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Thursday, 5 January 2012

Prices 'Down 60%-Plus'

MANY PEOPLE selling their homes are still looking for prices higher than buyers are likely to pay – and the difference between asking and selling prices can be as much as 20 per cent.

For while property website surveys published this week show residential property price falls since the peak of the property boom of between 43 and 52 per cent nationally, estate agents say that actual selling prices are now down by around 60 per cent and more.

The lack of specific information about property sales prices means that buyers and sellers are still largely in the dark about what is actually happening in the property market.

This should change in June, when a property price register detailing recent sales, with addresses and prices, is published by the Property Services Regulatory Authority (PSRA).

The figures published by property websites MyHome and Daft are all based on asking prices.

Meanwhile, the CSO’s most recent residential property price index, published in late December, showed prices paid for property down by 52 per cent from the peak – but its figures are based on mortgage drawdowns and exclude cash transactions, which many agents now say account for one-third and more of their sales.

Sherry FitzGerald puts the fall in selling prices from the peak in 2006 at 62.4 per cent in Dublin, and at 59.8 per cent nationally. Douglas Newman Good’s CEO Keith Lowe puts the fall in greater Dublin at 65 per cent, while Edward Hanafin, a director with Lisney in Cork, says that prices there are off the peak by about 50-60 per cent “and more for apartments”.

Given the continued uncertainty of the market, and the probability that prices will continue to fall in 2012, what should people who still want to buy – or sell– this year do? At what level should buyers pitch an offer, and how can vendors put a realistic price on their home, given the uncertainty?

Sherry FitzGerald director Simon Ensor says that a further fall in prices of 5 to 10 per cent is a definite possibility, so if you’re making an offer on a property, you could pitch it by at least that much below the asking price. As always, of course, it depends on the kind and location of the property.

Ronan O’Driscoll, director of residential at Savills, says: “If you’re looking at an apartment in a rural location you could make a ridiculously lowball offer, and perhaps get a bargain, because there’s such a minute market for them.

“However, there’s little point bidding €150,000 for a three/four-bed semi in an established suburb of Dublin, Cork or Galway which has dropped in price from €700,000 to €350,000 since the peak.”

This is because the kind of property most in demand at the moment, according to most agents, is the solid three/four-bed suburban semi in areas not too far from city centres.

“Further depreciation of good family homes is less likely,” says Ensor, “because the buyer who might have bought a two-bed apartment will now go straight for the three-bed semi.”

Ensor says that there is more happening in the market than people think. “Some people who can buy are doing so. They just want to settle down, knowing they’ll be there for 25 years.”

MyHome managing director Angela Keegan agrees that prices for traditional three-bed semis are likely to stabilise first. But for sellers wondering how to price their property for sale “local information is absolutely critical” she says.

“You need to talk to people who have bought or sold in your area recently, and talk to local agents.”

Ronan O’Driscoll says that buyers who have a house to sell shouldn’t bother making an offer on another property, even if their home is in a good location: “Sell the house first and have a pile of money ready to pounce.”

Frank Conway of Moneycoach points out that sellers – many caught in negative equity – are seeking economic prices that will pay off their mortgage and advises sellers to ask for more than they might get, with a view to bartering.

He, like all pundits, agrees that lack of confidence and lack of credit are the main factors keeping the market subdued, and believes it will stay that way in 2012 until this changes.

Measures in last month’s budget – changes to mortgage interest relief, the capital gains tax incentive, continued low rate of stamp duty – are seen as possible positives for the property market for 2012. The effect of the planned property tax is as yet unknown.

But continued price falls are not necessarily bad, says Daft economist Ronan Lyons in the Daft price survey report. “ . . if the size of the correction in house prices is determined by fundamental factors, then it is better for the prices to race to the finishing line than crawl there”.

Report by FRANCES O'ROURKE - Irish Times

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