The uneconomical cost of building
represents a major threat to the health of a property market that has only
recently returned to normality, according to Real Estate Alliance.
The price of an average three bedroom semi
has risen by just 1.32% nationwide in the first three months of 2015, with
prices dropping by over -6% in one area of Dublin, according to a national
survey carried out by the group.
The Real Estate Alliance Average house
index concentrates on Ireland's typical stock home, the three-bed semi, giving
a picture of the property market in towns and cities countrywide.
The average semi detached house nationally,
including Dublin, now costs €187,153 the latest REA survey has found – a rise
of 16.23% over the past 12 months.
However, the average house has risen by
just 1.32%, or €7,005, across the country over the December 2014 figure of
€184,713 – and the lack of a supply of suitable housing is a feature of the
market across the country.
“There is an acute lack of supply of
three-bedroom family homes because it is still not financially viable in many
areas for builders to construct homes and make a profit,” said REA Chief
Executive Philip Farrell.
And while Dublin led the way in the market
recovery last year, prices have fallen by -0.28% in Dublin city and county in
the opening quarter, where the average semi-d now stands at €352,500.
“Following the Q4 slowdown, Dublin is now
feeling the joint effects of the abolition of the Capital Gains Incentive and
the and the introduction of increased deposit requirements by the Central
Bank,” said Philip Farrell.
“However, in areas of the capital where
average values are below the €220,000 threshold, strong demand still exists
from both first time buyers and investors.”
In Skerries, North Dublin, prices have
dropped by €20,000 in three months, with the average semi detached home now
costing €290,000.
REA agent Dermot Grimes says the Central
Bank’s new deposit rules have definitely had an impact in the market, but
buyers are also happy to take their time.
“Prices have come back to mid-2014 levels.
The market has stagnated due to the immediate impact of the new lending
restrictions, allied with the emergence of a more cautious buyer who is
prepared to wait for the right house,” said Mr Grimes.
In Rathcoole, REA McGee report a €10,000
drop in prices since December to €320,000, while REA McDonald in Lucan state
that prices have fallen by -1.79% in the west side of the city due to lack of
supply of suitable housing.
However, while demand for smaller 3 beds and
apartments is strong, Barry McDonald from REA McDonald expects the market to
rebound with signs of building sites in full swing fuelling demand.
In a complete shift in the market, the
biggest increases over the last year have come from what is termed Tier Three –
the country areas, outside of the pale and the major cities, which have gone up
by 17.28%, ahead of Dublin city’s 17.18%, and 14.82% when Dublin city and
county are combined.
Taking a view over the past six months, property
price rise rates in the rest of the country (5.1%) have more than trebled that
of the capital (1.55%).
In the opening quarter this year, there
have been significant increases in Carlow (7.50%), Kilkenny City (7.41%),
Waterford City (5%) and Wexford (8%), while the rise in sterling has seen a
jump in property prices in Bundoran in Donegal of 7.69%.
While uncertainty in the market over the
Central Bank’s new lending deposit restrictions has played its part, Real
Estate Alliance believe that supply in the market is the biggest issue that the
Government needs to address.
“Our survey is taken around the country,
and in almost every case, supply is the defining factor,” said Philip Farrell.
“For example, there will be a demand for
10,000 new homes in Dublin this year and there will only be 6,000 built.
“In country and commuter areas where the
average value is below €200,000, supply of new homes will remain reduced even
if lands become available due to profitability issues for developers who need
houses to sell for above that mark.
“This is caused by the current high cost of
construction which is exacerbated by the significant taxes which are payable on
a new home (28% of the cost) and the recently increased building regulations.
“Until the costs of building are lowered,
or the market takes an unlikely jump, we are looking at being unable to satisfy
the demand that exists in the market.
“We are also seeing a series of micro
markets opening up within counties such as Meath where Trim (12.9%) has shown a
massive rise in the past three months while Ashbourne has actually fallen
(-0.71%) in Q1.
“Ashbourne had previously shown growth in
the early part of 2014, while Trim is now firmly in the focus of a new wave of
commuters and showing its first significant rise.
“It now takes six weeks to sell the average
house in Dublin, a week longer than it did in September 2014, while the
situation in Tier Three (the rest of the country) has reversed, with time to
sell dropping from seven weeks to six on average.”
The rise in mortgage buyers has continued
across the nation, with cash purchasers falling from 50% of the market in
September 2014 to 42% at the end of March 2015.
In Dublin, 70% of purchases are now funded
by mortgages, an increase of 13 points from six months ago.
However, in the Tier Two areas of the
commuter belt and the major cities, cash buyers form 43% of the market, down to
combination of cheaper prices and the influence of the strength of sterling and
returned emigrants.
“With the new regulations coming in, we are
seeing commuters starting to move out further again in almost a second
migration,” said Philip Farrell.
“In these pockets of localised demand in
the commuter belt, we are seeing first time buyers now starting to look at the
further extremes of Tier Two due to the fact that they will always fall under €220,000.
“Many of these have loan approval from 2014
which is due to expire in the next few months and we are seeing a “use it or
lose it” scenario where we have a stock of new housing in commuter areas.
“Investors are starting to look at rental
properties again, which we can see in areas such as Tallaght (+4.55% in Q1)
with more affordable house prices but significant rental demand.
“Rental demand is only going one way due to
many people being in a holding pattern and an Increase of 10-15% in 2014 could
quite possibly be matched in 2015.
“This is happening in a more consolidated
way as the amateur investor has been largely removed from the market.”
Ends
