Family homes fuel upturn in sales

Official statistics point to a rise in prices of 15 per cent in Dublin in the year to October, but the jump is closer to 20 per cent in some parts of the capital, while Kildare, Meath, Wicklow and Cork are also experiencing something of a revival


It’s a cold November day, but in Dublin’s Mount Merrion, evidence of the current problems in the property market are in sharp focus.

A first viewing for a 1950s bungalow in need of full refurbishment and modernisation has attracted more than 80 people, with couples out in force trying to secure a family home. And they’re not just out for a nose – listed at €445,000, bidding has since pushed the price past the €600,000 mark.

With family homes in short supply for a whole host of reasons, prices are being pushed up, even though demand remains constrained – and even though the economy’s fundamentals remain poor, with job losses continuing to make the headlines.

Indeed, Dublin agent Owen Reilly says that “everything is selling in Dublin” at the moment, with demand even for apartments along the M50 “if the price is right”.

Such is the level of interest in certain areas and certain properties that that dreaded practice, gazumping, is making an appearance again. One househunter recently had just such an experience when she went sale agreed on a two-bed apartment close to Dublin’s city centre.

But her delight was short-lived when the agent rang her back to say he had received a higher offer which his client wanted to take. Not only that, but the other bidder was a cash buyer, with funds in the bank, and could keep bidding. So she backed away from the deal.

In the leafy suburbs of Dublin 6, another putative buyer has found demand so strong that properties “are now being sold under the radar without any advertising whatsoever or visible estate agent signs and at rocketing prices”. He has only discovered the transactions once the sale appears on the property price register.

This pressure is pushing prices up. Official statistics point to a rise of 15 per cent in Dublin in the year to October, but the jump is closer to 20 per cent in some parts of the capital.

Take the example of 49 Leeson Park. On May 14th of this year it was registered on the price register as having sold for €1.95 million. Five months later and it has sold again for a price of €2.15 million – a difference of €200,000, or 10 per cent, in five short months.

Or how about the experience of one road, Clonkeen Drive, in Foxrock. In June, a four-bed semi-detached in reasonable condition sold for €442,000. Fast forward three short months and a similar property, with a slightly higher spec, sold for €534,250, while in November, another property on the same road and of a similar condition, sold for €545,000. That’s more than a 23 per cent jump in just five short months.

But while Dublin remains the nexus of activity, accounting for some 34 per cent of all transactions in the 11 months to November 26th, there has also been a lift outside the capital, with the number of sales outside of Dublin up by 8 per cent over this period on the previous year, according to the price register.

Cork is the next biggest hub, with 10 per cent of transactions, steady on 2012, while the Dublin commuter belt of Kildare, Meath and Wicklow accounts for a further 7 per cent of transactions. But blackspots remain across the country. In Co Monaghan, for example, there were just 182 sales in this period, with Longford reporting just 190 and Leitrim 221.

While more than one in two transactions are still being done by cash buyers, Trevor Grant, chairman of the Association of Expert Mortgage Advisors, notes that the banks are lending again.

Unsuccessful bids
For Grant, the re-emergence of Permanent TSB and KBC Bank in the market and lending up to 90 per cent of the purchase price, has meant that this year has been “much better than last”. And next year may be even busier, with €3 billion of mortgage lending forecast.

But he notes that “the calibre of people is extremely good” and the amount of paperwork – and the manner in which it needs to be presented – to get that precious mortgage approval can be off-putting.

And, if you’re stuck in negative equity, you might find those ads currently playing on the radio from one particular bank somewhat misleading.

For Grant, it is “absolutely not” the case that banks are facilitating lenders with negative equity mortgages. He asserts that there have been only of the order of 100 or so negative equity mortgages issued this year, and that they are “fundamentally flawed”, because even if a borrower can sell their existing property, the amount of negative equity they will be lumbered with may likely preclude them from borrowing again to fund another purchase.

Another issue is that “people are getting approved, they are bidding on properties but are then unsuccessful,” Grant says.

After all, it is the cash buyers who can go the distance in a bidding war, because they have the flexibility to bid up. As Grant notes, a mortgage approval is for a fixed amount - and purchasers have to either fill the gap from their own funds, or forego the property. “It’s a problem,” he says.

And, while Reilly asserts that agents are no longer advising vendors to go for a cash buyer, as they would have done in 2010/2011, for some vendors it remains the best option.

While there are signs of a bubble in particular quarters, it doesn’t mean we’re returning to the heady days of 2006.

“Everything takes so much longer. Even when you’re dealing with a cash buyer, everything moves a lot slower because everyone is much more diligent,” says Reilly, pointing out that “a quick sale in today’s market is two months”.

And rising prices might end up actually dampening them.

Cash buyers
“If prices go up further it may encourage more sellers to sell, which could see an increase in supply,” says Reilly, adding that this might also see investors looking for a good deal “disengage from the market”, which in turn could further alleviate price pressure.

Another factor is the major impact cash buyers, with their fat pockets, are having on the market at present. But market commentators say they are a finite number.

“We’re not going to have cash buyers forever,” says Reilly.

And it’s important to point out that prices are’t going exclusively in one direction. A three-bedroom property on the popular Wereview Drive in Stillorgan, Co Dublin, recently had its price cut by €25,000, down to €470,000 for example, while on Glasnevin Avenue in Dublin’s northside, a four-bed semi-detached property has had 10 per cent, or €50,000, knocked off it.

So if you are looking to buy in 2014, keep that panic in check.

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