Property investor

The decision to actually count the number of vacant homes in the country will finally offer some clarity on the true state of the market, writes JACK FAGAN

JUST WATCH how the upcoming Government report on unsold new homes is used to get yet another tilt at developers and bankers for their role in the property bubble that has crippled the banking system and the economy. The whole episode has been played out for around two years and, while the two groups have had to take the rap for serious miscalculations, it must surely be time to move on and look at ways of clearing the vacant apartments and houses around the country.

The decision by the Department of the Environment to physically count all vacant new homes will provide much needed clarity for the first time on the size and location of the stock overhanging the market.

Many of the developers directly involved have already had their loans transferred to Nama and, with the bad bank keen to recover these loans as quickly as possible, it follows that builders will now be encouraged to push ahead with the sale of the first tranche of completed homes. The real test for developers will be to come up with selling prices that appeal to first-time buyers. According to one new homes agent, it may not be enough to offer discounts in line with the reduced values set by Nama in December, 2009. Even before the sell-off gets under way, the agent contends that Nama “bought in too dear as new home prices have slipped by a further 15 per cent since then”.

Be that as it may, prices will have to be attractive if developers are serious about clearing unsold stock. Otherwise nothing will move and Nama’s clients will be stuck in a dead end with little prospect of working their way out of the present difficulties.

The publication shortly of an up-to-date list of unsold apartments and houses – including the dreaded “ghost estates” – should help to eliminate much of the uncertainty about the new homes market. Equally important is the issue of mortgages, because banks are no longer lending money willy-nilly to anybody knocking on their doors. They want huge deposits and – surprise, surprise – they will now even check whether you might have the resources to repay the mortgage. How strange.

While it is anybody’s guess how many ghost estates are dotted around the country, there is much less confusion about the supply of unsold homes in the Dublin area. Sherry FitzGerald’s Marion Finnegan recently counted 7,000 apartments and houses in the four local authority areas in Dublin. However, the figure shoots up to 10,700, according to Ronan O’Driscoll of Savills, once you extend the study to the greater Dublin area and include centres like Blessington, Bray, Kilcock, Maynooth and Dunboyne – towns within half an hour’s drive of the city centre.

The overall figure for the Dublin region could be inflated further were it not for the fact that many Dublin-based developers now sheltering under the Nama umbrella resorted to renting out about 2,500 newly-built apartments when sales dried up.

One developer alone, Liam Carroll, had at one stage no less than 1,000 apartments and hotel suites for rent in Tallaght. Though the letting campaign was relatively successful, it did not save Carroll’s skin.

One way or another it will take a few years to shift the oversupply of apartments in the greater Dublin area. Those within the city boundary will be much easier to sell once prices bottom out.

The crisis will inevitably force the construction industry and local authorities to look at the overall planning strategy which favoured apartments and duplex units in out-of-town locations rather than the conventional three-bedroom starter houses. Now everybody prefers houses.

The building boom in the apartment sector kept most people happy when the market was in full flight. Local authorities got extra levies, builders made a killing from high density schemes and investors were able to avail of tax breaks and a buoyant rental market thanks to the influx of eastern European workers. When the property bubble burst, all that changed.