by Marian McQuillan
Quillsen Director Marian McQuillen spoke with The Independent newspaper recently regarding how the property market is shaping up for 2017. Read the full article to learn Marian's thoughts on investing and trading-up in 2017.
How do you see the Irish residential market behaving this year? (2017)
The market will continue to be heavily influenced by a shortage of supply and as a result the pressure on prices will continue to be upwards. Whilst we anticipate there will be more new builds and more stock, it will take a while for this to filter through the system and we expect demand will still outstrip supply for the foreseeable future.
The new help to buy scheme and the relaxation of the central bank rules will add to the upward pressure on prices. However, general affordability will also be an issue and this will act as a counter balance to that upward pressure. Overall we expect prices to increase in the region of 5%- 8% in 2017.
With rising prices in Dublin we also anticipate increased movement of buyers towards the M50/commuter belt.
In what locations do you expect to see most capital value growth?
We expect to see capital growth in all locations in the greater Dublin area, but in particular in prime residential locations close to good public transport, schools, shopping and within easy reach of the city centre and all locations along the Dart or Luas lines.
We expect significant capital growth in properties priced up to €500,000 - aided particularly by the relaxation of the central bank rules and also the fact that the supply/demand imbalance is greater at this price level.
Are prices static or falling in any locations that you can think of?
Prices in general in the Dublin area are definitely not falling. At the early part of 2016 apartment prices were pretty static but increased somewhat – maybe around 5% in the latter part of the year. Strong demand in the family home market, (primarily 3 & 4 bed semis in mature residential locations), has resulted in increased prices throughout the latter part of 2016 and we envisage this continuing into 2017.
Higher value properties, €1.5m plus, have shown slowest growth largely because of a smaller number of buyers being prepared to trade up. We believe that in the main this is because trader uppers are more cautious about indebtedness and are making improvements and doing extensions to their existing properties.
What impact (if any) do you think the combined effects of last Budget’s Help To Buy scheme combined with the Central Bank’s end of year tweaks to its lending regime will have on the market?
The prices for new build starter homes will increase. The changes will also increase supply of new housing as developers will be more confident that they will have willing and able buyers for their units at that higher price. However in the short to medium term the supply side of the curve will not be adjusted quickly enough to meet current demand.
In your experience, what percentage of buyers are paying cash? Do you think this will rise or fall this year?
Approx. 44% of our sales were to cash purchasers. These comprised largely investors and pension funds. As there is a finite pool of cash buyers we would expect the percentage of cash buyers to decline in 2017.
In your view how is the supply side of the residential property market sitting at the moment?
There is a chronic shortage of homes for sale and the number of houses for sale has reached a 9 year low. With the number of government initiatives introduced to address this we would expect perhaps a slight improvement in 2017, although we fear it will still be a long way off what is needed to correct the supply/demand balance.
If supply is at a record low right now why aren’t enough people selling?
There are a number of factors affecting those considering selling. Many potential sellers are still in negative equity despite a rise in prices over the last few years. Lending criteria, although somewhat eased with the changes to the Central Bank Regulations announced recently is still very challenging.
Many who would previously have considered selling do not have the appetite for risk ( a hangover from the bust & subsequent recession ) and are instead spending smaller amounts of money to extend and improve their existing homes, where possible.
A significant factor for those on tracker mortgages is that if they sell they may lose them.
Is it a good time to trade up? State why?
Yes we believe it is a good time to trade up – particularly if your budget is €1million plus. Higher end properties have not increased as much in percentage terms, fine family homes can be purchased with good gardens and in good locations at more attractive prices than heretofore. In addition, many of these homes had been significantly upgraded during the Celtic tiger years and are in turnkey condition.
In your view, will there be enough new homes to meet demand in 2017?
No we do not believe that there will be enough new homes to meet demand in 2017. An estimated 30,000 units per annum are needed to meet current demand. Developers are still having difficulties raising funding. The planning process is slow and unwieldy. Much of the proposed new builds have not yet even broken ground. Due to the emigration of people with building skills there is now a shortage of skilled labour in the construction business.
Is there a danger of another property bubble forming as some are claiming?
We think it unlikely that another bubble will form in the short to medium term. There is more prudent lending in place now compared to 10 years ago. Although the deposit requirement has been reduced to 10% for first time buyers, it is still necessary to meet the 3.5 times salary requirement. This in our opinion is central in avoiding another bubble. The central bank is continuing to monitor activity and is ready to tweak the rules if there is any sign of another bubble.
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About the Author
Finding a new home can be one of the most daunting experiences in many people's lives but I believe we provide a service that helps families and communities, keeps the domestic economy moving and keeps businesses thriving.
As one of the Directors of Quillsen I wake up every morning invigorated and excited about the day ahead. I love every part of estate agency. I'm a qualified and experienced accountant but I was drawn to property sales during my career and have never looked back.
The success of Quillsen is founded on our expert and professional staff. We take pride in the service we deliver to buyers and sellers. We, as a company, communicate effectively with all clients (buyers and sellers). I hope you find my blog interesting and informative, and I hope it is a reflection of the helpful service we provide to all that come through our office doors or visit our website.