Property & Mortgages

Wednesday 20 August 2014

Some who sold with a view to trading up have been left high and dry

Mark Keenan

Published 26/06/2014 | 02:30

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THE big question always being asked in the property market is whether or not it's a good time to buy a house right now?

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But for every buyer there's a vendor – and given the latest CSO figures, it's actually a very pertinent time to ask ourselves the opposite question – is it a good time to sell?

In what has essentially become a three-tier Irish property market (Dublin, Dublin commuter counties, Galway city and Cork city and then everywhere else) – the answer depends on where you live and what your personal circumstances are.

But if you're selling in the capital and you plan to buy another property, then selling up (to buy again) has become a particularly hazardous activity.

This is because, as the CSO figures show, property inflation is now running at almost 2pc – or more than €1,000 per week on an average home. And while you'll have no trouble at all selling your home in the capital, you'll have some serious bother acquiring your next property.

Therefore, the biggest nightmare a vendor can face is being homeless again six months later – having watched your buying power diminish at pace in that period and watched the quality of the home you can afford shrinking by the day.

So many who sold last year in the hope of trading up today find themselves still homeless six months on and now unable to afford the better house type they wanted to move into. By now they might even be lucky to buy a home akin to the standard of the one they sold.

The fear of being left "high and dry" in the capital has now in itself become a self perpetuating cause of property price inflation.

The irony is that if you can trade up, it is actually a good idea. As property prices rise over time, the "gaps" between steps on the property ladder widen and become more expensive to cross. So while the difference between a three-bed and four-bed might be €60,000 today, next year it might be €100,000.

Scarcity in the capital is the biggest cause of inflation there and there is no chance of that being rectified any time soon. Even if emergency measures were taken it still takes a year to get a scheme through planning, on site and then completed.

Government has done little to alleviate the problem, leading some to believe that Michael Noonan et al actually want prices to continue rising apace. The local authorities continue to levy house building out of existence in the capital while also insisting on home types that no one wants to buy. So no change there and none likely to take place soon. It means Dublin inflation is likely to continue.

And if you live in one of those rural areas where it's been impossible to sell a property for nearly six years, it would also be a good time to sell if you plan to trade up – but a bad decision if you don't plan to buy another property, as you'll be selling on the bottom.

The next two years are when pent-up demand will take most effect in areas which have been hitherto flat for prices for many years. Therefore buying now for those who want to trade up will enable them to do so more cheaply and when the trading up gap between your current home and a bigger one will be the smallest in perhaps a generation.

Barring an unexpected upset, property prices across the country are likely to continue in an upwards direction for some years to come.

The problem, of course is that if no one sells, the shortage only gets worse and so on it goes.

Irish Independent

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