Mixed trend presents new posers for bidders
We were afraid the bank might not approve of a sale at a price that was over the average price
One can't help feeling sympathy for home buyers with the contradictory stories and commentaries about the Irish housing market or rather I should say markets. On the one hand Moodys forecast further price falls. On the other hand the Government's Central Statistics Office says prices are rising in Dublin.
On the one hand an over supply of residences and further job loses could push prices down. On the other hand the ESRI warns that a shortage of houses in key urban areas could push up prices in those areas.
Even more puzzling is the concern of banks and agents about price rises. For instance there's the story about a couple who recently bought a three-bedroom semi in a north Dublin town. They secured the house for €160,000, which seems fair as it was in line with average local prices.
However another bidder for the same property might not consider it at all fair as she had bid more than that. So why was the lower bid successful? The key factor was that the agent was afraid that the bank might not approve the mortgage for the higher bidder as her bid was above the local market average. Then the deal would collapse and the property would have to go back on the market thus delaying the sale for several months.
After the pain of property crash, it appears laudable that the banks are so concerned about fair value that they would refuse to provide a mortgage for a property which seemed over valued. But what does this mean for a buyer's bidding strategy?
Should they find out what the local average price is for a particular house type and just make that bid refusing to budge even when the estate agent says he has got higher bids?
That strategy could, after all, prove futile. Consider that such renowned authorities as the CSO says that there's no such thing as an average house price. That's why the CSO does not publish one with its house price indices for Dublin or for the rest of the country.
During the week I tested this proposition in a couple of areas. In the Clontarf area of Dublin two estate agents separately suggested that the price for a three-bedroom semi was about €410,000. But a search on a popular property website could not find any such semis in the area at that average price.
Two examples of similar semis in the area had price differences of as much as €200,000. One at 419 Clontarf Road, which is asking €525,000, has a long back garden and sea views. The other, at 56 Hollybrook Grove, is asking €320,000. Both need refurbishment. How can you bid with a shortage of average priced semis?
Then there's Galway, where the average price for a three-bed semi is reckoned to be €188,500 but this rises significantly in more sought-after areas such as Salthill. A web search showed only two of these available in this suburb, one asking €290,000 and the other asking €365,000.
In Portlaoise an average three-bedroom semi ranges between €90,000 and €100,000, and while there's a plentiful supply of second-hand and new houses ranging in asking prices from €69,000 to €225,000 only about half of them are asking less than €100,000.
So, as the saying goes, 'you makes your bid and takes your chances'.
However, bidding strategies have also changed. Up to last year the sales strategy was to ask for a price above the price at which a vendor was willing to sell. But the successful pricing strategy of Allsop Space auctions changed the market strategies. Other agents, seeking to attract buyers and compete with the auctions, began to quote keen prices for private treaty sales.
As a result, in areas where demand is healthy and supply is low, such as Clontarf and Salthill, houses which are keenly priced have been selling for above their asking prices. This is because agents are slow to push up asking prices which reflect local shortages because any price increase could discourage prospective bidders in search of bargains.
One agent said that if a house is priced by even 5pc to 10pc over what is perceived as fair value they won't attract viewers or bidders. But hopefully the stronger activity will encourage more people to sell.
After all, the clock may also be ticking for vendors. Demand in the more sought-after areas may soften next year when buyers will no longer have the support of mortgage interest tax relief.