Mail on Sunday 15 December property review and 2014 prediction


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Mail on Sunday 15 December property review and 2014 prediction

  1. 1. Date 15 December 2013 Page 44,53 Six property experts take the market’s temperature and prescribe their own routes to recovery Prices will rise in 2014 but t banks must start lending ALAN MCQUAID Economist, Merrion Capital What we found out about the property market last year: That Irish people are still in love with property despite the huge crash in recent years and many people overseas see good value in Irish real estate at the moment if the anecdotal stories of strong international interest from the likes of China and Russia are to be believed. There also appears to be a lot of money floating around with a significant amount of transactions being taken up by cash. Biggest change I saw in 2013: The pick-up in the property market was quicker and more sustained than I had expected and it looks like there will be an overall increase in prices for the first time in six years, when most analysts were talking about another year of decline at the start of 2013. Buoyed up by: Clearly buoyed up by a lack of supply of houses, particularly in the Dublin area; demand for more family homes; a large element of cash buyers and an improvement in the labour market. i i db Q A Disappointed by: The number of mortgage buyers appears to be low, which raises a question about credit availability. Banks are saying they are lending, so it may be more of a demand than supply issue. Given the time it takes to go through the whole mortgage process, I suppose it should be no great surprise that a vendor faced with two prospective buyers (one with cash and the other with a mortgage) is opting for the cash buyer the vast majority of the time. Some individuals/couples may therefore feel it is a waste of time looking for a mortgage at this juncture. But I don’t see there being an endless amount of cash buyers, so something will have to give in the end. Lessons we still have to learn: Prices can go down as well as up and low interest rates cannot last forever. That said, I don’t see the European Central Bank hiking rates until 2015 at the earliest which is good news for those on tracker mortgages. However, irrespective of what the ECB does, those on variable rate mortgages will still be at the mercy of the individual banks. One thing I’d like to see in 2014: This could be a change in bank- ing policy re trackers (or whatever ld b l d d would create a balanced and healthy market). Those on variable rate mortgages cannot go on forever subsidising those on a tracker mortgage. However, it is hard to see an easy solution to this. I would also like to see a more general recovery in the property market than simply just Dublin and the other major cities. The worry is that rural Ireland will be left behind and we will have an unhealthy urban/rural divide. My predictions for next year: Looking forward, it is hard to see how house prices can keep on rising indefinitely without the banks returning to more ‘normal’ lending practices and making credit more freely available than at the moment. The market cannot survive on mainly cash transactions and only limited mortgage draw-downs. Still, the supply issue notwithstanding, the big driver in my view over the next 12 months or so will be disposable income and in particular employment prospects. The recent signs of general improvement in the labour market and on the jobs front should help sustain the housing market recovery in the short-term, especially in Dublin, though there may be a lag in the rest of the country. Overall, I see a low to mid single d hh Copyright NLA Media Access. For internal use only. Not for reproduction.
  2. 2. Date 15 December 2013 Page 44,53 digit average price rise in Irish house prices in 2014, with Dublin posting the biggest increase. KEITH LOWE MD. Douglas Newman Good What we found out about the property market last year: Last year was proof, if proof were needed, that the property market in Ireland has life in it yet and that property prices have fallen too far and almost certainly overcorrected in certain locations, particularly in Dublin. This was demonstrated by a quick rebound in property prices with five consecutive quarterly price rises in the capital as they moved towards equilibrium or fair value. This was inevitable as property prices had fallen too far, especially in Dublin, a view that was echoed by many estate agents, economists, the OECD and commentators at the Central Bank. Biggest change I saw in 2013: Apart from a surge in property prices in the capital, the biggest change in 2013 was the very high level of cash buyers, which accounted for around 57% of all sales in the first half of this year. This was up from a little over a third of all sales in 2012 and is much higher than the 30% reported in the UK this year. However, the number of cash transactions appears to be moderating with a marked reduction to around 35% in September – the latest available figures. The high number of cash buyers made it quite difficult for potential purchasers with mortgages h d Q A to compete. This proved very frustrating for many and should not be as prevalent in 2014. Buoyed up by: I am heartened by the level of interest from both domestic and foreign investors in the residential property market. The returns for investors are better than ever. The reason being that property prices are low and rents are rising – hence yields are strong. Couple this with the fact that deposit rates are at all time low and one can see the attraction for investors to purchase residential properties in the capital. Some entry level properties are offering 10% – 15% returns in Dublin, Cork and Galway and this beats earning 1% or 2% interest in the bank and then paying DIRT! Disappointed by: I view the Government’s most recent budget as a missed opportunity. Demand in Dublin is considerably exceeding supply, forcing up prices. Other key urban areas such as the cities of Cork and Galway have reported stock shortages and upward pressure on prices. The population in these areas is increasing, yet the level of housing stock is stagnant. In Australia and the USA governments introduced grants and tax credits for new homes sales in an effort to boost supply. The system was so successful that it was extended twice in both countries. If construction is to re-start, the Irish government should also be assisting in construction finance, be it directly or by guaranteeing finance to the banks. Best sale of the year 57a South Hill in Dartry, which had an asking price of €895,000. There were number of bidders h d l f h who competed strongly for this lovely family home which eventually sold for €1,300,000, 45% over the quoting price. This is a great price for the area and reflects the desire for and shortage of good family homes. Lessons we have to learn: Like it or not, property is a key driver to economic recovery. History shows that there has never been an economic recovery that has not always coincided with a robust and well-functioning housing market. My predictions for 2014: It is my belief that property prices in the capital will rise by 10 – 15%. We will also see some recovery in other urban areas but remote rural areas will take longer to recover. Copyright NLA Media Access. For internal use only. Not for reproduction.
  3. 3. Date 15 December 2013 Page 44,53 More domestic buyers What we found out about market: Confidence has improved among bidders and buyers. Bidding was brisk and plentiful, reflected in the large attendances at each auction. Many bidders commented that this was a good time to buy as they felt prices had stabilised and Q A ROBERT HOBAN Director of Auctions Allsop Space demand was growing in good locations. Biggest change I saw in 2013: The strengthening of the domestic Irish buyer. In 2012, 15% of our buyers were from overseas. This What we found out about the market last year: 2013 was a gamechanging year for the property market, the combination of very low supply particularly in the regional centres and pent-up demand resulted in a much more competitive bidding environment with resultant price inflation in Dublin, Cork and Galway in particular. Biggest change I saw in 2013: When you compare the start of 2013 with the closing months, the change in sentiment toward property and the more positive outlook is very notable. Buoyed up by: The increasingly positive view of Ireland abroad as a competitive and enjoyable place to visit and do business. It is a pleasant reminder to us that our best years may be ahead of us despite the hard lessons that have been learned along the way. Q A dropped by 3 percentage points to 12% in 2013.Domestic bidders are now buying 88% of properties. Buoyed up by: The growth of the commercial and but cash won’t be enough investment sector. Bigger and bigger lot sizes are now being sold. In Tuesday’s auction, €3.25m was paid for a large office block in Limerick (River House, Charlotte’s Quay), rented to the OPW, after heated bidding. The property had been for sale for six months through another agency by private treaty with three offers ranging from €2.6m to €2.8m. 4 Disappointed by: The lack of quality stock available as a result of too few debt deals taking place in Irish credit institutions. The understandable difficulty is that the banks would close overnight if all debt was written down, yet increased lending into the market is badly needed in 2014. Lessons to learn: If normal levels of finance are not forthcoming, the cash market cannot be relied upon to soak up the supply of properties. The number coming to the market in 2014 is set to increase greatly as banks line up buy-to-let portfolios for disposal. Things are looking up – but we need to start building new homes MICHAEL GREHAN MD. Sherry FitzGerald Group Disappointed by: The lack of joined-up thinking that is required from the various bodies to the property needs of Irish society on the back of a fast-growing population which has grown by 8.5% since 2006. Best sale of the year One of our most notable sales of 2013 in terms of both value and profile was that of Abbeville in Kinsealy, the former home of the late Charles Haughey and his family. Abbeville is a stunning private estate, yet its proximity to Dublin and its international airport made it a particularly attractive property to both domestic and internationally based buyers. Whilst it is a hugely important sale, it is also extremely satisfying that the buyer appreciates the rich historical provenance and architectural merit of Abbeville and plans a comprehensive restoration. Lessons we still have to learn: We need to plan the future. At this juncture, we have experienced five or six years of limited construction activity but strong population growth. As a result, shortages of available houses have emerged. We need to begin construction activity in all our regional cities but also perhaps we need to do so most urgently in Dublin. Copyright NLA Media Access. For internal use only. Not for reproduction.
  4. 4. Date 15 December 2013 Page 44,53 g ANGELA KEEGAN MD. What we found out about the property market last year: The market has finally bottomed out. The property market is cyclical in nature but because of the recession the downward cycle we have just emerged from was longer and much deeper than anything we’ve seen previously. Biggest change I saw in 2013: Confidence has come back with more potential purchasers completing transactions. The other big change was the double-digit price increase that we’ve seen in some areas in Dublin. Buoyed up by: After six very challenging years it’s very positive for the market that prices have started to recover. However, that comes with a caveat that we want and need more transactions. Disappointed by: The lack of supply. This is restricting normal market movement and driving prices higher. For example, has 3,200 Dublin properties for sale. In January 2012 the figure was 6,093! The price increase in Dublin is not sustainable in the long term. Best sale of the year Milverton, Herbert Park, Donnybrook auctioned by Lisney. It broke records in 2004 when it sold for €8m and broke records in 2013 when it was sold for €4.6m. It shows that a good house in a good location will always buck the trend. One thing I’d like to see in 2014: An overall solution to the underlying problem of negative equity and more sustainable solutions by the banks for the over-borrowed. Q A SIMON STOKES Residential Group chairman, SCSI What we found out about the property market last year: There is greater pent-up demand in Dublin than anyone realised. There is also a significant number of cash purchasers looking for good quality family homes. Biggest change I saw in 2013: Huge increase in demand for family homes in well-established residential areas. Increased interest in investment properties, particularly smaller commercial investments under €1.5m Buoyed up by: Increased demand and interest generally. Market is staring to recover – prices have risen significantly in Dublin over the last 12 months. Disappointed by: Lack of political will to get banks to lend despite the billions poured in to rescue them. Best sale of the year: House requiring extensive refurbishment on Northumberland Road, Ballsbridge – over €800,000. It is lovely to see a magnificent Georgian building return to its original purpose. Lessons we still have to learn: There will be no general economic recovery without bank lending. One thing I’d like to see in 2014: Government and local authorities realising that we need zoned lands suitable for building family homes. Banks being more realistic about lending to developers and home buyers. My predictions for next year: Continued growth in Dublin residential prices. Gradual improvement in other urban centres. Q A Copyright NLA Media Access. For internal use only. Not for reproduction.
  5. 5. Date 15 December 2013 Page 44,53 GREAT PRICE: Demand for 57a South Hill in Dartry, Dublin was so high it was sold by DNG for €1.3m, 45% above the €895,000 asking price TOWN AND COUNTRY: Walford, on Shrewsbury Road in Dublin 4, owned by a trust linked to Gayle Killilea sold privately for €14m, while Charles Haughey’s former estate, Abbeville in Kinsealy sold for €5.5m Copyright NLA Media Access. For internal use only. Not for reproduction.
  6. 6. Date 15 December 2013 Page 44,53 Copyright NLA Media Access. For internal use only. Not for reproduction.