Free fall over but Budget will not help recovery
2012 Review:While house prices have stabilised somewhat, a two tier market is emerging, and homeowners are fearful
Can we look back on 2012 as the year when the residential property market halted its cataclysmic decline? The answer depends on where you’re sitting, literally. There is a clear two-tier market emerging between urban and rural properties.
The national average house price has more or less stabilised since February, but house prices outside of Dublin in many cases continue to fall particularly in Munster and Connaught. House prices in the capital now stand about 56 per cent lower than at their highest level in early 2007.
Sales recorded on the new Residential Property Price Register for the first nine months of 2012 are up 24 per cent on the previous year. In pockets of Dublin reports are coming in of record attendances at house viewings, a number of successful residential auctions achieving prices above the estimate and shortages of stock in some areas.
However the expiry of mortgage interest relief for first-time buyers on December 31st has driven most transactions in the last quarter of the year.
The real driver of market sentiment has to be consumer confidence. The failure of the banks to lend continues to stymie activity. Buyers can’t get the funding they need, and vendors can’t move until they have sold. There’s a significant number of houses going sale agreed only to fall through when funding fails to materialise. October mortgage figures reflected a 27 per cent annual increase in approvals, a positive development but an increase that is working off a very low base.
According to Ed Carey, chair of the residential property group of the Society of Chartered Surveyors Ireland (SCSI): “Scarcity will be an issue in 2013. Negative equity is stopping people putting their homes on the market, they can’t do business with the banks. They can’t sell up so they can’t move on.”
The combined effect of the abolition of mortgage interest relief, the new property tax and other austerity measures could apply further downward pressure to house prices next year. Annette Hughes, director of DKM Economic Consultants, says: “People’s ability to pay has been seriously impacted. I would expect that this will drive prices downwards as people won’t be in a position to borrow the same amount – it’s a further drag on disposable income which will fuel lenders’ decisions. There will be less money chasing the same properties.”
News this week that in the New Year the banks will get the power they need to seize control of homes in mortgage arrears, will certainly terrify homeowners already in difficulty, but it’s likely the primary focus of the new measures will be on the one-third of buy-to-let homes in arrears. (The Central Bank’s recent figures show 169,000 home loans consisting of €31 billion in debt in arrears at the end of June, with arrears for 90 days or more running at 20 per cent.)