2008Review: SELLING:While surveys talk of an average price fall of 9 per cent since January, some vendors have had to cut prices by 50 per cent to sell, writes Orna Mulcahy, Property Editor
THE SALE of a detached family house on Dublin's northside tells the story of the capital's property market in 2008 better than most. The four-bedroom house hit the market in January, asking €2.2 million - a price that might have worked in the heady days of the boom, before the US financial market went into freefall taking Ireland's economy with it.
There were no takers and the price was reduced to €1.95 million in April. It was cut again in June to €1.8 million, and again in July to €1.6 million. In October a deal was finally agreed at €1.125 million - 49 per cent below the original asking price. Try telling the owner that, according to the latest Permanent TSB/ESRI index, Dublin prices are down by just 9 per cent since January.
The story repeats itself across the city with sellers in the mid to upper end of the market forced to reduce prices drastically if they want to sell.
A tsunami of bad news on the financial front has brought the housing market virtually to a standstill with first-time buyers afraid to commit, banks refusing to lend, and cash-rich bargain hunters on the prowl.
House prices have been declining since the peak of the property market in 2006. At first the slowdown was gradual, leading the industry to talk about a "soft landing." However, a succession of interest rate rises through 2007 scared buyers, and that was before the sub prime mortgage crisis in America hit the headlines. Thousands of properties unsold in 2007 were still for sale in 2008, giving buyers a huge choice of second-hand and new homes, many of them at steadily discounted prices.
Developers with stock to clear hit the market with deep discounts and had some success at first. Then prices had to be continually readjusted downward to reflect the weakening market and valuing property became a tricky business.
If agents weren't busy selling, they certainly had plenty of valuation work as banks demanded continuous updates on clients' portfolios. They have also been increasingly engaged by buyers anxious to negotiate even better terms at a late stage.
By summer sales activity had dropped away and economists argued that house prices could fall by between 30 per cent and 50 per cent before the market bottomed out. There was now a record amount of property for sale. In August property website myhome.ie had over 8,300 homes for sale in the Dublin area, twice as many as had been available in autumn 2006. Property was also taking a lot longer to sell. The average sale time recorded by myhome.ie is now 220 days, compared with 100 days in 2006.
By September the consensus among estate agents was that the market had "fallen off a cliff". Irish house prices had become wildly inflated since the last recession, post 9/11, and those who bought houses or apartments in the years 2005 and 2006 are most likely to be in negative equity.
Buy-to-let investors have been particularly hard hit in the purchase of new apartments from plans. Prices agreed one or two years ago have slipped dramatically, particularly in suburban areas now seen to have an oversupply of new apartments. Many who made legal commitments have been desperately trying to wriggle out of them, but ever diligent solicitors, and desperate developers are threatening court action to ensure sales are closed.
As the year progressed, the number of purchasers in a position to sign an unconditional contract dropped substantially.
Effectively the market has been restricted to cash buyers, very few of whom have the confidence to go out and buy. They are waiting for the floor to appear.
Despite the gloom and doom there have been transactions. Early in the year, Lisney sold Glenlion in Howth, a substantial property owned by rogue solicitor Michael Lynn and subsequently sold by the bank. It made €4.9 million under the hammer.
The spring season brought a glut of expensive houses onto the market as it became clear that, although property was struggling, the prospect of prices falling even further frightened punters into selling.
There were some successes. In April Lisney again fetched a premium price, this time for 57 Wellington Road, which made €6 million under the hammer.
In Howth, Adam Clarke of Savills sold the home of Jennifer Guinness, Ceanchor House, a Georgian on almost nine acres of headland and seafront. It went on the market in 2006 asking €12 million, but eventually sold for between €7.5 million and €8 million - a price drop of around 38 per cent. Also in April came a superb Georgian townhouse at 24 Fitzwilliam Square, for sale at €10 million. Owned by magazine publisher Kevin Kelly, it was advertised internationally but failed to attract a bid. It is still available at a reduced price of €8.5 million.
In Foxrock, Sherry FitzGerald sold two high-end houses in Foxrock, Fairholme on Brighton Road for €4.2 million and Glenarm on Torquay Road for €5.7 million but a large number of similar houses languish unsold in the neighbourhood.
Suburbs like Blackrock and Monkstown have also seen a glut of properties that remain unsold, even those with knockout features, like Eagle Lodge on Sydney Avenue, Blackrock, which saw some early interest but is still for sale.
As the autumn selling season got underway, high-end properties continued to come on the market, including the Shrewsbury Road HQ of the Pharmaceutical Society being offered at €25 million. The property, which includes two modern apartments and a cottage, was totally refurbished in 1999, could easily revert to a family home but there were no takers at €25 million. It too is still for sale.
