Housing for All and National Development Plan are a step in the right direction but planning reform will determine their success, urges property firm Savills.
Turnover in the Irish development land market totalled €184m in Q3 2021, bringing year-to-date turnover to €378m, according to new data from Savills.
This represents a decline of 19pc compared to the quarterly average of €227m witnessed over the last five years.
“It has become increasingly clear that one of the key constraints on construction in Ireland is its inadequate planning system”
Crucially, however, the market appears to be turning a corner in its recovery from the pandemic with turnover increasing by 86pc compared to the €100m that traded in Q2 2021.
Looking ahead, there are several high-profile sales currently on the market expected to sign in the final quarter, which would add additional turnover of between €150m and €200m to the full-year sales volumes. Demand for development land remains strong and we expect sites coming to the market to see strong interest from developers as we move into 2022.
According to Savills, the largest deal of the quarter was Eagle Street Partners’ purchase of the Castleforbes Business Park site for €78.5m from Glenveagh. The site has the planning for 702 residential apartments and 219 hotel rooms.
The second-largest deal of the quarter was 1-6 City Quay, which was sold to KC Capital for approximately €40.5m. The bidding process had several motivated participants involved which pushed the final price well above the guide price of €35m. Crucially, the sale of this site demonstrates that appetite for commercial development in the CBD is still robust as we emerge from the pandemic.
Other notable deals that transacted in Q3 include Millennium Park in Naas, 92/93 St. Stephen’s Green, Mountview in Citywest, and Lands at Inchinappa in Ashford, Co. Wickow which sold for a combined total of approximately €40.0m.
While the resurgent housing market in 2021 has continued to drive bids for housing sites both with and without planning, demand remains strongest for sites with full planning permission. Appetite amongst developers remains strong, however, with some 60pc of the land trading this quarter expected to have residential use once developed.
“It has become increasingly clear that one of the key constraints on construction in Ireland is its inadequate planning system,” said John Swarbrigg, director with Savills Development, Consulting and Agency team.
“Housing developments in Ireland have been subject to a wave of judicial review challenges which has inevitably harmed delivery rates of residential units.”
Swarbrigg said that while the phasing out of the SHD (Strategic Housing Developments) system is a step in the right direction, he would argue that the new arrangements being introduced for ‘Large-Scale Residential Developments’ (LSRDs’) do not go far enough.
“As it stands, the system will comprise of three stages, consisting of a pre-application consultation stage, a planning application stage, and an appeals stage. This system is likely to be dogged by the same issues as its predecessor, leaving developers vulnerable to appeals while not going far enough to prevent the ease at which the current judicial review process can be availed of.
“We believe that changing this is critical to unlocking the supply promised by the Government under the ‘Housing for All’ plan. An efficient planning system is crucial to a functional housing market, and we welcome the news that the system will be going under review by the Attorney General as part of the recently announced National Development Plan”.
“Looking more broadly at the National Development Plan, the €165bn worth of spending and development that the Government has committed to is a positive affirmation of the Government’s strategy of developing the capital, regional cities and towns. The development land market stands to gain greatly from the widespread infrastructure investment that has been promised, with improved transport links making commuting more viable in many locations.
“Some €12bn has been set aside for new public transport infrastructure with a further €5.8bn capital deployment for new roads. In both instances, this should improve the connectivity of rural areas. Similarly, an expansion of the Luas in Dublin and upgrades to the train network in Cork will make commuter belt areas more attractive to potential commuters.”
Swarbrigg concluded that the plan reaffirms the Government’s commitments made under the ‘Housing for All’ plan with an additional 6,000 affordable homes to be built each year. Further investment of €6bn into Irish Water over the lifetime of the strategy is also being committed to. ]
“This will help to unlock development sites in more rural areas and thereby increase the viability of sites outside of Dublin. One notable risk that has been identified in the plan is the crowding out of private investment and construction. The NDP is set to bring public investment to 5pc of GNI* (Adjusted Gross National Income), which is well above the EU average of 3pc of GDP.
“With inflationary pressures already clearly present in the Irish construction sector, supply constraints of labour and materials could be exacerbated by a large uptick in public infrastructural expenditure. Crucially, the NDP seeks to mitigate this in the medium to long-term by boosting labour capacity via increased spending on skills training and reskilling to fit the needs of an expanding economy post-Covid. This, in turn, would have positive externalities for the development land market, with greater capacity reducing the cost of development and thereby increasing the viability and attractiveness of new schemes,” said Swarbrigg.