Judging by the number of comments on the property page of the Sunday Tribune online, nothing gets readers reaching for the keyboard quite like that most contentious of topics – house prices. Then, to really get their goat, along came last week's headline in the Irish Times referring to a report on the European housing market by Standard and Poor claiming 'Irish property' may be undervalued'. Sellers would have been momentarily uplifted, others aghast, at the news that our ongoing market correction "seems overdone". That would have been until they read further and discovered that the agency didn't rule out a further decline in prices.
In analysis quoted on Daft.ie back in April, Brian Lucey, professor of finance at TCD School of Business, echoed UCD's Morgan Kelly's prediction that a fall of 50% from the peak of mid-2006 was necessary before any sign of an upturn. Lucey established that the market therefore faces another 18 months of falling prices.
With an expectation that there is still some way to go, what is actually selling? In the absence of facts on actual prices, Daft.ie is tracking activity on sales. And according to economist Ronan Lyons, those figures are pretty good. "We looked at how many properties were posted for January, and then tracked how many were 'sale agreed' or were taken off the site by April. About one in three within that period were 'sale agreed'."
As to the suggestion that we face another 18 months of falling prices, Lyons says Brian Lucey is using that statistic as a rule of thumb based on property crashes elsewhere. "Prices fall quickly at the start of a downturn, but then the pace of the fall gradually slows. I'm certainly not saying we are anywhere near the end that decline yet, but if you look at certain areas of Dublin, prices have already fallen back by 50% from the peak – particularly if you bear in mind that selling prices are invariably lower than asking prices."
Paul O'Connor of Myhat.ie, a property site that can summarise trends of sales and price listings in certain areas, says those hoping to sell should get used to the fact that the falling market will continue for some time. "Rather than focusing on how long the decline will last, they should decide whether or not to sell."
So far, prices are down an average of 6%, while we are heading for a total drop this year of over 14% (compared to about 18% in 2009). The average asking price for a three-bed semi in Dublin is now close to €342,000, says O'Connor.
"We are still seeing a 1% to 2% fall monthly, and while unemployment increases, the number of buyers decreases. But if you look at certain areas, you may see that prices have stabilised to a degree – actually our survey of four-bed semis in south Dublin shows a slight increase in prices. And that's because there is a steady demand for those properties. During the boom, there was almost a desperation to get on the ladder, so first-time buyers bought in the outlying suburbs and commuter belt. The fact that there are so many of these properties now for sale will keep drawing that average price statistic down, but the average for Dublin won't accurately reflect every area."
"We had almost 25 instructions in May. It all comes down to price of course. We would have multiple bidding now on one property, and what is selling is property in the €200,000-€300,000 bracket. One of the nicest homes we sold recently, off the New Cabra Road, had eight bidders chasing it. The property was on the market for €295,000. There was a lot of interest because it was in walk-in condition and realistically priced. It sold for €300,000."
Doherty estimates that the drop from peak in the area is now around 40%. He has also sold a couple of properties over €400,000 to first-time buyers – surprising, surely, as they must have needed huge mortgages at a time when banks are holding tight on financing? "These would be couples who held back during the boom and have been renting over five years or so. They now have the opportunity to buy the house they want at the right price."
But there was bad news for first-time buyers last week with the announcement from EBS that it has restricted mortgage approval even further. The lender also says it will no longer provide mortgages for apartments in rural towns. On the other hand, granting loans to those who would struggle to make repayments is unfair in the long run – and it's one of the reasons the market crashed in the first place.
Elsewhere, there has been a ripple of activity in the auction market, with two results for properties in south Co Dublin and Wicklow achieving in excess of the guide. In the case of the second property, a large bungalow in The Burnaby which fetched €910,000, the AMV of €650,000 might have brought about a degree of feverish bidding not seen for some time.
Back at the lower end, Doherty says the panic of old is no longer there among the buyers he deals with. "People do a lot of research now before they buy. They are very clued-in to asking prices in the same area, what is selling and what is not. Inevitably, that means it's taking much longer to sell a property."
Which is as it should be for what is still the most expensive (falling prices or not) purchase anyone makes in a lifetime.
Report by Valerie Shanley - Tribune Property.