SURVEYORSJOURNAL - Bubbling under Is there an asset bubble in the Dublin housing market? - Society of Chartered Surveyors Ireland
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
SURVEYORSJOURNAL
Volume 7 | Issue 3 | Autumn 2017
Bubbling under
Is there an asset bubble in the
Dublin housing market?CONTENTS
27 11
Society of Chartered
Surveyors Ireland,
38 Merrion Square,
Dublin 2.
Tel: 01-644 5500
Email: info@scsi.ie
Web: www.scsi.ie
Áine Myler, Director General
EDITORIAL BOARD
Chairman:
Tom Dunne DIT
Members:
Deirdre Costello Jones Lang LaSalle
John Costello Costello Commercial
Tom Cullen Think Media
Brian Gilson Lisney
Frank Harrington Smith Harrington
Paul Mooney Benchmark Property
Paul O'Grady Think Media
14 20
Ronan O’Hara Sherry FitzGerald
Rowena Quinn Hunters
Andrew Ramsey McGovern Surveyors
Paddy Shine Dublin City Council
Claire Solon Friends First
John Vaudin
WK Nowlan Real Estate Advisors
PUBLISHERS
Published on behalf of the Society
of Chartered Surveyors Ireland
by Think Media Ltd
Editorial: Ann-Marie Hardiman
Paul O’Grady
24
Colm Quinn
Design: Tony Byrne
Tom Cullen President's message 4 Time to invest in our future –
Eimear Moroney SCSI pre-Budget submission 20
Editorial 5
Advertising: Paul O’Grady Bubbling under 22
Business news 6
Burning issues 24
www.scsi.ie Interview with Society President Colin Bray 11
Surfing waves of change 27
Views expressed by contributors or Adding value for clients 14
correspondents are not necessarily A day in the life – Kersten Mehl 30
those of the Society of Chartered SIT up and listen... 17
Surveyors Ireland or the publisher
Society news 31
Mood and salaries on the rise 18
and neither the Society of Chartered
The last word 34
Surveyors Ireland nor the publisher
accept any responsibility for them.
Letters, comments and articles are welcome
All submissions will be considered by the Editorial Board: editor@scsi.ie
SURVEYORS JOURNAL
Volume 7, Issue 3, Autumn 2017
3PRESIDENT’S MESSAGE
Roadshow will present opportunities
The Society is showcasing how new technologies can help members’ businesses.
As the Irish economy becomes busier and more demanding of our Paddy will ensure compliance with the professional valuation
time, I hope that members have had the opportunity to have a standards that the scheme requires and that our members seek to
break from working life over the summer. Such a break, taken in uphold in the public interest.
any number of ways, is very important for our mental and physical
wellbeing. In any case, we return with our autumn edition of the Ploughing Championships
Surveyors Journal packed with important information, reflecting in a For the second year, the Society will have a presence at the
multitude of ways, the wide diversity of work of the Society. Ploughing Championships. This year, we will join forces with the
PRSA, Ordnance Survey Ireland, the Property Registration Authority,
Come to the roadshow Valuation Office, IPAV and MyHome.ie to provide information and
A Survey, Innovation and Technology (SIT) roadshow has been advice on all things property, land and construction. We'll have
organised by the Society and will travel to Meath, Kilkenny, Cork, expert members on site to provide guidance to the public on
Limerick and Galway. It will demonstrate and discuss new building regulations, residential tenancy issues, valuation, boundary
technology and innovation with the surveying profession over the disputes, mapping and much more. It’s an excellent matching of
second week in September. Our clients want higher levels of our collaborative skills with a rural event that attracts up to 200,000
information and analysis; we need to find ways to work more people over three days. All members who visit the Championships
effectively and efficiently, and technology can provide terrific are welcome to call to our stand.
opportunities for us to be competitive, develop new services and
stay relevant. Our member Philip Farrell will act as Chairman of the Budgeting for the future
roadshow meetings. As well as being Principal of Farrell Property The Society’s Budget Submission will be made shortly to the
Consultants, he is Managing Director of Quartech International. Department of Finance. It highlights the key issues identified by
Antony Slumbers is an experienced digital strategist and founded members in our recent survey under three key themes: data,
and sold several leading property-related online businesses. His housing and infrastructure. The lack of clear, connected data in our
commercial activity dates right back to the very early days of the housing sector is one of the key factors in the current crisis. High
internet. His current blog on www.antonyslumbers.com features six quality, real-time information is vital for the operational decision
video chats about the future of real estate. He constantly questions making and planning of our built environment. A commitment by
assumptions and argues: “The real estate business is no longer Government to resource, integrate and share its data sources would
about real estate. We are moving, everywhere, from being a provide clarity and support long-term development and finance
product to a service business”. strategies.
Members are encouraged to attend with colleagues to learn how
typical small- and medium-sized construction, land or property
businesses can continue to develop their businesses in the face of
these changes. I look forward to meeting you there!
New Regulatory Surveyor
As the Valuer Registration scheme has become well established and
recognised with all financial institutions, we are delighted to Colin Bray
welcome Paddy Darmody to the team as the Regulatory Surveyor President
working in Ireland to provide the independent audit oversight role. Society of Chartered Surveyors Ireland
SURVEYORS JOURNAL
4 Volume 7, Issue 3, Autumn 2017EDITORIAL THIS ISSUE IN NUMBERS
Keeping abreast
of technology Date in September when
12
the SCSI SIT roadshow
begins
(page 17)
New European standards will soon be
upon us, while housing remains an
enormous challenge.
First let me congratulate Colin Bray on his election as President of The intrinsic value of an
the Society. Colin is the first geomatics surveyor to lead the SCSI. average Dublin house
€718,841
Geomatics surveying, although one of the smallest practice groups,
is increasingly important, given the increasing use of digital (page 23)
technology in construction, real estate and the built environment
more generally. All surveyors need to acquaint themselves with the
potential of new technologies, and I am sure that members will
become more enlightened about this in the course of Colin's tenure
at the helm of the Society.
Can I direct readers' attention to the article by Joseph Little, 'Surfing
waves of change' on page 27? This deals with the Nearly Zero
Energy Building (NZEB) Standard, an EU-wide jump in energy
efficiency requiring all new buildings that will be occupied by the
public sector to meet NZEB in just five months' time. All other Possible fine for not
buildings must meet the standard just two years later, including all complying with fire
€130,000
dwellings. This is a very significant development, which will have an regulations
effect on construction and property professionals and their clients.
Many surveyors may not appreciate that this is imminent. (page 26)
Finally, another edition of this Journal has a cover relating to
housing. Lisa Cassidy asks if there is an asset bubble in the Dublin
housing market, and tries to answer the question in an interesting
way by using an economic model based on a concept of intrinsic
value. Lisa concludes that property professionals believe there is no
bubble, but the fact remains that housing is perhaps the greatest
challenge facing the Government. The SCSI has made noteworthy
contributions to understanding the issues involved, and I have no
doubt about housing appearing in future editions, as this is a
problem likely to get worse before it is solved. The number of months
before all new public sector
5
buildings need to meet the
NZEB standard.
(page 28)
Tom Dunne
Editor
SURVEYORS JOURNAL
Volume 7, Issue 3, Autumn 2017
5BUSINESS NEWS Further expansion at The Building Consultancy Ashley O’Toole and Agne Bukaty are the latest additions to The Building Consultancy team. Ashley joins the company from Aramark, holds degrees in both Building Surveying and Architectural Technology and has 10 years experience in the industry. Agne joins the Interior Architecture Department, having recently graduated with an honours Degree from DIT. The directors are delighted both Ashley and Agne have chosen to develop their career with The Building Consultancy which provides a full range of building surveying, design and project management services.
BUSINESS NEWS
Ecocem appoints Susan McGarry
Susan McGarry has been appointed Group Sustainability
Manager for Ecocem Materials.
A civil engineer, Susan has spearheaded the sustainable
operations of the Ecocem Group, having implemented
quality, environmental, and health and safety standards
across the group facilities around Europe.
Susan previously held the positions of Environment
Manager and Technical Development Manager with the
firm. Completing her Master's in Engineering
Management in UCD, Susan is an LEED green assessor
and concrete technologist, and will produce the group’s
first sustainability report in 2017.
The Irish cement company has been transformed into a
sustainable manufacturing organisation due to Susan’s
commitment to the environment and passion for global
sustainability in manufacturing.
Former NAMA senior property
adviser sets up new firm
Aidan Ringrose, former senior
property advisor at NAMA, has
announced the re-establishment
of Ringrose Chartered Surveyors
providing advice on commercial
property. During his six years with
NAMA, he was involved in the
development, disposal and
management of significant real
estate holdings in the Republic, Northern Ireland and the
UK. Aidan is a Fellow of the Society of Chartered
Surveyors and the Royal Institute of Chartered Surveyors,
as well as a member of the Institute of Chartered
Arbitrators and a Registered Valuer of the RICS.
Share your news with us
The Surveyors Journal is happy to accept short submissions from
members on new developments in their business, including the
announcement of new appointments or promotions. If you have
some news you would like us to consider for publication, please
send it to ann-marie@thinkmedia.ie. Please note that
submissions may be edited, as space is limited.
SURVEYORS JOURNAL
8 Volume 7, Issue 3, Autumn 2017INTERVIEW
Colm Quinn
Journalist and Sub-editor with
Think Media Ltd
Geomatics on the map
New President of the Society, geomatics surveyor Colin Bray, says there is a need for surveyors
to work together, to think long term and act in the short term.
Colin Bray says he’s very proud to be the first geomatics can provide stronger opportunities for collaboration and growth for
surveyor to become President of the SCSI: “During my term, I’d our profession”.
love to show the role that geospatial information can play in all One of the key things he wants to ensure is that the Society
areas of surveying for the benefit of members, clients, and continues to be recognised as a successful, independent
society in general.” professional body, and remains a member-centric organisation
He has worked for Ordnance Survey Ireland (OSi) for nearly 20 aligned with high professional standards, while also driving
years, joining as a professional surveyor in 1998, before becoming diversity, innovation and change.
chief technology officer and then the agency’s Chief Executive.
Disruptive technology
Priorities New technology is coming or is already here in most of the
Colin says one of his biggest priorities as President is to continue professional groups, and will affect nearly everyone: “In order to
the implementation of the SCSI’s Strategic Plan 2016-2020. He says plan for that, to take advantage of it and make sure it doesn’t
the society has 13 professional groups and that it is greater than the manage us, we need education and awareness. We really need to
sum of its parts: understand what’s coming down the road and plan for that and
“We are typically domain experts within those professional groups, take advantage of it. Technology shouldn’t be seen as a threat or a
but there is huge opportunity and value for ourselves, for the risk; it’s an opportunity”.
Society, for industry and for the public in those groups working He says that technology will allow surveyors to provide additional
more effectively together. We have to ensure that we’re effectively products and services. It will also provide the profession with further
playing our own roles but I really believe that working together, we efficiencies by allowing it to use resources more effectively.
SURVEYORS JOURNAL
Volume 7, Issue 3, Autumn 2017
11INTERVIEW
Focus points term. He says when looking to the long term, a key element is data
Colin says he has three key focus points for his term as President. and having authoritative data available, which enables people to
Firstly: “It is our role as managers of the landscape lifecycle to ensure make informed evidence-based decisions. This applies particularly to
that we have clarity about how our different disciplines within the planning: “If we have data available to us at the planning stage, we
Society work together, to effectively manage our built environment”. will make informed decisions and will be able to deal more effectively
This requires a joined-up thinking approach. The Society’s different with the fluidity of the market going forward”.
professional groups need to work together and take advantage of the Accurate and timely data is a major interest of Colin’s and is part of
different skills and competencies that they have. his work in the Society, OSi and in public service reform: “We need to
Secondly, he wants more member engagement and connectivity with enable the integration of data and, ultimately, enable access to that
the organisation, both regionally and nationally: “It’s a members’ data”.
organisation, for the members, in the public interest. That’s the key One important responsibility for Colin currently is leading in the
point. And we need to ensure that we balance the needs of the development of national geospatial strategy for the State: “Everything
different disciplines within the Society. Members and their happens somewhere, and we really need to have the data
professional skills are a critical component in the development and infrastructure behind that so that we can join datasets based on
recovery of Ireland”. standards, but predominantly based on location”.
Thirdly, he wants to ensure that surveyors as a profession are actively When quality data is talked about, location really plays a strong role:
pursuing an agenda of technological and innovative work practices, as “Two datasets may only have location in common. When we sit that
he believes this is critical to building a sustainable profession and digital information on top of a digital map within a computer system,
successful careers for the Society’s current and future members. The we can start to analyse the data and get a better understanding”.
pace of change in the technology sector is very fast indeed when He speaks about geocoding information, which allows for data that
compared to the scale traditionally seen in the built environment, and was previously seen in isolation to be integrated with many different
surveyors need to lead in the provision of new services and processes, datasets via the location context: “That really gives us a much better
and continue to demonstrate their value to clients. understanding of what is happening and what potentially could
happen. That ability within computer systems to be able to scenario
plan the 'what if?' If I built that there, what would be the impact? If I
wanted to put in a school or a factory, what are the existing dynamics
“Brexit is one of the key issues out there that are already there”?
and we’re still trying to get our heads This creates flexible, dynamic plans that can be modified and
adapted, based on real-time information.
around what that is actually going to As part of his work with OSi, Colin is working closely with the Office
mean for the profession.” of the Government Chief Information Officer and the CSO in the
development of a National Data Infrastructure (NDI), which will
enable integration of Government data.
Major issues
There can be pressure to always focus on the immediate, but Colin Achieving these goals
says he usually takes a longer-term view when it comes to issues: “I The first approach to achieving his goals is to do the day job of
think when we take a long-term view, it’s around strategy, it’s around President. Other things Colin has planned is a document, the SCSI
ensuring we’re managing future issues. That really is key”. professional map, which will explain the different professional groups
Colin believes urgent can be the enemy of important and we should within the Society, what they do and how they interact with each
be focused on the important issues. There are a number of important other: “That idea of a graphic interface is so we within the Society,
issues which he identifies. our clients, the public and the Government can better understand
It is estimated that there will be another million people in the country what Chartered Surveyors do across the property, land and
by 2040, and in the region of an extra 500,000 homes will be needed construction spectrum and where their roles intersect”.
close to services and amenities. He also believes it is imperative that Another initiative happening in September 2017 is a Survey,
we align infrastructure and housing demands. Urbanisation is Innovation and Technology roadshow (see page 17). Taking place in
happening fast across the world. Ireland is no exception, and new five locations around the country, this will focus on the need for
technology and changes in the way we live and work will bring new surveyors to update and familiarise themselves with state-of-the-art
challenges. But of course, he recognises that there are immediate technology developments and innovative work practices.
issues such as Brexit and the need to invest in innovation and If surveyors are not informed and educated about changes that are
technology after the economic collapse: “Brexit is one of the key coming, then they will be negatively affected by them: “We can’t let
issues out there and we’re still trying to get our heads around what developments in technology pass us by. We really need to take
that is actually going to mean for the profession”. advantage of them. It is coming hard and fast”.
He is glad to report that an all-island SCSI/RICS NI working group has
been established, and is looking forward to seeing the output from BIM conference
that group. This will help show what the key issues are, which will One of the biggest industry innovations is building information
need to be addressed by surveyors in the immediate and medium modelling (BIM), and the SCSI will host a national BIM conference
SURVEYORS JOURNAL
12 Volume 7, Issue 3, Autumn 2017INTERVIEW
next April: “When we look at other developed countries around the When people think about the modern geomatics surveyor, they often
world, BIM is taking hold and it’s starting to gain some traction here. think about drones, indoor laser scanning, etc.: “These are now
There is a requirement for the SCSI to be involved in a central way, becoming standard parts of the geomatics surveyor’s kit”.
because it will be based very much on standards, compliance and
regulation”. Members’ organisation
With all the new technology around, it is still vital that surveyors
engage with the Society: “The SCSI is a members’ organisation. We
appreciate our members’ ongoing participation and commitment.
“When we look at other developed countries Whether it’s connecting with colleagues, upskilling, job hunting or
around the world, BIM is taking hold and it’s seeking advice, member participation is key and I really would
encourage all members to actively get involved in participating in and
starting to gain some traction here.” helping to run their society. I’ve really gotten a huge delight from
doing it and it really comes back through relationships, through
He said that BIM is particularly important for quantity, geomatics and networking. It is very, very worthwhile activity”.
facility management surveyors. Surveyors need to understand that
BIM is for everyone and find out if it will affect their professional area.
Colin says it is a new way of managing the built environment and
goes all the way from planning to development, valuing or selling,
Global manager
maintenance and management of a building: “It crosses so many Colin graduated from DIT Bolton Street in geomatics surveying
professional groups, but also so many different professions: surveyors, and afterwards did a post grad in geodetic engineering in
engineers, architects”. Germany. Following that he did a Master’s in Organisational
He says geomatics is a very good example of a professional group Behaviour in the Irish Management Institute (IMI). He serves on
that has a track record of implementing innovation and change the European Executive Committee of the United Nations
management: “Of all the groups within chartered surveying, we’ve Committee of Experts on Global Geospatial Information
been impacted the most by technology and have really seen it as Management (UN-GGIM).
something to be taken advantage of. It’s provided us with the ability In his spare time, Colin enjoys spending time with his family. He
to not only do things more effectively and efficiently, but also to do lives in Howth with his wife Andrea and son Matthew, and
things that we couldn’t do before”. enjoys sailing.
SURVEYORS JOURNAL
Volume 7, Issue 3, Autumn 2017
13HEADING FEATURE
Peter Duignan
Capital Projects Consultant, Bank of Ireland
Adding value
for clients
Surveyors can use their detailed knowledge of construction
costs to carry out a tax analysis for clients.
While creating proposals for construction projects, surveyors and allowances against tax, with regards to the plant and equipment
project managers create an immense amount of information. This they need to operate their business within a building, in addition to
will encompass everything from scheme viability to design options and the expenses incurred in keeping that building in good repair.
cost estimating. While this information serves the immediate needs of
the project, have we ever considered its use in enhancing the total
package that can be delivered to a client? Take construction costs for
The capital (non-allowable) elements will
example. Construction project clients generally require great detail and generally consist of the costs associated with
breakdown of costs. Having produced a detailed breakdown, the
surveyor or project manager will gain great insight into how cost is
the acquisition of a site, demolition of
allocated to various items of the construction process. This insight in structures, provision of utilities and the
turn can be used to allocate costs as they apply over capital, capital
allowable and revenue taxation deduction categories. A detailed tax
construction of the building shell.
analysis can be very useful to a client and their tax advisers in For the general purposes of analysis, the three categories of cost
accurately predicting the various tax allowances they may be able to can be broken down into capital (non-allowable), capital allowable
avail of. This article does not purport to be a guide on tax practice, and revenue allowable:
but merely to alert surveyors and project managers to an aspect of
project cost management which can enhance the n capital (non-allowable) cost will generally apply
service they offer to clients. to the shell and core construction elements;
these add to the value of the owner’s assets
Allowances and are not generally tax deductible;
A building is intrinsically valuable n capital allowable will apply to plant and
and will constitute a substantial moveable fittings that can be depreciated
asset to its owners or over a number of years (generally
operators. The activity eight); and,
carried out in the n revenue allowable will apply to
building, however, maintenance and other ‘business
involves wear and as usual’ expenditure and is
tear, and the deductible from the current
provision and year’s revenue.
replacement of
plant and A tax analysis can be
machinery to carry undertaken at each stage of
on the business. the budgeting process to
The tax system reflect any changes or
allows alterations made
business in the project.
operators
to claim
SURVEYORS JOURNAL
14 Volume 7, Issue 3, Autumn 2017FEATURE
Differentiating between revenue and capital expenditure Similarly, while the repair of a leaking roof would be regarded as
The difference between revenue and capital is crucial when revenue repairs, the replacement of the roof with a higher
computing a client’s corporate tax liability. The definition of repair is specification of construction (better insulation and modern roof
not always very clear. For a cost to be revenue allowable from membrane) could be regarded as capital works in that they
taxable income, the work must be in respect of repairs and not of represent an improvement from the original specification.
improvements or upgrading. Where the issue has been tested While working on existing structures, the issue of tax categorisation
in case law, the view has been that if part of a building asset is can become very relevant.
restored or replaced, such work is deemed a repair. On the other It is likely that there will be a combination of new works together
hand, if an entire building asset is replaced, such work is regarded as with renewal and repair works involved. This will result in a budget
a renewal or improvement. plan and spend that will involve elements of capital, capital
allowable and revenue expenditure.
Capital expenditure and capital allowances
A detailed tax analysis can be very useful to a In building projects, capital expenditure will be incurred on the
client and their tax advisers in accurately provision of plant and machinery or on the building or setting
involved. Capital allowances are claimable on machinery or plant
predicting the various tax allowances they installed in the building or purchased for use in that building, and
may be able to avail of. the cost involved in getting them operational and productive.
While the term machinery is quite easily defined, the term “plant” is
For example, where a lift has been routinely serviced, such a cost less so and is the subject of much litigation. Generally, it is defined
would be regarded as a revenue (repair) expenditure, whereas if the as “any apparatus kept for permanent employment in a trade”. It
lift car and plant has been replaced, this spend would be regarded can be taken to mean fixtures and fittings of a permanent and
as a capital spend (renewal). durable nature, such as office desks or shop counters, but not, for
SURVEYORS JOURNAL
Volume 7, Issue 3, Autumn 2017
15FEATURE
example, a shop front. Mostly therefore, the capital allowable Furniture and fittings
elements of a building spend can be grouped under two headings: Furniture and fittings used in the pursuit of a business or trade
n capital allowable building plant; and, can also attract capital allowances. This can comprise a wide
n capital allowable fittings and furniture. range of items. In some cases, it might include specialised items
used in the course of the activities taking place in the building.
The capital (non-allowable) elements will generally consist of the The surveyor or project manager should work closely with the
costs associated with the acquisition of a site, demolition of client to identify any such items.
structures, provision of utilities and the construction of the building Generally, the test for allowable items in this category is their
shell. mobility. For example, floor coverings stuck fast to the floor will
be regarded as part of the setting, while easily removable carpet
Building plant tiles could qualify for allowances.
The key determinant of this definition for tax purposes is whether
the item in question is part of the “setting” in which the trade is Related costs, fees and charges
carried out, or an item necessary in carrying out the trade. Usually, a cost related to an item for which an allowance is being
In general, plant can be looked upon as those fixed items that claimed can also be included in that cost. For example, necessary
become part of the building fabric and by their nature are not building work and wiring up required to install a piece of
generally removed when a building is sold. Typically, plant will be allowable plant or machinery may also be included as part of the
defined as items such as air conditioning, heating plant, lifts and claimable cost. Similarly, costs like the assembly of furniture can
escalators, plumbing and sanitary fittings, and water heaters. Works be included with the actual cost of the furniture as an allowable
necessary to install these items can also be regarded as plant, such item. Professional fees will also generally follow the classification
as wiring to items that can be regarded as part of the setting, and of a claimed-cost item. In the case of a building that combines
these will not attract capital allowances. capital, revenue and capital allowable spends, professional fees
Here are some examples: are commonly applied pro rata across the various tax categories.
n standard light fittings would be regarded as part of the general Generally, hire costs will be treated as revenue deductible, if
setting; however, special light fittings such as display lighting or ownership of the hired items does not pass.
heat lamps in a food preparation setting may be regarded as
items used in the pursuit of a trade, and could be regarded as Tax advice
capital allowable items; The key to offering an effective service with regard to tax
n partitions may be regarded as plant if they are movable and can categorisation is close co-operation with the client’s tax adviser.
be changed to accommodate the business activities in the Tax categorisation for leasehold premises may be more complex,
building, while fixed stud partitions could be regarded as part of with responsibility divided between the landlord’s shell and the
the setting; and, tenant’s fit-out. The length of the lease may also be a
n suspended ceilings generally would be regarded as part of the determinant of the number of years over which tax can be
setting, unless they facilitated some other advantage to the trade written off.
operating in the building – if, for example, they were an integral In complex refurbishment projects, a detailed analysis of all costs
part of the air conditioning system or provided a certain should be carried out, and in particular, of the M and E costs.
ambiance to the interior, they could be considered as an This will better enable project managers and surveyors to
allowable capital expense. calculate which are allowable (deductible) and non-allowable
amounts.
There are various templates available for this purpose and they
generally work by identifying allowable and deductible items and
While working on existing structures, the generating a capital (non-allowable) residue.
issue of tax categorisation can become very A draft tax analysis may inform the project team on the most
advantageous way to construct a project. It might influence a
relevant. It is likely that there will be a client to look to restoration and repair as opposed to a total new
combination of new works together with build approach. It might also influence the choice of
prefabricated mobile components in lieu of built-in fittings.
renewal and repair works This whole tax categorisation process will involve the surveyor or
project manager getting an overall appreciation of the cost
Mechanical and electrical cost breakdown drivers of projects rather than the basic building cost, and may
As the definition of plant for tax purposes is quite tricky, it is open up avenues for further enhancement of the quality of
advisable that a thorough cost breakdown be done of the service offered.
mechanical and electrical (M and E) elements of a construction By showing a more thorough approach to the issues that drive
spend. With the increased use of IT and technology in business, it is clients to commission buildings, it is not inconceivable that they
likely that there will be many items used in the pursuit of the trade will seek further assistance from their surveyors and project
or activity to be found. managers and cement a longer-term relationship.
SURVEYORS JOURNAL
16 Volume 7, Issue 3, Autumn 2017ROADSHOW
SIT up and listen…
The SCSI Survey, Innovation and Technology roadshow is coming to a venue near you soon!
SCSI President Colin Bray will be embarking on a cross-country
roadshow during September to share and discuss opportunities for No need to fear technology
innovation in the profession – across all disciplines. The Survey, The roadshow seminars will be chaired by Philip Farrell, Managing
Innovation and Technology (SIT) roadshow will focus on technology and Director, Quartech International, and Principal, Farrell Property
innovation within the surveying community. The roadshow will travel to Consultants. Philip is Fellow of the SCSI and has been active within
Meath, Kilkenny, Cork, Limerick and Galway. Colin Bray, who is also the Society for a number of years. Having worked at all levels of the
Chief Executive and Chief Survey Officer at Ordnance Survey Ireland, will property industry for many years, including as an estate
share his experience and introduce his organisation as an example of agent/surveyor, he is acutely aware of the challenges now facing
adapting to new advances. He will be joined by keynote speaker surveyors in their day-to-day businesses. This is as a result of the
Anthony Slumbers, an experienced digital strategist and product leader unprecedented influences from online advances in technology. Philip
in the PropTech space, who will discuss state-of-the-art technologies is actively involved in PropTech sector. He is also a market
from an experienced and knowledgeable viewpoint. commentator and, until recently, wrote a weekly property column in
the Sunday Independent. According to Philip: “Surveyors need not be
Focusing on members fearful of these advances in technology. They are here to stay and are
These roadshows form part of the Society’s overall strategy of focusing only the beginning – they need to be embraced. Surveyors can use
on member-centric events within a vibrant organisation driving diversity, them to enhance their practice, their offering to their clients and, as a
innovation and change. They will address the issues affecting SMEs, result, their bottom line”.
particularly in the regions, and look at near-term innovations that can
help your business straight away.
Roadshow dates
The growth of surveying technologies n NE and Dublin Region – September 12 (morning), Dunboyne Castle
The SIT roadshows will look at how surveying technologies are growing n SE Region – September 12 (afternoon), Hotel Kilkenny
in power and use, as are the accompanying software systems and n Southern Region/Cork – September 13 (morning), Clayton Silver
support applications (cloud computing, online geo-databases, mobile Springs, Cork
phone-controlled equipment, multispectral analysis). The new data n Southern Region / Limerick – September 13 (afternoon), Savoy
include control data and information, visible, infrared and multi- Hotel, Limerick
spectrum imaging, obliquely-sensed aerial data, cadastral information n Western Region – Galway - September 14 (morning), Ardilaun Hotel,
and regional mapping products. Galway
The growth of technology has been the catalyst that enables a surveyor
to evolve from measurer/interpreter to geo-data manager. In this
expanded role, surveyors can select, gather and combine information
and techniques to meet the needs of the entire project while retaining
the ability to drill into tiny details.
As clients become increasingly sophisticated, they drive the surveyor to
deliver higher levels of information and analysis. At the same time, the
technological advances in acquiring and applying measurements enable
surveyors to perform as the geodata managers that their clients and
communities require. By selecting data management technologies, the
surveyor can structure an optimal geospatial solution. As a community,
opportunities for collaboration and growth within the profession allow us
to be more innovative and create better workflow environments.
To fall behind this curve means missed opportunities – for companies
and consultants. Book your place today at the SIT Roadshow 2017.
SURVEYORS JOURNAL
Volume 7, Issue 3, Autumn 2017
17FEATURE FEATURE
Edward McAuley BSc (Hons) Surv
Manager, Professional Groups,
Regions & Standards, SCSI
Mood and salaries on the rise
It’s been a good year for surveyors and the majority expect the trend to continue.
GeNDeR AVeRAGe WAGe
PAy GAP FOR PROFeSSIONALS
€60,000
€71,500
€66,500
NOW
STANDS
AT 5% LAND CONSTRUCTION PROPeRTy
The annual SCSI Remuneration and Benefits report is now in its year on year. Interestingly, for surveyors based outside Dublin who
second year and builds on the success and popularity of last year’s received an increase in pay, the report recorded a 5% increase in
report. The anonymous member survey, which is carried out in their salaries. Although salary inflation outside Dublin remains
June, is by far the most popular survey issued by the SCSI. With relatively modest and regional median salaries remain (23%) lower
almost 1,100 responses, it was encouraging to see such a keen than those achieved in Dublin, it is a welcomed development to see
interest in this piece of research, which thankfully allayed any initial some positive movements in pay. Hopefully, this means that activity
‘survey unpopularity’ concerns, given the personal nature of the levels are on the increase and that profitability is re-entering the
information being requested. Not surprisingly, as our career begins sectors.
and progresses, owe are instinctively interested in how our
performance, measured in salaries and benefits, compares with
industry averages. This might explain why we have received such a
Not surprisingly, as our career begins and
great response to, and interest in, our questionnaire. progresses, we are instinctively interested in
Positive movement
how our performance, measured in salaries
Before we explore the survey results, it’s important to understand and benefits, compares with industry
the survey response profile that informs our report. Of the
respondents to the survey, 86% were employed in the private
averages. This might explain why we have
sector, with 54% of the total respondents working in private received such a great response to, and
practice consultancy. A total of 57% of respondents were based in
Dublin, with the majority (51%) working in companies of fewer
interest in, our questionnaire.
than 50 employees. Quantity surveyors provided the largest number This year we analysed remuneration figures against SCSI disciplines
of responses by professional group (35%), with residential agency in the construction, land and property categories. Construction
and valuation surveyors at 12% and 9%, respectively. professionals are now earning a median salary of €71,500, with the
Considering the sample as a whole, the results show a rise in vast majority (80%) of the salary data coming from the quantity
surveying salaries in the past 12 months across all disciplines and surveying discipline. Property surveyors are earning €66,500, and
regions. The median national annual salary now stands at €70,000, land surveyors are earning an annual median salary of €60,000.
with over half (54%) of surveyors receiving a median increase of 7% Land surveying disciplines have experienced the largest increase in
SURVEYORS JOURNAL
18 Volume 7, Issue 3, Autumn 2017FEATURE
MeDIAN SALARy
by ReGION
CONNAUGHT
/ULSTER DUBLIN
+2% +3%
MUNSTER REST OF
+4% LEINSTER
+9%
annual salary inflation of 15% in 12 months, compared to 2% and
3% for construction and property surveyors, respectively.
Gender pay balance and surveyors’ benefits
Another positive statistic to see is that the gender pay gap is now
5%, with males earning slightly more than their female
counterparts. The annual leave average among the surveying
industry is 24 days and approximately 70% of surveyors manage to
use their full leave entitlement in the 12 months. Mobile phones,
professional association membership and laptops remain the top
three benefits to supplement surveyors’ overall remuneration
packages in 2017. The results of the survey have shown a marked
increase (16 percentage points) in those receiving a bonus/access to
a profit-sharing scheme as part of their remuneration package.
Positive outlook for surveyors
In terms of the outlook for the surveying profession, 65% are
confident they will receive a pay increase next year. Some 85%
would recommend their profession to school leavers and 81% are
not likely to change employer in the next 12 months. Salary is the
most important career priority, followed by job security, and 54%
say that their company is likely to increase its headcount in the next
12 months. Only 4% of surveyors indicated that they feel market
conditions in the next 12 months will negatively affect their pay,
with the remainder being an even split between those who are
unsure and those indicating a positive change in their
remuneration.
SURVEYORS JOURNAL
Volume 7, Issue 3, Autumn 2017
19HEADING FEATURE
Edward McAuley BSc (Hons) Surv
Manager, Professional Groups,
Regions & Standards, SCSI
Time to invest
in our future
The SCSI's pre-Budget submission calls for
joined-up thinking from Government to
address the housing crisis, infrastructure
deficits, fire safety and land transfer.
It’s often useful to review previous reports and submissions ESB connections to establish house completions has also recently
made by the SCSI over the years to see how accurate and been shown to give a highly inaccurate overestimation at a time
insightful our recommendations and calls for change were at when reliable supply data is vital.
that time, and how the current economic and sectoral Housing is still the single biggest issue facing our society and SCSI
landscape has changed since. So, before we began to draft the members are very vocal that to adequately address the supply
Society's pre-Budget submission 2018, I reviewed our submission issue, the Government needs to tackle the underlying costs of
from 2013. In the context of our current housing crisis, with over constructing homes. The SCSI reiterates that this could be done
100,000 people on the social housing waiting list, only 16,000 by reducing VAT from 13.5% to 0% for houses being delivered to
residential units being constructed (with a demand for 35,000), the market at an affordable range up to €300,000 (nuanced by
and with property prices rising, in some cases, at double digit location), by introducing access to more affordable development
growth, it was useful to be reminded that SCSI members finance, and by increasing the supply of development land to the
predicted housing supply constraints over four years ago. market by reducing capital gains tax (CGT) for a defined period.
Disappointingly, it’s frustrating to see the crisis get progressively
worse, in spite of raising concerns and calling for action Infrastructure
repeatedly over the following years. Four years later, the housing Recent reports suggest that the amount of ‘fiscal space’, i.e., the
crisis is the principal issue addressed in this year’s SCSI submission. amount of revenue available to Government following a
At the heart of any authoritative and reliable decision-making combination of tax cuts or spending increases, is just €300 million
process, access to real-time, accurate and consolidated data is for 2018. This might sound like a lot, but in the context of overall
imperative. The SCSI is calling on the Government to invest in our Government expenditure of €58bn, this represents just 0.005% of
future through the funding of joined-up, data-gathering projects
so that our built environment can become a lot more predictable.
This will aid those in senior positions to make the right calls in
relation to planning, density, transport, housing types,
affordability, tenure balance and lifestyle, and to create an
environment fit for future generations. Sadly, this has been lacking
and Ireland is displaying symptoms of post-recessional doldrums,
which require immediate attention. Predictability is a recipe for
any stable and functioning property or construction market, and
this is something that Ireland has never had, which is evident in
our volatile boom–bust cycles. The recently published Central
Statistics Office (CSO) and GeoDirectory vacant housing statistics
show discrepancies, and this can lead to obvious confusion FIGURE 1: CSO and GeoDirectory figures in vacant housing in Ireland are wildly
regarding the true nature of the problem (Figure 1). Reliance on contradictory.
SURVEYORS JOURNAL
20 Volume 7, Issue 3, Autumn 2017FEATURE
issues. There have been some high-profile reports in the media in
recent times where building defects were uncovered, and the
Government is urged to be cognisant of this issue in the context
of setting Budget 2018. Following the recent tragic events in
Grenfell Tower in London, this is a priority issue for our
policymakers, as apartment development will be one of the key
factors in alleviating the housing crisis in our cities.
total expenditure. During the recessionary years, Ireland Farmland transfer
underinvested in capital spending and the National Of course, Brexit is the concerning factor that has the potential to
Competitiveness Council recently highlighted this as a growing affect many of Ireland’s economic metrics, such as housing supply,
concern; Ireland needs to increase funding to remain competitive competitiveness and exports. In the final agreement when the UK
and to continue to attract investment. The SCSI’s pre-Budget leaves the EU single market, tariff rates on food and agricultural
submission 2018 calls on the Government to continue to increase products need to be at 0% or at minimal rates. It is accepted that
capital investment and return to medium-term budgeting, as this agriculture is the sector most exposed to the effects of Brexit and
provides clarity and certainty for businesses to tender for public every effort should be made to mitigate or reduce these risks.
works programmes. Agriculture is heavily reliant on the EU Single Farm Payment and
The SCSI recommends that the Government continues to monitor the inter-generational transfer of land is one that should be
the administration of public works tendering, to ensure that the promoted so that the industry can move to a more sustainable
process is rigorous, but not so administratively burdensome that it and cost-effective model in preparation of the review of the
excludes small businesses or new entrants into the Irish Common Agricultural Policy in 2020, which is likely to be less
construction sector. supportive of Irish farming.
Regional Ireland is still lagging behind with poor internet Members have highlighted many taxation barriers preventing the
connectivity. The National Broadband Plan is a vital strategy to transaction of farmland. For example, the CGT rate is currently at
deliver upon the objective for all-Ireland web connectivity. The 33%, which can result in a substantial tax liability. The SCSI
SCSI recommends that this strategy is supported in the Budget, to recommends that this rate is reduced to 20% to allow or
ensure that businesses everywhere have access to high-speed incentivise those landowners that have retired from farming, or
broadband to take full advantage of technological innovation and have no desire to farm, to dispose of land to the market, so that
support economic growth more evenly around the country. younger farmers with ambitions to set up a viable commercial
enterprise are provided with every opportunity to do so.
Fire safety
The SCSI recently called for a high-level review of all apartment To read the SCSI's pre-Budget submission in full, go to www.scsi.ie.
blocks built during the boom years to identify potential safety
SURVEYORS JOURNAL
Volume 7, Issue 3, Autumn 2017
21HEADING PROPERTY
Lisa Cassidy
Asset Manager, Sigma Retail Partners
Bubbling
under
Is there an asset bubble in
the Dublin housing market?
The housing market in Ireland is notable for its cyclical nature. due to developer input costs, and that margins are tight. All
House prices increased by 150% between 1998 and 2006 (Lyons, participants believed we are not close to the peak of the cycle, an
2012). Between 2006 and 2012, prices decreased by 53%, and since indication that prices will continue to increase. The respondents
then prices have increased by 46%. One of the reasons put forward for asserted that there was no chance of another property crash in the
the crash was the availability of credit. The imperfections in the credit foreseeable future. The study concluded that professionals within the
market have been an area of concern for many years. A study carried out property sector believe that there is no property bubble present within
by Murphy (2005) found that the user cost has both a negative effect on the Dublin housing market. The interview participants determined that
the price of houses and the capability of leading to bubbles. Other this is due to stricter lending criteria and lack of cheap credit.
factors that can lead to the existence of bubbles are imputed rents,
investor rationality and the cost of capital, market values and intrinsic Case study
values. Residential property prices increased by 9.4% in early 2017, and The research also included a case study, which used the Gordon Growth
house prices in the capital rose by 8.7%. The cost of apartments grew by Model to determine the intrinsic value of the average property in
9.6% over the same period. In Ireland, demand and interest rates play Dublin’s housing market. Professor Myron Gordon developed the
an essential role in the determination of property price movements. Gordon Growth Model, which is used to determine the fundamental
This study was developed with the aim of ascertaining whether there is value of stock, based on the future sequence of dividends that mature at
an asset bubble in Dublin’s housing market.* Using case studies and a constant rate. The formula used to determine the stock value using the
interviews with professionals in the property sector, it analysed the Gordon Growth Model is as follows:
current Dublin property market and the association between present Asset value = D / (K-G)
market prices and intrinsic values. The main objectives were to discover Where:
new facts and verify and test important facts regarding property asset D = Expected dividend per share one year from now
bubbles in Dublin’s housing market. K = Required rate of return for equity investor
G = Growth rate in dividends
Interviews I applied this formula to the Dublin housing market using the average
The results of the interviews reflected the perceptions of professionals market rent as a proxy for imputed rent:
within the Dublin property sector. It was clear that participants did not Intrinsic value of Dublin houses = D / (K-G)
see any bubble present within the current Dublin market. Also, most Where:
asserted that no speculative bubble was taking place. However, others D = Imputed rent
believed that bubbles were only present at some sites. K = Discount rate
Most of the participants agreed that Brexit might have an overall G = Growth rate
negative effect on the Irish economy, with some believing it was too
early to ascertain whether Brexit would generate upward pressure on Inputs were sourced from the Residential Tenancies Board (RTB) and
Dublin rents. In relation to whether rents will continue to increase if Residential Property Price Register, respectively. The average rent
pressure zones are lifted, or whether they will begin to cool, one of the (imputed rent) in Dublin during 2016 was €1,300 per month (€15,600
participants asserted that the market was at an early phase of its current per annum). The average residential sales price in Dublin in 2016 was
property cycle. Most of the participants agreed on the rental growth €405,466.
rate. Regarding supply challenges in the Dublin housing market, most of It is more difficult to determine the discount rate. The data range was
the responses indicated that the market structure was not the issue, and obtained through qualitative interviews with professionals within the
that developers are focusing on office developments, which achieve property sector and estimated at between 7% and 8% (McHugh, 2017).
higher returns, but also that adequate office supply could be reached by However, this represented minimal risk. For increased risk, this would be
2019-2020. The participants believed that developer costs remain high raised to double-digit figures (McHugh, 2017). Therefore, the discount
SURVEYORS JOURNAL
22 Volume 7, Issue 3, Autumn 2017PROPERTY
rate ranged from 7% to 10%. It was assumed that the average growth
rate would remain in line with the pressure zone restriction of 4% until Calculating the intrinsic value of
the restriction is lifted in 2020. The growth rate was concluded in the
qualitative interviews to range from 4-6%. Each scenario was then
an average Dublin house
entered into the model. Based on the research, it was deemed necessary
to use several scenarios to incorporate the full range of estimated Example: Scenario 1
discount rates and growth rates. Average house price in Dublin in 2016 €405,466
By comparing the average sale price and the intrinsic value, I would be Average rent in Dublin in 2016 €15,600 pa
able to determine whether the intrinsic value was below the average sale Assumptions
price and, therefore, whether a price bubble was present in the market. Growth rate: 4% up to 2020, 6% in 2021
An analysis using the Gordon Growth Model indicates that when the Discount rate: 7%
growth rate remains at 4% and risk remains low, there is no asset bubble
present because the intrinsic value of the average property is Calculation of projected rent
€718,841,which is above the average sale price at €405,466. Note: a formula is applied for today’s value of future income after
According to evaluations made for the case study, it was clear that application of growth and discount assumptions.
intrinsic value plays an integral role in ascertaining whether a bubble is
present. Moreover, when supply and demand do not match, there is a 2017 €15,600 2018 €15,163 2019 €14,737
strong tendency for a bubble to occur. It is clear from the growth model 2020 €14,324 2021 €14,191
that there is no property bubble present in the Dublin housing market.
However, if rent pressure zones are reintroduced in 2020, and an Total projected rent receivable 2017-2021 €74,015
increased risk drives the discount rate to 10%, a property bubble will be
present. Formula for calculation
Intrinsic value of a Dublin house = D / (K-G) plus projected rent received
Risk of a bubble
The Gordon Growth Model shows that if the risks associated with the Where
Dublin property market increase to 10% or above, and pressure zones D = imputed rent K = discount rate G = growth rate
remain in place, a property bubble of 3% will be present. With the D: Imputed rent is calculated in 2021 without discount (so €15,600 x
current supply issues in the Dublin housing market, coupled with high 4% per annum, plus 6% in 2021) = €18,601. This is multiplied by the
demand, the average property price in Dublin is likely to continue to assumed future growth rate of 4% so €18,601 x 1.04 = €19,344.78
increase, which would further increase the gap between the average Note: It is assumed that growth will remain at 4% in each year after. This
house price in Dublin and the intrinsic value. This model is based on is why you need to apply 4% to find D. So the formula for D is: F(1+G)
assumptions and provides insights into whether a bubble exists in the where F is year 2021 income.
Dublin housing market at the time of writing (April 2017). The author
K is assumed as 7% for this scenario.
believes that there is a lack of in-depth knowledge of the technical
G is assumed as 4% for this scenario.
definition of real asset bubbles, discount rates and asset bubble models
in the market, and the area would benefit from further study. So calculation of intrinsic value for 2021 is:
€19,344.78 divided by 0.03 (0.07 minus 0.04) = €644,826 plus
References available online at www.surveyorsjournal.ie projected rent received of €74,015
*This article is based on a dissertation completed for the Bachelor of = €718,841
Science in Valuation Surveying at Dublin Institute of Technology.
SURVEYORS JOURNAL
Volume 7, Issue 3, Autumn 2017
23You can also read
