Property: Dublin

Property editor Shane McGinley looks at how the Irish capital is faring.

Dublin’s destiny
With Ireland suffering from a recession, and the end to the boom years of the property market, we take a closer look at what’s in store for 2009

When it was first announced that Ireland had fallen into recession I was at a meeting in London’s Canary Wharf. Emerging from the Underground, to my left newly-unemployed workers milled around the Lehman Brothers building and to my right several men in suits gulped down espressos as they looked at stock notices passing over their heads, all with bright red arrows pointing downwards. A newspaper vendor was proclaiming a large bank was shedding staff, but the big business story was that Ireland’s Celtic Tiger was dead – the dreaded “r” word was now a reality and the days of people queuing up outside Dublin estate agents for the chance to buy an apartment were officially over.

Reading economists’ and analysts’ reports recently, some do point to a light at the end of the tunnel, but before we look at how to get out of this let’s first look at the stark realities that Dubliners presently face. According to the Permanent TSB / ESRI House Price Index, in the first nine months of 2008 average national prices fell by 7% and year on year they were down 10.6%. In Dublin, average prices performed moderately better, falling 6.6% and 8.4% in the same periods. The average Dublin house price has now fallen to €371,288, which is still nearly 40% higher than the average national price across Ireland.

For years the Irish were seen as the big spenders in property, both at home and across the globe, but last year this all changed. According to Savills Ireland head of research Joan Henry, Irish property spending in 2008 fell to €15 billion, down from €45 billion in 2007 and a record high of €54.4 billion in 2006.

Agents at Hooke and MacDonald estimate the correction is as much as 30% on the peak experienced in mid-2006. In Dublin, the number of new homes started was down 42% in 2008 and there are about 6,500 unsold homes in the capital, which represents about 1% of total stock. But the figures do show that Dublin only accounts for 20% of the total unsold stock in the country, indicating that while things are bad in the capital the property downturn has been felt harder in rural areas of Ireland.

For developments that did get underway their prices were slashed to much more reasonable levels – a move no doubt welcomed by struggling buyers. Kathy Flanagan from Lisney New Homes reports that the Harbour Court project in Dun Laoghaire – launched off plan in 2007 – saw prices of one- and two-bedroom apartments drop from €425,000 to €300,000, and from €550,000 to €410,000, respectively, reflecting changing market conditions.

Lisney director David Bewley says: “As the stock of houses for sale increased, some of these properties, especially apartments, were transferred to the lettings market, resulting in a noticeable decline in rental values.” He adds that the declines were as much as 20% in some areas. Meanwhile, figures from the Daft. ie Rental Report for the third quarter of 2008 show rents in Dublin have indeed declined, reporting single-digits falls.

The highest drops were witnessed in West County Dublin, where average monthly rents fell 4.9% to €1,165. Average rents in the city centre dropped by 1.1% to €1,200. For landlords, yields have remained static at about 4%, but the market power is now firmly in the hands of the renters.

Jobs in the construction industry have been shed, the economy is in recession and Gillian Nelis, property editor of the Sunday Business Post, says that “the banking crisis, soaring unemployment and extremely poor consumer confidence have all resulted in the market having one of its worst years in living memory, a fact underlined by a survey that found 80% of estate agents were selling less than three properties a month”.

OK, so we’ve looked at the gloomy headlines – but there are some reasons to smile, especially if you are a buyer or a renter. “In a market with too many rental properties, those wearing the buyer’s hat are now firmly in control. The message to those already in rented accommodation is: if you are at all unhappy with your rental circumstances, push for improved conditions, bargain for lower rents, or move to a better place,” says Dr Stephen Kinsella of the University of Limerick, introducing the latest Daft.ie report.

Hooke and MacDonald report that the market is now more accessible for first-time buyers than at any point between 2001 and 2006, and Budget 2009 also offered first-time buyers increased levels of mortgage interest relief. The Irish Bankers Federation also found that while the mortgage market is still slow, first-time buyers have increased their share to a record high of 23.3%.

There are also a number of fundamental human reasons why the market in Dublin and Ireland has to recover – because people still need and want somewhere to live! Ireland has one of the lowest new home completion rates per capita among other countries in the EU, while figures show that Ireland is presently experiencing one of the highest birth rates since the 1980s, with the population expected to hit nearly 7 million by 2060. On top of this, Ireland also had a net migration rate of 28,000 last year, so it’s simply not possible to stop building new houses.

If you are trying to sell your house these are very hard times, and if you are a renter these are great times. But eventually, like most Dubliners, you are going to want to buy your own place so it’s surely just a matter of time before the market has to recover. “Every storm has an ending,” says agency boss Ken MacDonald optimistically.

FACTS & FIGURES

AREA: 115km²
POPULATION: 1,045,769
CURRENCY: Euro
HOUSE PRICES: Average prices in Dublin have fallen by 8.4% year on year to September 2008, compared with 10.6% nationally.
RENTAL YIELDS: Rental yields in Dublin are about 4%, but average rents have dropped by 1%–5% across the city.
AGENTS: Contact Irish agents through the Irish Auctioneers & Valuers Institute (IAVI), which represents more than 2,000 qualified auctioneers, estate agents and valuers. For more information, visit www.iavi.ie
BUYING TIPS: Since 1 January 2009, all residential properties for sale or for rent in Ireland are required to have a Building Energy Rating (BER) Certificate. So if you are a buyer, renter or landlord make sure the relevant paperwork is in order.
RESALES: Second-hand homes are also down, but as they are generally cheaper than new homes they may appeal to those who only qualify for lower mortgages.
TAXES: Rental income is taxed at 20%, capital gains is 20% and stamp duty ranges from 7%–9% but is exempt on the first €125,000.
AVERAGE PRICES: The average price of a house in Dublin in September 2008 was €371,288.

Take Five
IN AND AROUND DUBLIN

Kensington Lodge, Dun Laoghaire
PRICE: From €295,000
DETAILS: A late-Georgian residence converted into apartments, with 82 units across three buildings. Less than 3km from the harbour.
Finnegan Menton, Tel: +353 1614 7900, www.finneganmenton.ie

Swan Lake, Dublin 8
PRICE: From €1.8 million
DETAILS: Two luxury modern homes with south-facing lawns, fronting onto the River Liffey and close to Phoenix Park, the largest urban park in Europe.
Owen Reilly, Tel: +353 1677 7100, www.owenreilly.ie

Hollywood House, Glenealy, Co. Wicklow
Price: From €9 million
Details: A Georgian house dating to 1760 with six bedrooms, a guesthouse and 20ha of land, located about 48km from Dublin.
Knight Frank LLP, Tel: +353 1662 3255, www.knightfrank.ie or
Colliers Jackson-Stops, Tel: +353 1633 3700, www.colliersjs.COM

5a Albany Court, Killiney
PRICE: From €1.1 million
DETAILS: Three-bedroom newly built house with luxury amenities, a manicured lawn with mature trees and timber decking, close to the DART train service to Dublin.
Owen Reilly, Tel: +353 1677 7100, www.ownereilly.ie

Butterfield, Rathfarnham
PRICE: From €925,000
DETAILS: This Southside scheme has one five-bedroom period house, two detached four-bedroom houses, and eight semi-detached homes with four different types available.
Lisney New Homes, Tel: +353 1644 0060, www.lisney.com

Been there done that

COMMUTING TO THE CAPITAL
Frenchwoman Claire Aumont on setting up home near Dublin

Interior designer Claire Aumont, a Ryanair frequent flyer between Dublin and her birthplace near Tours in the Loire Valley, was living in England in the early 1990s when she met her Irish husband.

“I was ready to move on and, of all the opportunities that presented themselves to me, Dublin seemed the best one,” she says. In 1992 they moved to the capital, and rented a tiny apartment in Ranelagh, close to the city centre where her husband worked. “It was so small you could watch TV from the bathroom,” she says.

Just over a year later, they decided to put down roots and settled on Dunboyne, County Meath, which at the time was fast becoming one of the major commuter towns being consumed by Dublin.

“Dunboyne is not far from Dublin, only about two miles from the border. My children go to school in Dublin, and I go there every day for work,” she says. “It is a modest semidetached house with four bedrooms. Back in those days bedrooms were small – they make them a bit bigger these days. Five years ago we converted the attic to give us some more space, and I use the entire top floor for my office because I also work from home.”

Claire’s father was an architect, and although at first she didn’t want to follow in the family tradition, she soon realised it was in her blood. She went to college, studied interior design and now has a thriving business. The fact that she also has two children makes working from home much more attractive, as her husband travels a lot for work.

Living in Dublin throughout the property boom Claire has experienced both sides of it. Since she has lived there, Dunboyne has twice been flooded, and she says it soon transpired that some of the housing estates were built on flood plains. Two years ago, she also discovered that a developer planned to build behind her house. Reluctant to have apartments overlooking her back garden she fought the plans and won. At the time she put their property on the market, which is when she realised the extent of the boom – the house they had bought for just over €54,800 in 1993 was now getting offers for over €500,000.

"It's a different world," Claire says of the Irish attitude to property. "The French aren't attached to land as much as the Irish. There is a history of ownership here that doesn't exist so much in France. There, people prefer to rent, feeling that there are too many ties in owning property.

“French people would not buy in Ireland, and I don’t know many who have bought in the last few years. The price of an ordinary house here, or an ordinary house in France is still huge. A French person would not dedicate that much of their budget to buying a property, even if they could afford it and were comfortable with their salary.”
For more on Claire’s design business, visit www.avenirdesigns.com and www.avenirart.com

Tips & debate

BUYERS’ AGENTS
You wouldn’t sell your house without a good estate agent, so you shouldn’t buy without an expert either, especially in this market, says Shane McGinley

It used to be common across Dublin and other EU cities to see queues of people outside estate agents, deposit in hand, waiting to hand over their cash. I even witnessed some who had stayed up overnight so they could get an apartment in a prime location. The market has now changed and there are thousands of properties up for sale, with estate agents now offering ever more imaginative incentives to try to entice buyers through the door.

When selling a house you wouldn’t think about not getting an expert estate agent to advise you; and when signing a sales contract abroad you’d be mad not to get an expert lawyer to look through it first – so when buying a house you should also get an expert to help advise on what will probably be the biggest purchase of your life. Paul O’Reilly from Property Seekers says that already about 85% of property buyers in the US use buyers’ agents – however the concept is new in Ireland and in the rest of Europe.

Carol Tallon from Buyers Broker Ltd in Dublin points out that while she charges a 1.5% fee she regularly secures buyers upwards of a 5% discount on the price they would normally pay, which she says justifies the service. She believes first-time buyers are the ones who could benefit most, as they usually pay about 8% more than mature buyers.

The theory makes sense, because buyers are negotiating with trained estate agents who sell day-in, day-out and know all the proven selling strategies. Tallon previously worked in law and her partner worked as an estate agent, so they are the people to send out into the market to do the hard search then go to battle on your behalf to get a good discount.

Take auctioneers, for instance. They are looking after their client and their commission, so it makes sense to have someone experienced fighting your end too.

“Auctioneers get a lot of bad press that they fail in their obligations to the buyer. But legally they have no duty to the buyer and they only represent one party – the seller,” says Tallon. “People say they have a moral duty to the buyer when they don’t, and if they did share their interest they wouldn’t be doing their job for the seller.”

So how does it work? Firstly, buyers’ agents do not sell property or receive payment of any kind from a seller. They are not connected with any sellers’ agents or auctioneers, and for that reason they should have access to every property that is on the market.

After a meeting to decide what the buyer is looking for, an agent will consider up to 100 properties and view approximately 10 of those before going back to the buyer. From that report, the buyer will decide which properties, if any, to view. The agent will then arrange a day of viewings.

After a suitable property has been found, the agent will negotiate the best possible deal in terms of price and draw up the paperwork. In relation to fees, buyers’ agents operate on a commission basis, which is on average up to 5%. They usually invoice their fee at the same time that they arrange the 5% booking deposit.
www.buyersbroker.ie / www.propertyseekers.ie / www.buyersagent.ie
Shane McGinley is overseas property correspondent for the Sunday Tribune.