Starter homes are likely to remain scarce in Dublin's suburbs over the next year, despite Government measures to increase the supply, according to estate agents.
Government measures designed to calm the market are working. They have already brought about a number of fundamental changes, but it will some time before they achieve their aim of halting rising prices or lead to a significant increase in new homes.
Private investors have been taken out of the new homes market as a result of the Bacon initiatives, but although house completions in the country as a whole are expected to break through the 40,000 mark for the first time, there is still a considerable shortfall in starter homes in Dublin and other cities. Gerry Leahy, who specialises in new house sales in the Dublin area, says that despite the public-private partnership to service and rezone more land, there will be no immediate acceleration in the supply because of the lengthy planning process involved. It was now taking seven or eight months to get planning approval, and this would mean that the increased supply of houses would not be available for at least a year - "in other words, the next century".
The buoyant new homes market in the early part of 1998 was largely fuelled by investors, who bought up to 30 per cent of some of the developments in west Dublin. With many of the schemes selling within hours or days, new house prices in the Dublin area seemed out of control for a while, rising by 17.6 per cent between January and June. The 12-month figure may well be close to the 31 per cent increase recorded in 1997. Agent Ross McParland says that during the sales frenzy in the early part of the year, people were buying second houses just like second cars. Builders were operating on advance sales, and in many cases had taken bookings for houses which would not be ready for at least six months. After the Bacon report, owner-occupiers reclaimed the market which was once again price sensitive, particularly in the area of starter homes. Builders were improving design and finishes to attract buyers. Mr McParland expects a slowdown in price increases next year, particularly in the outlying suburbs. In these areas, the increase may be around 5 per cent, but it could be up to three times that figure in the well-established inner suburbs because of the scarcity of development land.
Mr Leahy estimates that prices could rise by a further 10 per cent next year. He did not expect to see queues again outside new schemes. Ronan O'Driscoll of Hamilton Osborne King says most of the price increases occurred in the early part of the year, particularly before the Bacon measures were introduced. Price increases in recent months had been "quite modest". Mr O'Driscoll will be handling the sale of 85 four and five-bedroom houses and 80 apartments at Brennanstown Road early in the new year. Another large scheme will include 150 apartments and 50 houses at the former Linden Nursing Home at Grove Avenue, Blackrock. The Brennanstown Road development will be the first for a considerable time aimed at the top end of the market. With the rush to build starter homes over the part three years, few developments have catered for families wanting to trade up into larger homes.
One of the exceptions in the past year was the Leixlip Manor scheme at Celbridge, where Hooke & MacDonald sold all 52 homes in the first phase over a single weekend. Cosgraves are due to bring another 45 houses on to the market in the new year.
Around 3,000 apartments have been sold in the Dublin area over the past year, with about 40 per cent of them being bought by Section 23 investors looking for a tax shelter for rental income. Further evidence that investors were alive and well came in September, when they bought 130 Section 23 apartments within a few hours at Custom House Square in the Dublin docklands. The development will eventually have a total of 600 apartments. Though Hooke & MacDonald found owner-occupiers for a whole range of inner city apartment schemes in the autumn, the agency warns that the volume of rental accommodation in the city will not expand because of the Government decision to disallow investors the right to offset mortgage charges against rental income. Despite the widespread acknowledgement of the need to increasing housing densities in the city and the inner suburbs, Ken MacDonald says that Dublin Corporation's decision to refuse planning permission to Morrison Homes for 112 apartments in a 13-storey block opposite The Point Depot "flies in the face of Government policy".
With gazumping by builders again drawing Government ire during the year, there have been signs that the Irish Home Builders Association will finally bring developers into line. The association has dragged its feet on the issue and is only moving because of a Government threat to take action.
