Reality hits as market enters calming phase

Activity levels for September saw more For Sale signs go up, increased supply and quite a flurry of activity. But a review of the number of sales actually agreed in the month, and the price that they transacted at, would indicate things have calmed down in the capital.

It’s visually evident too. Driving familiar routes along roads, and into cul de sacs and housing developments, the number of For Sale boards is far greater than last year. It was not uncommon back then to have a house on the market with four parties chasing it, bidding upwards from the asking price. Why? For fear that a similar type property might not come available again.

Today, there is more choice, with possibly four houses on the market in a cul de sac, one for each of those parties.

Secondly, there is a great level of confusion around pricing. Various reports, sources and the property price index indicate that prices are on the up, or rather that they were.

Unfortunately, there is a time lag between the time of agreeing a sale and when it first appears on the price register, and thus in many instances this information could be quite historic, in some cases up to six months old.

To know where the market is at, we need to look at current activity, not historic, and we cannot say what the future may bring in terms of pricing. So viewing numbers, levels of activity and number of bidders are our best gauge.

When any new property comes to the market, there is a short window of a few weeks where it attracts attention and parties are stimulated to come forward to view and put forward their expressions of interest.

The key to stimulating that interest is the price. We must remember that intended purchasers have done their research and have visited similar properties in their preferred location. So intended purchasers, when they present offers, have done quite an amount of homework.

If we look at pricing over the past month, there has been an adjustment downwards in many instances, in particular this has been borne out in recent figures for Dublin.

Quite a number of the properties launched in September had been for sale earlier in the year. They have now been relaunched, but with a slightly reduced asking price.

The reason for this? The original pricing did not encourage intended purchasers to engage. Valuation is not an exact science but the methods used to value a property have to be substantiated. Comparable evidence, very recent activity, not historic, and supply in a given area are key to determining an asking price.

But unfortunately, statistics, reports and prices achieved when there was far less supply resulted in an upward trend in asking prices. Both agents and vendors were responsible for this upward trend, only to realise that the price, in many instances, is not achievable.

The change in Central Bank regulations has also had an effect. A party wishing to purchase a property at around €250,000 now requires a deposit of €50,000, as opposed to €25,000. It takes quite a lot of time to save that amount of money. Additionally, if the property requires work or upgrading, they need to increase their savings further to pay for the upgrade work.

The middle market has certainly seen the greatest level of calming. This is in part down to the level of cash savings required to purchase a property in the region of say, €700,000.

Childcare for two children can account for about €1,800 per month before food is put on the table or a bill or mortgage is paid. Therefore in order for a couple to purchase at this level, they require a deposit of a minimum of €200,000, which can be difficult to achieve, given the cost of living.

While buying or selling a property is possibly one of the biggest moves we make, pricing is key. Similar to the summer sales in department stores, if a quality product is appropriately priced, it is likely to be snapped up and sold in the early weeks. Conversely, a product that is overpriced is likely to remain for sale with further reductions inevitable.

An asking price is one that your agent can stand behind, substantiate and back up with recent comparable evidence.

It is better to have a swift, active, exciting campaign resulting in possibly a bonus price, in excess of the asking price, rather than lingering on the market and ending up in the “further reductions” section.

We are all tempted to opt for the higher price for fear that the property may not attract multiple bidders, but if you track recent successful sales, those with cautious expectation have engaged and excited intended purchasers.

Securing a home for many purchasers is the ultimate aim for 2015-2016, but ultimately, the price is key. There is a market, we are transacting, the demand is there and activity is exciting, for both purchasers and vendors. However we must be practical in our expectations.

Rowena Quinn is managing partner at Hunters Estate Agent