What a difference a week makes. In the last seven days, we saw the long-awaited national property price register finally publish the achieved sales prices of more than 50,000 houses and apartments from around the country sold since 2010. It makes for interesting reading and, as we expected, there are more than a few surprises. The timing could not have been better for auction giants, Allsop Space who held another phenomenally successful event in The Shelbourne on Wednesday.
More than 2,700 people crowded into the main hall, with hundreds bidding for the 127 lots on offer. The reserve prices were higher than usual and are now closer to the standard asking prices that we see on private treaty listings.
For the first time, we were able to compare prices under the hammer with prices achieved for similar properties listed on the register. Although one direct comparison could be made and that was the Georgian pre-63 property at 23 Northumberland Road, Ballsbridge, Dublin 4, which was sold three months ago for €550,000. The savvy owner then offered the building for sale with a reasonable reserve price of €590,000. Even the owner must have been surprised when the hammer came down at €685,000, clearing profit before stamp duty of €135,000 – not bad for three months work!
Of course, not all were success stories. A three bedroom, end of terrace house at 37 Cedarwood Drive, in Carrigaline, County Cork sold for €139,000, which was well above the reserve price. Local estate agents, who had recently sold a similar house on the same road for €170,000, later commented that such selling ‘below market value’ is not good for the tax payer. Fair point, you might think, however, to my mind this is just one example of the fall-out that estate agents all around the country will be dealing with following the launch of the register. It also raises the issue of value; not fair value, not good value or even poor value but rather, what constitutes market value. Is it the price achieved by way of a private treaty sale, or the price under the hammer a month later, or perhaps somewhere in the middle? I have always maintained that market value is the price achieved or achievable today, irrespective of market conditions as buyers use (or ought to use) those market conditions to reach upon the price they are willing to pay. So in its simplest term, a three bedroom end of terrace in Cedarwood Drive is now worth €139,000 and the second most recent buyer on the street, who may not have even moved into their new home yet, is sitting on negative equity to the tune of €31,000. This is scary stuff for impending buyers but for the first-time, they are not powerless. They now have access to enough information to gauge the financial level of offers and can calculate what the purchase price needs to be within a smaller range. Sellers will need to do a bit of internet surfing and soul-searching to find the realistic asking price for their property. It may be the case that the publication of the register will take some sellers out of the market altogether and this is not a bad thing. It is of no benefit to the market having sellers, who cannot afford to sell at current market values, cluttering up an already cluttered marketplace.
Sellers like that just don’t make it into the Allsop Space listing. That firm deals only with sellers who accept that price is the single greatest factor determining whether or not a property will sell. And their point was well made last Wednesday, with close of €18 million worth of sales in just seven hours. Demand was much greater than supply, with multiple bidders for most lots. In fact, bidding was not dampened by news on the day of AIB’s 0.5 per cent interest rate hike.
All in all, it has been another good week for would-be buyers and particularly for first-time buyers, who now have less than four weeks to find their new home and submit their mortgage application in time to qualify for tax relief on mortgage interest.
The progress made seems to question the Central Bank warning this week that “recovery” of house prices could take another 20 years. It’s not the time-scale that I object to, although in my opinion it is overly-cautious, but rather the notion of recovery. That implies that the Irish property market was functioning, then broke down, and will be fixed again in 20 years. Please excuse my simplistic overview but using today as a starting point, should “recovery” really be our target?