Dublin 1: New breed of buyer comes into complex D1 market
The Dublin 1 market is dominated by apartments, the investor’s favourite buy. So given the expiry of the capital gains tax relief at the end of 2014 and the flurry of purchasing from investors that it caused, it was likely that the north city centre would have a slow start to 2015.
“The level of activity in the first quarter was quite down, with far less demand from investors and the new Central Bank rules taking effect,” says Owen Reilly.
The second quarter saw a pick-up in the number of enquiries coming in, which in turn drove higher prices amidst tight supply. The price increases in turn encouraged vendors who had been holding off bringing their properties to the market.
It meant that investors reappeared mid-way through the year. “The summer brought a strong re-emergence of investors encouraged by a buoyant rental market,” says Reilly. “This new breed of investor is very focused on a strong yield going forward rather than on nabbing a bargain,” says Reilly who estimates that around 90pc of the purchasers in Dublin 1 in the second half of 2015 were investors, compared to about 60pc earlier in the year before the Central Bank regulations kicked in. The activity meant that supply was again very tight in the second half, and some price inflation resulted. The average selling time also dropped from nine weeks to four weeks in the third quarter.”
Apartment prices can vary hugely across the Dublin 1 postcode. “In Spencer Dock, a modern two-bed, two-bath could make €400,000, while an older two-bed in the IFSC might make only €300,000. In Mountjoy Square, a one-bed basement apartment went for €155,000 recently, while a more modern one-bed would cost €200,000.”
Reilly takes the view that most of the recovery in the market has now taken place in Dublin 1.
“The mortgage regulations were a real game-changer,” he says, “and this new set of circumstances is here to stay. The Central Bank has achieved its goal.” Reilly says growth for the last 12 months was 5pc and predicts the same again for the year ahead.
“New home starts are slow to get moving,” he says, “and there will be no new homes in the North Docks completed in 2016, although some may be sold off the plans. The fundamentals of the economy look good, but production from the builders won’t be enough to meet demand. We might see a slightly bigger percentage increase in the North Docklands, which is booming, as Paddy McKillen is building a new hotel at Castle Forbes and Yahoo and the Central Bank have or are moving into the area.
“I think growth of 5pc is great, as it indicates a healthy market, but not everyone agrees with me. We are still 25/30pc off peak boom prices. There are still people in negative equity who can’t trade up because they can’t fund the 20pc deposit, and that has an impact on supply. Similarly, first-time buyers are having to rent longer while they save a deposit.”
Another issue in Dublin 1, as in Dublin 2, is the huge amount of empty floors located above city shops which are not being used. It remains to be seen whether recently introduced incentives will cause these to be utilized for badly needed accommodation.
“I have not had clients coming to me saying I want to acquire a building and convert the upper floors. Traditional institutional investors have been treating upper floors like an afterthought, but I think new buyers going forward will want to make use of these spaces properly and sweat the asset. I think we’ll see redevelopment starting to happen in time, albeit very slowly.”