Saturday, 28 February 2009

Irish Property Free Fall...

House prices now falling faster than ever...

HOUSE prices are falling more steeply than ever, as sellers discount heavily to try to secure a sale.

Average prices nationally fell by 1.4pc in January, compared to falls of 0.8pc in October, 0.5pc in November and 0.9pc in December, according to the latest Permanent TSB/ESRI house price index.

Prices were down by 9.8pc in the 12 months to January, compared to a fall of 9.1pc in the year to December.

The average price paid for a house nationally last month was €258,006, down €3,500 on December 2008, and compared with a peak price of €311,078 in January 2007.

The price falls have increased in recent months, said Permanent TSB manager of business strategy Niall O'Grady.

"The pace of reductions is clearly accelerating due to deepening price discounting in the market in an attempt to clear existing stock," he said.

Dublin house prices were worst hit, falling by 1.4pc in January, whereas there was a reduction of 0.6pc for houses outside the capital.

Overall, Dublin prices are down 12.4pc in the 12 months to January 2009, and by 9.9pc outside Dublin.

The average price for a house in Dublin last month was €346,274, 50pc dearer than it was outside Dublin. The commuter belt in counties Louth, Meath, Kildare and Wicklow have seen falls of nearly 17pc, with prices now down to €265,550 on average.

First-time buyers have enjoyed sharper price falls in the last 12 months than those moving home, with their prices down by 13.5pc, compared to 8.9pc for second-time buyers.

The average price paid by a first-time buyer in January was €222,371, down nearly €2,000 since December. New houses fetched an average price of €263,000, while second-hand homes fetched €253,584.

Report by Aideen Sheehan - Irish Independent.

Saturday, 21 February 2009

Hard Times In Ireland...

'I moved from a three-bedroom house into a six-bedroom house. So I'm stuck'.

HARD TIMES: Dublin families who moved to the commuter belt in search of a better life are among those now queuing for a living...

IT’S AN eerily quiet midweek morning in Cavan town. Until recently, processions of lorries thundered through here at rush-hour and heedless streams of cars clogged up the narrow approach roads. Today, traffic glides through the town. The mid-term break from school means it’s quieter than normal, but local people say the long traffic jams have all but disappeared, even on normal weekdays.

Greg (47), a father of five, would welcome the quieter roads and the faster journey to work, except he’s signing on the live register for the first time.

He’s one of a swarm of Dublin migrants who sold modest properties in the capital and bought large, detached trophy homes in commuter-belt towns across the south of Cavan such as Virginia, Ballyjamesduff and Bailieborough.

Some, though, are beginning to question whether they made the right move: as job losses mount and property values plummet, many new arrivals find themselves saddled with hefty mortgages and shrinking bank balances.

“I moved up here for the change in lifestyle,” says Greg, who was laid off last month from insulation manufacturers Kingspan. “I had a three-bedroom house in Ballyfermot and moved into a six-bedroom house with one acre of land. So I’m stuck here for the moment.” He’s still figuring out how he’s going to pay the €1,500 a month mortgage while relying on social welfare as his sole source of income. He has a three-month reprieve from the bank for the time being.

“I’m worried about work, of course, but I’ve been temporarily laid off and hope to be back working in a few months. But I’m happy with the decision to move here. The kids love it, they have their own bedrooms, their own privacy. That’s been fantastic...”

And what of his neighbours, many of whom also traded up by trading out of Dublin?

“Most are surviving and getting by. Most are happy to stay. They don’t want to go back... in any case, you meet more people up here from Dublin than you would at home. Neighbours from Ballyfermot, the whole lot,” he jokes.

Some young people who moved with their families to the commuter belt as children are also finding themselves on the dole for the first time.

Aidan (21) moved up to Virginia with his family several years ago. He had been working as a retail manager in a supermarket in Kells, Co Meath, until a few months ago. “I thought the job was secure. Maybe I was a bit arrogant. I thought I was invincible against what’s happening. Everyone has to eat at the end of the day, but clearly not. It’s rough out there. I’m going to go back to college in September to do an arts degree.”

His friend Aaron (20), also from Dublin, is planning to go to college to try to ride out the economic storm. “I’m going to head back to Dublin, because the college is there. It can be very limiting here. The transport is non-existent in the evenings.”

Away from the drab social welfare on the edge of town, the signs of the recession are hard to miss.

An estate agent is advertising one-bed apartments for sale for €99,000, a 40 per cent price drop over the past year.
Up the street, construction work is starting on the warehouse that will house a new Aldi supermarket.

Over on the Dublin Road, a small crowd has gathered outside a timber flooring shop. On the window is a notice scrawled in black marker, which reads: “The following is a list of people who are very, very, very slow in paying their bills...”

Six names are on the notice, followed by the amount of money they owe, and the date the payment was due. Some of the outstanding bills date back three years and range up to €4,000.

“It these kinds of bills that are pulling businesses under,” says Owen Smith, the shop owner. “I’m standing up for small businesses. I’m not looking for anything that’s not mine. My back is to the wall and this is my last resort.”

Back at the welfare office, times are just as tough for a new generation of well-educated men and women who have only ever known good times.

Noel (26) ploughed his substantial earnings as a civil engineer into a house outside Cavan. Now, he’s faced with having to sell it to make ends meet. “I’ll try to renegotiate the mortgage. As I see it, the banks will have to agree. They’re the ones who should be carrying the can. If I made mistakes like they did, I’d be sacked.”

Colm (25), also an engineer, was laid off last week and is planning to do what previous generations have done: head to England.

“Young people here, they’ve got nothing. Lots are just sitting at home, doing nothing They can’t even get interviews,” he says with frustration. “That’s the way it is. Myself and a few friends will head across the water in a fortnight. There’s no other option.”

Report CARL OBRIEN - Irish Times.

Wednesday, 11 February 2009

Irish Property 10 Years Before Prices Will Recover...

Guru hobbs blames cowen as homeowners face 10 year wait for property price recovery...

Financial guru Eddie Hobbs has lashed Taoiseach Brian Cowen for the "leadership vacuum" that has prevailed for the past year.

And he warned that it could take up to 10 years for Irish property prices to return to anywhere near their pre-recession levels.

In a hard-hitting critique of the country's leaders, Hobbs claimed the Government had failed to lead the nation for the past decade.

"There was a lot more they could have done but I don't think the Government have properly governed the country for the past 10 years," he told the Herald.

"Ireland has been governed by other forces instead, like developers and public sector income through the partnership process. Now that that process is fractured, the Government is only beginning to govern again.

"I find it no coincidence that we're finally beginning to see leadership from Brian Cowen within days of the fracturing of the partnership process." He continued: "We have only had a Government reacting to a crisis and now they're being pressurised into making a decision."

The TV presenter and financial consultant went on to say how the current climate of fear among the Irish people needs to be urgently tackled.

"One thing Brian Cowen needs to do to convince his sceptics is to get rid of the public's fear of spending money. If six months ago, the Government had come out with a radical plan to combat the dire economy, then the atmosphere in Ireland today would be so different," he continued.


"If there were like 'We're in it together, here's the plan', but there wasn't any of that -- there was a leadership vacuum. It has created an enormous degree of fear that we shouldn't be feeling and Brian Cowen must bear enormous responsibility for that."

The Cork commentator, who was at the Dylan Hotel for the new Independent Directory launch, is bringing out a book on how to survive the recession. However, he reckons that people can get their finances under control -- providing they face up to their debts.

"They need to put a debt proposal together and do a frank and honest assessment of their balance sheet -- what they own and what they owe and their cash flow. They need to take out all of their self delusion and then go and talk to their creditors.

"The alternative is, you stick your head in the sand and start getting those letters from solicitors and then debt-collecting agencies and court orders, then sheriffs arrive and you're not in control."

In time, he said that the property market will bounce back -- but it may not be until 2020. "Negative equity is not essentially a problem as long as you make the repayments because house prices will inevitably come back up but it could take between eight or 10 years."

Report by Melanie Finn - Evening Herald.

Monday, 9 February 2009

Developers Cut New Home Prices In Dublin...

Developers cut prices of new homes in Dublin...

Developers have sharply reduced prices at some of Dublin’s bigger housing schemes this weekend, in a bid to stimulate sales of vacant units and entice first-time buyers into the market. Price reductions of up to €150,000 are being offered at the latest releases of apartments and houses for sale.

P Elliott & Co has put a total of 80 units at four of its apartment schemes, on to the market through Hooke & MacDonald, at substantially reduced prices. Prices now start at €169,000 for a one-bedroom apartment at Arena in west Dublin, while a two-bedroom apartments at Mellowes Quay in Dublin 8 now costs €269,000, down from a high of €415,000 in spring 2007. Jackson Homes, Kingscroft Developments and Durkan New Homes have also reduced prices at their schemes by about €100,000, or up to 30 per cent on peak levels. Estate agents reported strong enquiries ahead of this weekend’s releases.

‘‘Based on the level of enquiries we’ve had, we expect to sell a good number of units but not all this weekend. I think the sales will happen over the next few weeks,” said Ken MacDonald of Hooke & MacDonald.

‘‘From the huge number of phone calls we’ve received, it would appear people are responding to lower prices.”

Sherry FitzGerald New Homes has released 35 units for sale at Jackson Homes’ Beechwood Court development on the Stillorgan Road in south Dublin. Two-bedroom apartments are now priced from €395,000, down 35 per cent on peak levels and down 12 per cent on 2004 launch prices.

Meanwhile residential sales data of actual sales prices seen by The Sunday Business Post reveals second-hand residential properties in the capital are selling well below the asking prices being quoted by estate agents. The data shows a number of large detached properties in Co Dublin changed hands at prices between 30 and 50 per cent lower than the asking price. Based on a sample of ten properties sold last month in the capital, the average second-hand dwelling was sold at a 25 per cent reduction on the original asking price.

Separately, new research from AIB argues that Ireland is well ahead of other European countries such as Spain and Britain in the housing cycle, in terms of the downturns in prices, and in particular, activity levels.

The research shows the price correction in Ireland started earlier than in Spain or Britain and also appear to have been more substantial. Prices in Ireland peaked at the end of 2006 compared to the third quarter of 2007 in Britain and the first quarter of 2008 in Spain.

Report By Michelle Devane - Sunday Business Post.

Friday, 6 February 2009

Taxing Times For Ireland...

Ireland Cuts Spending As Budget Gap Widens...

DUBLIN -- Ireland's prime minister announced €2 billion ($2.57 billion) in public-spending cuts on Tuesday, saying the country desperately needs to shore up its battered public finances. Also Tuesday, the Polish government approved a contingency plan to trim public spending by 19.7 billion zlotys ($5.65 billion). The budget cuts come even as other countries are boosting spending to juice their economies.

Speaking to the Irish parliament, Prime Minister Brian Cowen said the bulk of this year's cuts -- some €1.4 billion -- would come in the form of increased pension levies on public-sector employees. That is effectively a pay cut for those workers. Mr. Cowen also pressed forward with tax increases for higher-income workers and second-home owners.

Though countries around the globe are unwrapping stimulus plans, Ireland is in different straits. Tumbling house prices are gutting property-tax receipts, and Ireland is facing a widening budget gap that threatens its AAA sovereign credit rating and limits its ability to simply borrow more to ride out the recession.

Polish Finance Minister Jacek Rostowski said his country's austerity measures are essential to keep the central-government deficit at its planned level of 18.2 billion zlotys in 2009. Without the steps, he said, Poland risks undermining its financial credibility at a moment when the U.S. and Western European countries are flooding the market with sovereign debt.

Mr. Cowen said Ireland's cuts this year must be followed by €4 billion more in cuts in 2010 and 2011; €3.5 billion in 2012; and €3 billion in 2013.

The Irish premier pushed the measures forward after talks on pay with trade unions ended without success. He said that didn't signal that the overall process had failed, and that the government would continue to engage the unions.

The latest steps come on top of measures in Ireland's 2009 budget, announced in October, that will raise a separate €2 billion, or 1% of gross domestic product, in additional taxation, Mr. Cowen said.

The opposition criticized the cuts. Merely cutting spending will set the country "on a downward spiral that will make the situation even worse," said Labour Party leader Eamon Gilmore.

Ireland was the first euro zone economy to fall into recession last year. GDP contracted in the first and second quarters after a decade-long period of unprecedented economic growth fueled by a booming construction sector and investment by multinationals. In September, Ireland took steps to guarantee nearly its entire banking system, and in December it added a package to bolster banks' balance sheets.

Irish public finances have continued to deteriorate rapidly. Government figures on Tuesday showed a January budget deficit of €747 million versus a surplus of €630 million in January 2008 because of the housing-market crash and weakening consumer confidence.

Those figures provide "further evidence that the deepening recession continues to savage the public finances," said Bloxham Stockbrokers' chief economist, Alan McQuaid. "The good news is that the government has to some degree taken the bull by the horns, implementing public-expenditure savings without the full agreement of the public-sector unions," he added. "The bad news is that the government would still like to keep the social partners on board."

Mr. Rostowski said 10 billion zlotys of the trims to Poland's budget would come from cuts in central government spending, while 9.7 billion zlotys in savings would come from revamping financing of infrastructure projects.

—David McQuaid in Warsaw contributed to this article.

Thursday, 5 February 2009

Talking Property...

The blame game for the boom is well underway, says Isabel Morton...

LAST SEPTEMBER, I rather boldly suggested that we might all consider suing the banks. I am now interested to hear that it is to come to pass. Investors are planning to sue Anglo Irish Bank.

Given what we now know about the specific circumstances of that particular bank, it is understandable that investors, who lost a lot of money, are now somewhat sore about it all.

However, the idea that property developers are also considering suing Anglo Irish Bank is not quite as easy to fathom, particularly as they are suing based on the grounds that the bank behaved negligently by breaching the guidelines of sensible lending practices.

My initial reaction to this news was: that the property developers have some nerve; and that they hadn’t a hope in hell of succeeding.

But, having thought about the basis of their argument, I could see that the same argument might actually be applicable to many of the loans and mortgages obtained by the rest of us mere mortals over the past decade or so.

Of those who were lucky enough (now debatable) to get a bank loan to buy property, many received a 100 per cent mortgage plus (in many cases) extra financing to cover the stamp duty, legal expenses and funds for renovating or furnishing the property.

Others were encouraged by the Government to invest in Section 23 and Section 50 properties and other enticing schemes, which enabled the investor to get tax relief on their rental income. It was, according to the Government, a win/win situation for all involved. And indeed, for a while it was.

The banks made big bucks selling loans and mortgages to the developers, builders and of course, the property buying public. The Government, in turn, raked in fortunes on stamp duty, VAT and income tax. And because the world was skipping along gaily and property prices were increasing annually, the developers were able to sell on their properties at a profit, pay back their bank loans and gear up again for future projects.

Needless to say, nobody was complaining at the time, with the exception of the first-time buyers whose attempts to get on the first rung of the property ladder became like chasing a mirage. Every time they thought they were nearly there, it would disappear from before their eyes.

The banks made sure to do their own bank valuations (for which the prospective borrower invariably had to pay) and they supposedly applied the rigours of their “stress tests” to ensure that the borrower would be able to service their mortgage.

And the borrowers were delighted that the bank had confidence in them. After all, the banks were professionals and they were giving out loans and mortgages to people all day, every day – so they should know. And, if they had faith in you and/or your project and were prepared to put their money where their mouth was, you in turn, had faith in them.

What we all forgot was that banks are just like shops, except that they sell money. And bankers are effectively salespeople: the more they sell, the higher the bonus.

Almost overnight it seemed that everyone who could borrowed to invest in property. Not just the mega rich, but the ordinary working person who felt that property would provide them with an income for their retirement, provide for them in their old age and would be an investment for their children’s future.

It was in the banker’s interest to make it easier for us to borrow money, and equally it was in the Government’s interest not to attempt to stem the flow of tax and stamp duty into their coffers. So it was in both their interests to stay silent, play the game and ignore the potential repercussions.

But in the same way as retailers and service providers are subject to the rules and regulation of the National Consumer Agency and the ombudsman, financial institutions are subject to regulations and are overseen by the financial regulator.

Did the banks break their own set of rules and guidelines?

Did the financial regulator ensure that the guidelines were being adhered to?

If the answer to either or both of these questions is in doubt, then the next step is legal action.

Borrowers could sue the banks for lending them more that the recommended guidelines.

The banks would then sue the financial regulator for failing to regulate.

The financial regulator would in turn sue the Government for failing to ensure that they, the financial regulators, were actually regulating. And the Government would then increase our taxes to cover the costs.

Simple really and perhaps not half as far fetched as it might initially appear.

Report by Isabel Morton - Irish Times.

Monday, 2 February 2009

Dublin Property Market Worst In Europe...

Dublin Property Market Draws Low Marks for European Investment...

Feb. 2 (Bloomberg) -- Dublin, capital of the first euro-region country to report an economic recession, offers the worst real estate investment prospects among Europe’s major urban markets, Pricewaterhouse Coopers LLP said.

The Irish capital ranked last among 27 European cities judged for their property investment and development opportunities, according to the annual survey of 520 real estate professionals. Dublin also came second to last, after Moscow, as the riskiest market.

Irish commercial real estate values declined almost 24 percent in the 12 months ended Sept. 30, according to London- based researcher Investment Property Databank. The collapse of the housing market and restricted lending by banks contributed to Ireland’s slower economic growth, which in turn curtailed demand for commercial space.

The Irish “were the longest at the party and now have the biggest hangover,” John Forbes, PwC’s head of real estate, said at a presentation in London. “We’re moving from a capital market crisis to an occupier crisis.”

Values of shops, offices and warehouses in the 27 European cities Pricewaterhouse Coopers surveyed are all expected to fall this year as economies slow or enter recession, making it harder for tenants to pay rent. Already commercial tenant defaults are rising, Forbes said.

Values are likely to fall the least in Munich, according to the survey respondents.

U.K. Has Further to Fall

Consensus showed the U.K. commercial real estate market will fall 50 percent from its peak in June 2007, meaning prices may have as much as 20 percent further to decline this year before reaching the bottom towards the end of 2009, Forbes said.

The shortage of property financing will be a continued challenge, according to the survey.

Banks are rationing credit as they rebuild balance sheets battered by losses or writedowns totaling $1.06 trillion to date. That will limit the number of large transactions and restrict loans even to borrowers with proven investment records and good relationships with their lenders, the survey found.

Banks are unlikely to call loans “because the alternative is big write-downs,” Forbes said.

The slide in property values is also deterring investors who have cash, Forbes said. Lower oil prices and the slump in capital markets mean sovereign wealth funds have less money to invest. Qatar and Kuwait have stepped in to prop up local banks and stock markets.

Institutional investors such as pension funds, endowments and life insurers are also unlikely to increase their real estate allocations, Forbes said.

“Not everybody is going to get through the next year,” he said. Investors who bought real estate near its peak and relied on debt to make purchases are going to be “struggling for survival.”

Pricewaterhouse Coopers compiled the study for the Urban Land Institute by surveying brokers and analysts from the continent’s largest property investors, including Deutsche Bank AG’s RREEF, ING Real Estate and Morgan Stanley.

Report by Simon Packard - Bloomberg.

Sunday, 1 February 2009

Get Real!

The new property reality...

Like many things these days, the chances of selling a property seems to boil down to one factor: putting a realistic price tag on it and then being willing to take less than that.
For estate agents around the country the last six months have been their worst nightmare. The younger generation of property professionals has never encountered the frustrations of the kind of market in which they are now operating.

In the last six months there has been a growing body of buyers who are ready with mortgage approval or cash in the bank. These potential buyers have been tentatively viewing properties, and some even made offers. Then the daily diet of bad news increased and they evaporated back to the arms of the rental market - or their parents spare rooms - to sit it out.

So what properties have sold in the last six months, the toughest months in a generation? The answer seems to be those that are 30 to 40 per cent cheaper than houses were on the same streets and roads during the peak of 2006.

‘‘The only thing moving them are extremely realistic asking prices,” said Ronan O’Hara, a director at Savills.

‘‘That means a 30 per cent reduction on prices since January last year, and buyers certainly shouldn’t be shy in asking would the vendor take less. In some cases they will, and the reason is that they will be getting the same value in whatever they’re buying further down the line.”

On the good news side of the balance sheet, first-time buyers and ordinary buyers now have increased mortgage interest relief, less stamp duty to pay and steadily dropping mortgage rates. ‘You’ve got people who have been looking for a year, they’re sick of it at this stage - and they just want to get on with their lives,” said O’Hara.

These are the buyers who he believes will buy a property in the coming weeks and months despite predictions of further price drops, ‘‘as long as it’s well within their financial comfort zone.

‘‘You have a situation where big three or four-bedroom semis in places like Glenegeary with 80-foot back gardens which would have been selling for nearly €1 million at the peak, are now something in the order of €675,000 to €700,000,” he said. Houses in some south Dublin estates are now available for the price of apartments, and the price drops at the top end of the market have been even steeper, he added.

In recent months Savills sold 25 Idrone Terrace in Blackrock, a 288 square metre four-bed Regency terraced house which was on the market for €2.8 million but which fetched less. The firm also sold Ballycrane, a detached Victorian 139 square metre three-bed redbrick on Castlepark Road in Sandycove, which was asking €995,000.

In better times both of these properties would have been auction sales that may have sold for more than their guide price. Instead buyers bought in a calm and unhurried manner, where all the cards were stacked in their favour.

According to Michael Grehan, managing director of Sherry FitzGerald, there are three categories of properties where sales are happening. The first are those properties close to Dublin city centre, particularly the apartment market around the docklands and the IFSC.

‘‘The numerous incentives introduced over the last year and a half, including increased mortgage interest relief and reduced stamp duty, encouraged first time buyers into the market.

The increased affordability of smart apartments in this location was improved by the reduced asking prices of many of the properties for sale,” he said. Sherry FitzGerald sold a two-bed apartment at the Gallery Quay development, which was originally on the market at an asking price of €575,000.

The second sector Grehan identifies is ‘‘established, more mature suburbs, particularly in locations with good transport routes like the Dart or Luas - and even better if they are located close to the coast’’.

Like Savills, Sherry FitzGerald has seen ‘‘realistically priced’’ three and four-bed family homes with good gardens in Dalkey, Glenageary, Clontarf and Blackrock sell well. Price drops meant that buyers were able once again to afford to buy in an area where they grew up, and the buyers were mostly people trading up from first homes.

In this segment Sherry FitzGerald sold a four-bed semi on Glenabbey Road in Mount Merrion which had been on the market at an asking price of €1.035 million.

The third category, the top end of the Dublin market has seen the steepest price drops, Grehan believes. ‘‘In fact we have evidence that in some instances the fall has been as high as 50 per cent from peak to current levels,” he said.

‘‘Some of the successful sales over the last couple of months included properties that ended up selling for up to and over €1million below their initial asking price.” In recent months the firm sold 83 Upper Leeson Street, which was originally asking €2.5 million.

Grehan believes there is something of a pent-up demand among buyers who have been sitting it out waiting for prices to get to the bottom of the curve. ‘‘We were pleased with the level of offers and the 20 sale agreeds that occurred in our first week trading last month,” he said.

But he believes that more transparency, and agents being allowed to disclose selling prices, would show buyers that the significant price drops for which they are waiting have occurred. All three properties mentioned above sold for significantly less than their original asking price.

The managing director of Gunne estate agents Declan Cassidy has also seen buyers making the decision to go with an offer once they see a property significantly cheaper than similar ones were two years ago.

‘‘I’ve been in the situation where people say to me, ’Declan, why should I buy this house?’. I can point across the road and tell them ‘that house sold at the height of the market, in slightly better condition than this one, for €850,000.And this one is asking €550,000’.”

Many of Gunne’s buyers in the last six months had moved into rented apartments and houses, or back in with parents waiting to see how the market was going. ‘‘But then your life is on hold,” said Cassidy.

‘‘The advantage of not waiting is viewing the property as a home rather than an investment, and buying in much calmer conditions than have prevailed in the last decade.

Buyers see a house that they can get for under the asking price and not be in a bidding war with someone else.”

Cassidy estimates that up to 40 per cent of the firm’s buyers in the last six months have been first-time purchasers. ‘‘They are people who have heard all the dire predictions but want to get into a home and live in it without worrying about its value in the short term,” he said.

Sales have been good, he says, for northside Dublin properties between East Wall and Clontarf. One property, 44 Mount Prospect Grove in Clontarf, went on the market at the end of August and the sale closed before Christmas. The asking price was €595,000 and the three-bed semi needed work.

Another property, 2 St Mary’s Terrace in East Wall, went on the market in September at €225,000.The one to two bed terraced cottage was also in need of modernisation, Cassidy said.

Reoprt by Catherine Cleary - Sunday Business Post.