Summary
- The residential market has been relatively busy in the last four months
- Sellers are finally accepting that values are dictated by prospective purchasers
- Receivers and liquidators dealing with developers' assets have started to place apartments on the market
- Results from Lisney's Q2 2010 Residential Value Index show that Dublin house prices continued to fall in the three months to the end of June
- The mortgage market continues to be firmly focused on First Time Buyers
- No one-fix solution to the problem of 'ghost estates'
- Download Lisney Residential Update Summer 2010
Activity
The residential market has been relatively busy in the last four months compared to the preceding year and a half. There has been a greater sense of urgency among purchasers and as a result the level of activity has increased.
This activity is largely due to sellers finally accepting that values are dictated by prospective purchasers. Accepting this reality has taken some time as many home owners put off reducing their asking price in the hope that values would stop falling. The majority of purchasers in the market are currently 'cash buyers' and only require 40% to 60% of the price in borrowings. This is having an impact on achievable price levels.
At the start of June, we successfully auctioned two houses. 22 Glenvar Park in Blackrock and Sunnyside, St Vincent's Road in Greystones sold under the hammer, for €975,000 and €910,000 respectively. Each sale exceeded the AMV and the vendors' expectation.
Receivers and liquidators dealing with developers' assets have started to place apartments on the market. This seems to have been the correct strategy given the level of interest and success to date. However, such a policy has severely under-cut the prices sought for all other apartment schemes. The impact of this on market values remains to be seen but will likely push some values down further.
Prices
From market peak in late 2006, prices have fallen much further than many expected and the timescale of this has taken a lot longer than originally estimated. Prospective purchasers are now taken aback at what value can be had in the marketplace generally.
Results from Lisney's 02 2010 Residential Value Index show that Dublin house prices continued to fall in the three-months to the end of June. The pace of decline was similar to that of previous quarters with the index of overall values declining 5.9%. Since market peak in the latter half of 2006, average Dublin house prices have fallen by 53.5%.
Market activity is concentrated at the "under €1m" level, which comprises mainly of mid range 3 and 4-bed units. The indices illustrate that such homes have held their value better than the larger and smaller formats. The prospects for the autumn market are better than this time last year and provided vendors' expectations are reasonable as regards price, buyers will be found in a matter of weeks.
Mortgages
The mortgage market continues to be firmly focused on first-time buyers. The latest research from the Irish Banking Federation and PricewaterhouseCoopers shows that almost 33.5% of all mortgages granted in the first quarter of the year were to this category of purchaser.
Mortgage lending criteria continued to tighten. The EBS in particular has become stricter and will not lend money for the purchase of apartments unless they are located in major urban or commuter areas. This is a very serious change in practice and should other lenders decide to follow suit, will have serious affects on the value of apartments in towns and villages throughout the country. Additionally, the society has changed its rules on the amount of income it will take into account when assessing applications. Repayments may not exceed 30% of disposable income and only 75% of second incomes will be considered in a joint application.
Ghost Estates
There has been much talk about what developers and indeed NAMA should do with "Ghost Estates". We are of the opinion that there is no one-fixed solution. Every individual development will be different and the options chosen will depend on the scheme's location, demographics, the potential for future demand and what percentage of the scheme still needs to be completed.
Where there is demand and where much of the development is already complete, the units will more than likely be sold, possibly less than construction cost. We are starting to see this with some developments. It is positive form the point of view that existing occupiers will have neighbours, live in estates with completed services and suffer less risk of vandalism. However, it is likely that it will exacerbate the rate of negative equity of the existing residents.
In very extreme and limited cases where units are only partly built and it is obvious that if completed, they will be unsalable and never occupied due to their rural location, lack of services and little prospect for long term demand, they may need to be demolished. This will mean additional costs to return to agricultural land.
Alternatives such as holding the properties and actively managing and keeping then in good condition in anticipation of a rising market (albeit well into the future), or leasing to public/private sector tenants, are also options. Both come with their own pro's and con's, but whatever the option is chosen, it will need to ensure that the developments do not become a larger blight on the landscape and that any possibility for unsafe situations with partly-built or for anti-social behaviour is removed.
