Tuesday 19 February 2019

Galway City: Price rises can't mask issues

7 The Crescent, Galway, sold for €2.15m in May
7 The Crescent, Galway, sold for €2.15m in May

HOUSE prices are up by 10pc in Galway city, which sees its housing problems continue into 2018, with the development of new homes still stifled on a number of fronts - and homelessness now hitting the headlines.

Alan McKenna of city-based agency O'Donnellan & Joyce estimates that in the absence of supply solutions, house prices will rise another 10pc this year - albeit down on the 14pc growth experienced in 2016.

"We still have a lot of ex-pats and locals returning from abroad and from Dublin," says McKenna.

Employment is on the rise in Galway, with expanding mid-sized home-grown firms now recruiting alongside the thriving multi-nationals based here; but job growth is putting pressure on housing by attracting non-locals from other Irish cities and from abroad.

On top of this, many parts of the city are suffering repeat problems with flooding, due to Galway's unique geography which has it hemmed in by water on three sides.

There is a shortage of housing, stemming from a lack of green-field sites and the reluctance to grant permission in tourist-sensitive/Gaeltacht regions on the outskirts of the city, compounded by the fact that many builders still believe development is just not profitable enough at current prices for them take the plunge.

Developers who want to begin construction in the city area also have great difficulty in getting regular bank finance - most will have to pay 14pc-plus to private capital outfits if they want to fund a big scheme.

The result is that few large new-home schemes are being built for a city of 80,000-plus, save for those underway by O'Malley and Burkeway.

The Maolin scheme continued at Knocknacarra and two estates launched at Roscam. There have been smaller developments at Clybaun and Craughwell. But that's about it.

Such was the demand that the few new three-bed semis coming up for sale have now pushed over the €300,000 mark.

With no substantial increase in supply predicted for 2018, this year's limited output is more likely to sell for €320,000 or €330,000.

With existing schemes heading into final phases, attention is now focusing on two sites at Barna and at Collegians, but neither are likely to have homes finished in numbers by the end of this year.

Permission was also granted by the city council for 52 new homes at the five-acre site at the former Heneghan's nurseries opposite Eircom. This was given the go-ahead despite many objections from local residents.

Four-bed detached homes are up to €390,000 and expected to push over the €400,000 mark during the year, and five-bed detached properties are likely to cruise through the €500,000 barrier in 2018.

There is strong demand for almost all house types and the big focus is on family homes. One exception was apartments which have been hit by rent controls.

The local authority has been accused of sticking its head in the sand on homelessness, with no social housing built here since 2009 and none likely to be finished any time in 2018.

By the end of the year there were 30 families in temporary accommodation listed as homeless. There were requests to avail of the local authority's land bank, in particular an 11-acre site at Sandy Row, to build social housing.

Rents are now hitting €1,200 per month for a one-bedroom city apartment, and €1,300 for a two-bed, despite Government rent controls being introduced.

According to a survey by the Simon Community just before Christmas, not one of the properties available to let in the city was priced within the limits of the HAP (Housing Assistance Payment) rent supplement.

McKenna reports that the other big news is that banks are lending again, and as a result mortgaged buyers have been gaining the upper hand against the cash buyers and investors who have dominated the city market since the crash.

Whereas it had been estimated that investors accounted for 60pc of purchases in 2016, through the last 12 months mortgage holders have pushed over the 50pc mark to comprise the majority of buyers for the first time since the boom.

A few years ago an open viewing of a three-bed semi might have attracted 10 parties; now it is more like 30. The second-hand semi, priced at €250,000 on average 12 months ago, now stands at €275,000 and will go above €300,000 this year. Four-bed semis have jumped up to €330,000. Outside Dublin these are some of the country's most expensive city prices.

Meanwhile, it has become more difficult to value the smaller properties chased by investors thanks to the introduction of rent controls.

"If you have two apartments, one let for €500 per month and one for €1,000, because the former didn't increase its rents, then the maximum the rent will increase by is 4pc every two years," says McKenna.

"You're now looking at two very different investment prospects. This means that two apartments which are physically the same can fetch very different prices depending on rental circumstances."

As a result, it is estimated that smaller apartments have increased at around half the rate of most other types - around 5pc.

In the case of a property fixed with poor rental income upon the introduction of controls, there might be little or no increase in capital value at all.

In contrast, another exception to the 10pc rule, albeit through faster growth than the norm, are three- and four-bed bungalows in town, which have surged in value thanks to heated competition from more than one buyer type.

Three-bed bungalows are up from €225,000 to €275,000, adding about 22pc, while the four-beds have risen from €265,000 to €300,000, up 13pc.

The city population is steadily aging and these homes are presenting a popular option not only for younger couples seeking to get on the property ladder, but also to older 'empty nesters' who are looking to trade down from a big detached property to something more manageable.

The average age of Galway's population is now 37.5, compared to 36.1 in April 2011, slightly above the national average.

And years of double-digit percentage inflation has meant bad news for younger couples who have been priced out with three bed semis rising in value over 5 years from €184,000 to €275,000.

In many cases they are now opting to chase affordability instead in outlying towns. This is reflecting in the increasing populations recorded in the likes of Athenry (up 13pc on 2011), Tuam, Gort, Kinvara and Clarinbridge.

Given its lack of expansion opportunitiues, Galway City will have to look to these towns, as well as suburban townlands like Oranmore and Craughwell to house its younger citizens.

Irish Independent

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