It is anybody's guess what will happen to property in 1999. Most years, it's a throw of the dice whether prices will rise or fall. At the same time, there are aspects for the foreseeable future which should reassure a public confused and fearful about the past year's bullish property market, when Dublin second-hand house prices rose by 26 per cent according to official statistics.
Statistics for the latter part of the year would initially suggest that prices of residential property will level off. Massive increases on the scale of the past few years are not on the cards according to auctioneers, many of whom looked on the widespread withdrawals at auction last season as a healthy dampening down of a market losing the run of itself.
Some agents blamed unrealistically high expectations for last autumn's downturn. If a house sold for a good price, neighbours looked for £10,000 of £15,000 extra the next time, regardless of condition or orientation. Houses that would normally have sold by private treaty went the auction route and suffered as a consequence.
The wait-and-see factor was another reason. Potential buyers, mindful of the negative equity situation that followed the property boom in the UK, decided to sit tight and wait for the bubble to burst. Much of the over £1 billion in mortgage loans advanced between July and September last year has still to be spent. It is early days to conclude that the boom of preceding years will not be repeated in 1999.
The burning question is whether current low mortgage rates will lure investors back into residential property and send prices spiralling upwards. Experts are forecasting that, once the expected early rush to the market is over, prices will settle down as confidence grows with European monetary unity.
Indications are that strikingly different rates of increase will prevail for new developments and for second-hand housing. With over 50 new schemes coming on stream in the greater Dublin area alone in 1999, new houses are expected to rise by just 5 per cent over the coming year. Second-hand houses, on the other hand, particularly those close to town centres, will continue to attract strong prices. "There will still be auction room tears over period houses in the Dublin suburbs," says auctioneer Ross McParland.
A record 41,000 new house completions last year failed to satisfy demand. Returned emigrants in the year up to April 1997 accounted for 44,000 potential cash buyers, and the figure is growing. Figures from economist Marion Finnegan of Sherry Fitzgerald show a projected demand for half a million houses in the coming decade. Ms Finnegan calls for a reduction in dependency on Dublin County and a regional development strategy that will encourage a spread of population.
Densities will continue to be a key issue - one that could pave the way for more affordable housing, according to Mr Michael Goggins of the Irish Home Builders' Association. A study of the property market commissioned by the Department of the Environment will publish its findings early in 1999 and the subject of density will be high on the agenda.
Rents soared in 1998 and the emigrants returning home to well-paid jobs will keep up the pressure on supply. Threshold's Kieran Murphy is lobbying for more tax relief and increased lease security for tenants. His proposal of a ceiling on rent increases will not be welcomed by landlords, whose returns have been curtailed by Government action following the Bacon Report recommendations. Richard O'Sullivan of Christies proposes selective tax relief for tenants who are renting while saving to buy a house. The rental market scarcity, he says, is because residential property investment in this country cannot compete with London yields of up to 10 per cent.
For investors in 1999, estate agent Ken McDonald recommends either one of the seaside resort schemes close to the capital or an inner city development, such as Temple Bar, that will give tax benefits to both owner-occupiers and investors. Peter Wyse believes that investors will buy abroad unless the Government is forced to modify its legislation. "The people who suffer are the 15 per cent of the population who are paying excessive rents because of the shortage."
Outside Dublin, prices are lower, but Cork agent John O'Mahony says that demand is currently outstripping supply in that city. New developments coming on stream at Midleton, Carrigtwohill, Blackpool and Our Lady's Hospital should take care of waiting lists. Waterford house prices are expected to rise steadily because of renewed interest from investors in residential letting properties in the town. According to auctioneer Donald Palmer, much of the secondhand property coming on the market in past months has sold to outside investors.
Galway investors are also returning to the residential housing market. They are buying up good letting properties close to the city centre, confident that a combination of capital growth and rent income will give a 6 per cent return. New housing developments planned for 1999 include a large development on the Headford Road and smaller schemes at Oranmore and Athenry.
Low mortgage interest rates will encourage a steady upward trend in Limerick, particularly in the scarce second-hand house market. Cyril deCourcy says investors are buying showroom and office properties for letting. New housing developments in the coming year include schemes at Castletroy, Raheen, Dooradoyle and Rosbrien.
Investors have turned northwards in greater numbers since the Good Friday Agreement. Belfast has one of the highest concentrations of period houses in the country, many needing work but all the cheaper for that. Edwardian redbrick houses can still be bought in parts of north and east Belfast for under £50,000. Dublin property developer Michael Roden is currently upgrading the former Scottish Mutual offices in Donegall Square, Belfast. The tall sandstone building behind the City Hall is expected to attract a top office rent of £25 per sq ft. Andy Tough of Lisney's Belfast office sees city centre offices and the leisure sector as major areas for growth in the coming year.
The big question for 1999 is - will interest rates remain low for the foreseeable future? Aidan Clarke, head of mortgages at Allied Irish Banks, is confident that, with the euro coming on stream this month, rates will stabilise. "New buyers can now get a fixed rate of 4.7 per cent, so it's a good time to fix your mortgage. Variable rates are always higher, but are expected to drop. Prospects are good all round for 1999."
