The art of buying at the market bottom
THE upcoming auction by Real Estate Alliance of 72 properties ranging from a riverside mill with valuable hydro-power rights attaching, through commercial, retail, industrial and agricultural properties to residential homes should reveal a lot where prices are concerned. All come with published AMVs and it will be interesting to see what the final knockdown prices are in relation to these.
According to Daft.ie, the speed of the housing market crash is losing pace, but it is doubtful whether prices have yet bottomed out, despite Brian Lenihan's predictions.
However, economists are warning that people thinking of buying a house who are holding back, waiting for prices to finish falling, could be taking a risk. Some mortgage experts have calculated that another 10pc fall in house prices would be wiped out by rising mortgage rates.
Buyers of new-build homes are at a distinct advantage when planning their finances. They know what they can afford. They know the price of the property they want to buy. So they know the size of the mortgage they need to apply for. Everything is straightforward.
Purchasers of second-hand homes, on the other hand, can find themselves seriously wrong-footed as they try to guess at the selling price of a house -- particularly if they have nothing to judge it against. If a house up the road sold for €580,000 a month ago the chances are that, barring a bidding war, the house they are interested in will sell for in and around that price. But if there is nothing to go by they are dependent to a great extent on the honesty of the selling agent. It becomes a credibility issue.
The credibility problem arises partly because so many properties were slow to sell over the winter and some have come back on the market with further price cuts. So bidders find it difficult to believe that anyone else would bid for the particular property that interests them. In addition, there are well-financed buyers who read reports that banks are not lending money and so these buyers are puzzled that anyone can afford to bid against them.
In this market, timing is more important than ever. If a three-bedroom or four bedroom house in the €400,000 to €700,000 price range is in good condition in an area which has had a strong track record then there's a good chance that it won't stay on the market for long. Consequently a buyer who really wants a particular property in this sector of the market may well lose out if they plan to test an agent's patience.
One agent recounts how such incredulity was reflected in the approach of a buyer. "I told the prospective buyer that there was already a bid of €600,000 on a south Dublin semi but he didn't believe me.
In fact, the buyer insisted on making a first offer of €590,000 and arguing: "Even if you have a higher bid I'm a better buyer as I have the finance in place."
And another buyer recently posed this question: "How can I believe the agent when he says he has a bid of €510,000 for the house for which he was originally asking €540,000?"
Yet another buyer said: "I tried to cut out the other bidder by bidding €10,000 more than him and now the agent says the other person has bid €5,000 more than me. Can I believe the agent?"
The Construction Industry Federation has called for the establishment of a national register of house prices.
Since the Permanent TSB/ESRI house price index will no longer be published monthly, due to a lack of sufficient mortgage information, there is a sense of unease amongst the purchasing public. The price index was viewed as a trusted barometer of the housing market.
Official figures record that average prices have fallen 31.5pc since the peak of the housing market, but anecdotal evidence can put that figure at nearer to 50pc.
On the otherhand last month more than 900 bargain hunters queued up to view apartments at Tailteann Court, Mullingar, Co Westmeath, where 48 units were snapped up and the agent has a waiting list of 157 buyers for any sales that fall through or for the 15 units when they come to market. The attraction, of course, was the price. One-bed units were priced from €70,000, two beds from €82,450 and three beds from €98,000.
National Irish Bank appointed John McStay as receiver to the 63-unit development after the developer hadn't sold a single unit. It had been expected to fetch up to €202,000 form some units.
It is quite likely that this scenario will be repeated across the country over the coming year.