Your Money: The property market is stalling... should you sell?

tom toon march 1

Louise McBride

Homeowners or investors who are eager to sell up should do so before this summer - or they could struggle to sell their properties this year.

This is what the Sunday Independent is hearing from property professionals and mortgage brokers on the ground. Some are warning that the momentum which built up in the property market last year has already gone and that this year could be a difficult time to sell a property.

Official figures released last week also suggest that last year may have been one of the best years since the downturn to put a house on the market.

House prices fell by 1.4pc last January - the largest drop recorded for a single month since February 2012. In Dublin, house prices fell by almost 2pc last January - the biggest monthly dip since January 2012.

"2014 was a phenomenal year for the property market with a real mix of first-time buyers, people trading up and down, and foreign investors," says Karen Mulvaney, managing director of The Buyer's Agent, a Dublin company that helps buyers find homes.

"January just passed and was also very busy but then February hit and things have just stopped. There is an element of frenzy for those who had mortgages approved before the Central Bank's new lending rules - but apart from them, the market has gone very quiet."

Under the Central Bank rules, an individual trading up needs an €80,000 deposit to buy a home worth €400,000 - compared to €40,000 before. A first-time buyer now needs a €40,000 deposit to buy a home for €310,000 - up from €31,000 previously.

In the run-up to the introduction of those rules, there was a dash for mortgage applications.

That rush began last September but this "slowed significantly" once the Central Bank announced its regulations in late January, according to Trevor Grant, chairman of the Association of Expert Mortgage Advisers (AEMA), which represents mortgage brokers.

"Potential borrowers - mainly first-time buyers in Dublin - became confused and concerned about the impact the new rules would have on their borrowing capacity," says Mr Grant.

A quiet or slow market is clearly bad news for sellers as they are less likely to sell their home quickly and for a good price.

Posing as a property owner who was considering putting her house up for sale, this paper approached a number of estate agents and asked if now was a good time to come to market.

"Market conditions are not as aggressive as they have been - and January and February have been slow," one local estate agent in south-west Dublin said.

One of the larger estate agents, meanwhile, told us that the market had "levelled off" since the start of the year and that "prices are not going for much above their asking".

This is in marked contrast to this time last year, when bids of as much as 50pc over the asking had become the norm in some locations.

Could things pick up?

Although the Central Bank rules seem to have dissuaded people from applying for mortgages last month, the market could be busy over the next few months - because of the rush last year by house hunters to get mortgage approvals before the new regulations kicked in.

More than 7,500 people were approved for mortgages in the last three months of 2014 - about 46pc more than did so during the same months in 2013. Mortgage approvals are generally valid for about six months - hence some estate agents are reporting a scramble to use them up.

This is why Michael Dowling, managing director of the mortgage brokers Abacus Finance, believes the next four months could be the best time to sell one's property - if you want to do so this year. "Along with the spike in mortgage approvals in the last three months of 2014, there was also a higher number of mortgage applications than normal in the first few weeks of this year," says Mr Dowling. "This was all driven by the new Central Bank rules. The first six months of this year should be a good time to sell therefore - as you've plenty of buyers out there with mortgage approval and a shortage of supply."

Once those mortgage approvals lapse however, the property market could nose-dive - and even more so than it did last January.

"The latter half of the year mightn't be so good for selling a home because house hunters will be able to borrow less money and that will have an impact on prices," says Mr Dowling.

Which properties are likely to sell best?

Owners of properties that fall within the budget of first-time buyers could find it easier to sell their homes today - and get a better price than expected - than owners of more valuable houses will.

The new lending rules are more stringent for investors and those trading up than they are for first-time buyers - so the higher-end properties could be more adversely affected.

The estate agent Douglas Newman Good (DNG) has noticed an increase in the number of viewers and bidders for property priced at the entry level since the rules kicked in.

"Many first-time buyers were sitting on the fence with the view that property prices might have fallen once the Central Bank imposed the new lending restrictions," says DNG boss, Keith Lowe.

The restrictions are not as severe for first-time buyers as had been expected, according to Mr Lowe. "It is therefore now likely that entry level prices will rise at a quicker rate than any other price sectors," says Mr Lowe. "It is too early to anticipate if the restrictions will have any dampening impact on other price sectors as most buyers currently viewing houses with our agency have loan approval already - based on the old lending criteria which still stand."

Some estate agents and property professionals believe that 2015 won't be as strong a year as 2014 - because the investors who rushed to buy property towards the end of 2014 - before the Capital Gains Tax (CGT) tax break ran out - have now gone. With this tax relief, you could have avoided paying CGT on any profits made from the sale of a property as long as you bought between December 7, 2011 and the end of 2014 and held on to that property for seven years.

"Due to the high number of sales at the back end of last year as investors rushed to beat the deadline to qualify for CGT, it is unlikely that the number of sales in 2015 will vastly exceed the number of transactions last year - if they do, it'll be by just 5pc-10pc," says Mr Lowe.

Time to test the market?

You could of course test the market if considering selling your home - and you should generally know between three to four weeks what price you are likely to fetch for it.

The time you come to market however will have a big bearing on the price you get for your home. Spring and September are generally considered good times to bring a house to market; August not so. Easter and early summer can also be good times to sell a home.

The most important thing however is supply and demand - and if buyers are drying up now that the Central Bank's lending rules are starting to bite, this year could be a disastrous time to sell your home.