Central Bank’s mortgage lending rules have hadthe intended effect of containing property prices rises.Although new housing delivery increased, as viabilityimproved in more locations, new apartment andhouse delivery costs remain challenging, with tenderprice inflation a significant factor for the market. Wehope that newly formed Land Development Agencywill quickly increase the supply of State-owned landto the market to support supply at affordable levels.pleased to note that Vacant Housing Officers have beenappointed in many local authority areas to streamlinethe development process.The residential rental sector has experienced furtherrent inflation in 2018. Our members accuratelypredicted the annual rent inflation rates as reported bythe RTB of 5.4% for existing tenancies and 8% for newtenancies. The SCSI prediction for 2019 is that rentinflation is expected to be 6% in the Rest of Leinsterdespite a raft of regulatory changes.Attracting and retaining skilled staff has been anongoing challenge for businesses. It’s encouragingto see that the increased number of school-leaversconsidering property as a career choice. The CAOpoints for most third-level property courses are on therise and the prospects for those new entrants looksvery positive. In our ‘Employment Opportunitiesand Skills Requirements 2018 Report’, the demandfor qualified property professionals is consideredto remain high, even in periods of lower economicgrowth, due to the continued undersupply of graduatesduring the downturn and the increased demand forprofessional services from corporate, institutional andstatutory agencies. Encouragingly, many studentsidentify the achievement of chartered status as theirgoal, with global recognition as an additional benefit.I would like to thank our members for taking thetime to complete our survey and provide their expertinsights, which have proved uncannily prescient inprevious years. We appreciate your continued supportand commitment during 2018 and very much lookforward to working with you in 2019.Yours SincerelyÁINE MYLERDIRECTOR GENERALt:We engaged extensively with policymakers in 2018on how to better use existing buildings for residentialuse and we are pleased to see these proposals beingput into action. The last Census report over 2 millionhousing units in Ireland, many of which are unusedor underutilised. So while new supply is important inmany locations, finding better ways to use our existingstock can also improve supply, rejuvenate areas andrevitalise communities. The Government’s recentreport - Bringing back homes – Manual for the reuseof Existing buildings – outlines what supports are nowavailable to undertake this much needed renewal. Wepublished our ‘Rejuvenation of Irelands Small TownCentres’ report last year, and strongly recommendedthe reuse of existing buildings on high streets totackle the decline of our towns and villages. We are 353 (0)1 644 5500

NationalEconomicTrends

vUnemployment5.3%December 20182,273.2Down from(000)EmploymentQ3 201816%January 20121,863.2Mortgage Approvals*Value(000)Up fromQ1 2012MortgageDrawdowns* Value 8.46 bDec 17 - Nov 18 7.04 bQ4 17 - Q3 18Up fromUp from 2.37 bYear 2012 2.09 bYear 2011* House Purchase onlyConsumer ExpenditureVAT 25,542 bQ3 2018 14.1 bYear 2018Up fromUp from 21,781 bQ1 2012House Completions9.7 bResidential Prices(Index)Year 201117,161Q4 17 - Q3 18107.9October 2018Up fromUp from4,575Year 201358.7March 2013

PopulationTrends in Restof Leinster

8ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTERPOPULATION TRENDS INREST OF LEINSTERThe population of thecombined Mid-East,Midlands and South-Eastregions grew by over 50,000between 2011 and 2016 (4%).This rate of growth wasamong the highest in thecountry.9ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTERCHANGING AGE PROFILEOF POPULATION IN 2016The National Planning Framework publishedin February 2018, projects a populationgrowth for these regions combined from2016 to 2040 of approximately 246,000. Thisis based on an assumption that the nationalpopulation growth is shared 50:50 betweenthe East and Midlands Regions and the restof the country. Based on this projection andon the expected household size, it suggests asignificant demand for housing in the region.Chart 2 shows the changing age profile ofthe three regions combined population. It isclear that the population, similar to the restof the country is ageing. The proportion ofthe population in the key house buying ageof 25 -34 decreased by over 15%, while thenext younger age group of 15 -24 year olds,showed only marginal growth.A noteworthy feature of the population changein the 2011 – 2016 period is the significant ageingof the population, with the greatest growthtaking place on the over 65s and over 80s. Thiswill give rise to a changing profile of buyers astrading-down is likely to become a greater partof the market and the need for smaller but moreage-friendly houses will impact on the type ofsupply required.Chart 2– Rest of Leinster Population: Percentage change by Age Group 2011-16Chart 1 – Expected Population (million) growth in Rest of 1.00201120162040(NPF Projection)*** Rest of Leinster consists of the following regions - Mid-East, Midlands and South-East.** Projection by ESRI assuming the national population growth is shared equally between the Eastern and Midlands regions and the rest ofthe country. Projection is based on the old Regional Authority boundaries so data is not fully compatible with Chart 1-15.0%0-14-15.4-20.0%Source: CSO * Mid-East, Midlands and South-East regions15-2425-3935-4950-6465-7980

0110ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTEREMPLOYMENT ANDUNEMPLOYMENTLEVEL AND TRENDUnemployment in the Rest of Leinsterfell by approximately 7,000 in the lastyear, a fall from 7.4% to 6.9% of thelabour force. Employment increasedby 15,000 over the same period.Unemployment has fallen by 64,000 inthe past 6 years while employment hasgrown by over 100,000 in that time.11ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTERChart 4 - Unemployment rate – Rest of Leinster Q1 2012 - Q3 2018Unemployment Rate (%)20.0%18.0%16.0%14.0%12.0%10.0%8.0%Chart 3 Employment & Unemployment –Rest of Leinster Q3 2012 - Q3 2018Employed (000)Unemployed (000)65504710688705335415675876066256412012 Q32013 Q32014 Q32015 Q32016 Q32017 Q32018 Q31116005004003002001000Source: 5032015012014032014012013032013012012030.0%Source: CSO8007006.0%201201The unemploymentrate has fallen from17.2% in Q3 2012 to6.9% in Q3 2018.

12ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTERRENTAL LEVELAND TRENDAlmost all of the locations shown haveexperienced average rental growthin the 5 year period in excess of 20%,with the highest of those shown beingNavan, Co. Meath at 44%Chart 5 - Rest of Leinster Average Rent ( ) for 3-bed semi-detached house 2012 and 2017: Selected avan,MeathTullamore,Athlone, Enniscorthy,OffalyWestmeath WexfordWicklowTownSource: RTB/CSOHOUSE STARTS– LEVEL ANDTRENDThe level of housing starts has grownby almost 250% in the past threeyears, although this was from a lowbase in 2015Chart 6 House Starts Rest of LeinsterHousing 020152016Source: Department of Housing, Planning and Local Government20172018*ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTER13

14ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTERANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTEROur MarketSurveyResults15

16ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTEROUR MARKET SURVEYRESULTS17ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTERVENDOR PRICEEXPECTATIONSChart 8 – Vendor Price Expectations in 2018,Rest of LeinsterDecrreasedOver 80% of respondents indicated thatvendor price expectations had increased in2018 with just 4% reporting that they haddecreased and the remainder indicating thatthey had stayed the same.MARKETACTIVITYRemainedthe same4.0%14.7%81.3%Increased0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0%An equal proportion(40% ) of respondentsreport that activityincreased and remainedstatic in 2018. It isnoteworthy that thecombined percentage ofrespondents reportingstatic or fallen activitylevels (almost 60%)is significantly higherthan this reportingan increase in activitylevels. This maysuggest some slowingin the market.Chart 7 Level of activity in 2018 reported bySCSI agents, Rest of LeinsterIncreasedRemained the samePRICEEXPECTATIONS2019Decreased17%Over 60% of respondents expect prices torise in 2019, with close to 20% expectingprices to fall.The maximum expected price change by anyrespondent is 10%, while the largest expectedprice fall by any respondent is also 10%.41%Chart 9 - Price expectations 2019 - Percent of respondents expecting prices to;Fall18.8%42%17.4%Stay the 0%80.0%

18ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTERSECOND-HANDPROPERTIES – EXPECTEDPRICE CHANGE 2019EXPECTEDRELATIONSHIPBETWEEN SUPPLYAND DEMAND:SECOND-HANDPROPERTIESEach of the identified segments of the secondhand residential market are expected to showprice rises in 2019, ranging from 2% for 4/5bed detached houses to 4% for 3-bed semidetached houses and 2-bed townhousesChart 10 – Average Expected Price change 2019: 2nd-hand units2 bed apartment60.0%3%1 bed apartment4 bed semi3 bed semi4%Less than demand4%2 bed townhouse22.533.520.0%10.0%4%3 bed townhouse1.5Equal to demand30.0%3%1Greater than demand40.0%2%0.5In the other 4 segments, the favoured expectationwas that demand would exceed supply but in nomarket segments was this an overwhelming view.50.0%3%0The rise in residential prices in recent yearshas been, in part, attributed to an imbalanceof supply and demand. The survey responseswere mixed with more respondents expectingthat demand and supply would be inequilibrium in three of the market segmentsshownChart 11 – Expected relationship between supply and demand 2019: 2nd hand units.Percentage of respondents expecting that supply will be:Average expected price change 2019: 2nd hand units4/5 bed detached19ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTER40.0%2 bedtownhouse3 bedtownhouse3 bed semi4 bed semi4/5 beddetached1 bedapartment2 bedapartment

20ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTERRANKING OF FACTORSLIKELY TO INFLUENCESUPPLY OF 2ND-HANDUNITS IN 2019The three most important factors likelyto impact on the supply of 2nd-handresidential units in 2019 was, according tothe survey respondents, an increase in newbuilds to market which was ranked number1 by 33% of respondents and ranked in theANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTER21TIME TAKEN TOSELL PROPERTIEStop 3 by 68% of respondents, landlordsexiting the rental sector, ranked in thetop three by 59% of respondents andan increase in the availability of financeranked in the top three by 54% ofrespondentsThe average time taken tosell a property from receipt ofinstructions to closure of sale isa little over five months.Chart 12 – Percentage of respondents ranking of factors likely to influence supply of 2nd-hand units in 2019Increase in new builds to marketFirst-time buyers tax rebate (Help to Buy)Increase in availability of financeProperties emerging from negative equityLandlords exiting the rental sectorAn increase in property valuesOtherCrossfintan, Ballask, Carne Co. Wexford.Sold in January 2019 by Menapia 30.0%20.0%10.0%33.0%27.0%13.5%0.0%RANKED AS NO.1 FACTORRANKED IN TOP 3 FACTORS

22ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTERREASONS WHYPROPERTIESMAY NOT SELLThe single most important reason forfailure of properties to sell is Vendor’s priceexpectations are not met ranked first by46% of respondents and in the top 3 by83%. Concern following building surveywas ranked first by 23% of respondentsand in the top 3 by 74% of respondents.Mortgage issues was also ranked in thetop 3 by 73% of respondents, and toppedranked by 23%.23ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTERNEWPROPERTIES –EXPECTED PRICECHANGE 2019Chart 14 – Average Expected Price Change 2019 - New units2 bed apartmentChart 13 - Reasons why property may not sell1 bed apartmentConcern following building surveyPurchaser finding another propertyVendor decides not to sell forreasons other than price4%3 bed semi83.3%74.2%5%4 bed semiVendor’s price expectations are not met80.0%5%4/5 bed detachedMortgage issues90.0%6%72.7%70.0%4%3 bed townhouse5%2 bed 0.0%10.0%0.0%RANKED AS NO.1 FACTORRANKED IN TOP 3 FACTORS1.02.03.04.05.06.07.0

24ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF UPPLY ANDDEMANDIn all segments of the market, except 4/5bed detached houses, respondents expectdemand to exceed supply. The percentage ofrespondents expecting demand to be greaterthan supply ranges from 45% for 3-bedsemi-detached houses to 51% for 2-bedtownhouses.Chart 15 - Expected relationship between supply and demand 2019: New units.Percentage of respondents expecting that supply will be:Greater than demandEqual to demandLess than 01002 bedtownhouse3 bedtownhouse3 bed semi4 bed semi4/5 beddetached1 bedapartment2 bedapartmentANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTERMARKETING OFNEW HOUSINGSCHEMES25Forty five percentof agents expectto market newhousing schemesin 2019. Of thosethat expect tomarket newschemes, 47%expect to marketbetween 21 and 50units. Seventeenpercent expect tomarket more than100 units.

26ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTERRESIDENTIALRENTSRents are expected to rise by an average of over6% across all segments of the market, rangingfrom 6% for 4/5-bed detached houses to 7% for3-bed semi-detached houses.27ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTEREXPECTED RELATIONSHIP BETWEENSUPPLY OF AND DEMAND FOR RENTALPROPERTIES IN 2019Chart 16 - Average Expected % Change in Rent 2019In three of the four identified segments, justover 80% of respondents expect demandto exceed supply. In the other segment,1-bed apartment, 78% of respondents expectdemand to exceed supplyAverage expected % change in rent 20194/5 bed detached64 bed semi6Chart 17 - Expected relationship between supply and demand 2019: Rental Properties.Percentage of respondents expecting that supply will be:73 bed semiLess then demand73 bed town houses1 bed apartment5.45.65.86.080.6%80.6%2 bed apartment65.280.0%3 bed semi62 bed apartmentGreater than demand4 bed semi62 bed town housesEqual to demand6.277.8%1 bed 60.0%70.0%80.0%90.0%

28ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTERACTIVITYINDICATORS INTHE RENTALSECTOROver three-quarters of respondents reportan increase in tenant demand in 2018. Thisreflects the supply and also the affordabilityproblems that many people face in relation tohouse purchase, partly based on the CentralBank lending constraints.Over 50% of respondents report a decrease inlandlord instructions. As with other regions this mayreflect the reported trend of landlords exiting therental marketChart 18 – Activity Indicators: Change over past 12 monthsPercentage of respondents reporting that activity 7.1%30.0%19.4%20.0%10.0%0.0%8.6%2.8%TENANT DEMANDLANDLORD INSTRUCTIONSANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTER29

30ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTERANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTERImpact ofGovernmentInterventionin the market31

32ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTERIMPACT OF GOVERNMENTINTERVENTION IN THEMARKETChart 19 - Impact of Government intervention in the market:Percentage of respondents indicating:100.0%80.0%60.0%The Government introducedRent Pressure Zones (RPZs)and maximum percentageincreases in rent in December2016. The dominant view (56%of respondents) was that whilerents have continued to rise,the impact of the Governmentintervention has been to slowdown the rate of increase.33ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF O IMPACTRATE OF INCREASEIN RENTS HASSLOWED DOWNRENTS HAVEFALLENRENTS HAVESTABILISED

34ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTERANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTERKey issuesimpacting theMarket35

36ANNUAL RESIDENTIAL MARKET REPORT REVIEW & OUTLOOK 2019 THE REST OF LEINSTER

10 ANNUAL RESIDENTIAL MARKET REPORT REVIEW OTLOO 201 THE REST OF LEINSTER ANNUAL RESIDENTIAL MARKET REPORT REVIEW OTLOO 201 THE REST OF LEINSTER 11 800 700 600 500 400 300 200 100 0 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Chart 3 Employment & Unemployment –Rest of Leinster Q3 2012 - Q3 2018 111

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