- Posted by Michael Griffin in Uncategorized
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2020 has been a year to memorialise in the most traumatic sense. A global pandemic and several public lockdowns have played havoc with people’s lives and well-being. The economic impact of the pandemic has hit certain sectors such as hospitality and retail hardest. The construction sector has faced difficulties too. The supply chain of both new & second hand residential property is severely choked both locally and nationally. Economically the country is still endeavouring to get to grip with the unfolding consequences of COVID 19. Nearly 1 year into the pandemic, the property market is in a state of flux.
Reflecting back to March 2020 as the pandemic began to unfold, the reaction to the first lockdown by ‘would be buyers’ was one of uncertainty, greeted by panic. Buyers, sellers, agents – all stakeholders: struggled to interpret the magnitude of a lockdown on the economy and the property market. Forty-five per cent of properties that were ‘sale agreed’ at that point with Griffin Auctioneers either fell through or were ‘put on ice’. Nobody could possibly forecast with certitude the impact of a pandemic on the property market. The headlines were grim, doomsday scenarios were projected and personal doubt about the stability of our way of life was ubiquitous in those days, weeks and months that lay ahead. The remnants of the financial crisis loomed large. Effectively what unfolded was a ‘freezing’ or ‘dormancy’ of the residential property market both locally and nationally.
Analysing the data from the property price register of properties registered sold in the Tramore area, for the period commencing March 1st 2019 and ending July 31st 2019, and for the same period in 2020, the transaction of properties sold fell by 31% due to the lockdown. With the property market effectively dormant there were very few properties listed from March 2020 to June 2020. (Griffin Auctioneers, did lead the way introducing cutting edge technology enabling virtual tours for all our properties and some were successfully viewed, negotiated & sold online). From June 8th 2020 when restrictions lifted for the property & construction sector, the demand to purchase homes, both new and second hand was unprecedented. The introduction of ‘remote working’ by employers, to facilitate employees working from home, presented opportunities for families and young single millennials to seek more affordable housing outside of the capital cities like Dublin & London. Hotspots such as Tramore, Co. Waterford, rich in amenities, accessible and affordable, attracted motivated buyers who moved speedily to secure homes. The lockdown had enabled those who had the fortuitousness of working remotely save for deposits for mortgages and the pillar banks having fortified a solid position during the pandemic were willing to lend to those that fulfilled the criteria.
The Irish Property Register recorded 186 transactions of properties sold in Tramore, Co. Waterford throughout 2020. In fact, only 166 of these transactions have taken place within the Tramore town boundary itself (20 of those are based in Waterford City). Comparatively up to the same point in 2019 there were 193 properties registered sold on the register, (applying the same method excluding Waterford registered sales) there was a 10% decrease in total property sales transactions between 2019 and 2020. The Daft.ie 2020 Q4 Housing report states that supply fell a third, with fewer than 4,600 properties on the market in Munster on December 1st 2020, down from almost 6,800 on the same date a year ago. The report further outlines that transactions throughout Munster, in the year to September 2020 than the previous 12 months were down 14%. Ronan Lyons assistant Professor in Economics, Trinity College Dublin pronounced that ‘the fall in the construction of new homes led to a reduction in the volume of homes going to market resulting into an unprecedented scarcity of homes for sale.’ Ronan Lyons asserts that ‘the housing market is – as the name suggests – a market and the laws of supply and demand are powerful descriptors of what is going on. The lack of supply – coupled with demand for housing holding up remarkably well this year – has translated into strong increases in housing prices, especially in the second half of the year.’ Lyons furthers the point by stating ‘In Dublin, for example, where there were 20% fewer homes available to buy on December 1 this year compared to the same date in 2019, average list prices rose by 7.2% year-on-year.’ This analysis is evident in the property market in Tramore where listings of second-hand homes for sale are at an all-time low and the construction of new homes is not keeping up with the demand from buyers. The sold price of a second hand 3 bed semi-detached house increased by 8% in some cases throughout 2020.
Table 1.1 below is a snapshot of Asking Prices across Waterford City and County.
|1 bed apartment
|2 bed terraced
|3 bed semi-d
|4 bed bungalow
|5 bed detached
|1 bed apartment
|2 bed terraced
|3 bed semi-d
|4 bed bungalow
|5 bed detached
Patently a lack of supply continues to be the primary driver of house price inflation. There is a severe shortage of new homes actively under construction in the county. Factors such as prohibitive land values, limited shovel ready sites, restricted access to development finance, increased development levies (Irish water) and structural failings in the planning system combine to limit the supply of new homes.
Table 1.2 Irish Property Register – Tramore, Co. Waterford 2020
|% of total transactions
|€0k – €99,000k
|€100,000 – €199,000k
|€200,000 – €299,000k
|€300,000 – €399,000k
|€400,000 – €499,000k
|> – €500,000
Looking at the property market in Tramore, Co.Waterford, Table 1.2 above breaks down the percentage of sales transactions per €100,000 price bracket up to €500,000 and above. The most concentrated segment €200,000 – €299,000 consisted of 48% of total transactions, with 45% of these purchases transpiring in the new homes market. As the ‘sole selling agent’ for S.E Construction for the final phase in Cluain Larach, Knockenduff, Tramore: Michael Griffin noted that 85% – 90% of property sales were allocated to first time buyers, this is mainly attributed to the assistance of the Help to Buy Scheme. The scheme assists FTB’s (first time buyer’s) with the deposit required to purchase a new home, by giving a refund of income tax and DIRT tax paid in Ireland over the previous 4 years. Borrowers can claim a maximum of 10% of the value of the property or €30,000 whichever is lower (see https://www.revenue.ie/en/property/help-to-buy-incentive/index.aspx). The Central Bank reported that new mortgage lending rose by €1 billion to nearly €9 billion last year. This was the largest annual increase since 2009. Even though only 2% of transactions occurred in excess of €500,000, options to purchase properties have been limited in this category due to the lack downsizing options available locally. Griffin Auctioneers achieved the strongest sales results in that category, with Michael Griffin successfully negotiating and selling a range of highly sought-after homes from Carrigeenlea on the Cliff Road to the Coast Road, Newtown and the Old Waterford Road in Tramore. With keen interest from abroad and nationally, there is pent up demand from cash ready buyers ready to acquire ‘one-off’ homes in the centre of town, the Cliff Road area and in the more established parts of the town such as The Doneraile. Expect to see some strong numbers posted next year into 2021.
The pandemic has not halted the rise in property values but has inflamed the symptoms of a chronically undersupplied and disjointed housing market. 2021, already amid another lockdown, is encountering deepening shortages in the both the supply of new homes to market and the availability of properties in the rental sector. Ronan Lyons summarises the Q4 2020 Housing Report by saying ‘The sale segment had been improving in the late 2010s, with the construction of new homes helping the second-hand segment match the likely capacity of owner-occupier mortgage demand and prices stabilising as a result. Covid-19 has, however, disrupted this. Policymakers ought to hope that this disruption is temporary, and that the housing system returns to some better semblance of capacity meeting underlying need. Decades of strong growth in the need for housing are likely on the way.’ And that is quite the difference from 2008 where we had an abundance of supply and too much credit.
Commentators in the media are quite right in saying – that it is different this time – with reference to an embryonic housing price bubble. It is remarkably different now, the consequences of not ramping up the supply of new homes for both the private and social sector will be devastating on another generation of our citizens. The construction sector must lead the way in not only rebuilding the economy after the pandemic but also rebuilding people’s lives. Lyons, concludes by saying ‘supply, supply, supply must remain the policymaker catchphrase.’ I strongly agree with that statement, it just might fix it! Let’s hope so anyway.
Thanks for reading. Wishing each and everyone a healthy 2021. Yours sincerely, Michael Griffin.