Mission Not Impossible
– Carol Tallon
Originally published in Dublin’s Metro Herald 8 March 2012
Many of the first –time buyers I meet daily describe themselves as lucky. They consider themselves lucky not to have bought during the boom years, lucky not to have able to secure a mortgage when all of their peers did and lucky not to have borrowed 100% of the half-million euro that it would have required to buy a poorly-built, starter home miles from Dublin. What a difference a few years and some perspective makes. These were the excluded members of upwardly mobile society – renters.
Many are civil servants; many are single professionals and a few are returned emigrants. They all have one thing in common, each one of them thought about or tried to purchase in better days. They know that they got lucky once before, they are not depending on dumb luck now, lessons have been learnt. In today’s market, these savvy buyers are unlike the breed of first-time buyers that went before them. They have large cash reserves, all earned and saved – daddy is not signing any of these booking deposit cheques. Mortgages required can be as low as 40 per cent LTV but rarely higher than 75 per cent, this higher figure is a self-imposed cap. Buyers today place more emphasis on affordability than capacity to borrow. They will buy what they need and no more. Ego projects are a thing of the past for all buyers, not just first-timers. When I talk to buyers about access to credit, it becomes clear that funds are available. There can be no doubt that lenders are cherry-picking the very best applicants, but shouldn’t this always have been the case?
Today’s buyers also take a more proactive, or dare I say aggressive approach to house-hunting. Sellers who are not genuinely motivated to sell will be pushed aside in favour of those who are willing to discount. Our buyers are bargain hunting with gusto! Estate agents need to embrace this new style of buying and respond. This response ought to take the shape of truer valuations, better management of their sellers’ expectations and better communication of real information. The best agents have already made the shift, these are the South County Dublin auctioneering firms reporting 8 – 12 sales per small office per week. The little guys know the locals markets, once again, the giants of the industry will be left behind.
Buyers today generally know that this is a good time to step into the market and they are ready, not recklessly anxious to buy, but ready. They understand that a purchase in this or any market should be for the long term, so it is important to get it right. There are a number of individual considerations and then a number of separate, external market considerations to take into account.
Individual considerations include the person, in particular, the prospective buyer must assess genuinely whether or not he/she is financially in a position to buy. That means not only will he qualify for a mortgage, but also, does he have cash savings of no less than 15 per cent of the value of the property to put towards the purchase to cover the deposits, stamp duty, legal and agency expenses and other associated costs of buying?
The second consideration for the buyer must surely be the type of property sought. The level of over-supply in the apartment market in some areas is so excessive, that buyers might be better served by waiting for the impending bank and NAMA auctions rather than buying now. This will depend hugely on the immediate area in which the buyer is looking. The market as a whole has not levelled out as yet and is unlikely to so on paper for another while, as the over-hang of apartment stock and poorly appointed new houses continue to distort the market. However, pockets of the market, where demand from first time buyers has been high, has experienced a levelling off and demand remains steady while supply is low and ever decreasing.
The golden rule for buyers is to forget national or even regional statistics and examine local demand versus supply or over supply. In areas where property prices in general do not appear to have hit their floor, or bottom level, the strategy is not to wait but rather to shop around to find a seller who is willing to reduce their price. Essentially, the buyer instead of waiting for the market to drop naturally goes ahead with the purchase at BMV, or below market value prices, in anticipation of slight future decreases in the short term i.e. the buyer future proofs their home.
Carol Tallon, author of the Irish Property Buyers Handbook 2011 and MD of Buyers Broker Ltd. Tel: + 353 (0) 1 4428 035 www.buyersbroker.ie