Home Truths: Interventions to give Dublin the 'splits'
WHAT a difference a year makes in the Irish property market! Twelve months ago, Dublin prices were rocketing at 2pc or more per month, while most parts of rural Ireland were flat or saw prices falling in the lingering tail-end sting of the 2007 property crash.
But just one year later and it's a complete about turn - the regions are experiencing an unprecedented spring back with semi-detached prices in towns bounding off the bottom with increases of as much as 44pc in 12 months according to the Average House Index commissioned by the Irish Independent to the Real Estate Alliance network and published at the start of this week.
In contrast, Dublin prices have now "stalled" according to the same data. The capital's market showed a rise of just 0.89pc in the last quarter of 2014 and at least one area has now started to register falling prices - Lucan, the sprawling west Dublin suburb has seen home values slip down by 7pc in the last quarter, falling in value by as fast as they were rising a year ago.
Dublin's 0.89pc result for three months could mean that prices rose in October, flatlined in November and fell in December. There is evidence that many Dublin vendors overpriced towards year's end. A correction of such overpricing means price cuts, but it's still not clear whether widespread value falls have actually occurred. The Dublin semi-d average is now a pricey €379,167 - an increase of just over €3,000 on Q3.
While the rise of the regions is set to continue and is wholly natural after such a severe crash, Dublin's recent prices flatline has been artificially generated by the forthcoming Central Bank lending restrictions which - by the nature of the €220,000 price barrier - will impact almost entirely on the capital where most family homes are priced at well in excess of that figure.
The next big question is exactly what will happen next in Dublin?
Most estate agencies in the capital seem to believe Dublin will take it on the chin - that it will take perhaps four months for buyers and lenders to work a way around the new lending measures and prices will remain stagnant or sliding slightly in the coming months, but will start reviving again by Easter to early summer at a more 'normal' pace, perhaps a half per cent a month instead of three.
They expect 'roundabout' solutions to take root to the Central Bank measures - like recent Credit Union network proposals to give loans to parents to hand to house-buying adult children to bridge the deposit gap.
And to address the new 3.5 times income to loan ratio requirement, there is a belief banks may once again allow bonuses, overtime and additional incomes outside of the workplace to be considered as income. If this sort of thing starts happening, it will be more than a little ironic that Central Bank measures introduced to curb unusual lending practices could, in essence, end up causing them. Lenders cranking cash out of aged parents? Dog walking fees included as income? It's all a bit 2005 really.
What we may see in the months ahead is a splitting of Dublin's market into regions of varying performance with prices rising, falling and stagnant in the capital, all at the same time.
Lucan isn't the only Dublin sub market out of step. Our own recent property price study by local markets, How Much Is Your House Worth? 2015, showed Dublin 18 has been experiencing price stagnation since the start of last year, attributed to an unusual surge late in 2013 which caused vendors to overprice through much of 2014.
Agents in 'working class' areas like Ballymun, Finglas, Ballyfermot and Dublin 20 are estimating the Central Bank measures will hit their areas hardest, given that their buyers are least able to assemble a double sized deposit. They are predicting zero growth for 2015.
In contrast, agents in better off suburbs believe wealthier buyers and parents will be more able to acquire the additional savings required. In these areas they are predicting high single-digit percentage growth. Prices rose by around 10pc in Dublin City Centre at year's end thanks to the expiry of capital gains relief on investment property. In the city centre, apartments favoured by investors are the dominant house type.
Consider that in December, an apartment on a D1 street might well have risen in value by 10pc, while at the same time a terraced house on the exact same street could have shed 5pc of its value.
The more artificial interventions that affect the Dublin property market going forward (shortage, no building in some areas, building in others, the two Central Bank measures, relief expiry etc), the more likely the capital is to split into very different performing micromarkets.