There are fewer ready buyers in the Dublin market at the moment, the problem is that every buyer is competing for the same few houses
House-hunting is rarely as exciting or romantic as the term might suggest and this is particularly true in the Dublin market at the moment. First-time buyers have always faced challenges and certainly, these challenges tend to change with the times but there appears to be a palpable sense of missed opportunity here and perhaps a sense of disbelief that prices are rising so quickly. Market watchers would be forgiven for thinking that the market went straight from crashed to soaring. Of course, this is only true for the cities and immediate surrounds, the rest of the country, while improving, is finding the recovery patchy and slow.
But in Dublin there really was no period of balance; no plateau. While conservative would-be buyers were still waiting for the bottom of the market to be called, or at least generally agreed upon, reports of rising prices started to circulate. That was in 2012 and since then, prices have only moved in one direction, upwards. This is neither desirable nor sensible but it is the prevailing market reality and one that is likely to continue for another two years. We can estimate the period of this ‘boiler house’ situation by measuring the consistent demand, diminishing stock levels and inability of developers to bring new stock to completion until late 2016 and 2017. So how does that help house-hunters in today’s market?
Firstly, would-be buyers need to determine whether, in fact, they should even be competing in the market at the moment. Perhaps a two year wait would be a better option for some.
While prices will likely not decrease in two or three years time, there is likely to be some period of stabilisation where the rate of increase slows as more and more new stock is delivered to the market. When trying to make the decision about whether to buy now or wait, buyers should be checking out the planning applications in their chosen locality. What volume, and more importantly, what type of housing is already planned? Conor Skehan, Chairman of the Housing Agency recently commented on RTE radio that there will be housing available for up to 30,000 people in Cherrywood, South County Dublin within the next number of years. This is huge future volume and should certainly be a factor for buyers to consider today.
Of course, if buyers decide that now is the right time, taking into account local market factors and their own personal and lifestyle concerns, then they need to be aware of what lies ahead. There is so little housing, new or second, coming to the market at the moment that it is best to presume that what is available today is what the total selection is. If the right property comes along, buyers need to be in a position to bid. This means that finance – both mortgage and cash for deposit and professional fees – is in place. I generally recommend an early bid, if a property is going to go well above budget, it is much better to find out quickly. In a fast moving market, such as we see in Dublin, time lost amounts to a real and tangible opportunity cost. Bid quickly, bid often and when the property goes outside of its genuine market value, be prepared to move on. Market value is not the mystical, intangible figure it once was; the Property Price Register allows buyers to access recent house sales data – just remember that we are in a rising market and provide for that. Buyers who make their interest in the property clear from the start generally fare well in bidding. Unfortunately we still do not have a transparent or verifiable system of bidding in Ireland, as operates in other countries. The best way for buyers to protect themselves is to always bid in writing. It is fine to give an offer over the phone but only where that phone call is confirmed by a follow up email. Likewise, where competing offers come in, it is more reliable to receive this information in writing. If the estate agent does not cooperate, it is sufficient for the bidder to write an email to the estate agent referring to the other offer and perhaps seeking confirmation that the competing offer is unconditional. For example, an offer to purchase subject to the sale of another property will always be less credible than a straightforward offer. Similarly, a cash offer will generally trump a mortgaged offer. In situations like this, buyers will learns very quickly that the successful or ‘best bidder’ will not necessarily be the highest bidder. This can be positive or negative, depending upon the circumstances the buyer finds themselves in.
While bidding and negotiations can be difficult, no buyer can afford to bow out. In the past, many house-hunters walked away from aggressive or competitive bidding. Unfortunately in the Dublin market right now, all bidding is aggressive and if buyers want to win, they need to play the game – which, of course, is increasingly difficult as the rules continue to change. The most unfair change is when open bidding turns to sealed or best bids by a certain day or time. This effectively turns the bidding process into a tender. Tenders have, in the past, been used mainly for commercial property transactions, or for the sale of unpredictable assets that are difficult to value. The sale of residential property in Ireland by tender is not a common occurrence; however, the unusual market dynamics in Dublin at the moment – high demand against a backdrop of market uncertainty, where low supply levels are driving aggressive bidding – has prompted many local agents to revert to this type of sale. What we see at work in the local residential market is a quasi-tender scenario whereby the estate agent offers the property for sale by private treaty but subsequently advises that the best bid, by a certain time on a prescribed date, will be the winning bid. In this type of scenario, there is rarely a tender document setting out terms and conditions. Nor is there a prescribed acceptable format for bids, except that the offering must be put forward in writing. Although a tender offer may be made conditional, I certainly would not recommend this. Having everything in place in advance, including a structural survey, greatly increases the chances of success. The main disadvantage of this happening for buyers is that the bidding through tender is confidential. This means that bidders will not know how high or low to aim and may end up missing out on the property in question, or worse, grossly over-paying for it (and yes, this is infinitely worst than missing out).
The best way to avoid this is to determine market value, find out as much about competing bidders as possible and to present yourself as the best possible bidder. As mentioned above, it is not all about price.