By Carol Tallon

Originally published in the Sunday Business Post, January 20 2013

Uncertainty is still the only certainty or investors and buyers in a market facing contradictory information and with Nama as a main player


The New Year brought with it new round of property reports from property sales websites and, the Central Statistics Office and a host of estate agencies reporting from the national property price register.  The greatest surprise is that there were no surprises.  In fact, the last two years were relatively predictable for most sectors of the residential property market, with houses in desirable areas seeing recovery while apartments generally lagged behind – and  2013 appears likely to follow that trajectory.  Housing stock in particular areas of Dublin (city and county), Galway and, more recently, Cork  are reducing month on month, to the point where further development in the short-term is likely.  Apartments are performing better than expected in the capital but continuing their decline in most other parts of the country.  When we speak of  recovery, it is becoming ever clearer that a big part of our recovery and the future of the market will involve more bulldozers than cranes.

So what does that mean for punters?  After the flurry of first-time buyer activity in the latter months of last year, with most scrambling to purchase before the end of 2012 in order to avail of the tax relief on mortgage interest scheme, the first quarter of the year is now expected to be dominated by investors.  While access to credit for residential investors remains tight, the lending situation is improving slowly for the right applicants with the right investments.  In fact, with the majority of homebuyers who had been sitting on the fence for much of the last few years, having bought last year, a lull for the first few months appears inevitable.

Looking at the year ahead, consumer sentiment is no longer a vague concept, when speaking to potential buyers or investors, it is clear that the contradictory information that people are hearing nationally and seeing locally is continuing to damage the marketplace.  Just this week I met with a farming couple who are seeking a house in the capital for their adult son.  Living in a regional market town that has seen gross over-building and a resulting depressed property market, they wondered whether now was even the right time – feeling that the market might perhaps drop by a further 20% this year.  Who knows, in their local town, they might be right.  However, the market that they are trying to buy in, Dublin, could not be more different.  They referred to buying only in “good areas”, identifying the DART or green LUAS line as areas of interest and they were certainly surprised to find out how much a three bedroom house would set them back.  They were also surprised to find that the volume of houses available were too far from the city centre.  The reality is that first-time buyers have been buying up all houses below €400,000 since 2011, the best homes sold first, by late 2012, most were buying houses in need of a update.  I can confidently reject the notion of a further 20% drop in houses in these key areas.  On the other hand, if this couple were interested in investing in an apartment in similar areas, particularly in Sandyford and surrounding areas, the reality is that another year will bring likely price drops and there is a solid reason for this – over-supply.  As a buyer, it is so important to look not only at the properties listed for sale, but also at the partially completed blocks to the right and left – who owns them?  NAMA, or maybe other banks? What will they do with them, how soon might they hit the market and when they do, will you be in a position to compete with the State or a bank landlord when it comes to knocking down rental or sale prices?  That is a lot of uncertainty for any buyer or investor to face and  at the moment, it is difficult to see how the potential returns justify the likely risks.  The truth is that investors can still benefit from the current market conditions if they are willing to work for them.  Capital appreciation is no longer a given, buying well is the only protection left, adding value puts the investor back in to the driving seat.  As discussed over the past year, housing supply in desirable residential areas is down to worryingly low levels, however, there are still renovation opportunities in prime locations like Portobello or Drumcondra, which home buyers generally cannot avail of without the support of lenders who are slow to agree to stage payments.  When a three bedroom house requiring basic upgrading and modernisation can be purchased below the cost of a two bedroom apartment in the same area, it reassures investors that opportunities do exist.

Over the next two weeks, we should see the release of two multi-lot auction catalogues from Allsop Space and Real Estate Alliance  who are holding property auctions on March 1st and 5th respectively.

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