Thursday 27 August 2015

Athlone - Entire block of houses & apartments for sale for €1.75m

REA Hynes are offering for sale 24 houses & apartments in one lot at a price of €1.75m. The portfolio at Shannon Weir, Athlone comprises of a mix of 1, 2 & 3 bedroom duplex homes and apartments.  Built in the late 90’s on the banks of the river Shannnon, an extensive refurbishment program has been indertaken by the owners and the portfolio is fully let.  The block will be largely of interest to investors with funds who will view the dramatic fall in values and rising rent returns as a good opportunity to invest.
The entire portfolio is producing a rent roll of €156,840 per annum with review potential to €172,765 according to the Healy Hynes of agents REA Hynes.  “A selling price of €1.75 million would provide a net return for a new owner of 8.9%”. stated Mr. Hynes.
The sale comes at a time when sentiment is improving and agents are reporting increased rents and limited new supply.  Healy Hynes says their research had shown that apartment values have increased with a rise of 26 per cent.  “Despite increases however, apartment values remain over 70% below their peak.  With rents rising we are at a turning point in the cycle.” He concluded.

Monday 24 August 2015

Average age of first time buyer at 33

The average age of the first time buyer in Ireland has risen by four years to 33 over the past decade, with a leading estate agency group predicting that this figure may rise sharply over the next few years.

In 2005 the average first time buyer in Ireland was approximately 29 years old, but, according to Real Estate Alliance (REA), this figure has increased by 14% and is still rising due to a combination of circumstances.

While a rise in the age of housebuyers is also being experienced in the UK and US, the financial impediments placed in front of our returning emigrants combined with high rents and the introduction of the mortgage deposit rules have combined to create a situation that is increasingly delaying the entry of young people into the housing market.

“While many young people are now returning from abroad with the growth in the economy, they are finding it difficult to get mortgage approval without a full year’s employment behind them, which is pushing the average up all the time,” said REA CEO Philip Farrell.

“Through economic or other reasons, our young people left the country in their droves over the past decade, and this has created a lost generation in housing purchase terms.

“A high percentage of young Irish adults in their early 20's choose to travel the world for extensive periods of time – at one stage emigration was claiming 60,000 young people a year.

“In many cases the decision to do this is taken following completion of college education or after learning a skill.

“As a result of this people are taking longer to return home, settle down and have families – we estimate that emigration has put many people’s life plans back by five years.

“We are also finding that young people’s attitude towards property buying in their 20s is changing as a result of the global crash.

“Due to the uncertainty surrounding property values during the recession, many young people chose to 'park the bus' in relation to purchasing their own home and confidence in property as an investment was diminished.

“Interestingly, average life expectancy in Ireland has increased by four years to nearly 81 over the last 15 years. This figure will continue to increase and it is our opinion that young people feel that they have a lot of time on their side.

“As a result of both of these factors, we have seen many potential first time buyers choosing to either remain in the family home or rent for longer periods rather than following the race to get on the property ladder.

“This has had a knock-on effect and the average age of the second-time buyer is 39 and also increasing.

“It is important to remember that there exists particular pockets of the country where these figures are both lower and higher than the average.

“We estimate that the average first time buyer in the capital is already 35, due to high property values.

“However, in rural county towns with a large multinational IT employer, our agents report that the first time buyer average is firmly in the mid to late twenties as well-paid employees take advantage of lower cost housing.

“Over the past two years average property values have increased at a faster pace than average wage levels, therefore the whole area of affordability has become a factor.

“One issue for consideration is the low prevailing interest rates which will not remain so forever and ultimately will also affect the affordability issue.”

Real Estate Alliance (REA) is Ireland’s leading property group of Chartered Surveyors with over 55 branches nationwide, comprising many of the country’s longest-established auctioneers and estate agents.

One of the main issues REA agents are encountering is young people getting adequate access to finance.

“For many people purchasing in 2005, access to credit was not a huge issue.

“They could borrow up to 95% of the purchase price of a house and, in many cases, up to five times their salary.

“This has all changed with the introduction of the Central Bank’s mortgage deposit requirements, which, combined with high rents, have made it increasingly difficult for young people to save deposits, especially in Dublin.

“While their use as a medium to moderate house price increases has been welcome, they have had the effect of suppressing movement in many areas of the market, especially in the ability of the second time buyer to move, thus keeping the supply of housing to the first time buyer at a minimum.

“The new income requirements of 3.5 times salary combined with increased deposit requirements introduced by the Central Bank in February of this year will continue to put pressure on the average age of first time buyers in this country.

REA agents are also reporting that young people are also being forced to reapply for finance due to mortgage offers running out after a sale falling through somewhere in the selling chain.

“Up to recently a huge percentage of banks and receivers sales were falling through due to issues such as title, which meant that young people were having to return to the issuing bank for reapproval.

“This may not be related to the property in question, but often to the next one in the buying chain and has been a source of heartbreak for many potential buyers.”

Robert Grimes of REA Grimes Mortgages in Dublin feels that the traditional view of the property ladder has changed for young people.

“I feel that first time buyers are looking for a house that they can possibly live in for life rather than having to plan to trade up.

“I definitely feel that there is a fear factor of not making the same mistake that family members, friends or work colleagues did a decade ago.”


Wednesday 5 August 2015

Time to level the playing field for second-time buyers

The second-time buyer is potentially being excluded from the housing market as a consequence of the recently-introduced Central Bank deposit requirements.

Philip Farrell, CEO of Real Estate Alliance believes that it is time for the Government and the Central Bank to reassess the effects that the recently-introduced deposit requirements are having on the property market both in Dublin and beyond. 

While there may be some relief on the way for homeowners with the mooted freezing of Residential Property Charges, the real issue for homeowners looking to move house for whatever reason is their inability to raise 20% of the purchase price.

We are seeing evidence that this is having a marked effect on properties valued at above €300,000, and that rather than turning heat down in the market, it has cut off the flame for people wishing to trade up.

To understand their effect on the market, it is important to look at how these new borrowing requirements are structured. 

First-time buyers can still borrow 90% of the purchase price of a house up to a maximum of €220,000. Anything above this figure only qualifies for 80% funding. 

This cooling measure is having the desired effect amongst first-time buyers. 

However, second-time buyers can only borrow 80% of the entire purchase price as the 90% facility up to a ceiling of €220,000 only applies to first-time buyers. 

What is becoming clear is that in particular parts of Dublin, mainly the city centre and south Dublin, this is a bridge too far for second-time buyers. 

The primary reason for the introduction of the increased deposit requirements was to take some of the heat out of sectors of the residential markets which had seen noticeable increases over the previous 15 months. 

As is synonymous with capital cities in many rebounding property markets, Dublin had experienced the most significant increases in values, with properties increasing by up to 40% in some locations. 

The Central Bank intervention in February 2015 was well intentioned and as a direct result we are now witnessing a slowdown in the increase in property values – and a decrease in some cases. 

Recent market prices have also been influenced by the ending of the seven-year capital gains exemption relief period and the expiry of six-month loan approvals issued under the previous borrowing requirement structure.

It is now evident that while property values throughout most of the country are now static or experiencing minimal increases, values are now falling in some parts of the capital as highlighted in the recent REA Average House Price survey where Dublin prices were down 5% in Q2. 

Our recent survey showed that the average price of a house in Dublin is now over €362,000. 

A typical couple who bought an average small house during the boom may have a mortgage of €330,000, and, hopefully, no negative equity.

Let us say they identify a larger home they would like to purchase for €440,000.

Under the previous structure they would need a combined gross annual income of approximately €80,000 and would need to provide 8% of the purchase price of the property which would total €35,200. 

Under the new borrowing restrictions they can only borrow up to 3.5 times their combined annual gross salary which would need to be in excess of €100,000

However, where the real challenge comes in is the deposit requirement which has now gone up to €88,000 – that is €52,800 more than previously.

This is a net figure which would require a borrower to earn an extra annual gross figure of approximately €90,000 – putting the next move on the property ladder beyond the means of most average families.

We are seeing that this restriction is starting to have a profound effect on the property values above the €300,000 mark. 

And while there is an acute shortage of new homes on the market we may continue to see pressure on values over the next 12 months as people will not be in a position to raise such large deposits. 

Many people who had intended to sell or look for something larger will now simply stay put and others may postpone moving plans for a couple of years.

While values outside the capital are much lower, the effect of these restrictions will still be felt, but to a much lesser degree. 

I believe the Government should address this anomaly in the market and Real Estate Alliance will be making a pre-budget submission on this issue. 

There was real merit in the Central Bank's initial intervention, however this needs to be reassessed as it is now alienating the second-time buyer and will continue to exclude them from the market not alone in Dublin but potentially throughout the rest of the country. 

We are proposing that the Central Bank would retain the current price ceiling of €220,000 but bring second time buyers into the net, allowing them to borrow 90% of the purchase price up the ceiling of €220,000 with a maximum of 80% available on monies above this. 

If this was the case, the deposit required for our sample couple would drop from €88,000 to €66,000, a saving of €22,000

The indications are that the annual supply of new homes required as a result of our demographics may not be satisfied nationally over the next two years.

However, if the current regime is retained it will act as a significant barrier to those looking to move up the property ladder, freeing up homes in the vital entry sector.

Philip Farrell is CEO of Real Estate Alliance