Monday, January 28, 2008

A Buyer’s Market?

According to everyone in the industry, I’ve happened upon a great time to enter the property market. Comments from estate agents and pundits are constantly reinforcing the message that now is the time of the cheeky offer and that opportunities abound for the savvy investor.

But I’m not an investor - I’m a wannabe homeowner. This curtails my house selection somewhat as a good price is not the only characteristic I’m looking for.

To be clear, I’m looking for a large two-, or small three-bed house in any one of about four areas relatively close to the city centre. My budget is, according to all the latest reports, ample enough for me to secure such an abode.

However, I’m increasingly finding that in the time of the buyer, no-one’s selling - at least not at realistic prices.

If I sought an unoccupied apartment on the outskirts of Dublin, or a newly built house in the commuter belt, I would surely profit from the much publicised drop in prices. However, I’m discovering that this drop in prices isn’t being consistently applied to second-hand homes in prime locations.

The main reason for this seems to be that I’m trying to buy from those standing one rung further up the property ladder. In the same way that my mortgage approval sets pre-defined limits on my spending power, the price originally paid by vendors for their home and the equity it represents for them sets limits to what they will expect and can accept – and today’s prices appear to be too low to many of them, at least the ones I’ve been dealing with.

So if no-one’s selling, are prices actually dropping? Reading the Sunday Times ‘Home’ supplement yesterday, I was given the news that, in one of my target areas, the two-floor over basement houses have dropped by 30%. But the Sunday Times admits that this evidence is anecdotal and based on the opinions of agents. The scientific reality I’ve experienced is that facing a price of cut close to 30% combined with record rental incomes and a prediction that the market will begin to pick up in a year, vendors are more likely to consider becoming landlords than selling below their expectations.

So the pattern I’m following begins with a suitable house coming on the market at a mid to late 2007 price. Upon contacting the agent, I’m told that while the vendor may accept a slightly reduced offer, if they fail to achieve close to the asking price, the property will go for rent.

So if nothing’s selling have prices actually dropped? Is ‘buyer’s market’ just a positive way to describe a stagnant market, or does it just depend on what you’re buying?

If the Sunday Times based their information on sales agreed and achieved prices, I’d guess that the number of these houses sold with almost a third slashed off their prices would constitute too small a sample size to be taken seriously by any statistician.

And, I’m worried that this anecdotal evidence feeds the market stagnation. If you’re told by your Sunday newspaper that the single property you own has dropped by 30% in the last few months, you will surely be less likely to put it on the market, whereas a keen purchaser like myself may judge it as only having fallen by 15% in value.

This is like the few (but much publicised) houses in South County Dublin that sold after a €100,000 drop in price - suddenly anyone in the neighbourhood with plans to move thinks again.

At some point a needy vendor of a probate sale will fall into my lap, but realistically I expect to be house-hunting for quite some time. During this time, my sympathy will lie with the estate agents who are arranging and attending so many viewings for houses that will probably end up being up for rent.

1 comment:

Anonymous said...

Very interesting, I think you hit the nail on the head. Vendors need to wake up and smell the 'reduced to sell' coffee!
Disgruntled possible buyer.