Tuesday 6 December 2016

Real deal: Back in time to 1916

The business of property with Philip Farrell

Philip Farrell

Published 27/03/2016 | 02:30

Castlehyde House, in Cork — which owner Michael Flatley has on the market at a breezy €20m with joint agents Knight Frank and Goffs — was once the seat of the Hyde family. Most famous of the line was Douglas Hyde, first President of Ireland and founder of the Gaelic League — the cultural organisation that laid a foundation for other nationalist bodies which played a part in 1916. In fact the first meeting of the seven signatories of the Proclamation to discuss a rising took place at the Gaelic League offices on Parnell Street in September 1914 Photo: Bernie Keating/Provision
Castlehyde House, in Cork — which owner Michael Flatley has on the market at a breezy €20m with joint agents Knight Frank and Goffs — was once the seat of the Hyde family. Most famous of the line was Douglas Hyde, first President of Ireland and founder of the Gaelic League — the cultural organisation that laid a foundation for other nationalist bodies which played a part in 1916. In fact the first meeting of the seven signatories of the Proclamation to discuss a rising took place at the Gaelic League offices on Parnell Street in September 1914 Photo: Bernie Keating/Provision

Given the weekend that's in it, I thought it was timely to take a look at the state of the property market 100 years ago. In the absence of a comment from an estate agent with first-hand experience, the most accurate figures available for both housing stock and land use are from the 1911 Census. Back then, the total number of housing units in Ireland stood at 579,000. Today, the total housing stock comes to just under 2m (up 350pc on 1911).

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Over the same period, the population increased from 3.1m to 4.6m, up just 46pc. Another striking change was the rush from the country to the town - the population of Leinster increased by 116pc, Munster by 20pc while Connaught and Ulster each experienced a decline of 11pc.

As Ireland became more urbanised, the agricultural sector also experienced huge changes. In 1916 there were 328,000 farms over 1 hectare (2.5 acres) in Ireland. Today this figure is 135,000, a drop of 60pc. The average farm size has gone from 14 hectares (35 acres) to 33 hectares (82.5 acres). The 'spud' accounted for 172,000 hectares of land use in 1916, but we seem to have abandoned our staple - the figure today is down 90pc.

With no formal records available, the Registry of Deeds is the only source of information from 1916, but in many cases it doesn't have records of actual prices achieved.

Our columnist, economist Ronan Lyons, produced a paper in 2015 in which he aimed to create a House Price Index for Dublin dating back to 1900. He deduced that nominal house prices rose by a factor of 450. According to estate agents Knight Frank, a city centre Georgian residence which would sell for in the region of €3m today, would have a rental value of €5,000 per month. Back in 1916, that same house would have sold for €6,666 - just over five weeks' rent according today's values. If this trend holds, the same house in 2116 will be worth €1.35 billion. Think of the deposit needed.

Nama's final portfolio sales

In the last week Nama have brought the bulk of the remaining assets under its control to market. They are divided into two separate portfolios, Project Emerald and Project Ruby. The former portfolio comprises of loans against 236 properties, 70pc in Ireland and the balance in Europe and made up of 80pc commercial and 20pc residential.

The Project Ruby loans are secured against 253 properties with the vast majority located in Ireland (97pc), of these 90pc are commercial and 10pc residential. The face value of the two portfolios is in the region of €4.7bn. However they will be sold for significantly less than this.

There will be considerable interest in the portfolios, primarily from the same funds who have secured the large loan books in Ireland already, including Apollo, Lone Star, Mars Capital, Goldman Sachs and Cerberus.

A small number of further portfolio sales are expected this year, including an Ulster Bank book mainly of small farms and businesses. However, it seems likely that 2016 will bring to a close the era of distressed portfolio sales as a result of the property crash.

These portfolios have required that they have an Irish base to manage and dispose of their large international. Some of the initial portfolio sales may lead to secondary sales as funds make a return on their investment and sell on parts of their portfolios. No doubt, this will lead to new players in our investment market. The fallout from the recession has ushered in a whole new industry in Ireland.

Getting your finances in shape before you buy

Let's assume you've made up your mind to buy. You know it's a stressful process, so how can you minimise the stress? Firstly, before you start actually looking at a potential 'nest', it's important to source finance. Apart from supply issues, the other major stumbling block in the current housing market crisis is access to finance. Judging from the comments from the Central Bank about the lending requirements they introduced last year, this is not going to change any time soon.

Whether you are single or part of a couple, your direction will be very much determined by how much you can borrow. Putting your finance in place first will take time but leave you in a much stronger negotiating position when you do identify a potential property.

A good relationship with your bank can be helpful but it's advisable to shop around or speak to a broker. Though you may be charged for this service, it is money well spent.

Once loan approval is secured, you are armed for the battle that is 'negotiation'. Having your finance in place when it comes to negotiating will give both agent and vendor confidence that you are really interested. When supply is tight, competition is strong and keep in mind that in today's market, you may be competing with a cash buyer.

Sunday Independent

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