Cash is king in housing market

Tuesday 14 May 2013 10.02
Brand new house price register shows how property prices have fallen
Brand new house price register shows how property prices have fallen

Four in 10 house purchases are now made in cash as the lack of credit in the mortgage market continues to impact property prices.

New figures from estate agents Sherry Fitzgerald also show there is so little activity in the housing market that executor sales now account for 23% of all sales.

It says the quantity of stock on sale has fallen 25% year on year and puts the amount of cash transactions down to a lack of mortgage lending by the banks.

“Looking over the past 10 or 15 years, there were a negligible amount of cash buyers. I would say 95% to 98% of buyers were mortgage financed,” said Marian Finnegan, chief economist with Sherry Fitzgerald.

“Cash buying is a notable trend. In the last 18 months cash has been coming out from beneath the floorboards and this is borne out by the property price register. At the very upper end of the market - €2m plus, it is almost all cash,” said Finnegan.

She said the banks need to take note of the fact that people who have cash are willing to invest because they think they are getting value for money.

Sherry Fitzgerald is forecasting around €2bn in mortgage lending for 2012 compared to €40bn in the boom. It needs to be trending towards €10bn for the market to stabilise completely.

But she believes the freefall in prices is coming to an end. “I think in Dublin, there appears to be a bottoming out with Cork and Galway three or four months behind,” she said. Elsewhere, however, there were what she called “supply side” issues particularly in counties with ghost estates.

The estate agent’s quarterly data show the property crash has seen national house prices fall in real terms by 63.4% in real terms since the peak in 2007

Property price register shows how far market fell

The launch of the long-awarded national property price register has already proved to be one of the country’s most popular sites proving our love affair with bricks and mortar remains undimmed in the wake of the one of the world’s worst property crash.

With data for just 53,000 properties nationwide, it isn’t a comprehensive chronicle of property prices, but it has been welcomed as a start which will help everyone – sellers and buyers alike – get the transparency on sales data.

The register, compiled by the Property Services Regulatory Authority includes all sales since the beginning of 2010 with most activity in the capital.

A quick trawl through the data gives firm examples of just how bad the property crash has been.

From Ranelagh to Clontarf, then and now

For example, a modern house on a development on 40 Northbrook Avenue in Ranelagh sold for €353,300 in January 2012.

The three-bed terraced 100sqm house was advertised for sale at £370,000 and in the boom would have been unlikely to go for anything less than €600,000.

Selling for a comparable price, at €330,000, is a three bedroom house in Clontarf, Dublin 3 at 28 Mount Prospect Drive seen here on myhome.ie

In 2011, property watchers posting on the website www.thepropertypin.com noted the original asking price was €445,000

In the millionish euro bracket is this house in Castleknock in Dublin – 25 Georgian Village which went for €980,000 as seen on myhome.ie. It is a five bedroom detached house, approximately 3,000 square feet of accommodation with four reception rooms, and five bedrooms, three of which are en suite.

Again, the www.propertypin.com has some interesting historic data.

Its posters have a link to a report in the Irish Independent dated July 17, 1998 which says auctioneers “Gunnes secured £570,000 for 25 Georgian Village, Castleknock.”

Four years later in December 2002, the house was sold for close to €2m. The Irish Times reported: “A five-bedroom detached house, 25 Georgian Village, Castleknock, Dublin 15, was withdrawn at E1.8 million and sold after auction for a higher figure through Turley & Associates yesterday, virtually the last auction day of the year.” http://www.highbeam.com/doc/1P2-24642160.html

So while the 2012 sale price of just under €1m would bring tears to the eyes of the 2002 owner, where he or she the vendor, the cost of acquiring it is still substantially higher than in 1998 when Ireland’s property fortunes started to change.

Also at the higher end of sales is 30 Grosvenor Road in Rathgar, Dublin 6 which according to the property price register sold for €780,000 in April, 2012.

The Irish Independent in 1998 reported that this “gem” sold for €461,000.

Considering inflation, the price achieved 14 years later won’t have represented a huge growth in value. (According to ESRI figures, between 2000 and 2008, annual inflation in consumer prices, as measured by the CPI, meant that the average price level rose by 34.7 per cent before falling back again to 2007 levels in 2011 as prices were pushed down to try and stimulate lack of demand).

Cork house sells for 2009 price

In Cork, one of the higher end properties sold this year was No 17, The Paddocks in Douglas which changed hands for a handsome €1.6m according to the property price register

Not so long ago The Examiner was gushing about this “race-inspired” property which was launched in the 1990s when the bigger houses were on the market for €120,000, something of a “scandal” apparently at the time.

No, 17, The Examiner reported in 2009 was put on the market by Savills at €1.6m. It is not known if that was achieved, but the market was already two years into a decline by then and the banking crisis underway.

If it was achieved, that’s good news for the owners. With national house prices down around 50% on the peak in 2007 according to the latest CSO figures, then this property may have been one that was the exception that proved the rule.