If 2013 was the year when the tumbling property market found a floor, 2014 was the one where property values, particularly in the capital, not only picked themselves up but started running.
Analysis of the Property Price Register shows that transactions nationally between January and November are up 34 per cent on the same period last year. In value terms, the 15 per cent growth recorded in Dublin house prices in 2013 is approaching 25 per cent as 2014 draws to a close. Prices may be rising from a low base, but such rapid growth also brings its own problems.
There is universal concern about uncertainty around the proposed 20 per cent deposit requirement in 2014 and whether it will have an adverse impact on buyers seeking mortgages. Industry experts envisage a slowdown in growth next year of between 5 and 6 per cent.
Dublin
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It has been a year of two distinct halves for the capital, where the first was characterised by galloping price rises and frenetic buying activity. Despite a limited stock of properties, many buyers decided to jump simultaneously, driving prices up.
Traditionally popular residential areas on both sides of the Liffey became almost unaffordable for many again. Established leafy suburbs and coastal areas saw record numbers attending viewings and the practice of gazumping made its ugly return. The market showed all the signs of repeating the same mistakes of the recent past.
The second half of the year brought something of a reality check, especially at the higher end. Where a number of auctions had achieved eye-popping results, a series of high-profile properties failed to sell at auction as summer approached. Although most have since sold, the “grab them at any cost” appetite ebbed away.
The autumn market has been far less frenzied, although the stock of properties available is a growing concern. Sellers may be holding off in the belief that prices will rise further and the demand side is no longer dominated by cash buyers and investors (mainly ex-pats planning a return), but a more normal mortgage-assisted and very price sensitive buyer.
Price inflation
Michael Grehan, head of residential at Sherry FitzGerald, says they are seeing the greatest price inflation in traditional family homes of less than €600,000 in value. “That said, we have also noticed a significant uplift in activity in the €1 million plus bracket during 2014.” This has been borne out by Dublin sales of almost 300 properties for €1million or more.
The strain is being felt at the middle to upper end of the market, while activity at the lower end is much stronger. According to Keith Lowe, chief executive of DNG: “Entry-level priced property is now outperforming high-end houses, where the opposite was the case when the market began its recovery.
“Property prices under €250,000 rose by a surprising 7.1 per cent in the last quarter as investors pushed up prices, especially in Dublin city centre, in a rush to buy before the end of 2014.” This rush may be driven by buyers hoping to avail of the December capital gains tax deadline. Lowe is seeing it in particular at the lower end in city centre and apartment locations.
Agents are also reporting a late rush in sales of premium properties, part-built schemes and apartment blocks to avail of CGT, but these sales have yet to be reflected on the Property Price Register.
Cash buyers
With cash buyers now accounting for about 50 per cent of sales, Graham Murray, head of residential at Savills, says: “This is mostly due to the attractive yields available for residential investment and the CGT exemptions, along with owner-occupiers who have decided now is the right time to buy. The middle to upper end of the market has remained active with income producing properties particularly popular.” Some investors have already taken the money and run, with the art of “flipping” very much back on the agenda. It hasn’t been unusual to see houses bought within the last 12 to 18 months returned to the market and sold on at a 40 to 50 per cent profit.
The second highest-selling Dublin house of the year was probably the most audacious flip, when a US-based Irish investor bought 2 Shrewsbury Road in Ballsbridge in October 2013 for €4.65 million and resold it off market to an Irish buyer with no structural improvement for €6.5 million in early August – a 40 per cent profit in just 10 months.
On the new homes front, there has been a welcome return of new schemes, but many of these are small infill developments. Apart from a few large phased projects, there is still a long way to go to meet the clear demand for affordable family homes that will allow younger buyers to move on from renting or rearing families in unsuitable apartment complexes. A number of major schemes are due to begin next year, but it will be well into 2016 before substantial numbers of new homes will be available to buy.
Country
Areas outside the capital did not progress at quite the same rate. At the premium and high end of the market, the international or ex-pat buyer continues to dominate.
In contrast also, the country estates market got off to quite a slow start, possibly due to bad weather here and overseas, which delayed viewings and launches. Very positive media reports about the recovery here may also have deterred overseas investors who had been seeking value. In comparison with almost 300 €1 million plus sales in Dublin, the rest of the country recorded just 30 such sales.
According to David Ashmore, head of country estates with Sherry FitzGerald and Christies International, business is surprisingly brisk towards year end. “We’re seeing a move towards unconditional contracts to allow investors avail of CGT relief, so the last quarter for us has been far and away the busiest of the year.” It will be early next year, however, before the Property Price Register can confirm whether this interest converted to 11th hour sales.
Cork fared well, where six properties sold for more than €1 million, and Shorecliffe in Glandore, the former Co Cork holiday home of Sir Anthony O’Reilly has just gone sale agreed at €1.75 million.
Kinsale’s enduring appeal for sailors and holidaymakers continued as it registered three of the million plus sales. Despite a decent trading environment with plenty of interest, Maeve McCarthy of Charles McCarthy auctioneers in Skibbereen says the most frustrating feature of 2014 has been sellers not getting their houses in order – literally – before putting them up for sale. “Vendors need to do more due diligence before selling. I would say between 70 and 80 per cent of the properties that went sale agreed with us this year were held up two to three months over details like maps not matching boundaries, certificates of compliance not being available, unregistered rights of way or property tax just not being up to date.”
The experience is not unique, as agents increasingly come up against buyers’ solicitors who will not accept what would have passed muster 10 years ago in order to complete a sale.
The transaction values at the upper end are markedly lower than last year, where the top six country residential sales were for €3 million or more, whereas this year they are closer to the €1.5 million plus mark. There’s a finite supply of country estates of course, but a healthy stock remains for sale.
Meanwhile Cork, Limerick and Galway have recorded strong house sales, a trend to be expected on the heels of Dublin’s growth. According to Michael Grehan of Sherry FitzGerald: “There has been a notable uplift in some of the regional centres, in particular in the Limerick market in quarter four. The over-correction that occurred during the property crisis has largely been dealt with in Dublin, while the markets in the counties around the country are all operating at different speeds. Some of the larger regional centres will continue to experience above trend growth in the months ahead while more moderate growth is likely in the non-core locations.”
Commuter belt counties (Kildare, Wicklow, Meath and Louth) have also recorded significant increases in sales and transactions – again off a very low base. But these areas are experiencing significant demand for new homes schemes as the economy recovers and younger buyers seek affordable first homes. Plans are under way for a number of large scale schemes, but it will be well into 2016 before they can begin to satisfy pent-up demand.
DUBLIN: Top six residential sales
€7.9m Deepwell, Rock Hill, Blackrock, Co Dublin. Agent: Sherry FitzGerald
€6.5m No 2 Shrewsbury Road, Ballsbridge, Dublin 4. Agent: Off market
€6m No 73 Ailesbury Road, Ballsbridge, Dublin 4. Agent: Off market
€5m No 27 Ailesbury Road, Ballsbridge, Dublin 4. Agent: Hunters
€4.8m No 18 Elgin Road, Ballsbridge, Dublin 4. Agent: Lisney
€4.75m Thorndale, 31 Temple Road, dartry, Dublin 6. Agent: Sherry FitzGerald
COUNTRY: Top six residential sales
Region €6m Boystown House, Blessington, Co Wicklow. Agent: Sherry FitzGerald
€1.95m the Palisades, Ardbrack, Kinsale, Co Cork. Agent: Dominic Daly
Region €1.85m Glasheenaulin, Castletownsend, Co Cork. Agent: Savills & Charles McCarthy
€1.7m Violet Garden, Glandore, Co Cork. Agent: Charles McCarthy
€1.558m Windy Ridge, Rochestown Road, Cork. Agent: Sherry FitzGerald
Region €1.5m Oldcourt House, Donadea, Co Kildare. Agent: Savills
