What Dublin Buyers are really paying

The_Conductor

http://www.irishtimes.com/newspaper/property/2009/0507/1224246048049.html

What Dublin buyers are really paying

What’s your house really worth? Secret house sale data for the first four months of the year shows that in some cases, houses in the Dublin area are selling for half what the owners wanted. And nearly 20 per cent of buyers are paying cash, writes ORNA MULCAHY, Property Editor .

DATA FROM the sale of almost 200 homes in the Dublin area seen by The Irish Times show that house prices in the capital have dropped by up to 52 per cent since 2007.

The data relates to 192 sales conducted by one of the country’s leading estate agencies in the first four months of 2009.

The properties represent a wide range of homes at virtually every level of the market and in most postal districts. The majority of the 192 homes sold had been on the market since 2008, with some properties on sale since 2007.

Analysis of the sales show that homes at the lower end of the price scale have fared best, selling for between 5 and 20 per cent below asking prices. In a very small number of cases starter homes actually attracted bids over the asking price. Two of the 192 properties sold for above their asking prices and both were in the €300,000 to €400,000 bracket. In both cases the buyers paid around €10,000 over the asking price in competitive bidding.

Sellers in the middle market, with houses priced between €500,000 and €1 million have seen the values of their homes fall by between 30 and 45 per cent. On the plus side, there is a good deal of activity at this level of the market as buyers identify value in solid family homes in top suburban locations.

Houses priced in the €1 million-€2 million market have seen their value halved, where they are selling at all. Of the 192 properties sold, just 14 fetched over €1 million.

A surprisingly high number of buyers are paying cash – 19 per cent of the sample, while AIB has emerged as the foremost lender.

The prices provide the first true snapshot of the current state of the second-hand housing market in over a year, since auctioneers stopped revealing the sale prices they’d achieved following a row with the National Consumer Agency (NCA) (see panel on page 6).

While the information relates to sales from one estate agency chain only, the geographical spread and the range of house types, from apartments, through three and four-bedroom semis up to large period houses, provides a valid view of the market.

Properties that have been on the market for over a year have seen the most significant drops. For instance, an apartment in Clontarf that went for sale in late 2007 at around €430,000 sold last month for just over €300,000, a drop of 39 per cent.

In Blackrock, a substantial family home first offered a year ago at €1.6 million was eventually sold for around €850,000 – a 47 per cent drop.

In Dún Laoghaire, a period house that was on the market for 12 months dropped from over €1.5 million to around €900,000, a drop of around 44 per cent. A large country-style property in south Co Dublin that came on the market a year ago at €4 million eventually sold for €1.9 million – a drop of 52.5 per cent.

Across the city in Dublin 5, a spacious detached house offered in 2007 at around €750,000 eventually sold for just under €400,000 – 48 per cent lower. In Dublin 6, an attractive semi on one of the better roads of Rathgar was offered early in 2007 at €1.9 million but sold early in 2009 for around €1 million – 45 per cent below the original asking price. In Stillorgan, a typical four-bedroom semi sold for 36 per cent below its asking price, after 16 months on the market.

The market has continued to correct through the first quarter of 2009. Sellers who put their homes on the market in the January-March period invariably had to drop prices to achieve a sale. For example, in Dublin 9, a terraced three-bedroom house that came on the market in February at close to €400,000 was sold shortly afterwards for 9 per cent less.

In Stepaside, a modern duplex on the market at just over €400,000 at the end of 2008 sold for €360,000 in early 2009, a drop of around 8 per cent.Neighbourhoods that saw big price inflation during the property boom have seen corresponding drops since the peak of the market.

The correction has been severe in parts of Dublin 18 – Foxrock and Carrickmines in particular, where there is an oversupply of newly built high spec homes. Two large contemporary homes in Dublin 18, on the market since late 2007 and early 2008 respectively, were both sold at approximately €2 million each – around 50 per cent less than their original asking prices.

Parts of Dublin 4 have also taken a big hit on prices. In Sandymount for instance, an attractive four-bedroom semi with a garage that last year was expected to make over €1 million eventually sold for €700,000, while nearby, a three-bedroom semi that had been priced at close to €900,000 in late 2007 finally sold for just over €450,000 – a 48 per cent drop.

Buyers at the lower end of the price scale have not been able to avail of such large discounts, since starter and trade-down home prices seem to have held up, pricewise, better than their more salubrious neighbours.

For instance, in Sallynoggin a refurbished former Corporation house on the market at over €350,000 sold for just 4 per cent less. In Clontarf, an apartment priced at €280,000 was sale agreed at a modest 10 per cent below the asking price; in Clonee, Dublin 15, a modern three-bedroom semi fetched just over €300,000, 7 per cent down from its asking price, while in Sutton, a three-bedroom home on the market at just over €330,000 sold quickly for over €325,000, or 2 per cent less than the asking price.

Finance was disclosed in 109, or 57 per cent, of the 192 cases. Of this, 109, a high proportion – 19 per cent- were cash buyers. Among those who had secured mortgages, 38.5 per cent were being funded by AIB; 12 per cent got mortgages through brokers; 10 per cent with Bank of Ireland; 7 per cent with the EBS; 6.5 per cent from the agent’s broker; 2 per cent from Permanent TSB; Halifax, Vision Financial Services, Bank of Scotland and Lombard Finance all supplied 1 per cent of mortgages each; and 1 per cent came under the shared ownership scheme.

Interestingly, in 6.5 per cent of the cases where finance was disclosed, the mortgages were given to people who worked in banks and financial institutions. This group secured discounts of up to 44 per cent on the original quoted price – or an average discount of 29 per cent. In 34 cases – 18 per cent of the 192 sales – an initial sale had fallen through with the eventual sale coming later, after further price drops. In at least six cases a sale had fallen through on more than one occasion.

Earlier this week the Irish Auctioneers Valuers Institute (IAVI) published a survey showing that house prices continued to drop in early 2009, by an average of 8.7 per cent nationwide in the first three months of the year. The survey, conducted among the IAVI’s 2,000 members, shows that the decline in Dublin was less – on average 5.6 per cent compared to 12 per cent in Munster and 8.5 per cent and 7.5 per cent in Leinster and Connaught respectively.

The house price data seen by The Irish Times bears this out, though it does show that the pace of sales accelerated in the first quarter of the year where the price was already seen to be fair, and a further discount could be negotiated.

In Dublin 8, a two-bedroom artisan cottage on the market at just over €350,000 quickly sold for around €300,000 while in Walkinstown, a typical three-bedroom terraced house was sold for €15,000 under its asking price of €300,000. Meanwhile a recently completed one-bedroom apartment in Sandyford was quickly sold for around €260,000 – about €5,000 below its asking price.

In Howth, a village cottage sold for just 6 per cent below its asking price. While the 192 sales do not make much of a dent in the large oversupply of homes in the market, the signs are that buyers are prepared to move where they perceive real value. The next step for the market will be to get transparency on prices.

With legislation currently being pushed through to activate the National Property Services Regulatory Authority, auctioneers can only hope that one of its first moves will be to demand that property prices to be recorded and put into the public domain.

ESTATE AGENTS stopped providing information on private treaty sales a year ago, following threats by the National Consumer Agency (NCA) that they could be prosecuted unless they provided absolutely accurate sale prices.

Up until then, private treaty prices provided by estate agents were usually reported as “in the region of” because the Data Protection Act prevents agents giving the exact price without rarely-forthcoming written permission from both vendor and buyer.

Reports that some agents had been exaggerating these prices to bolster a falling market in early 2008 prompted the NCA to warn that estate agents who report inaccurate sales prices could be prosecuted under the Consumer Protection Act 2007.

The Irish Auctioneers and Valuers Institute (IAVI) countered that as a result very few house prices would be published, a warning that turned out to be accurate.

There have been no changes, or promises of changes, in data protection legislation to allow agents to provide the information since then.

And the near total collapse of auction sales – just 127 auctions were held in Dublin in 2008 compared with nearly 1,500 in 2006 – means that the market is now starved of price information.

whizzbang

Its amazing how this secret information suddenly becomes available just as the Estate Agents are trying to convince us that prices have dropped and we have hit the bottom. Incredible timing, how lucky we all are!

The_Conductor

whizzbang wrote: »

Its amazing how this secret information suddenly becomes available just as the Estate Agents are trying to convince us that prices have dropped and we have hit the bottom. Incredible timing, how lucky we all are!

My reading of it is more along the lines of- the high end of the market has taken a big hit already- the lower end hasn't. Its probable that future falls may be concentrated in this general direction.

irlrobins

smccarrick wrote: »

Its probable that future falls may be concentrated in this general direction.

Maybe not. The lower end might have more activity, as more FTB's find properties are coming into their price range.

A year ago some FTB's would only be able to afford a 1 bed apt. Now for the same price they can buy a 3 bed semi in some areas. This combined with all time low interest rates will bring more people into the lower segment of the market.

In fact, if job security was less of an issue in say a years time, there might be a rush of FTB's to get on the property ladder before prices and rates increase.

meditraitor

Interesting article but its hard to see the wood for the tree's at the moment. The auctioneers and developers/investers are doing their best to slow the price crash but everyone who wants to buy a property and is willing to wait is sceptical and waiting till the market really does hit bottom.
I could be wrong but a lot of people I know believe it will be the latter part of next year before the real value shows its head and if this is true among the majority of prospective buyers then it will be the end of next year before we see a more steady stream of purchases. This should stop the drop.

jetski

Good read, Cheers.

The_Conductor

irlrobins wrote: »

Maybe not. The lower end might have more activity, as more FTB's find properties are coming into their price range.

A year ago some FTB's would only be able to afford a 1 bed apt. Now for the same price they can buy a 3 bed semi in some areas. This combined with all time low interest rates will bring more people into the lower segment of the market.

In fact, if job security was less of an issue in say a years time, there might be a rush of FTB's to get on the property ladder before prices and rates increase.

I agree with what you're saying. Its all up in the air though. Interest rates will be determined by what happens in the bigger economies- not ours. The consensus is that the decrease to 1% today is the bottom of the cycle- and that rates will increase to between 4 and 5% over the next 4-5 years (again, depending on how things go). This was reflected in the communique from the Finance Ministers last weekend- where they also emphasised that all stimulus packages currently in force would be promptly withdrawn as economic conditions improve.

Ireland is possibly in the worst of every situation. We are praying for an improvement in the global economy- not so much to help the Irish economy- but to improve people's prospects elsewhere.

Our unemployment rate is not expected to stabilise in the current 3 year programme (current predictions are optimistically looking at early 2012).

Taxation is going to further increase- with a simultaneous cutback in expenditure......

I cannot see any particular sector of the market getting particularly active in the medium term.......

irlrobins

smccarrick wrote: »

The consensus is that the decrease to 1% today is the bottom of the cycle- and that rates will increase to between 4 and 5% over the next 4-5 years (again, depending on how things go).

I agree, I think the time is right to start returning from variable mortgages to fixed rate. Although there's been a lot of press about people being stuck in fixed rates and large breakout fees, that's at the other end of the spectrum then where we are now. Fixing in for 2+ years now could prove a saving.

Taking AIB's FTB rate today (before any ECB rate cut)
2 Year Fixed 2.80%
3Year Fixed 3.10%
4 Year Fixed 3.45%
5 Year Fixed 3.69%

Very attractive I think!

We will see falls for at least another 24 months.
The unemployment rate may peak next year (hopefully it will peak and then come down somewhat) then reposessions will follow - taking what a year to 18 months to come through? Until then prices wont bottom out.

So conservative estimate - 2 years of falls left

mathie

smccarrick wrote: »

I agree with what you're saying. Its all up in the air though. Interest rates will be determined by what happens in the bigger economies- not ours. The consensus is that the decrease to 1% today is the bottom of the cycle- and that rates will increase to between 4 and 5% over the next 4-5 years (again, depending on how things go). This was reflected in the communique from the Finance Ministers last weekend- where they also emphasised that all stimulus packages currently in force would be promptly withdrawn as economic conditions improve.

Ireland is possibly in the worst of every situation. We are praying for an improvement in the global economy- not so much to help the Irish economy- but to improve people's prospects elsewhere.

Our unemployment rate is not expected to stabilise in the current 3 year programme (current predictions are optimistically looking at early 2012).

Taxation is going to further increase- with a simultaneous cutback in expenditure......

I cannot see any particular sector of the market getting particularly active in the medium term.......

Trichet said that he wouldn't rule out another rate cut. So we can't be sure we're at the bottom of the cycle for rate cuts.

The_Conductor

mathie wrote: »

Trichet said that he wouldn't rule out another rate cut. So we can't be sure we're at the bottom of the cycle for rate cuts.

Trichet has confused the hell out of the markets with his comments yesterday- no-one knows what to expect. They are now saying that it appears that 'inflation' continues to be a concern for the Central Bankers (totally aside from the fact that the entire continent is currently in negative inflation). Real interest rates are already at below .5% (when negative inflation and the contracting economy are factored into the equation), and it seems that the lesson they are insisting on learning from the past few years- is that of their excesses in the earlier years of this decade.

In further news- Irish sovereign debt shot up an additional .8% (from a 1.9% spread to a 2.7% spread) this week, against German sovereign debt- on the back of proposals to pay pension funds a premia to invest in Irish capital expenditure projects. International investors do not see why pension funds should be treated any differently than they......

Trichet has ruled out 'quantitative easing' as a financial mechanism for dealing with the current crisis- this is the biggest difference between the approach in the US/UK and the ECB. Quantitative easing- is a fancy word for broadening the money supply (in its most base form- by printing more money). The ECB has decided in its infinite wisdom to instead spend another EUR60b on 'high quality mortgage assets' to support the EU banking sector. Aka- the banks will hock off more performing loans to the ECB- leaving them with an even higher proportion of impaired loans on their books- all the while the EU money supply is actually contracting.......

Just what are the ECB up to?