Demand is strong but the obstacles are many
This new homes season saw strong buyer demand hampered by lending restrictions and lack of stock.
It was an auspicious season for new homes, but sales would have been better if strong buyer demand was not hindered by several factors. Lack of stock and difficulties accessing funding due to the Central Bank mortgage lending rules remain major obstacles. First-time buyers, most typically two professionals around the age of 34, were the most common purchasers. Their house of choice? The three- and four-bed semi-detached.
"With the launches that we had, we have sold everything we needed to," says David Browne, head of new homes for Savills. "It hasn't gone much better, in that we have not sold double the amount we needed to or wanted to because the restrictions to finance have dampened that down."
Something of a two-tier situation arose among buyers. "It arguably is a little of the haves and the have-nots," explains Sherry Fitzgerald's head of new homes Ivan Gaine.
"The best performing price point is the €350,000-€550,000 market," says Gaine, who divides the market into the sub-€350,000 price bracket, €350,000-€550,000 and in excess of €550,000.
This is an anomaly as the lowest, most affordable end of the market should be the most successful. "In some ways, it's easier to sell a three-bedroom house for €400,000 than it is to sell it for €290,000," Gaine continues. "Location obviously plays a big part in all of that. The really core mid-market locations in the suburbs are the ones that are performing well. The mid-market is the mass market, whereas really the sub-€350,000 should be, but isn't, because for that demographic, their rents have moved up and it has become more difficult to save a deposit."
"Where people are most struggling with the Central Bank is at the lower end, which is where we have the biggest issue in terms of delivering stock," agrees Browne of Savills.
The lack of stock at the lower end of the market has also meant that first-time buyers continued to be pushed out to Dublin's surrounding counties.
"[The season] was constrained by the Central Bank lending regulations in the sense that for first-time buyers in particular, the vast bulk of them couldn't access the market," says Ken MacDonald of Hooke and MacDonald. "They have ended up in the rental market or have had to move out into the surrounding counties. It is pushing up prices in surrounding counties, whereas the Dublin house price is much more stable."
"Generally, what we're seeing is that the first-time buyer is the main mover in the market," says Will Coonan of REA Coonan, whose work is mostly around the Kildare area. "We would see them taking the greater percentage of any scheme we're working on,"
The high-end of the market saw strong sales. Sherry FitzGerald launched the season in January with 55 Percy Place, with a price range of €650,000-€1.35m, and almost all units had sold by the end of February. Savills brought Embassy Place in Ballsbridge to the market, one of the most expensive new homes developments in the country priced at €775,000-€2.5m, and have sold 14 of the 17 units. Hooke and MacDonald launched Ardilea Crescent, family homes priced upwards of €875,000, and have sold 12.
In the mid-market range, once the area was good and the pricing was right, launches met with strong demand. "In every area bar the upper end, it would be still quite price-sensitive," reflects Browne of Savills. "If a house is worth €400,000 and it's priced at €420,000, it would be slower."
Hooke and MacDonald launched Cuil Duin last weekend in City West, selling 35 houses in the first week in the €280,000-€300,000 price range. Their apartment launch in Castleknock the same weekend saw 24 of the 27 units sold. DNG saw very promising sales in their first-time buyer market, with buyer demand meaning they released phases ahead of schedule on a number of occasions, says director Gina Kennedy.
Around the country, raising finance did not prove as much of an issue. Shortage of stock and strong buyer demand meant that what did launch, sold well. Sherry FitzGerald Cork saw strong sales in the four-bed semi-detached market from first-time buyers and traders-up, with sales strong in the €295,000-€300,000 range.
Savills in Cork launched two new developments in Kinsale, and in Convent Garden 20 units sold out in nine days, in the €235,000-€265,000 price range. "At the €250,000 price range, there's definitely huge demand. It gets a bit different when you're looking at detached houses at €460,000-€550,000. The buyers are fewer," says their head of new homes Catherine McAuliffe.
In Galway, Maoilin on the west side of the city saw the launch of its second and third phases in January and April, and 72 of the total 73, mostly three-bed and four-bed units, have now sold, in a price range of €265,000-€370,000. "More and more people are getting finances, but stock is still a problem," says Niall Browne of O'Donnellan and Joyce.
"The economy has improved, employment prospects have improved. There's just more confidence around," says Ken MacDonald. "The prospects for the new homes market are very good but we just need to deal with the roadblocks that are there."
Several factors are contributing to buyer uncertainty. "There is an expectation that the Central Bank is going to do something," says Browne of Savills on purchaser expectations about amendments to the mortgage regulations. "Once they come out with an announcement either which way, it's going to be good news because it brings clarity to the market. The worst thing for a new homes market is uncertainty."
Gaine of Sherry FitzGerald identifies four hurdles facing the new homes market. Minister Simon Coveney's upcoming plan, uncertainty over Brexit, the budget and the Central Bank review. "The next six months we've a lot to navigate, but hopefully on the back of that, the next couple of years will see an increase in volumes delivered and people being able to purchase houses."