More price cuts certain

House Prices:More price cuts in the new homes sector seem inevitable following the decision by a Wicklow housebuilder last week to drop €105,000 from the price of traditional three-bedroom semis in Delgany village.

Prices at the scheme, called Churchfields, were reduced from €700,000 to €595,000 in order to shift houses which were completed over the summer months but had failed to sell. After intense publicity - mainly on national radio and television - more housebuilders seem set to follow with substantial cuts in order to find buyers for an estimated 6,000 newly-built homes for sale in the greater Dublin area.

The new policy has already been taken on board by Maplewood Developments which has trimmed back its prices at the huge Adamstown development in west Dublin. The price of four-bedroom semi-detached houses has been cut by around €45,000 to €475,000 for the latest launch this weekend. However, selling prices of smaller units at the scheme have only changed marginally, while two-bedroom townhouses have actually risen by almost €11,000 due to demand for this particular house type.

Elsewhere developers are also reviewing their prices to take account of the gloomy market. In most cases, prices are likely to fall, particularly in the more outlying areas. The only question is by how much. Builders with a large number of units ready-to-go have been watching the competition, before deciding how much to trim back their prices. The days of throwing in a few extras to attract sales are over. Buyers watching values drop now want serious discounts and nothing less.

The reality is that there are lots of buyers out there, if the price is right. At Churchfields in Delgany, all eight of the cut-price three-bedroom houses were reserved over the weekend, according to the selling agents. Developer Jim Wood may have upset some hardline builders by so publicly cutting prices, but it seems to have worked. That is, assuming the reservations convert into actual sales. Estate agents are finding it difficult to wrap up deals with confidence draining out of the market. However, should the European Central Bank decide today not to proceed with another interest rate rise at this stage, there is a good chance of some stability returning to the market earlier than expected.

The price cuts will have little long term effect on housebuilding firms, which have enjoyed phenomenal profit margins in recent years. They view the present uncertainty as merely a blip which they will get over in due course.