As the autumn property season begins, are there signs of life in the depressed market? A number of well-placed market observers offer their views
STEPHEN MCCARTHY
Director, Allsop Space
We’re seeing a lot more activity than 12 months ago, but anyone trying to predict the market is only guessing. However the indicators are very strong on the private treaty side where there isn’t enough supply in the Dublin area. We’re averaging more than 40 viewers at every viewing with Hunters residential. On the letting side, things are also more active, again there’s a shortage of properties, monthly rates are up about 10 per cent in the last quarter, and we’re even seeing people bidding against each other for monthly rentals.
We’ve noticed more purchasers with bank finance on the residential side, and were logging more financed offers than cash offers. In the July auction, 52 per cent of buyers had finance, compared with just 14 per cent at our first auction in April 2011.
We’re planning two auctions before the end of the year, in early October and early December, with between 125 and 175 properties on offer in each. This would be up on our previous auctions where we usually have about 100 lots. There are more properties coming through from banks and receivers.
DES O’MALLEY,
Sherry FitzGerald O’Malley, Limerick
There’s a glimmer of light down here. Selling isn’t really a problem – we have more purchasers than realistically priced properties – but volume is way down in certain markets. There isn’t just one market any more. Broad statistics don’t apply across the board.
Family home prices are increasing in key areas in the city because supply has contracted so much. Very soon we will need to see new homes built again to cater for families. The current stock overhangs just aren’t suitable. I’d say there are 3,000 units on the market in Limerick but only about 10 per cent of those are realistically in play. The rest are overpriced, are repeat listings, have been on the market too long, or may no longer be available.
Bungalows out the county are suffering badly. Supply is solid, but the demand has dried up. I see value for buyers because build and site costs would be greater at this stage. I think the property market is fixing itself slowly, but we have to leave it alone and not intervene. Things like mortgage relief are only background music, the supply of new homes is just not there.
MICHAEL GREHAN,
Managing Director Residential, Sherry FitzGerald
There is a buzz now about all our cities, but lurking beneath the surface, a lot of personal economic challenges still exist for people trapped in negative equity and coping with unemployment. Yet there are 200 households being formed every week in Dublin, and little is being built to meet this demand.
Are rents and prices rising? The indications are that they are beginning to nudge upwards in certain suburbs, particularly in Dublin.
The legacy of the boom years is deep and painful. The price correction now hovers either side of 60 per cent, which appears to be the tipping point for renewed interest. Market evidence indicates that approximately 20 per cent of house sales are exceeding the asking price in certain Dublin suburbs and that multiple bidding is becoming the norm as the stock available for sale is down 24 per cent since this time last year. Cash purchasers now account for up to 40 per cent of sales while our limited banking sector is showing a renewed appetite for lending. Moreover, a pattern of increased demand has spread to our other cities and regional markets.
A definite trend of interest in purchasing has emerged from the connected Irish overseas.
Undoubtedly large loan sales by the banks and the sale of buy-to-let stock that is under water will help the banks’ balance sheets, but it doesn’t address the growing problem of the failure to meet the needs of a growing urban population. It is as if we have been given a sentence – because we built too much of the wrong thing in the wrong place, we now can’t build the right thing in the right place.
The demand, in my view, is for apartments in the centre of Dublin as well as three- and four-bed family homes in suburban locations in our major cities.
CASH BUYER
(Name withheld)
We won’t buy a house until we see the property price register. It’s impossible to make a rational decision without accurate information. Then we can compare like with like and relative value. If property prices continue to decline, as I expect they will, then access to accurate information provides a base from which to look forward.
People buy houses for many reasons. We’ve been renting for four years and want our own home now. As cash buyers, we’re looking for a home, not an investment. You cannot predict the bottom of the market – we’re just playing the hand we’ve been dealt.
Prices will continue to decline over the next few years – economic conditions are so dire that no other scenario is plausible. Incomes will be taxed more, jobs are scarce and the banks are bust. Interest rates are very low due to the euro crisis. That’s a concern, but out of our control.
Property tax for south Dublin, where we’re buying, will, in my view, be €1,200 per year minimum. Owning a home is expensive and that won’t change. We’ll be in it for 20 years. If it’s still worth then what we pay for it now, allowing for inflation, that’s fine.
OWEN REILLY,
Director, Owen Reilly property consultants
It is too early to call a bottom on the market but there are positive signs. Dublin house prices have stabilised in good locations close to the city centre with good amenities. Some locations have actually increased in value, albeit modestly, for the first time since 2006. This is being driven by a limited supply of houses because of negative equity and sellers choosing a sit-and-wait approach. Increased demand is fuelled by cash buyers, who I estimate now make up at least 50 per cent of all buyers. Many of them sold at the right time and have now tired of renting.
In the apartment market there is a significant increase in transactions in well-managed developments close to the city by both first-time buyers and investors. Investors are attracted by a buoyant rental market, strong rental yields (6 -11 per cent) and perhaps a flight to safety given the ongoing uncertainty with the euro.
A slowly growing trend is for foreign investors or “property tourists” buying here. Many first-time buyers now see real value and are ready to buy given that mortgage interest relief will be withdrawn this year. The main barrier for first-time buyers is either qualifying for a mortgage or qualifying for a mortgage at their desired level.
A sustainable recovery in the residential market cannot be driven by cash buyers. The Government should make it a priority to bring in a foreign retail bank to offer mortgages. A normal mortgage market is crucial for recovery. The most positive view at this stage is that the Dublin residential market is through the worst.
ANGELA KEEGAN,
Managing director, MyHome.ie (an Irish Times subsidiary)
Our short term view of the property market is relatively positive, especially in urban areas. First-time buyers who want to avail of mortgage interest relief before the end of 2012 are driving transactions. A couple can save up to €30,000 between now and 2017 when the relief will be scrapped. As a result, we are seeing supply shortages in certain urban areas – mainly for three- bed semis in good locations – while rental prices are also rising. Conversely, in new developments in rural locations there is excess supply and large price falls.
If you take the country as a whole and look beyond year's end the picture is much more problematic. Cash transactions and auction sales are not included in many of the price surveys but these transactions now account for circa 30% of sales. From talking to agents all over the country and studying the prices achieved in these cash sales, it seems clear to us that property prices outside of the capital, still have some way to fall.
While the emergence of a variety of micro markets has made it more difficult to make general predictions, we are now in our sixth straight year of price falls. Though the rate of decline is moderating and affordability is improving, the overall trend will not change until the wider economic picture improves. External factors beyond our control will have a huge impact on the three key areas of employment growth, consumer confidence and access to credit.
JOHN O'REILLY,
Sherry FitzGerald O'Reilly, Naas
Our main market is first-time buyers, and when we ask them what they think, they all say they believe prices are close to the bottom. I believe they are the most educated property buyers you can meet, they have done a lot of research. Business-wise there's plenty of activity, this is the fourth month in a row we've sold more than 10 properties. But there is going to be a problem further down the track because no-one is building new homes in the greater Dublin area. Everyone can see there will be a shortage of three-bed semis.
In the wider Naas area there's a serious and ongoing problem with sewage infrastructure, and we understand it's going to take another few years to sort out. This will have knock-on implications for planning permissions and that is going to have to be sorted out soon.
Buyers seem to be getting finance – in the last three weeks we have closed 10 out of 10 sales. Very few transactions are falling through because of financing and we would see a strong mix of cash and mortgaged buyers. The days of people buying because of tax incentives like mortgage interest relief are over. They'll simply buy now if they want to buy.
KEITH LOWE,
Chief executive,
Douglas Newman Good
This year is proving to be a turning point in the market and we've seen a material change in market conditions since January and particularly in the last three months. Interestingly, the market is no longer seasonal as our agency has experienced strong sales over the summer period with uncharacteristically strong viewings levels, multiple bidding and robust results, with many prices exceeding the quoting figures. All of this despite the challenging mortgage market.
Cash transactions account for more than one third of our sales and this trend seems to be increasing. Viewing levels have also spiralled, with the most sought-after properties attracting 60-100 separate viewing parties over the normally quiet summer period.
The change outside Dublin has not been as pronounced but there are solid signs of recovery in the regions with not just house sales but also apartments selling. However, there are some rural locations where recovery will be more protracted due to local economic circumstances and oversupply. In years to come, people will look back at this period and marvel at the value that was on offer. Many will regret the missed opportunities and others will be rewarded by their foresight
VINNIE FINNEGAN,
Managing director,
Vincent Finnegan
There is a shortage of supply for family properties in good areas in Dublin. This is creating a demand and agents have been experiencing competitive bidding for certain types of properties. I would suggest that if the global economy begins to recover and employment stabilises that we can look back at December 2011 as the bottom of the market in Dublin. But there are still serious growing pains and issues to address. First, our banks need to begin to recover and deal with mortgage arrears as quickly as possible. They also need to start speculative lending again, to builders and
investors, as there is a shortage of, and demand for, family properties in Dublin. This would lead to immediate job creation.
Secondly, we need to pay close attention to the potential ticking time-bomb that is mortgage rate increases. I don't know how, but some clear plans/provisions need to be put in place to combat increases. In the Dublin market, apartments are selling again at market price. Three- and four-bedroom houses are selling well due to lack of supply. High-end properties are also selling, albeit at lower prices. Commercial properties are selling and renting in prime areas.
In my opinion, it has become a viable option to look at property investment once more.
