The new year will see new houses and many apartments coming to the market
– Originally published in the Sunday Business Post, November 25, 2012
This has been one of the most interesting weeks in the Irish property market all year. After years, and yes, it really has been years, of watching the same properties linger on the market, fresh stock is starting to come through. More importantly, conversations with estate agents and Receivers have confirmed that, for the first time in many years, the New Year will bring new houses and many more new apartment schemes.
Sellers from 2008 were rarely in the market by choice, generally, these people needed to sell. The reasons were not necessarily financial. In many cases, sellers offered their property for sale at the lowest price they could afford – not always low enough for the market – simply to get on with their lives. From 2011, we started to see sellers testing the market. We know that throughout 2012, houses in key residential areas, priced reasonably, were sale agreeing within weeks of coming to the market. This reached fever pitch in South County Dublin in the third quarter of 2012, with home-buyers rushing to buy their new homes in time to avail of the mortgage interest relief deadline of the end of the year. This was seen in most urban areas nationwide, but not to the same extent.
This period taught us a few things about the market, namely; pent-up demand is not a myth or media creation, also, buyers are not as damaged by the crash as we initially thought. When the deadline was looming, first-time buyers in particular started to outbid each other with ridiculous speed. In desirable, residential areas with notably low levels of housing stock, demand outweighed supply. Viewings turned into open viewings, potential buyers were descending upon new houses in large numbers, offers were forthcoming on the day and asking prices were being exceeded. In my experience, some buyers were over-paying by up to €20,000 in the hope of availing of tax relief that is unlikely to exceed €18,000 over the five year period. This does not make sense on any level. We thought that rash buying was a thing of the past but perhaps not.
The good news for remaining buyers in the market now is that they can give a sigh of relief, most buyers who were ready and eager, have already handed over their deposits and are spending their evenings surfing Ikea on-line instead of daft.ie. Most commentators have predicted a lull in the market in the New Year. This may or may not manifest in price reductions. The most likely result will be a drop in apartment prices, as needs to happen anyway, and a slow down in the level of transactions. As we have seen all the way through the years of turmoil, properties that are priced to sell will sell. Houses that are well presented will attract attention. What tends to happen is that all demand is focused on securing the very best of supply i.e. 20 new houses in a small area with 20 ready buyers will not achieve balance or a functioning market , what will happen is that 16 of those buyers will fight over four of those new properties. This will have the effect of property price increases, decreases, over-supply (of a type) and under-supply (of a different type) – all within a very small market. Now imagine this happening on a national scale – chaos. This highlights the danger for buyers of relying upon market statistics. This national statistics or even regional statistics rarely tell the full story but buyers need the full story. It becomes the story of their house hunt, their search and their market. This is where buyers need to watch their desired area and keep a watching brief on new properties coming to the market, how long they are taking to sell and what is the relationship between asking and selling price.
And now for the really good news, halleluiah, finally, new stock is coming to the market. So far, we are aware of new town houses close to the city centre, larger homes from Stillorgan to Dalkey and the northside will have Receiver stock released throughout the first six months of 2013. Receivers have changed their approach of late. No longer are properties presented in a shoddy condition, selling a bottom level prices. New properties will be to a higher standard, some with sitting tenants (being sought now), and with functioning management companies. This will result in higher prices being sought and achieved, which will not affect home buyers but I would imagine investors will be a little put out. Of course, they have one final opportunity before the end of the year to bid on bargains under the hammer, with Allsop Space undertaking their final auction of 2012 early next month. It will be interesting to see if any home-buyers make an appearance here; the line-up is likely to appear more to investors.