Falling prices represent new reality...
At the end of last year, estate agents and vendors alike were reeling from the price drops that the market had experienced during 2007.
But although they were shell-shocked, many industry experts were predicting that the rate at which prices were dropping would slow during 2008, and that prices would stabilise.
Twelvemonths on, that now seems like nothing more than wishful thinking. The banking crisis, soaring unemployment and extremely poor consumer confidence have all resulted in the market having one of its worst years in living memory, a fact underlined last week by a survey which found that 80 per cent of estate agents were selling less than three properties a month.
Even those potential buyers who are interested in buying are finding funding increasingly difficult to source, although observers are hopeful that the European Central Bank’s (ECB) policy of aggressive rate cuts will go some way towards alleviating that problem.
With asking prices having been cut by as much as 40 and 50 per cent in some areas, some vendors are simply taking their homes off the market and shelving plans to move.
According to Marian Finnegan, economist with the Sherry FitzGerald Group, stock levels have been steadily falling throughout the year.
‘‘The number of properties going off the market, either through sales or withdrawals, has been higher than the numbers coming onto the market every single month this year,”
she said. ‘‘If you compare stock levels this November to last November, the number of properties on our books is down by around a third, and we feel the situation will continue to tighten further up until Easter.”
Finnegan believes that last Thursday’s 0.75 per cent cut in interest rates by the ECB will have an effect on the market, but said it would take time to filter through. ‘‘It is certainly encouraging that AIB came out quickly to say that it will be passing on the rate increase; they are the market leaders, so that is very important,” she said.
‘‘What this rate cut definitely means is that everything priced at under €400,000 in Dublin is now cheaper to buy, rather than rent - and that is really important. But it will take a while for the effects of the rate cut to trickle down to people, given that we’re facing into Christmas.”
Finnegan expects prices to continue to fall in the early part of next year, but believes that activity levels will pick up around Easter. ‘‘When that happens, we would expect prices to stay flat,” she said.
Robert Ganly, of Knight Frank, said the rate cut was ‘‘encouraging’’, but said rates needed to come down more in order to boost confidence.
‘‘There’s still an awful lot of money out there, but people need to have the confidence to spend it,” he said.
Ganly said that some vendors were still not facing the full facts about prices. ‘‘The simple fact is that prices are down by about 40 per cent on their peak in the spring of 2007. In locations that are less than prime, that figure could be as much as 50 per cent,” he said.
‘‘But a lot of properties are still overpriced, and their owners are not taking the hard decisions that need to be taken in terms of cutting their asking price. At the same time, some agents are still reluctant to strongly deliver the message to vendors that this is where the market is now. But it’s in everyone’s interest to be realistic about the situation we’re in.”
Keith Lowe, of Douglas Newman Good, agreed.
‘‘We reduced prices on McDonagh Junction, a scheme of Section 23 apartments in Kilkenny, by 40 per cent around three weeks ago. We have now sold 52 units out of 55 and it just illustrates the fact that, if you drop your price, you will sell,” he said.
Lowe is optimistic about the prospects for the market in 2009.
‘‘Things certainly won’t be returning to the way they used to be, but I do believe that the number of transactions will pick up. Last week’s rate cut has taken €300 a month off a €400,000 mortgage - that is quite a drop and it has to have an effect,” he said.
‘‘Everyone tries to predict what prices will do next; it’s virtually impossible to do so, but I do feel that if someone buys a property now, they will have got the majority of the price drop.”
He added that, for the first time in a long time, he has noticed investors returning to the market. ‘‘It is very much at the bottom end of the second-hand market, but I think it’s significant nonetheless,” he said.
‘‘You can now buy a house in areas of west Dublin like Clondalkin for €250,000 and rent it out for between €1,200 and €1,300 a month, so it’s paying for itself. We are going to see more of that type of buyer coming back into the market over the next few months.”
At the upper end of the market, a number of vendors found buyers for their properties, but only after substantial price cuts. Savills sold Ceanchor House in Howth, the home of Jennifer Guinness, for between €7.5 million and €8 million the house initially went on the market in 2006 for €12million.
In Foxrock, Fairholme on Brighton Road in Foxrock made €4.2milli on through Sherry FitzGerald, and the same agents secured €5.7 million for Glenarm on nearby Torquay Road.
Knight Frank handled the private treaty sale of singer Lisa Stansfield’s Dalkey home, Mount Henry on Torca Road.
The house had gone under the hammer with an AMV of €8 million in June 2007, but the asking price was subsequently cut to €6 million.
In Monkstown, Willow Lodge at 5 Richmond Hill was sold by Sherry FitzGerald, which had quoted €4 million.
Report by Gillian Nelis Sunday Business Post.