Twenty years a viewing: the ups and downs of the property pages
Average second-hand house prices were just £39,892 in 1988 when The Irish Timeslaunched its Propertysupplement, writes Edel Morgan
THE FIRST Propertysupplement in The Irish Timeson September 8th, 1988 began on a confident note by announcing it was "not just a day ahead but streets ahead" referring to its rival paper's Friday supplement.
A spread on Dalkey in the first issue reported that prices there were among the highest in Dublin. "There are no snips in Dalkey," declared agent Tom McCarron of HOK while Austin McMahon of Allen Townsend said you would be doing "extremely well" to get a four-bed detached house in the area for "in the late £60,000s".
Maeve Binchy wrote that growing up in 1950s Dalkey felt like "limbo" and the poor public transport thwarted her ambitions for a social life in the city centre. She said it was "a place or state that your family might get out off if things improved and there was a chance of somewhere really great like Sandymount". She had since grown to appreciate the area saying it got "bigger, brighter and wide awake" but blow-ins betrayed themselves by referring to it as a village when "the rest of us would call it a town".
In the same supplement estate agent Ken MacDonald said that there was evidence of a reduced demand for flats after an explosion in the Raglan House apartment building in Ballsbridge on New Year's Day 1987 which killed two people and injured four.
Official figures for the first quarter reported that average second-hand house prices rose £1,192 to £39,892 and, while the uplift was good news, it was nothing like the south of England where Michael Finlan reported on a "fantasy-like" boom with values zooming into the stratosphere. He enthused: "People who bought property six to seven years ago have seen the value of their property quadruple with breathtaking speed. Homes bought for £30,000 are now being sold for £100,000."
Here in Ireland there was scepticism surrounding the future of the IFSC, although earlier that year the first IFSC firm to be licenced (Gandon) had placed an ad with The Irish Timeslooking for trainee dealers but low corporation tax and a plentiful supply of skilled labour kept the centre going through some tough years to come. At the height of what was then being called the property boom, average house prices peaked in the second quarter of 1990 at £60,498 after having risen by more than 50 per cent between the beginning of 1988 and the early summer of 1990.
However, in an article of January 25th, 1990 economist Finola Kennedy predicted that an end was nigh for the boom which created "spectacular price increases" in 1989. She based her forecast on a combination of high emigration levels, rising interest rates - to 11.25 per cent in 1989 - a falling number of marriages and a 27 per cent drop in births since 1980.
She wasn't wrong, the property industry was set for a rocky road ahead. Although 1992 began on a high note with news in February that a Dublin business man paid £300,000 for a large penthouse at The Sweepstakes in Ballsbridge - "the highest paid in Dublin for a new apartment" - things went downhill from there, and on April 30th the "asides" column by Willy Clingan noted that "first indications" suggest there wasn't going to be "any great rush" of houses onto the market in the year's main selling season after Easter. "Some estate agents are hoping that it's mainly the dull weather that's making potential vendors hold off and that there will be a good flow of homes in May and June. The more realistic of them, however, accept that there are going to be fewer homes for sale this year."
By October another rise in interest rates had estate agents searching for a silver lining and suggesting that it may usher in a period "when there are bargains to be had".
GLOOM IN 1993
Amidst the gloom on April Fool's Day 1993 it was reported that second-hand house prices managed to nudge up by 2.9 per cent to £62,106 in the last quarter of 1992 despite three percentage point rises in interest rates. "The figures prove that average prices have hardly changed in two-and-a-half years" and the market "had been flat" since mid-1990, said a report in Property. It added: "The real winners are the people who sold at the height of the boom and invested their cash."
By June 1993 we reported Dublin house prices had fallen by 2.7 per cent in the first quarter. A drop in interest rates gave some cause for hope and in April Simon Ensor of Sherry FitzGerald declared he didn't remember a season when so many houses at the upper end were put on the market "and so many were sold".
Houses along the coast from Howth to Killiney were performing well but it was "taking time to move inland to more modern suburbs". But in September optimism had floundered somewhat and a report by John McManus on September 23rd said low interest rates were failing to stimulate demand for new mortgages with fears of a return to the previous autumn's currency crisis.
On October 7th, 1993 an article pondered if people who bought Section 23 apartments in the early 1980s had got value for money with evidence "that some of the schemes had not achieved the high rate of capital appreciation projected at the time". Apartments along the Dart were doing well but areas considered "less desirable" had proved less successful, affecting resale value.
By the end of 1993 there was a collective sigh of relief in the industry when interest rates fell to their lowest for years and estate agents were reporting a big surge in enquires. Estate agent Martin O'Mahony, in business since 1968, said he'd "no hesitation" in saying that "the year from September last year to September this year was the worst year I have ever gone through".
By the end of 1993 Telecom Éireann had lost some £7 million on the 5.5-acre former Johnston Mooney O'Brien site at Ballsbridge in Dublin which it purchased in 1990 for £9.4 million and sold to developers Sheelin McSharry. After the "telecom affair" scandal, Telecom Éireann abandoned plans for a national headquarters on the property. The previous year it was also refused planning permission by Dublin Corporation for offices there. The purchase in 1990 unleashed a chain of financial and political events which was ultimately a factor leading to a motion of no confidence in the leadership of former Taoiseach Charles Haughey.
A frenzy to snap up 400 new apartments on the quays in March 1994 was one of the first indicators that things were on the up. "Viewing sessions at both schemes at Clifden Court on Ellis Quay and Arran Quay apartments were at times reminiscent of the January sales in Grafton Street" wrote Willy Clingan who said there was a waiting list of 500 in case of cancellations.
Also that year, it was "the country house sale of the decade": Abbey Leix, home to the de Vesci family since it was built in 1773, had to be sold to cover inheritance tax. The 1,671-acre estate was sold by the young Viscount de Vesci to international banker David Davies who owns it to this day.
Many commentators agree that 1995 was the year the boom began. Early that year a launch of 70 apartments at the Johnston Mooney O'Brien site in Ballsbridge, now the Herbert Park Hotel, had buyers queuing for one-beds priced from £60,000, considered strong money at the time. In May 1996 the £1.55 million paid for Pitcairn - a seven-bed house on Shrewsbury Road in Ballsbridge needing refurbishment - was proof the boom had begun in earnest.
The story made the front page of The Irish Timeson May 22nd and Orna Mulcahy reported: "The price took the property market by surprise even in a year when prices have risen at an unprecedented rate. Three years ago there were no bidders at an auction for the house next door."
As the market took off, bidding wars became the norm and conditions got tougher for buyers. In February 1997 we reported that an increasing number of Dublin houses were being sold by private tender and buyers were forced to compete for a limited number of homes coming on the market - "it is a frustrating process for househunters who might find themselves silently gazumped in the sealed bid system".
On March 20th, 1997 Dublin's most expensive apartments at Corn Exchange, Burgh Quay in Dublin 2 went on sale with prices from £89,950. Amid the hype and with Dublin house prices almost on a par with the UK, British property expert Peter McManus warned that "reckless lending" could lead to a crash.
GUIDE PRICE CONTROVERSY
On May 20th there was a collective gasp as the 1950s Gorse Hill - a four-bed detached house on 1.25 acres on Vico Road in Killiney, Co Dublin - sold at auction for £1.5 million, £400,000 over the guide price issued by HOK. Property Editor Jack Fagan reported that the sale came "amid considerable controversy over the large discrepancy between the pre-action guide prices issued by auctioneers and the prices at which vendors will sell at auction".
Of the 10 most expensive houses sold in Dublin in 1997, eight overlooked the sea, according to a report by Orna Mulcahy with estate agents "keen to draw attention to any hint of a sea view". "There are sea glimpses, sea views and being on the sea - and they are very different things," declared Tom Day of Lisney. "In October the 1820s Mount Mapas, a large detached house overlooking the sea at Victoria Road, Killiney on 1.25 acres, made £2.3 million - the highest price paid for a Dublin house under the hammer, and a whopping £900,000 above the pre-auction guide price.
Despite prices rising by 23 per cent and no sign of any imminent slowdown, 1998 was filled with dire predictions of bubbles bursting and property crashes, with the ESRI calling for a slowdown in house prices.
In March 1998 the Dublin Docklands Development Authority took over from the Custom House Docks Authority and a masterplan was published for an area covering 1,300 acres on both sides of the River Liffey. A report the previous year described the docklands as an area suffering from an image of crime, poverty, low educational achievement, a threatening environment, traffic congestion and a lack of amenities. The report maintained that by the year 2012 "the Dublin docklands will be transformed".
On July 1st, 1998 Orna Mulcahy wrote that "proof that the Dublin property market had gone mad" was the sale of Sorrento House in Dalkey for £5.9 million to businessman Terry Coleman, breaking all previous records. In June 1999 and after much speculation the State finally bought Farmleigh, the Guinness mansion on 78 acres on the edge of the Phoenix Park amid much criticism that, had they bought it when the Guinness family first offered it for sale, it would have been considerably cheaper than the £23 million paid.
Despite initial scepticism, by 2000 the IFSC was the powerhouse of the Celtic Tiger and employed 10,000 and the problem had now become finding staff to fill positions at the growing financial services centre.
While the residential sales market was thriving, the rental market had fallen into chaos as a result of anti-investor measures introduced by the government on the advice of economist Peter Bacon.
While the measures were designed to give first-time buyers a better chance of getting onto the property ladder, for tenants it ushered in a landlord's market where people were forced to barter with property owners and queue around the block to find even the most substandard accommodation to rent. The Apartment Livingcolumn in September 2000 asked if we were in the era of the rental gazump? But by January 2002 - after the government relented and reintroduced mortgage interest relief - "there are already signs of the investor coming back to life" said Simon Ensor of Sherry FitzGerald, but he warned the real impact won't be felt until June.
Letting agent Sara Wallace from Colliers Jackson-Stops told us she couldn't find three penthouses for corporate lets. "Floor size alone does not a penthouse make but the title can give even the most basic apartment a vaguely cosmopolitan air and allow the builder to slap on an extra 20 per cent on the price in the process," said the article.
On the housing front a bullish market managed to survive the IT slump but was dealt a body blow by the 9/11 attacks and US economic downturn. We reported on March 28th, 2002 that after a hesitant start to the year first-time buyers are outnumbering investors on most sites. "This hasn't resulted in price rises. Builders left with unsold developments from the post-September 11th slump are opting for quick sell-outs rather than increased profits in virtually all cases."
But the boom wasn't cut short there, as many economists predicted, with losses on stock markets and the exposure of pension funds encouraging people to turn to property investments. A recovery was boosted by historically low interest rates, and profligate lending by the banks which meant there was no end to the appetite for property, sending many property-hungry Irish investors abroad to try their luck in overseas markets.
TENANTS CALL THE SHOTS
The downside of a Celtic Tiger in full swing was that housing was being pushed further and further out of the grasp of young buyers, with many priced out of their local area. By 2003 the tide had turned on the rental market and, with a glut of rental properties on the market, tenants were back with a vengeance and with a long list of demands. Landlords were being put through their paces for the first time in years and the establishment of the Private Residential Tenancies Board in 2004 meant that, as well as being obliged to register their details, they had to acknowledge certain tenant rights or risk being reported to the board . The amount of rental properties meant that mangy old fleapits were no longer acceptable and tenants were rejecting anything overpriced or underwhelming.
"It's all a far cry from the dingy bedsits of shabby houses with warped doors, landings that creaked and electric wiring that provided a near-death experience," commented our A Landlord's Lifecolumn. However many landlords eventually found a taker for their rental property given the large pool of young immigrants looking for somewhere to stay. In 2003 swanky new apartments were launched at Gallery Quay in Grand Canal Docks with prices at around €460,000-€480,000 for two-beds with water views. The apartments were part of the ongoing rejuvenation of the Bord Gáis site running from Pearse Street to the quays.
Another site in the process of transformation was Sheriff Street where the final phase of Custom House Square launched in 2003. "It is hard to believe now that only eight years ago when Dublin City Council offered the Sheriff Street site for sale, it pointedly avoided any mention of the city's worst black spot for fear of scaring off potential developers," wrote Jack Fagan.
Developer Mick Whelan, solicitor Paul Hanby and estate agent Paul Newman, however, saw potential in the three-acre site and bought it for £4.3 million in the mid-1990s, which according to the report potentially netted them profits of €80 million.
The following year in 2004 we reported that "the Luas effect" had been pushing property values and had helped revitalise the fortunes of Sandyford.
In 2005, 10 years into the boom, prices continued to soar with the purchase of Walford - an Edwardian pile with 1.8 acres on Shrewsbury Road - for €58 million by the Duggan family. First-time buyers were borrowing record amounts to buy modest houses and the price of a three-bed semi on certain roads in Sandymount was upwards of €1 million. Since 1995 house prices had risen a massive 150 per cent with many people sitting on massive equity.
In July 2005 the frenzy and hype continued when developer Seán Dunne bought the Jurys hotel site in Ballsbridge for €260 million, beating off competition from 15 other bidders.
The peak of the boom came in mid-2006 when house prices reached an all time high. Building continued apace in 2006 - we built a record 90,000 units - with construction accounting for a third of the overall economy. Prices rose by 25 per cent in the first quarter of 2006, but the gains were lost in the autumn. Lavish amounts were spent on houses with gardens ripe for development like Gortanore, a modest house on 2.8 acres in Foxrock sold for €31m - €11m over the AMV to developer David Arnold.
2007 was a year of rising interest rates which saw a softening of the market and, fast-forward to 2008, the credit crunch and rising interest rates have seen the market virtually grind to a halt with buyers afraid to get off the fence and builders refusing to start work on new sites, mothballing some that were under construction. When the 11-bed French Embassy on Ailesbury Road in Ballsbridge came on the market asking €60 million at the beginning of the year, rumours were flying about interest from several prominent businessmen and developers. The property editor wrote it is "built to impress, it has a sweeping driveway, a magnificent drawingroom that can take 200 for drinks (and possibly even Ferrero Rochers) and a diningroom that comfortably seats 45". However despite its credentials, though there were at least three separate bids on the property, the French failed to clinch a deal.
On August 21st we reported that planning applications for residential units has dropped across all of the Dublin local authorities and, with home owners reining in their finances, the numbers applying to make home improvements is down on last year.
Estate agents have been hit by salary cuts and redundancies in tough market conditions, with Remax closing a fifth of its offices in Ireland over the last year while well established agency Mason Gavigan closed its doors in August. Some big developers have come out and slashed prices in developments by up to €100,000 to lure buyers amid reports of up to 14,000 new homes unsold in Dublin alone.
Others are reluctant to reduce prices and are instead offering interest-free loans in a bid to shift units. Second-hand house prices have dropped to 2005 levels and look set to take a further hit. As we wrote on September 11th the posting of a "Sale Agreed" sign outside a house doesn't necessarily mean the deal is done and in many cases is "just the beginning of the negotiating process and not the end".
Predictions differ about when demand will pick up. A survey over the summer by Myhome.ie provided a chink of light when it said that would-be buyers are waiting in the wings for the market to bottom out. A surprising 38 per cent said they planned to buy a property in the next 12 months. But will this happen? Or will difficult lending conditions and general uncertainty prevail and put them off for another while? Watch this space.