End of road for soaring property market
Monday July 03 2006
THE runaway property market is finally beginning to cool and some homes are even seeing a drop in prices for the first time in more than a decade.
Estate agents said yesterday they had seen the first evidence of a "soft landing" after years of astounding growth.
But the Irish Auctioneers and Valuers Institute insisted there was no prospect of a property crash.
Its chief executive Alan Cooke said: "The soft landing seems to be happening. It won't happen across the entire market in one fell swoop and it won't hit geographically at the same time."
He said it would affect a range of mortgage holders across different sectors first.
"But it's only a question of time until it levels out."
Fintan McNamara, chief executive of the Institute of Professional Auctioneers and Valuers said a number of members had reported a significant drop in interest in property.
"In the mid-market sector there has been phenomenal growth," he said.
"An average three-bed semi in the inner suburbs of Dublin that was selling for €500,000 in autumn last year was selling for €700,000 six months later. That smacks of overheating.
"But agents are telling me that the same €700,000 property is now selling for about €20,000 less."
Those trying to sell recently constructed homes are having the same problems. The owners of a three-bed terraced house in Addison Park, Glasnevin, have been forced to reduce the asking price by a massive €75,000 to generate interest.
Agents have reported that both the number of inquiries and the number attending viewings is down.
This is partly due to the summer season, which is traditionally quieter, but also due to greater caution on the part of potential buyers.
"I'd say the experience in the next six months will be a levelling off in prices," Mr McNamara said.
A number of house-hunters have recently expressed surprise at the number of properties on the market and the duration of time it takes for the "sale agreed" sign to go up.
Mr McNamara said the effects of a price slowdown will be felt from the bottom up and will quickly have a knock-on effect.
First-time buyers will hold off getting onto the property ladder as they wait to see what happens and also in the hope of a drop in prices.
This in turn will affect those who are looking to trade up to their second property. If they cannot sell their home they will be unable to bid on mid-market properties.
Dublin is unlikely to see dramatic effects as one third of the population is concentrated in the capital.
But rental properties on the outskirts of the city are likely to be hit first. Although rents have increased in the past six months, Mr McNamara warned that they could drop "just as quickly".
A drop in rental income would also affect any first-time buyer who is availing of the rent-a-room scheme.
He also believes properties in the country won't see as dramatic a change as those on the outer edges of the capital, simply because they are not as expensive to begin with.
He pointed out that apartments and houses near the city centre are most likely to hold their value and to retain tenants.
But despite likely changes in the market Ireland continues to have one of the highest owner/occupier rates in Europe.
- Edel Kennedy
