Cork City Centre: Market set to cool in 2018
PRICE inflation in Cork city centre is now moving at a much slower rate than last year and is set to cool again somewhat in 2018. This is good news for first-time buyers in particular, who are also managing to get their hands on mortgage loans, as rare as hen's teeth just a few years ago.
According to Michael O'Donovan of Savills in Cork, values have increased by an average of 6pc in the last 12 months compared with 10pc in the previous year; he predicts an even more civilised 5pc for 2018.
"While more people are getting loans, the amount they can borrow is still quite restricted so a ceiling of sorts is being reached on prices," says O'Donovan.
"On top of this, the introduction of rent controls mean a lot of smaller properties are no longer being chased by investors. Those investors who are buying at the moment are more likely to be institutional in nature and more be interested in blocks of multiple units rather than single apartments here and there."
O'Donovan also points out that Cork city transactions fell through the last 12 months by 5pc, another indication of heat moving out of this market.
In previous years investors, landlords and cash buyers had dominated. But as we enter 2018, landlords are more likely to be selling their properties on to young first-time buyers, most having made a profit on their capital value investments - almost €50,000 on a two-bed apartment acquired four years ago or almost €100,000 on a two-bed terrace bought in 2014.
One-bedroom apartments are seldom as popular as their higher-earning two-bed counterparts. But 2017 was the year in which small apartments were rehabilitated in Cork city centre, adding 10pc in value to €165,000.
Cork city centre has surged as a buying location among young trendy professionals who are embracing life in the thick of the smoke with its lively cafes and bars and are being joined by city centre loving immigrant workers.
Traditionally younger Cork couples targeted the suburbs in search of their first homes, so this marks something of a social change. For 2018, 20-somethings are in a much better place economically thanks to the surging local jobs economy and able to acquire property thanks to a return to more regular lending levels by the banks.
The lenders are also favouring first timers with good jobs as being a better bet than their older debt stricken and recession damaged counterparts.
The result is that the typical age profile of the city centre buyer has fallen in the last 12 months from 30s to mid- to late 20s (usually couples).
Usually they are chasing small period properties like two-bed terraces which can still be got for less than €250,000. As a result of the increasing competition, these property types are expected to surge in value ahead of other types in 2018 - likely by 10pc. An indicator of growth in this segment is the fact that one of the pillar banks claims to have paid out more than 80pc of its lending in this location through the last 12 months for properties priced under €300,000.
Cash buyers have dropped again as a proportion of purchasers overall, with 'whole cash' transactions now accounting for around 30pc of deals while 'hybrid' deals with a proportion of cash and a proportion borrowed are making up about the same. Fully mortgaged buyers made up the rest.
The price of three-bed semis rose by €12,000 to €272,000, and four-bed semis are now selling at €290,000, up €20,000. With 5pc increases predicted they are likely to go past the €300k mark this year. But not all city centre property types registered value increases. As in other cities, the prohibitive cost of restoring 'protected' large period properties put buyers off. The city centre's oldest and largest types saw no value rises at all - selling at around €450,000, the same as three years ago.
For the most part, O'Donovan says younger buyers aren't interested in homes that require work. And the craftsmen necessary are becoming difficult to source - builders who struggled a few years ago and engaged in one-off house projects are now working on much bigger commercial and residential projects.
Big employers like Apple and UCC are impacting in particular on some of the better apartment schemes like the Elysian, Lancaster Gate and Opera Lane, where a two-bed will now rent for between €1,100 to €1,400.
But these rates are unlikely to go too much higher in 2018 thanks to rent controls which have for the time being been successful in cooling Leeside's rental market.
"Generous landlords who did their tenants 'a good turn' by keeping their rents lower than the market rate have been universally stung as the clock turned and Government legislation kerbed their ability to increase their earnings by more than 4pc every two years," says O'Donovan. Now their capital values too have been afflicted.
Yet again Albert Road proves to be the hottest location in Cork City Centre thanks to high competition for small period terrace properties which are still available for under €250k.