Sunday 24 February 2019

Strong 2015 predicted for house market outside Dublin

A “NATIONAL obsession” with buying property was one of the main factors that contributed to the economic crisis, the Oireachtas Banking Inquiry was told.
A “NATIONAL obsession” with buying property was one of the main factors that contributed to the economic crisis, the Oireachtas Banking Inquiry was told.
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Mark Keenan

Mark Keenan

House prices outside of Dublin are expected to rise by as much as 20pc next year, as the rest of the country begins to catch up with the capital.

Dublin prices soared for much of this year, although the market cooled somewhat in recent months. However, 6pc growth is still expected in 2015.

Outside of the capital, where values are much more affordable and therefore less likely to be affected, house prices are expected to continue rising strongly through 2015 - by as much as 20pc.

A survey carried out for the Irish Independent by the Real Estate Alliance (REA) shows that agents in Dublin believe prices will rise by just 6pc next year.

Uncertainty caused by proposed Central Bank restrictions on mortgage deposits has undermined confidence in the Dublin property market.

This month's survey of more than 50 REA member firms shows that the capital's property market has largely stalled in quarter four from September to December.

Agents said that it was now taking six weeks to sell the average Dublin home - a rise on the April-to-June figure of four weeks.

Agents in Dublin reported a flat fourth-quarter in many areas, with some buyers simply taking a watching brief due to uncertainty over the proposed Central Bank directive.

"It is clear from our agents that the lack of clarity from the Central Bank is having a large impact on confidence. However, even if it is resolved, the supply issue still remains. For a period for five years, the construction sector ground to a halt and we are still feeling the effects of this through the lack of availability of new homes," said REA chief executive Philip Farrell.

But commuter counties and the other major cities are expecting a strong 2015 - with healthy demand and limited supply being major factors, according to REA agents.

Westmeath showed the highest price growth expectation for 2015 at 20pc, followed by Kilkenny, Clare and Galway city all at 15pc. On the other end of the scale Sligo showed the lowest growth expectation at 4pc.

Demand in the three main cities outside Dublin is expected to remain high due to a lack of supply, with prices in Cork expected to rise by 10pc, Limerick by a stronger 12pc and Galway City by 15pc thanks to a shortage of good quality homes for sale in the Western capital.

Commuter counties Meath (13pc) and Kildare (11pc) have major towns with re-awakening property markets.

Meath, in particular, is reporting impressive growth in Kells and Trim. However, there are no new developments proposed for either town in 2015, unlike Navan, where prices are predicted to rise by 15pc.

Meanwhile, REA agents in many parts of the country are warning house building will not start until prices rise above cost value. "The demand for new builds is there, but until prices reach a certain level, some builders are reticent to begin developments," said Mr Farrell.

"Overall, we are now seeing a welcome return to a normally functioning market where you are likely to see less volatility and, thankfully, more predictability. As the market started to rebound, some of the high percentage recoveries that we saw in 2014 were quite misleading, due to the limited number of transactions involved, and the low price base that we were coming off."

Finally, the REA survey shows cash buyers reducing significantly, from 70pc of transactions 15 months ago to about 40pc today.

Ireland's three-tier housing market

Despite much being said about Ireland having a two-tier property market, evidence suggests that prices are moving in three blocks:

Dublin

Dublin city and county became the first Irish market to recover. It was in leafy Dublin 4 that property values first began to inch up early in 2012, with affluent buyers swooping in. The impetus spread rapidly outwards, suburb by suburb.

Driven by shortage, the looming end of tax incentives for investors, and the last hurrah of cash buyers, 2014 saw prices in Dublin increase by 24pc. This was the highest price inflation in the world.

It is generally thought that Dublin experienced a fall in values of up to 60pc since the bubble began to burst in late 2006. It has meant that prices had room to inflate.

Latest evidence is that runaway inflation is cooling.

Cities and commuter belt

After Dublin, Cork city was the next market to recover. It went from static prices to a rapid rise at the end of 2013. This was spearheaded by an investor feeding-frenzy at the bottom, with apartments snatched up.

Galway soon saw its prices begin to surge in a similar fashion and Limerick was next. Cork and Galway are now both experiencing similar issues to Dublin.

Meanwhile, the belt of commuter counties around Dublin - where prices had been hit especially hard in the downturn - also began to recover late in 2013. This occurred as first-time buyers started being priced out of Dublin.

The rural counties

These counties - the last to be hit by the property crash and the last to recover - began to see prices rise again in early 2014.

Buyers pounced on what they believed to be the cheapest prices in a generation.

Central Bank lending restrictions will certainly have an impact but, at the same time, it won't be as much of an obstacle to buyers. When a semi-detached house can cost €100,000, a deposit of €20,000 is more achievable.

Irish Independent

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