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Quo vadis?, Brexit & the curious case of the price of a 3 bed semi…have a quick read.

Quō vādis? is a Latin phrase meaning “Where are you marching?”

Recently referenced and directed by Donald Tusk the President of the European Council to the British PM Boris Johnson in the Brexit negotiations. It dates back to biblical usage in the Christian tradition regarding Saint Peter whereby according to the apocrpal Acts of Peter, he fled from crucifixion in Rome at the hands of the government and meets the risen Jesus on the road outside the city. Peter then asked Jesus “Quō vādis?”, to which Jesus replied “Rōmam eō iterum crucifīgī meaning “I am going to Rome to be crucified again”.

At this juncture, entering a new decade and with the worst economic crash in the history of the state in our rearview wing mirror, it is pertinent to ask the same question in relation to our property market. Where are we marching as we enter 2020?

The recent Daft.ie Wealth Report 2019 H2 highlights the fact that the value of all residential real estate in Ireland, as of 2019 Q3, is estimated to be €519bn. This is an increase of 60% from the lowpoint reached in late 2013, when Ireland’s housing was worth just under €325bn. Most of the increase since late 2013 has been from average property prices rising again. Ronan Lyons, Daft.ie’s leading economist, argues the point that the figures from this latest Daft.ie Q3 2019 Housing Report show that the prolonged increase in housing prices is, in many parts of the country and for the time being at least, over. Inflation in listed housing prices nationwide was just 0.1% in the third quarter of 2019, while in Dublin inflation was negative, with prices 0.6% lower than a year previous. The economist goes on to say ‘this change in availability is, ultimately, driven by construction. There were almost 20,000 homes built between the middle of 2018 and the middle of 2019, twice the number built during the twelve months of 2016.

That’s good news, if correct! Now lets take a look at the rental market.

The Rental Tenancies Board Rent Index Q3 2019 highlights the fact that the year-on-year growth rate of the national standardised average rent increased to 8.2 per cent in Q3 2019. The quarter-on-quarter growth of rent prices also increased to 3.3 per cent in Q3 2019, indicating a further strengthening in the quarterly inflation. The report further indicates that affordability issues in the housing market are resulting in an increasing number of people moving into the rental sector, exerting upward pressure on rents. Worringly despite the increase in housing completions recently, the level of supply remains significantly below the level of structural demand.

Analysing the data closer to home through the Property Price Register, specifically Tramore, Co. Waterford. At the period ending November 2019 looking back to 2018, there are notable exceptions associated with the price of 3 & 4 bed semi-detached properties. The average price for a second hand 1050 sq.ft 3 bed semi-detached house had an average selling price of €229,250 in 2019 compared with an average selling price of €202,500 in 2018, a percentage difference of 12.4%.  Also the average price of a 4 bed semi-detached 1400 sq.ft had an average price of €252,500 in 2019 compared with an average selling price of €212,500 throughout 2018, a percentage difference of 17%. This is in sharp contrast with the national data mentioned in the Daft.ie report.

Delving further into the data for both 2019 and 2018 in Tramore, Co.Waterford , what stands out is the decline in the number of new builds that were registered sold. There were only 25 new houses registered sold in 2019 in Tramore, equivalent to only 14% of property transactions up to 31st November 2019. Whereby throughout 2018, the numbers were far greater with 56 units registered sold amounting to 29% of the total transactions for the year. Double the following years total. The property price register data further contradicts the national outlook outlined in the Daft report which suggested that construction numbers were increasing thus leading to a cooling of property prices in the market.

There are a number of factors attributed to the recent escalation in property values locally. Firstly, the price band for these houses is in the most concentrated segment of the market, with 47% of all transactions in 2019 in Tramore, in the €200,000 – €400,000 bracket. This is mainly due to affordability and accessibility to finance. Secondly, the recent stand-off between Irish Water and ‘Local Developers’ over the associated costs servicing new construction sites, has also led to a sharp decline in construction, which is evident in the published numbers. All the while, buyers are burdening the cost as prices increase on an annual basis.

It is quite clear that 2020 is the year where all stakeholders have an obligation to deliver the construction of new homes. Nobody wants to return to the scenes of devastation that reached biblical proportions after the last crash. Marching forward it is critical that the undersupplied housing sector is serviced, so we can reach a natural equilibrium in the market. ‘Build and they will come’ they once said. No! just build, they are already here and waiting.

Thanks for reading, yours sincerely Michael Griffin.

 

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