Record high mortgage approvals, waiting lists and soaring Help-to-Buy applications – as the new homes market casts off the shackles of the Covid-19 pandemic, agents are expecting a busy autumn selling season across the country. The only obstacle is that there’s unlikely to be enough new homes to meet demand.
Some schemes that were held back due to the Covid restrictions are now coming to market
As with elsewhere in the property market, the imbalance between supply and demand is likely to continue in new homes over the coming months.
“We have a supply issue, there’s no two ways about it,” says Gemma Lanigan, a partner with DNG New Homes, as elsewhere, agents say the pandemic and associated restrictions have slowed the flow of new schemes to the market.
As Judy Sorohan, associate director with Hooke & MacDonald, notes, some developments “are coming on later than we would have anticipated. This means that a development that could have been on the market now, may not get out of the blocks until the new year, which means less choice for potential buyers.”
On the other hand, some schemes that were held back due to the Covid restrictions are now coming to market. David Browne, director of new homes with Savills, says supply is up this autumn, due to such delays.
“We have much more than we would normally have,” he says.
But it’s unlikely to be enough to quell demand, which has built up over some 18 months of lockdown and restrictions.
“It’s coming out of something of a slumber. There is a huge amount of pent-up demand,” says Ivan Gaine, managing director of new homes with Sherry Fitzgerald.
Where can I put the dog? That's what so many people are asking now
This is reflected in the strength of mortgage approvals, which hit a record €1.28 billion in July, with first-time buyers (FTBs) accounting for more than half of all applications approved. It’s also reflected on the ground, with strong sales for schemes that appeal to new home buyers.
In Limerick, for example, Sherry Fitzgerald recently sold 26 out of 27 three- and four-bed homes at The Edge, Castlebrook Manor in Castletroy, on the first day of launch, while housebuilder Glenveagh recently disclosed that it had sold, signed or reserved all the 1,150 homes that it expected to deliver in 2021, with a further 300 of stock for 2022 already reserved.
“The pull to new homes is much stronger than it has been,” says Browne, noting the increase in people who have been unsuccessful in bidding on second-hand homes, and are attracted by the price certainty of a new home. Those who have been renting may also be compelled to buy, given the fact that buying is still considerably cheaper than renting.
As a result, agents have considerable waiting lists in place for launch day.
“We have long, long waiting lists for nearly every development we have at the moment,” says Sorohan, adding that the longest tend to be for the more mature developments, which could have a couple of thousand potential buyers on them.
It’s a situation that DNG will shortly face at its impending launch at Kilcarbery Grange, a scheme of apartments and three- and four-bed homes in Dublin 22. The agent has about 2,000 people who have expressed interest in the scheme; but just 25 homes are going on sale.
“It’s literally going to be as quickly as people can respond, we’ll allocate them a time [to view] and if they want to book one, then they’ll book one,” says Lanigan.
More demand may also be expected to translate into higher prices, but agents note a certain ceiling on prices, as buyers can afford only so much through the Central Bank lending rules.
Further down the road, a boost in supply is expected, as normality returns.
“It takes time to ramp back up,” says Lanigan, but adds that there is a “good pipeline” of future developments.
Some of this will be down to Government policies. Indeed, with some €4 billion in State funds set to pour into the housing market on an annual basis, the Government’s Housing for All strategy, set out in early September, is nothing if not aspirational.
“It’s extremely ambitious in terms of the goals, most particularly in relation to the volume of homes,” says Ray Palmer-Smith, director of new homes with Knight Frank, adding, “I think in the longer term anything that’s going to increase supply into the market is definitely going to help.”
Indeed, the strategy sets out an aim of increasing the supply of housing to an average of 33,000 a year over the next decade, through a combination of social, affordable and cost rental, private rental and private ownership construction.
For those struggling to buy at present, the strategy heralds the introduction of a shared equity scheme, as well as other local authority-led affordable schemes.
The introduction of shared equity will be “potentially game changing” says Browne, noting that it should help those locked out of the market at present, as they earn too much for social housing but not enough to buy on the private market.
However, while the affordable schemes will be welcome, it will need a corresponding boost in supply.
“One concern would be around creating an even greater bottleneck in that first-time buyer market; this will need to be addressed by delivering more homes,” says Palmer-Smith.
And, while the strategy is big on headline-grabbing figures, exactly how much of this new supply will come to market has yet to be clarified.
“The detail will be critical,” says Gaine, noting that we still don’t know what the price ceilings will be for shared equity.
Where many see a real problem, however, is with respect to planning issues, and a reform of the judicial review process to reduce planning delays.
“In terms of delivering product to the market, it’s very badly needed,” says Palmer-Smith.
However, such reviews and changes won’t happen in the short term, so a positive impact may take some time.
Many first-time buyers in the new homes market have relied on the Help-to-Buy scheme to fund their deposit – latest figures show that more than 26,000 putative buyers have been approved for the incentive this year. Help-to-Buy offers a tax rebate of 10 per cent of the purchase price of a home, up to €30,000, and up to a purchase price ceiling of €500,000.
However, there is still an element of uncertainty with respect to its duration. Rather than confirming an extension to the scheme which is due to run out at the end of this year, the Government’s housing plan said “the Minister for Finance will consider an extension to the timeline in the context of Budget 2022”.
“It’s massively beneficial from a buyer’s perspective and it should be extended,” says Palmer-Smith, although he adds that he doesn’t expect there will be any change in terms of the price bracket, of €500,000.
In any case, this price ceiling hasn’t impacted some buyers. At a recent scheme in Churchtown, Dublin 14, Lanigan was surprised to find all the buyers of the homes, which were priced at about €700,000, were FTBs.
“Some have built up huge savings,” she says.
On the other side, some would-be buyers can’t even access Help-to-Buy, because their incomes are too low to qualify for enough of a mortgage.
This will be considered as part of the Central Bank’s mortgage lending rules. At present, these limit the amount a buyer can borrow to 3.5 times their income, although exceptions are possible in some cases.
However, some agents feel this multiple is too low.
“Nobody wants to see mad multiples,” says Browne, but there is a consensus around extending the multiple somewhat.
Palmer-Smith would also like to see some easing of multiples, “3.5 times salary is too tight”, he says.
Construction of apartments might abound, but buying a new one has become extremely difficult of late, with the private rental sector sucking up much of the supply. And where apartments have come to market, they have been aimed at the higher end of the market.
Over the coming months however, supply will pick up, aimed at a broader audience. Yes, new luxury schemes aimed at downsizers and first-time buyers with deep pockets will come to market – in Mount Merrion, Knight Frank is readying the launch of one-, two- and three-bed apartments at The Pinnacle – but the typical FTB will also be catered for.
In Clonsilla, for example, Savills is readying the launch of St Joseph’s, a scheme of one-, two- and three-bed apartments. Prices are expected to start in the low €200,000s for one-beds, increasing to the late €200,000s for two-beds.
People are casting the net much further afield; they don't really have the choice. Prices in Dublin are becoming too much of an issue for a lot of people
With the possibility of working more from home, “the commute isn’t that much of an issue any more”, says Sorohan.
This means that people are looking beyond the Dublin suburbs, with much of the new supply coming on stream in commuter towns in counties Wicklow, Kildare and Meath.
“People are casting the net much further afield; they don’t really have the choice. Prices in Dublin are becoming too much of an issue for a lot of people,” says Sorohan.
Indeed, a FTB survey from Sherry Fitzgerald found that the location aspiration for 20 per cent of FTBs had changed over the course of the pandemic.
“We’re seeing more of a distribution beyond Dublin,” says Gaine, noting that people relocating due to working from home is starting to happen more. “People will go further for more space, and are using their homes differently,” he adds. This means finding a space from which to work.
“People are buying four-beds instead of three because they want an office,” adds Browne.
This movement outside of Dublin should also lead to increased new developments over time.
“We’ll see more development out of Dublin,” says Lanigan.
And another impact of lockdown is that many house buyers have an additional member of the family they now have to consider.
“Where can I put the dog? That’s what so many people are asking now,” says Gaine.
