Galway overbuilt?

TomF

I've been looking at the Galway Advertiser's Accomodation to Let classifieds, and they go on and on with lots of houses for rent. I am also finding that owners and landlords are getting very anxious about empty houses and prices are falling rapidly. Could this be only happening in Galway? Are other cities finding the same thing happening?

Victor

It's May, a traditional weak period as students go home, but people are taking holiday hires just yet.

However, supply is catching up with demand, nationally at least.

spongebob

Originally posted by TomF
I've been looking at the Galway Advertiser's Accomodation to Let classifieds, and they go on and on with lots of houses for rent. I am also finding that owners and landlords are getting very anxious about empty houses and prices are falling rapidly. Could this be only happening in Galway? Are other cities finding the same thing happening?

Galway is ahead of the demand curve, while 70,000 units were completed nationally in 2003 or one for every 57 people , the completion rate in Galway and county was 5000 for 200000 people...most in the City (or even 5200 units for 190000 people) . Thats 1 for every 40 people or nearly 50% more than the National average. They are still banging them in.

If the market nationally was in equilibrium in 2003 then Galway is well oversupplied.

Rents have been static for 2 or 3 years. Scabby landlords (Magnolia paint merchants) are dumping as they cannot let any more. I know of people whose Landlord mentioned a rent rise in Knocknacarra during the spring. They said OK, we'll leave . He cut the rent .

Section 50 apartments cannot be let at the expected levels. While open market rents have fallen and are still falling the same cannot be said of house prices. Yet.
Galway will be the first City to post a decline in house values when the market turns. I am astonished that it has not done so yet.

M

ionapaul

My brother got a house on the outskirts of Galway in one of the huge developments (for Galway, 100s of new houses) that someone pulled out of and lost their deposit. There are 200 more houses going up in his estate, all with deposits paid for. Where are the immigrants needed to fill the 1000s of rooms in the 100s of houses in this one estate? I need someone to explain it to me...

They aren't in Galway right now, 60% of houses sold in Ireland are sold as 2nd homes/investments...and people are going to vote to make it harder for immigrants to come to Ireland! Funny stuff, I can see a time in the near future when people are begging the gov. to rent their investment houses off them to house the asylum seekers some people are trying to discourage from coming!

spongebob

Did your brother let out a room ? Was it for as much as he thought he'd get ? Did it take longer than he expected ?

M

ionapaul

Sorry, I meant that he *just* bought the house Very very recently, moving in later next month. 4 bedroom looking to rent 2 of those. Hopefully he won't have too much trouble...but I suspect he will. Too far from college for students to rent, bad infrastructure out there (no regular bus to town), and you could live right in the city centre for the same as he will be looking for in rent. Plus there are not a lot of high-paying jobs in Galway to attract the 1000s people each year they need to fill these rooms.

The only way I can see this housing boom working out and continuing is by incouraging massive immigration, higher paying jobs, and by knocking down older houses. Houses are expensive to buy and rent in San Francisco and Manhatten because there is no space to build new ones, a finite supply of houses/space creates the high prices - yet even in Dublin they are building new, massive apartment complexes in the city centre at the Docks, in the Phoinex Park. But they are all sold already I suppose...

spongebob

Originally posted by ionapaul
and you could live right in the city centre for the same as he will be looking for in rent.

Ahhhhhhh. He is in trouble so. Person has to have car , your brother has to have parking for them. Cost of parking in city centre is brutal. Thereforte he needs 2 Car owners and that creates hassle if he only has 2 spots with the house . I would budget on renting 1 room only TBH .

Person with no car is better off in city centre(ish) as they have lower transport costs for the same rent because the parking is not an issue.

The only thing that is keeping the market (for sellers) bouyant in Galway is an estate agent cartel who will not price houses below a certain floor. Thats around €250k for a suburban 3 bed semi.

M

Victor

ionapaul, your brother should target the ~€7,618 per annum (€635 per month) tax-free from the rent a room scheme and price accordingly, the price points being €315 (2 people) and €210 (3 people)

spongebob

The big picture is Here in the house completions for last year. (Word Document sorry )

Galway (City and council) had 5475 completions outta 68800 last year

Dublin (City and 3 councils ) had 14394 completions.

Galway has about 200,000 people or 5% of the population nationwide

Yet Galway had 8% of completions nationwide. Therefore it will be the first large town in a supply/demand equilibrium state or in an oversupply state. It is simply not growing the population that fast . The rental market has been soggy for about 2 years and they are still completing like mad.

M

shoegirl

Originally posted by ionapaul
Too far from college for students to rent, bad infrastructure out there (no regular bus to town), and you could live right in the city centre for the same as he will be looking for in rent. Plus there are not a lot of high-paying jobs in Galway to attract the 1000s people each year they need to fill these rooms.

I think you hit the nail on the head here.

I read in the CSO survey (see http://www.cso.ie) that Galway has the highest level of rented accomodation in Ireland - 25%. I think somewhere in Kerry is next. Galway has the advantage of being a tourist trap and a university city but this is not insurance against oversupply. At the same time I am sure that there are huge numbers of tenants in Galway who could afford to buy at a sub-market rate but who cannot because the house prices are still beyond their reach.

Those who believe that a price crash is on the cards are both right and wrong - the problem is that not all the country is desierable or sustainable and the likelihood is that there will be a price crash in low demand, weak economy areas while prices continue to spiral upwards in high demand, rich areas like the great Dublin area and south and west Cork.

I think the situation in Galway is not typical of the whole country as it has traditionally had bouyant tourism which increases the demand for property. Also many landlords are possibly also running bed and breakfasts or small guesthouses and may be depending on both incoming rentals and the long term equity on their properties. We may eventually - if this situation continues of course - see a market "correction."

The big effect on the private rented sector has been the removal of "new" Rent Allowance tenants from the sector as they have to be habitual renters in order to get the subsidy. This is having a gradual trickle down effect as demand is reduced, and they are restrcited to cheaper properties. Will be interesting to see how this affects in the longterm.

TomF

A neighbour of mine in Cork says the reason prices are high in Galway is that Dubliners "make a bee-line" to Galway when they are on holiday and are used to paying Dublin prices, so the Galwegian Gougers can charge what they will for just about anything. I am encouraged to read that this may not apply much longer for housing. I long for the day (may it soon arrive) when a potential buyer/renter will advertise that owners and agents may assemble at a time and place and begin the reverse-bidding. "It's a beautiful day for the auction, and you are all very welcome. We have a St. John's Ambulance crew specially trained in cardiac care standing-by. Now to business. Required: a furnished four-bedroom detached house, near the city centre with garage and large gardens, front and back. Shall we begin the bidding at a maximum monthly rental of €750? Thank you sir. Do I hear €700. Yes., sir, in the back, thank you very much! That €550 may be hard to beat. Please, ladies and gentlemen, we must preserve decorum... ."

TomF

We were in Galway again this week, and it seems that half of Knocknacarra is up for rent, and I think I was hearing some hint of worry in the voices of owners who wanted to get their houses rented. Also, the new Distributor Road from Bishop O'Donnell Road to Knocknacarra runs through urban landscape that puts me in mind of photographs I have seen of housing in Moscow (shudder). The cookie-cutter architecture in "new Galway" reminds me of what seemed to be miles of identical houses in Artane, Dublin in the 1970s.

spongebob

Indeed.

They are still building like mad, dunno who is buying them though . Novice investors maybe .

M

TomF

My brother just sent me an article from the June 3rd issue of The Economist. Here is something from it:

"Homing in on the risks:
Inflated house prices pose an even bigger risk to the world economy than oil"
...

"The argument that prices would happily flatten off [meaning, I think, that house prices would stop rising and leave everyone happy] always seemed implausible. For one thing, surging house values have priced out first-time buyers; it will require a sizeable drop in real house prices to lure them back. Second, while it is true that most homeowners stay put rather than sell in a weak market, the growing ranks of buy-to-let investors will be more likely to sell if prices stop rising and their rents do not cover their costs.
Housing optimists dismiss these fears by pointing out that doomsters such as The Economist began wringing their hands about a property bubble a year ago, and yet prices have continued to climb. But this has made the housing market not safer, but more vulnerable. The first law of bubbles is that they inflate for a lot longer than anybody expects. The second law is that they eventually burst."

spongebob

The same article pointed out that vast amounts of cheap speculative money have washed around the world since the interest rate drops after 911 almost 3 years back.....eg the South African futures market too as a % of South Africas GDP .

It was a really good article I thought , must check to make sure I did not throw it out since.

Housing in parts of the developed world is not the only bubble waiting to burst, as they all do in the end.

My personal theory is that the Irish housing bubble will burst first in Galway and in some of the seaside towns with section 48 relief ...and with no steady supply of refugees any more. My gut instinct is that the sub 200k semi will make an appearance .

M