How Low Dare You Go?
...With few property deals being done and prices in freefall, many vendors are wondering what their bottom line should be to get a sale...
House prices are sliding – and fast. Yet while most vendors now accept that they have to cut prices in order to tempt buyers, despite all the potential bargains on the market, statistics suggest that buyers are still deterred.
Lack of liquidity, the prospect of further price falls, job losses and a worsening economic climate are taking its toll.
In 2007, 158,000 people drew down mortgage loans. Frank Conway of the Irish Mortgage Corporation suggests this is down by as much as 36% this year – so far.
According to Sherry FitzGerald's latest House Price Index prices have fallen by 26% since their peak in June 2006, with prices down by as much as 32.8% in Dublin.
At the lower end of the market, vendors slashing €60,000, €70,000, €80,000 off the price of their property is common. High-end homes have been reduced by hundreds of thousands of euro and in some cases millions.
Website, thepropertypin.com which lists price drops of hundreds of properties all over Ireland, shows the price of one home in South Dublin slashed by 47%, another property in Westmeath has been reduced by 40%
In Kildare, Moyglare Manor, a 17-bed house hotel on 13 acres went to auction last year quoting €10m. It was subsequently reduced and was presented for auction again this year at €4m. It didn't sell and is now quoting €3.75m.
"The property has had no offers as yet," says Robert Hoban of Savills, adding that the vendors are open to negotiating with a cash buyer. "The reality is that people aren't willing to commit to paying high price tags in this market until they know for certain what is going to happen."
In south Dublin, a detached five-bed, 2,400sq ft house at 6 Richmond, Newpark Avenue, Blackrock went on the market earlier this year at €1.6m. It's been reduced several times and is now selling for €895,000.
Agent Andrew Allen of Allen & Jacobs Estates reports that the property has had viewings but no firm offers. "Based on price per square footage, it's certainly a good buy and possibly the cheapest in Blackrock," he says.
Reports abound of vendors who have had their property on the market for over a year without a single viewing. While others who have reduced the price of their property four and five times are still failing to attract a buyer.
No-one wants to undervalue their home, but many are now wondering just how low do they have to go to get a sale?
Some optimistic estate agents are predicting a 'bottoming out' soon. Other experts say that prices will continue to fall by a further eight to 10% next year, while commentators on property blog sites are predicting an Armageddon scenario and price drops of 80% – although they've little evidence to back this up.
Estate agent Owen Reilly believes that prices are close to bottoming in Dublin city centre but that prices in the suburbs still have a while to go.
He says many vendors reacted far too late to price reductions and are now being forced to make even bigger cuts.
"Prices are only now at a stage where estate agents advised them to be six months ago," says Reilly who's expecting a lengthy period of inactivity in terms of transactions with only those who have to sell or have to buy doing business next year.
On a more optimistic note he adds that when the market does pick up, prices could spike by as much as 5% in some areas, then level off.
A recent report on the economy by Davy Stockbroker says 'real progress' will not be made in the property market until property prices fall to a clearing level and mortgage availability improves.
Rossa White, economist at Davy's believes prices will fall a further 11.5% next year, and possibly more.
He says that there's still a lack of realism in the second-hand market. "Some people still expect their house to sell for 2006 prices," says White.
Dermot O'Leary chief economist, Goodbody Stockbrokers, expects prices to drop by a further 10% next year, adding that the rate of decline is very much a regional issue and that property prices will be affected by location and type of property.
"There is a huge oversupply of property in rural areas, particularly the midlands.
"A lack of liquidity and jobs losses means these areas can expect further price drops," he says,
With so many conflicting reports as to just how far prices will fall next year, Paul Murgatroyd, economist, Douglas Newman Good is perhaps most accurate when he says: "it's anyone's guess."
"No-one really knows when the bottom is until after it's passed," says Murgatroyd, adding that vendors who really want to sell will have to continue to reduce the price until someone buys.
He advises that all offers be considered, no matter how ridiculous.
Report by Roisin Carabine - Tribune Property