Dublin house prices are set to jump a further 12 per cent next year, following phenomenal growth of up to 50 per cent in the last three years. Prices rose to a record high this year, up 26 per cent on 1996, according to a survey published by the Irish Auctioneers and Valuers Institute (IAVI). But Sherry FitzGerald, the agency which handles the most sales in Dublin, says that the increase is closer to 30 per cent in many parts of Dublin.
The soaring prices took auctioneers by surprise. Following the 20 per cent increase recorded in 1996, they simply did not expect to have another record year. Last December leading estate agents predicted that values would rise by 7 to 15 per cent in 1997. In fact, they rose by that amount in the first six months of the year. With more increases on the way, the average wage earner is effectively being priced out of the housing market.
The average cost of a second-hand house in Dublin is now £100,000, while the average new home - a three-bedroom semi - costs £96,000, up from £76,439 last year. And the prices are rising by the month. The IAVI survey predicts that the average new home will break the £100,000 barrier by mid-1998. Many potential buyers would be pleased to pay the price, if they could get the house. But new housing developments invariably have huge waiting lists. Sherry FitzGerald recently logged 1,800 enquiries for 34 starter homes and apartments in Cherrywood near Cabinteely, Co Dublin.
Several factors contributed to the dramatic rise in values this year. With interest rates at their lowest levels for two decades, buyers pushed their borrowing ability to the limit to buy a family home. Investors were particularly active in the market, buying up to 40 per cent of new apartments and at least 10 per cent of new houses. Bricks and mortar became the fashionable investment in 1997 as people with a bit of cash to spare and good borrowing power sought to buy themselves "a pension". Investors also purchased heavily in the second-hand market, because of the strong demand for rental properties. The strong investor presence also cut back the supply of property since investors were buying, but not selling on their existing home. The second-hand house market was hit early in the year by a new punitive rate of stamp duty which added 9 per cent to the cost of buying a house worth £170,000 or more. This was designed to dampen down the market, but estate agents agree that it actually had the opposite effect. Many vendors in this price bracket decided not to trade up, thus constricting the supply of houses coming on the market and effectively putting a premium on those houses that did come up for sale.
Dublin houses in the middle market now cost over £200,000, while good family homes in the better suburbs are costing £300,000plus.
Many agents had difficulty keeping guideline prices reasonably accurate during the year as, week on week, record results were achieved in the auction rooms. Potential buyers were increasingly frustrated as sale prices went far beyond the guidelines offered by agents - in some cases sale prices exceeded their pre-auction estimates by up to 50 per cent. The IAVI was prompted to issue a new rule to auctioneers, aimed at keeping guide prices within 10 per cent of the auction reserve price - the price at which the property will be sold - and this measure has gone some way towards restoring faith in the auction system. However, the most spectacular increases have been at the top end of the market, where the best Dublin houses are now considered to be worth millions. Two years ago, the top price paid at auction for a Dublin home was £690,000. This year the highest auction price was a staggering £2.3 million, paid for Mount Mapas, a six-bedroom villa on Vico Road, Killiney.
It is figures like these that prompted the Government to announce a study of factors affecting house prices. This review is now underway and will be complete in the new year. Whether the Government will then introduce new measures, such as rezoning more land for housing developments, remains to be seen. In the meantime, continuing low interest rates mean that the property market is unlikely to cool down in the next 12 months as Ireland moves towards EMU.
Investors are likely to continue ploughing money into the market, particularly into new apartments and second-hand apartments which are seen as easy to manage investments that "wash their own face". But prices are rising for these properties at an alarming rate. According to Robin Palmer of Gunne's Ballsbridge office, apartments in the area have doubled in value in the last two years, and when they do come on the market they tend to sell almost overnight.
"The same could be said for some inner city apartments." he says. "Anything with a car parking space is selling exceptionally well, since people see parking as a prime concern. Parking spaces close to town have probably doubled in value in two years."
There are signs, however, that investors are turning away from the Dublin market because it is simply too expensive to give a good return. According to Aidan O'Hogan, managing director of Hamilton Osborne King, many of his clients are turning to residential and commercial investments in London, particularly in the Docklands area, where prices are on the rise. "You can buy there for virtually half the price and you get 10 or 11 per cent returns."
Irish buyers are also trawling the continent for bargains, according to Siobhan Kirwan of O'Dwyer Property Management. She says that several of her clients are now shopping for houses or apartments in France where property prices have dropped by up to 30 per cent in recent years.
