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Saturday, 17 December 2016

Top property sales 2016 – who bought and sold...

The year saw a shift from D4 to D6 while the country market slowed on the previous year...

DUBLIN...

Dublin 6 dominated top-end sales this year and, in particular, Dartry. Whereas in other years coastal south Co Dublin and Shrewsbury and Ailesbury Roads have dominated, Dublin 6 and the area around Temple Road have become hot property.

Top of the list was the purchase in May of Alston at 19 Temple Road for a whopping €10.225 million when former Paddy Power boss Patrick Kennedy traded up from his home on nearby Palmerston Road. In a quiet off-market deal, the Victorian property, on one acre, was sold by barrister Vincent Foley and his wife, Helen, who have lived there since the late 1980s.

Around the corner at 5 Temple Gardens, €6.5 million exchanged hands when the detached redbrick house on a third of an acre owned by the late barrister and former attorney general, Rory Brady, sold in another off-market deal.

Not long after Subiaco at 1 Temple Gardens sold for €5.85 million shortly after coming on the market. It’s believed that the buyers of both properties are Irish families planning to live there, however the Sherry FitzGerald broker facilitating the deals, Geralyn Byrne, refused to comment.

And if three of the top five sales weren’t enough for Byrne – aka the “Queen of Dublin 6” – she was also behind the sales of Helen Dillon’s famed Georgian home and garden at 45 Sandford Terrace, Ranelagh for €4.5 million; 1 Richview Park in Dartry for €3.075million and St Philip’s at 42F Palmerston Road for €3 million. Not a bad year’s work and presumably a very merry Christmas awaits Byrne.

Sherry Fitz completed a clean sweep of the top five Dublin sales when its other star agent, Simon Ensor, brokered the sales of Beulah in Dalkey for €6 million and 51 Ailesbury Road for €5.9 million. Beulah, a fine 465sq m (5,010sq ft) Victorian, on 1.7 acres, was the family home of the late Finn O’Sullivan, founder of transport and logistics firm Irish Express Cargo.

 The sale of 51 Ailesbury Road for €5.9 million only closed recently and its buyer remains something of a mystery as the property was bought in trust. Even the vendors don’t know their identity. Certainly one to watch when the removal trucks roll up.


COUNTRY...

The seeming never ending on again, off again sale of the late Tony Ryan’s former Lyons Demesne estate in Kildare came to a conclusion when it appeared on the Property Price Register as sold for €12 million in October. Factoring in the 600 acres on which the lavish Georgian mansion stands, the total sum paid is closer to €18 million. The property had been on the market for €25 million with Knight Frank when it was withdrawn in 2014 just as it looked like it was about to be sold close to the asking. It seems the ultimate buyer emerged from within the Ryan family, with Shane Ryan understood to have bought out the other members’ share, further bolstering his substantial prime property portfolio.

Report from Irish Times

Where are the incentives for the negative equity generation?

Looser Central Bank rules, generous Help to Buy grants for first-time buyers - but trader uppers are being left out in the cold...

They paid too much for their home during the boom; their wages are stagnant; their mortgage is still underwater; they may have a cheap tracker but have ended up renting their own home and leasing another family friendly property at a hefty rent themselves. They’re the negative equity generation and now they want to trade up – but any help form the Government is going towards first-time buyers and not them. Why?

It’s a question many people of a certain age may be asking themselves following last month’s revisions to the Central Bank’s mortgage rules. For first-time buyers, the requirement to have a deposit of just 10 per cent – or as low as 5 per cent on a new build thanks to the help-to-buy scheme – means getting the funds together to buy a first property, particularly in Dublin, has become a good deal easier.

But what about second-time buyers looking to trade up? What has been done for them?
An uneven playing field

Until October, buying a house was a difficult endeavour for all; yes, it was easier perhaps, for first-time buyers, particularly outside of Dublin, as they only needed a 10 per cent deposit on a purchase price of up to €220,000, but the introduction of the help-to-buy scheme in October, plus the relaxation of the 20 per cent rule, has been a double bonus for first-time buyers.

In effect it means that a first-time buyer will now only need to come up with a deposit of just €12,500 themselves (thanks to the 5 per cent via a rebate of income tax paid from the help-to-buy scheme) when buying a new property valued at €250,000 – down from €28,000 previously.
But what about those trading up?

Well, someone chasing this same property valued at €250,000, who already owns a house themselves, will only get a mortgage of €200,000 – 80 per cent of the property’s value – so they will have to come up with €50,000 in cash to buy. So it is just €12,500 for one cohort and €50,000 for the other – is this fair?

Joey Sheahan, head of credit with MyMortgages.ie, doesn’t think so, and he argues that those trading up should “at least be put on a level paying pitch” with first-time buyers.

“A second-time buyer in a lot of cases may have bought an apartment or small house back in the boom times when prices were far higher and may now be in negative equity, or may have outgrown their current property due to an expanding family. Some of those people would argue that they require a preferential deposit more than a first-time buyer,” says Sheahan, “In a lot of ways it’s the second-time buyer that needs the break more than the first-time buyer”.

He’s not alone. Eamonn Foley, a director with Sherry Fitzgerald, argues that help should also be forthcoming for those looking to trade up, noting that many who bought during the boom have since become “an unwilling landlord – and an unwilling tenant as well”.

“It’s something the Government should be looking at in terms of helping these people along the way,” he says.
Central Bank approach

The Central Bank has opted to differentiate between first-time buyers and those trading up on the grounds that allowing first-time buyers to purchase a house with a loan-to-value (LTV) of 90 per cent is a more prudent approach, as the default risk of a first-time buyer is lower than that for someone trading up.

“Evidence confirms that the differential treatment of first-time buyers and ‘second and subsequent buyers’ remains appropriate with the default risk of first-time buyers lower than that for second and subsequent buyers, and this result holds across all property values,” the Central Bank says.

But those who have clung onto their properties during the crash may argue that this is a harsh assessment.

Others suggest that first-time buyers should be incentivised, because they could well be spending an inordinate amount of their income on rent, while the trader upper may have a very manageable tracker mortgage on their property. Moreover, the trader-upper already has had their chance of getting on the property ladder (and possibly a first-time buyer grant too, before it was abolished in 2002).

Another point to consider is that the 20 per cent deposit is not an extra cost the trader-upper must face; it’s actually building up additional equity in their home, given that they’re borrowing just 80 per cent compared with the first-time buyer’s 90 per cent.

The problem perhaps, is that a generation of would-be trader-uppers in their late-30s and 40s bought at a period of peak prices – and there is a debate about whether this should be recognised in how they are treated today.
Underwater mortgages

Historically, second-time buyers have been able to use equity in their home to fund a deposit on the purchase of their next home. But for a large cohort of buyers who purchased in the years leading up to the crash, this is simply not possible.

Yes, the number in negative equity continues to slide, thanks to a combination of people paying down their loans and rising property prices. But in some cases prices are still 30 per cent off the peak, and some 15 per cent of homeowner mortgage loans – a significant chunk – were still in negative equity at the end of 2015, albeit down from 20 per cent on the previous year.

Since the introduction of the Central Bank mortgage lending rules in February 2015, borrowers in negative equity have been exempt from the requirement to meet the loan-to-value element, it is not always that easy for people in this situation to obtain a mortgage at all. According to figures from the Central Bank, only 240 negative equity loans, worth €37 million, were drawn down in the first six months of this year.

A negative equity mortgage means that someone embarking on buying a new home and selling their existing property, could, in effect, borrow on a LTV even above 100 per cent given that they are carrying debt with them from their current home. But they also have to comply with the mortgage multiple rules, of 3.5 times their income – a difficult task if they have to add on another €30,000-€40,000 in debt from their current property.
In equity . . . but not enough of it

And even if those trading up aren’t in negative equity, it may be the case that they won’t have enough equity in their current property to finance the purchase of a new home. If they bought their property in 2006/07, particularly if it was a house rather than an apartment, their mortgage may no longer be underwater. But selling their house is unlikely to give them a cash injection either, as they may just break even on the deal, leaving them to find as much as €80,000 for a deposit on a €400,000 sale price.
Selling first to get the deposit together

Another challenge for second-time buyers comes in the form of getting the property chain to work for them. Some banks will want you to sell your home before they will approve another mortgage for you. Even if they do approve it, you may still have to wait until your own home is sold before you can successfully complete the purchase of your new property, as you’ll need the funds for a deposit on the new property.

“It puts them in a far weaker position than someone who is fully mortgage approved,” notes Sheahan,

In a competitive bidding situation, a trader upper may be more constrained in making an offer, as every €1,000 they offer will mean an extra €200 towards the deposit – money they will have to have readily available to complete the deal.

“It puts them at a disadvantage,” agrees Foley.

Another issue is that a typical trading up home may be a 1970s/1980s semi-detached property; but these homes may need to be upgraded. Scrambling for a 20 per cent deposit may not leave much, if anything, left over for an upgrade.

In the absence of bridging finance, selling and buying a home as part of a property chain has also become next to impossible.

“It’s extremely difficult,” says Foley.

This means that, if you want to trade up, you may have to sell and move into a rental property while you search for a new home – and finding a short-term property in the current rental crisis is either impossible or exorbitant.

“What we’d often try to do is when someone has gone ‘sale agreed’ and has the contract out on their property, we’d say now is the time to try and find the next house. Where we possibly can, we dovetail the two to come together,” says Foley.
New allowances

But if the housing market incentives are skewed towards the first-time buyer at present, remember that trader uppers also got something in last month’s changes to the rules.

At present, banks are allowed lend more than 80 per cent to 15 per cent of applicants, which means that this cohort could need a deposit of as little as 10 per cent, whether they are buying for the first or second time.

Fast forward to January, however, and the Central Bank has amended its rule on allowances to allow banks to offer LTVs of more than 80 per cent to 20 per cent of second-time buyers. This means that one in five of those trading up will not need a 20 per cent deposit. This is a significant improvement on the current arrangement, which applies to both first-time buyers and those trading up.

But if you want to be one of these one in five, what do you have to do? A good place to start, perhaps, is examining who has already received such exemptions.

According to research from the Central Bank, allowances for trader uppers are typically associated with younger couples (average age of 39 compared to 42 for those without an allowance), who have higher incomes, and a larger loan size.

Sheehan notes that banks are tending to give exceptions to people with ample savings, in professional, pensionable jobs.

Report from Irish Times

Tantrum from landlords ignores need for reforms in rental sector

It is hard to know whether the threat by landlords to withdraw from State rental schemes and pass on a raft of charges to tenants is posturing, or a reality the Government will have to face.

Housing Minister Simon Coveney's rent control measures outlined this week, which are expected to become law before Christmas, have certainly raised the hackles of the Irish Property Owners Association (IPOA), which has 5,000 members across the State.

It said some members have threatened to withdraw from State-sponsored rental schemes, despite in many cases signing legally binding leases with local authorities. It has also proposed charging a payment to collect keys, imposing service charges and registration fees, obliging tenants to pay for parking and documents, and even asking tenants to contribute towards the Local Property Tax - which the Revenue Commissioners have said must be paid by owners, and not those renting.

The IPOA's claims that its members are "hard-pressed" and "victims of the newest onslaught on the sector" ring hollow. As far back as 2009, it was saying the same thing, yet the number of people renting and the amount being charged has since increased. The fact that tenants living in almost 150 locations across the State have experienced double-digit hikes in recent years means there is little or no sympathy for landlords. But the IPOA appears to be of the peculiar view that throwing a tantrum is the best course of action to stop these measures from becoming law.

But here's a wake-up call. Fianna Fáil and Fine Gael have agreed the measures, so they are coming into force. Threatening to impose a raft of additional charges as a means to circumvent the rules is counterproductive.

While many TDs are landlords - including Housing Minister Simon Coveney, Foreign Affairs Minister Charlie Flanagan, Government chief whip Regina Doherty, as well as John McGuinness and Timmy Dooley from Fianna Fáil - to say our politicians are in thrall to landlords is a stretch. If so, why introduce the concept of rent pressure zones and effectively cap rents for the next three years?

There's little doubt that the rental market as it currently exists is dysfunctional, serving neither the landlord nor tenant well, and changes are needed. There is no security of tenure, and landlords are not treated fairly by the taxation system - a point acknowledged in the Government's 'Strategy for the Rental Sector'. There are not enough inspections of rented properties, and landlords who breach the rules are rarely punished.

But this cohort are in the minority. Most landlords are far removed from the greedy money grabbers they are often branded, but the actions of those who seek to increase rents at the first available opportunity paint them all in a bad light.

The majority own one, two or three properties, and many are servicing hefty mortgages. Many are accidental landlords, stuck with a house or apartment which their family has grown out of but which they cannot sell because it is in negative equity. Others have been left high and dry by tenants who refuse to pay but won't leave the property. And there's no doubt that many renting are paying less than the market rates, because their landlord is happy to keep them in the property. Some have genuine concerns about the cap being introduced, and a major bone of contention is the 4pc limit on all tenancies, which will leave many out of pocket.

"I didn't realise the extent of the controls which would be assigned to new lets too," said Fintan McNamara (inset), from the Residential Landlords Association.

"If you have a tenant where you didn't put up the rents and they paid below-market rents, that rent applies to new lets too. It means landlords will have to charge 4pc every year just to keep up. The ones charging large rents will be rewarded.

"It wouldn't be so bad if it only applied to existing tenancies. It's very rigid. If they don't relax on that I could see a problem."

The measures will be subject to further Dáil debate next week, but major changes are unlikely.

While the focus has been on the imposition of the rental caps in Dublin and Cork, to be followed by the other cities and commuter towns early in the new year, there's a raft of other proposals in the strategy which must be implemented to improve the lot of landlords and tenants alike.

But the rental strategy only forms one part of the overall package of measures needed to return rents to sustainable levels. The basic problem is one of supply. There are not enough houses and apartments being built to keep pace with demand from those hoping to purchase or rent a home.

So far this year, fewer than 12,000 have been completed - not even half the number needed to meet demand. A more telling figure is the number of properties on which work has commenced. So far this year, that stands at fewer than 10,000.

Unless the other strands of 'Rebuilding Ireland' start to bear fruit, rent controls may end up being in place for longer than the three years envisaged. And that could pose a bigger headache for government than a tantrum from the landlord sector.

Report from Irish Independent