House prices fall 2.5pc across country as uncertainty over Brexit hits market
Figures for first six months of the year show the biggest decline was in prestigious Dublin 4 postcode, writes Fran Power
Last week, Government ministers were reportedly taken aback by the potential impact of a hard Brexit on the economy.
Figures contained in a new report on property prices may add to their woes.
Why? Because prices all over the country have fallen for the first six months of this year, with values in the capital hardest hit, and drops in the prestige address of D4 in double digits.
The national average price of a house in June 2019 was €263,606, a fall of 2.5pc over a period of six months. Analysts point to a lack of confidence in the market as uncertainty over Brexit continues.
The figures are contained in the latest Residential Property Price Barometer compiled from actual sales achieved nationwide for the first six months of the year by members of IPAV (the Institute of Professional Auctioneers and Valuers). Values are averaged across the three most popular types of housing - two-bed apartments, three-bed semis and four-bed semis.
Commenting on the report, IPAV chief executive Pat Davitt said: "The uncertainty of Brexit is having an impact on people's behaviour - whether to buy a property or not, and the timing of buying, even the timing of selling. Those prices are falling because of confidence, that's all. It's not that people can't afford to pay their mortgages, or people can't afford the property."
He adds: "The factor that led to the quick ramping up of prices is the same one that is now prompting would-be buyers to hold back. Its name is 'confidence' or, on the flipside, 'fear' - the confidence to buy at a reasonable price or before prices increase further, and the fear of paying too much and getting caught in negative equity, a sentiment that runs very deep and has become inter-generational since the financial crisis."
There are a number of key differences, of course, since property prices fell off a cliff between 2007 and 2013, dropping by almost half their value. The climb back up since then has seen values rise by almost 80pc, according to Government figures. This time around, though, the Central Bank has a tight grip on the purse strings, and strict lending rules mean mortgage approvals are more difficult to secure. That also means, according to Davitt, that prices are unlikely to continue to fall.
While Brexit is one factor affecting confidence, Davitt says: "With all the uncertainty going on with Brexit, I think the market has held very steady for what is happening. I think the property market is holding its nerve."
However, John McCartney, director of research at Savills, takes a different view. "Supply is just catching up with demand. It's as simple as that." He points to the stream of new homes to the market in recent years. Over 18,000 new homes were completed in 2018, an increase of 25pc over the previous year. That figure has risen to nearly 10,000 new homes built in the first six months of 2019.
"We're at the point," says McCartney, "where the market is approaching equilibrium, certainly in the sales market. The rental market has a little way to go but you can see that rent inflation is now slowing."
In February last year, the IPAV report correctly identified the first slowdown in the rate of house price increases. By September, it had picked up on the first price drops in Dublin. It now shows that the fall in prices has spread beyond the capital to commuter counties and rural areas.
Today's report from IPAV paints a gloomier picture on nationwide property prices, however, than the latest CSO figures for June, which showed that prices were still increasing, but at a slower rate of 2pc, their lowest for six years. The CSO figures also showed Dublin prices were virtually flatlining at 0.1pc, while IPAV's research shows drops of up to 12pc in some areas.
The latest Daft.ie report showed an increase in the number of properties for sale to 8,200 in May this year, the highest monthly figure in over a decade. It also shows that the number of new homes sold was up by 16pc in 2018.
According to IPAV, prices for three-bed semis fell in 27 of the 41 markets surveyed, and remained static in three more areas, indicating that an increased supply of new homes may indeed have mopped up demand for this type of housing.
However, in 11 areas, mainly outside the capital, prices increased with the largest rise in Wexford at 6.7pc, followed by Leitrim and Longford, narrowing the gap between city and country prices and reducing the impact of falling prices on the average national price for a three-bed semi to 1.34pc overall.
The price of a home in the premium Dublin 4 postcode has been hardest hit again. A prospective buyer in the area today could secure a four-bed semi for €150,000 less than just six months ago, a drop of 12.5pc, which as Donal Buckley comments in the report, would buy a three-bed semi in Mayo, Sligo or Tipperary.
Even so, Dublin 4 is still the most expensive address in Ireland with the average price of a four-bed semi at €1.05m, while the cost of a three-bed semi dropped by 7.89pc to €895,000.
Comments Pat Davitt: "D4 prices have gone up faster than anywhere and I think they are really coming back to normality. That is what is happening. It is taking longer to sell the houses there and people have to change the prices on them."
Another surprise is the drop in values in Dublin 14 which covers Churchtown, Clonskeagh, Rathfarnham and Dundrum, all places popular with families and with good school and transport links. Here, prices for four-bed semis fell to by 8.11pc down to €641,667, while three-bed semis fell by 6.61pc. In contrast, two-bed apartments saw a lift of 3.26pc to an average of €370,000, perhaps reflecting its popularity with young professionals.
On the up
Only two Dublin postcodes of the 13 surveyed showed price increases for both three- and four-bed semis. Dublin 6 saw strong rise of over 5pc to an average of €726,500 for a three-bed semi and nearly 7pc for a four-bed, to €925,000, making the largely Victorian streets of Ranelagh, Rathgar and Rathmines, the second most expensive place after Dublin 4 on which to buy a house. An explanation may lie in its large number of private schools, as well as easy access to the Luas. Likewise, Dublin 18 which covers sought-after areas like Foxrock, experienced price increases across the board, with the average three-bed semi now priced at €480,000, an increase of just over 2pc on the last six months of 2018.
Apartments buck the trend
In contrast, the apartment market showed double digit increases in some areas outside the capital, indicating that, outside Dublin, prices are only now catching up with the real cost of building. Cork city, for example, saw a big jump of nearly 11pc to €215,000 for a two-bed, while Galway city prices rose by approximately 5pc to €190,000.
Commuter counties Kilkenny, Carlow and Louth also saw price increases for apartments. County Wexford saw the biggest overall price increases for all house types - a sign that the commuter belt is moving further afield to take advantage of supply and affordability to an area where the average three-bed semi is €185,000.
However, in Dublin, the average price of two-bed apartments fell in all but four of the 13 city locations surveyed, as well as in the popular commuter counties of Wicklow and Kildare.
This may also reflect the increase in supply to the market and a consequent adjustment in values - County Wicklow, for example, which has seen large price increases over the last few years, as well as a number of new developments at Greystones, Wicklow town and Ashford, showed a sharp drop in average prices for two-bed apartments, as well as houses.
Sellers' expectations too high
"People are holding their breath," said Davitt. "I hear from some agents that people are pulling out of sales because of the uncertainty and everything else but that is always the case." He added, "things move on and time moves on and that's the way it goes."
According to a report published by estate agents REA earlier this year, the time taken to reach sale agreed in Dublin is eight weeks, double that of a year ago, in the country, it is nine weeks.
Davitt cautioned that vendors need to realise that prices are dropping and that their expectations must change accordingly. "Once people realise that the market has changed so that it will go down and up, that is the thing. I think that people are quick enough to change the prices when they go up, so they need to change them when they are going down as well."
John McCartney adds, "An important and very boffinish thing to say is that the market needs pricing signals. This is not sinister. It is an absolute necessity because pricing signals tell a builder when to stop building. It tells developers when we have got enough. All the hype has been that we need to keep building."