Thursday 20 September 2018

Charlie Weston: Eager to buy? Join the queue for another four years

(Stock photo)
(Stock photo)
Charlie Weston

Charlie Weston

THE scenes of people camping out in the rain this week, for a chance to put a deposit down on a new house, were an ugly reminder of the property boom years.

Around 20 people queued to buy houses in a development in west Dublin several days before they were due to go on sale.

It was not the first house-hunter queue in the last two years, and it is worth noting the developer and selling agents could have avoided a line forming by putting a ticketing system in place to deal with advanced demand for house sales.

That aside, the queuing-for-a-home phenomenon has echoes for many of the panic of the property bubble a decade ago.

Queueing for houses was a regular occurrence in the Celtic Tiger years as prices spiralled and people were desperate to get on the property ladder.

And it seems we are fast heading back to Celtic Tiger-type property nonsense, such is the jet-fuelled acceleration in property prices in the last three years.

Prices are rising so fast, they will be above the Celtic Tiger peak by the end of next year.

They jumped by 13pc in the year to February, the latest figures from the Central Statistics Office show. The rise is faster than previous months.

Economist with stockbroker Merrion Capital Alan McQuaid said: "If prices continue at the current pace they will be above Celtic Tiger levels within 18 months."

Overall, the national index is 22pc lower than its highest level in 2007.

Prices in the capital have now risen by over 90pc since the low-point of the crash. But they are still 23pc below their 2007 peak.

And house prices here are rising three times faster than in the rest of the European Union.

One of the reasons for this is pent-up demand for property, from both first-time buyers and movers.

Logjam

More than 80,000 want-to-be buyers are ready to purchase immediately as suppressed demand has created a housing logjam, according to the latest KBC Homebuyer report.

But it could be four years before the backlog of potential buyers is cleared, said KBC Bank economist Austin Hughes.

The survey found a wide range of factors have come together to create exceptional demand for homes, but a desire to "put down roots" is one of the key reasons.

Most potential buyers want a home that they will stay in for the rest of their lives, with few considering starter-type homes.

But they are having to compromise heavily on their preferred place to live.

Buyers are being forced into long commutes. That is why prices in the likes of Laois, Longford, Westmeath and Offaly have shot up by 15pc in the past year.

As many as 300,000 buyers are likely to seek to purchase by 2020, KBC said.

With just 50,000 transactions a year, it will take at least two years for the majority of these to realise their dreams.

Few existing homes are on sale.

What Mr Hughes calls the "locked-in syndrome" is clogging up the market as it is stopping people moving home.

People want to move, but they are unable to get a big enough deposit together.

Movers need a 20pc deposit and many have not got sufficient equity in their homes or enough spare cash to cover this.

Want-to-be movers also cannot find a suitable property to down size to, or are reluctant to move as it will mean losing a good-value tracker mortgage.

Trickle

And the supply of new homes is only a trickle, when we need a flood of properties.

Only around 20,000 new homes a year coming on the market, Mr Hughes said.

Meanwhile, Housing Minister Eoghan Murphy has been issuing more reports this week as he flails around seeking solutions to a problem that has been allowed to fester for too long.

Alan McQuaid, an economist with Merrion Stockbrokers, said housing had overtaken health as the main political issue.

And he warned: "Prices are only going one way in the short-term until the supply issue is resolved.

"There are shades of the Celtic Tiger era regarding the property market at the moment, and we all know how that ended."

He said prices would continue to rise at double-digit rates until recent changes in regulations act to spur greater housing supply.

Investment firm Friends First expects prices to rise by 10pc this year.

In many ways we are back where we started a decade ago when the Celtic Tiger bubble blow up in our faces.

Prices are rising at unsustainable rates. A decent three-bed property in Dublin and other cities is now priced at 10 times the industrial wage.

No wonder there were warnings this week that housing is now the biggest social and economic issue in the country.

What all this means is that we can expect more house hunters to be forced to queue in the rain for the chance to buy a home, as the cycle repeats itself.

Irish Independent

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