Ireland’s property market is stuck in a vacuum, with the only stimulus coming from the old reliable triggers: birth, marriage, death and, increasingly, debt
ARE WE THERE YET? The trip to the bottom of the property market is taking an awful long time. It’s three years since the jitters first took hold with talk of empty apartments and stalled sales, two years since the global economy took a nosedive courtesy of Lehman Bros.
Savvier individuals would say that they saw the end coming far earlier, as far back as autumn 2006 when auction rooms suddenly emptied. and demand for investment properties waned.
Either way it’s been a long grinding descent to the point we’re at now, with house prices halved and empty homes littered across the landscape. Some estate agents insist that the bottom is now and that people can “smell the value out there”. If only the banks would start lending again, they say.
However, would-be buyers have plenty of reason to be stay on the fence. First off, it’s hard to get a mortgage. With most of Ireland’s financial institutions in dire straits, there are really only two or three providers offering mortgages right now, as against over a dozen at the peak of the property boom four years ago.
Job insecurity is another cloud hanging over young and middle-aged workers who no longer see property ownership as the key to a comfortable retirement. There are other drags on the market: a lack of information on property prices, which are covered by the Data Protection Act, though a register of house prices is promised by the Government later in the year. Looming property tax is another turn-off.
Meanwhile, prices continue to fall gradually, and in most cases are back at 2000 levels. Some sellers however, are still clinging to old valuations and pricing their homes high. A considerable number of these are sticking to unrealistic value to assuage banks seeking to recover outstanding funds.
Nama has taken over the loans of thousands of properties, and now virtually controls large tracts of developments in places like Sandyford and the nothern fringe of the city. It’s now one of the largest property companies in the world, but observers say it’s so big, its employees are struggling to find a way out of the problem.
So far, Nama shows no sign of forcing developers to offload properties at bargain basement prices. For the moment both it, and the banks, are opting to rent out rather than sell distressed properties.
At the upper end of the market, private sales are an increasing trend – where owners want to sell without the hoopla of public viewings. Generally these are top-end homes with an estate agent acting as a broker. Lower down the price scale, sales are being driven by traditional triggers such as birth, marriage, death and, increasingly, debt. No one is buying or selling property on a whim, or to make a quick turn.
The sales process appears to be speeding up, especially in traditional neighbourhoods. In 2008 it was taking an average of 212 days to sell a property, in 2009 it dropped to 174 days. In 2010 it is taking an average of 121 days to sell, according to figures compiled by Sherry FitzGerald.
Unexpectedly, auctioneers are charging slightly higher fees with 1.5 per cent to 1.75 per cent now being sought by most established agencies, up from 1 per cent and less during the boom years. However, a number of new firms formed by ex-employees of the larger agencies will take less in the hope of building market share.
Ireland still has some of the lowest commission rates in Europe where they generally range between two and six per cent.
Both the larger agencies and new names in the business say it’s been a busy summer with more completions in July and August than expected.
Competition seems to be returning for at least one category of home – the well-located three or four-bed that has been fully refurbished. “Renovated houses are selling well,” according to Pat Mullery of DNG, who has many years experience in Dublin 6.
“If it needs lots of work, it is harder to sell.” Cash buyers offer the best prospects for vendors desperate to offload unrenovated property or investment property, which the banks are not interested in funding.
Overseas cash buyers have also swooped on a number of Dublin city centre properties being sold at heavy discounts, including a penthouse off Grafton Street that recently sold to a UK buyer who felt the price of around €1 million was value for a city centre location.
While the very wealthy, and there are still plenty of those, wait for bargains to come out of Nama, the winners in the residential market are likely to be those who have sold at the upper end of the market with the intention of renting until the floor appears. That is, at least, the ones who did not put their savings or windfall into bank shares while waiting to buy a replacement home.
Young couples with steady jobs and a record of saving as well as some family money are now at the top of the pile when it comes to arranging finance and viewings.
For these buyers there is now the possibility of moving to a neighbourhood or a road previously beyond their reach.Location is once more the key decider for buyers, rather than the prospect of capital appreciation.
As for less well-located property, the picture may not be quite as bleak as it seems. A study suggesting that there could be up to 300,000 vacant apartments and houses in Ireland has been highly disputed, with the Department of the Environment conducting its own research into the vacancy rate.
Its findings will be known later this month but one source suggests that the figure is more likely to be between 60,000 and 80,000 with a large number of these units in the greater Dublin area. This may ease some of the concerns over ghost estates.
Still, the problem of empty unsaleable homes remains and it’s clear that some of the worst examples will be demolished.
