Offer buyers real value and the market will moveThe slowdown in the residential property market seems set to spill over into the commercial sector with site sales rapidly slowing down and values slipping by at least 10-15 per cent.
Everyone accepts that prices for residential sites had become unrealistic, particularly where consortiums of buyers were at play. Seasoned housebuilders were having to compete against ambitious young things intent on making a fortune from flipping-on sites at huge profits. Some managed to pull it off, and others even embarked on developments by bringing in specialist builders, who delivered the final product.
That day is now well and truly over because of lending curbs by the banks. In one case, the bank bounced a cheque issued by a consortium to buy a high value site - something we hadn't seen for many years.
Last week's purchase by David Daly of two prime retail buildings on Grafton Street may have given a false impression of the strength of the market, particularly as he settled for a yield of just over 2 per cent. In the long term he is bound to do well on the investments, but few others would be able to live with that level of return.
For others, the banks are becoming increasingly reluctant to fund substantial deals, where there is a significant shortfall between the rental returns and the repayments. Some of the more experienced agents are anticipating a slippage in values, and are concerned that it will be in dribs and drabs, rather than in one sharp fall. This is what is happening in the residential market where both housebuilders and second-hand sellers alike cannot stomach the reality that their property ain't worth what it used to be. The result is an impasse, with buyers sitting on their hands, and vendors reluctantly dropping prices bit-by-bit.
Of course, the writing was on the wall for some time when the two major banks, AIB and Bank of Ireland, offloaded most of their prime properties to investors on a sale and leaseback arrangement. Their profits have soared in the meantime, while the new owners of some of the best buildings in the country are wondering if they paid a little bit too much. Only time will tell.
The scenario now emerging in the commercial as well as the residential market will not be resolved until buyers are offered real value - something that hasn't happened for several years. Cash buyers will be getting ready for the bargains that inevitably lie ahead. The credit splurge is over for the moment.
Why not invest in the incredible Hull
We received an e-mail from one Barney Buik from The Investment Property Search Company (Tips) this week asking us the intriguing question, "Why Hull?"
Why indeed? Once known as the ugliest city in the UK with the worst council, there has apparently been an ambitious drive on to transform it to the Barcelona of the north.
According to Tips, lots of Irish investors are coming to the conclusion "why not Hull?" and according to Tips, they now make up 30 per cent of new business . "Now that it has become harder and harder to find investments to fit the buy-to-let mould in Ireland, people are looking for investment opportunities elsewhere. We are currently sourcing and managing properties with gross yields between 5 per cent to 8 per cent," says the e-mail.
Ranked number eight city in the UK, apparently Hull has undergone regeneration and is in the grip of a mini-boom.
Tips, which calls itself a "young ambitious company', is run by two directors with investment banking backgrounds. They started out as property investors and branched out into property management, lettings, refurbishments, maintenance and property finding, all of which are now done within divisions of the group .
They manage in excess of 400 properties, and have plans to expand within Hull and to other areas of urban regeneration.
Manic Monday for Tullamore scheme
Talk about getting your lines crossed . . . The Moritz Group, described in a press release as "one of Ireland's largest property developers", announced on Monday last that it had lodged a planning application for a large mixed-use development in Tullamore town centre.
The highly ambitious €150 million scheme on an 11-acre site beside Dunnes Stores was to include 13,935sq m (150,000sq ft) of retail space, a 60-bedroom hotel, a primary health centre and 117 apartments.
All very interesting until the following morning when Slattery Communications rushed out a second press release announcing that "planning permission has actually been refused for this development". True enough, the Tullamore planners threw out the planning application on Monday on the grounds that it would be "visually dominant, overly obtrusive and fails to create a strong visual connection with adjoining buildings". Back to the drawing board.
Corpo says yes to plan for Dollymount House
The McKeon family's MKN Property Group has got planning permission from Dublin City Council to turn Dollymount House on Clontarf Road, Dublin 3 into a €50 million luxury apartment complex. The pub, which was a hotspot for local families for Sunday carvery lunch, will be demolished and replaced by three blocks of apartments rising to a height of five storeys.
MKN bought the pub on its site of about an acre for around €15 million last year - the equivalent of €227,000 per apartment site. Several of the 12 objectors to the scheme to Dublin City Council mourned the loss of the pub. "For years this public house provided a social and eating outlet for members of the public. This application removes a valuable neighbourhood facility," said one objector.
MKN has been involved in a number of apartment schemes, like the award-winning 150 Howth Road.
Chemical question burns for Gormley
The dreaded pyrite problem looks set to land on the doorstep of the Minister for the Environment John Gormley.
Earlier this week Fingal council members resolved to fire off a letter to the Minister asking him to create new guidelines requiring infill material to be chemically analysed. This, no doubt, is in response to Gormley's reminder to local authorities of their obligation to enforce building regulations last month.
Currently, department guidelines require only that the material is of suitable standard and quarry material is stress tested to ensure it can support the weight of a property, according to the Mayor of Fingal Cllr Alan Farrell.
The council is calling for new regulations requiring material to be chemically analysed as well, he says. This would ensure that every rock coming out of every quarry in the county is tested for pyrite and other unstable and unsuitable materials, he says. Such regulations would act as a preventative measure for future homeowners but will do nothing to alleviate the problems currently being suffered by a large number of residents in the north of the city and county whose newly built houses are cracking. The issue was discussed at the council's first meeting after the summer break and can be viewed on Fingal's website www.fingalcoco.ie.
Meanwhile, Labour's North East TD Tommy Broughan is planning to table a Dáil question to the Minister on the pyrite issue on the first day back at parliament.
The Dublin North East deputy is set to call for a full tracability audit on materials used in these developments and an investigation into how much building regulations were monitored during the recent building boom.
"It appears that building regulations have been totally left to the discretion of builders and developers, particularly in private estates. This is totally unacceptable."
There is a perception that the rush of development is such that quality issues may have been ignored, he added.
Belgium tops the charts for rising house prices in Europe
Forget chips and chocolate. It's all about house prices in Belgium these days.
The country had the largest increase in house prices in Europe last year, according to Halifax, the UK banking and insurance company.
House prices there rose by 18 per cent, compared with 15 per cent for France and a 14 per cent rise for Spain.
Over the last five years Spain had led the way with a 100 per cent increase in house prices, with the UK not far behind at 90 per cent, followed by France at 73 per cent and Ireland at 71 per cent.
