Quotes of the Week 30/05

“Hitting the very bottom of the curve is near impossible but we know the market has taken a hit. No one knows how far that hit is going to go but it won't last forever.” – Gary McCausland, property developer.

“The housing market remains critical to prospects in Ireland on an 18-month view. At least we are confident that we are nearer the end than the beginning. Residential investment as a percentage of the economy will be down to early 1990s levels by yearend 2008, and house prices have corrected some distance. But we do not see a bottom in 2008. It is vital that new housing sales overtake house completions. That inflection point will probably be reached some time in H1 2009.” – Davy Stockbrokers.

“House prices may fall 10.7% on average (12 months over 12 months) in 2008 followed by a further decline of 7.2% in 2009.” – Davy Stockbrokers

‘‘The adversely changed circumstances of the current private housing market to that of 2005/ 2006, when the bids were submitted, along with the significant additional costs of increased apartment sizes and new energy regulations, have rendered the whole concept of using the sale of private housing units to fund social and affordable housing and community services along with a balancing site purchase figure, unsustainable in the current market, despite the best efforts of everybody involved.” - Bernard McNamara.

"It wasn't just about rebuilding a few flats, it was about social regeneration" - Peter Ward, Chairman, O'Devaney Gardens Regeneration Board.

"About 10 days ago I was asked to go and see Ciaran McNamara in Dublin City Council, and he said to me 'we don't believe these PPPs are progressing, we've spent €27m and got nothing for it and we want to go a different route" - Bernard McNamara.

”We're going to have a third- or fourth-level campus, and we commissioned a design for a general hospital, so if people came to us they'd see how much land it would take up. This is not a dormitory town, it's an economic region." - David O'Connor, Fingal county manager.

Better late than early, when it comes to buying in our market.

Our anonymous buyer is wrapping up his house hunting activities.

Just over 6 months since I started viewing houses in earnest, I’ve made the decision to stop. It’s not what estate agents want from potential buyers at this time but I feel it’s the right choice for me to make. The way I feel about it is that not buying over the last half a year has saved me a lot of money – so why stop now?

I very nearly bought at the start of 2008, convinced that anything less than the asking price was a victory for me. Five months on, I’ve recently viewed a better house two doors down from that one I nearly bought, priced 50K lower. I’m confident that if the house in between were to come on the market at the end of this year, I’d stand to make a similar saving if I were to buy it then.

So isn’t that enough: postpone rather than pull out altogether? Wait until the end of 2008 and save 100K or approximately 20% of the value of a home? Maybe not when 2009 now looks gloomy from an economic perspective and when people have started talking about the possibility of a return to the depressing 80’s again.

This is where confidence comes in. Not many people in my shoes have confidence in the market at the moment, it seems to me, and the result is that we’re hesitating. But it could be worse than that. While many involved in the Irish property industry will point to the national media’s scaremongering as a cause of this, I must add that a lot of the industry’s own commentary has not helped. Though many responsible property professionals and economists carefully judge what they say, large sections of the industry simply churn out positive opinion and tell us all the time that “now is a good time to buy” or that “things are beginning to look better”. When these assessments are then later being revised and re-revised downwards, all such comments lose all credibility and damage buyers’ perception of the entire property market.

Additionally, the property market is feeling the effects of being touted as a good investment over the last decade. For most people in this country, including many first time buyers, purchasing property is a form of speculation, not a judgement based on lifestyle and affordability. Clearly, it would be better for the market were this not the case but after so many years of emphasising the potential value of the assets we live in, it’s impossible to shift the goalposts now.

My decision is basically an admission that I don’t think I’m capable of accurately judging when the market is going to bottom out and that I no longer trust anyone to tell me when that’s about to happen. The result is that I’ll have to judge the right time to buy from historical data such as TSB/ESRI indices which will invariably be a month or so out of date. The downside of this is that I won’t get prices when they’re at their lowest as the publication of such good news will see the rapid re-entry of people like me into the market and cause prices to spike shortly after the bottom has been reached. Still, it’s better to be a couple of months late then a year or so early … in this context.

And even then, I wonder could my nerves falter for other reasons, more about the panic of it all, the frenzy. What this country needs is a calm, stable market so that buyers such as myself can act rationally based on facts and figures. I would even go so far as to suggest a moratorium by the industry on economic predictions and that it just let people get on with the business of buying and selling their homes.

Another wedding invite?

My heart skipped a beat on Monday when I was picking up the mail and noticed the rough artisan-style cream coloured envelope that can only mean one thing - another wedding invitation.

To my interest (and relief), the envelope actually contained an elaborate invitation to attend the opening of Chesterfield at Cross Avenue - a new development from Avenue Homes, a subsidiary of The Naus Group, with HTMOR as the selling agent.

The invitation has a lone, real leaf affixed on the cover - one suspects from the gardens of Chesterfield themselves. It invites me to come and experience "life in the gardens of Chesterfield"- not to a mere new homes launch but a "garden party event".

With the location in Blackrock it's reasonable to expect an element of style to the campaign, but this is another example of just how far developers and their agents are prepared to go to get the attention of the house buying public. When business is slow, marketing needs to work twice as hard, as is evidenced also by the Chesterfield website which is currently putting the following proposal: "You know what you want from Blackrock living, so why not tell us?"

Newlyn's new approach to area information

Newlyn's brochures and marketing are always something of a departure, but the Tyrrells Brook brochure is very dramatically so in that it is not just an elaborate design feature that makes it stand out, but fundamental content.

All property brochures have sections about the local area and the amenities that might attract buyers to it, but they are usually quite stale, sometimes even just lists of shops, gyms etc.

For their Tyrrells Brook brochure, Newlyn approached a number of local people and with their permission photographed them in their place of work or at home and spoke to them about their thoughts on living and/or working in Edenderry.

The first six spreads of the brochure (after the opening landscape photograph) are given over to the portraits and words of the local people - including a teacher, a publican, a rugby player. The quality of the presentation is top-notch.

The effect is to give you a great sense of the place and a much more realistic one, not quite warts and all, but as close to it as a piece of marketing is ever going to go. It has the feel of the Seasame Street song, "People in Your Neighbourhood", and almost makes you look forward to meeting them when you're next walking down the street.

Why did nobody think of taking this approach before?

Design Factory designed. Penhire wrote. Ken Walsh took the photographs.

GAA teams sponsored by developers

Recently I have noticed that the number of GAA county teams that are sponsored by developers and builders, seem to be on the increase. Menolly (Meath), Ballymore (Wicklow & Roscommon) and McCabe (Louth) are an indication of this. Furthermore building products and services companies, such as Tegral (Kildare), Kingspan (Cavan) & FKM (Monaghan) are also involved in sponsoring teams.

Quotes of the Week 23/05

"I am delighted to be able to confirm that we certainly are at a better place than when we discussed the matter last October" - Ken MacDonald, Hooke & MacDonald

"The over-supply of available property is likely to mean that rents will continue to fall and at a time when main costs of living such as groceries and energy are rising rapidly, the news that rents are falling should be a welcome relief for renters." - Ronan Lyons, economist, Daft.ie

"It is far from clear what the effects of the NCA's media intervention in the house sales controversy will be. It is quite possible that attempts at resolving this issue in the full glare of the media may turn out to be counterproductive if further remedial action is not taken." - Fintan McNamara, IPAV.

"Millions of euro have been spent on ground testing, preparatory work and demolition on these sites, and much of the original housing has been knocked. This is going to leave parts of Dublin looking like Beirut." - Christy Burke, Sinn Féin group leader.

"The waiting lists for social and affordable housing in Dublin are the highest in the country and this deal collapse, due to Cowen's property crash, means that these people face an uncertain future" - Terence Flanagan, housing spokesman, Fine Gael.

"The adversely changed circumstances of the current private housing market to that of 2005/2006 when the bids were submitted, along with the significant additional costs of increased apartment sizes and new energy regulations, have rendered the whole concept of using the sale of private housing units to fund Social and Affordable Housing and Community Services along with a balancing site purchase figure, unsustainable in the current market, despite the best efforts of everybody involved." - Letter from Bernard McNamara & Co. to the Dublin City Council.

"We take the view that employment in construction will be almost 50,000 off its quarter one 2007 peak by the end of 2009." - FAS.

‘‘There are enormous opportunities for both HPEG [Beijing-based Heydey Property Enterprise Group] and Bannon clients in the Chinese market” - Neil Bannon, managing director, Bannon Commercial.

"It is necessary to have restrictions while construction is going on but I would like to see a more permanent solution, to make the city centre a much friendlier place to do business" - John Henry, chairman, Dublin Transportation Office.

Auctioneering signs and fines

In these lean times, when estate agents are keeping a closer eye on the bottom line, one cost that has come under increased scrutiny is the amount being spent on litter fines handed out for the erection of signage.

Alan Redmond, Redmond Auctioneers and president of the IPAV told us: “In recent times the local authorities have received many complaints because when times are harder and you’re trying to sell properties, it’s bad enough, but then being fined for just trying to do your work makes it even tougher.”

The two main instances where estate agents are found to be in breech of the act are when signs are placed at the entrance to estates rather then at the house in question and in rural areas where directional signs are placed at junctions. The punishment for breaking the litter act is a €150 fine, which, if not paid, will turn into a summons and possible prosecution.

To be exact, the litter act of 1997 says:

“19.

—(1) Where any structure or other land, door, gate, window, tree, pole or post is in or is visible from a public place, a person who is not the owner, occupier or person in charge thereof shall not—

( a ) exhibit or cause to be exhibited thereon any article or advertisement,

or

( b ) carry out or cause to be carried out any defacement thereof by writing or other marks,

unless the person is authorised in advance to do so in writing by such owner, occupier or person in charge or by or under any enactment.”

So signs cannot be erected on local authority lands and if erected at the entrance to a housing estate, the permission of the management company must be sought. Though the act states that the Gardai and local authorities have a joint role in enforcing litter standards, our enquires have shown no evidence that Gardai deal with the matter. Instead, they seem to have collectively kicked the matter to touch, allowing the local authorities to deal with the problem through their litter wardens.

One of the main issues raised among estate agents relates to the differing levels of enforcement of the litter act. Some Dublin agents have told us that they tend to receive warnings rather than fines while Michael Leyden, from Leyden Auctioneers in Ennis, who raised the matter on Joe Duffy's liveline last week, told us that he pays over €5,000 per annum in accumulated litter fines. He added that: “they’re down on you straight away around here but sometimes I go to Dublin by Loughrea, Ballinasloe and Athlone and by that route there are loads of signs up for months and months and nothing seems to be done about it.”

Leyden seems to be unlucky to be sharing a county with a particularly active environmental section. Last November, following the successful prosecution of two estate agents, Clare County Council put out a press release in which Cyril Feeney, Senior Executive Engineer with the Environment Section, said: "these successful prosecutions are a timely reminder to Auctioneers and Estate Agents of the implications of illegal advertising signs, which is contravention of the Litter Pollution Acts 1997-2003." Going a step further, Councillor Tommy Brennan, Chair of the Environment Emergency Services & Consumer Protection Strategic Policy Committee said "This [the prosecutions] is another success story for Clare County Council in eradicating litter in our County and the message must go out that it is an offence to litter and you will be prosecuted."

However, for estate agents, particularly those operating in rural areas, these littering offences are vital to business. Leyden explains that: “We have to put up a directional sign or an arrow sign pointing up a laneway or onto a secondary road or else no-one can find the place. We put that sign up at a t-junction or a crossroads and that’s where we’re getting fined. Of course, then the person selling the house is down on top of us – ‘you’ve no signs, how can you sell my house when you’ve no signs up about it’. When we tell them that they have to be prepared to pay €150 every week, they don’t believe us.”

According to Seamus Ahern, Administrative Officer in the Environmental Services Section of Dun Laoghaire Rathdown Council, litter wardens issue fines for any signs that they come across and then 21 days is allowed to pay the fine. He added: “We could take a direct prosecution but it’s rarely we do it just for a sign. The fine is incentive enough to take it down but generally we find they just move the sign to the property in question.”

Tony Maher from Kildare Tidy Towns has a slightly different take on things. “Where I’m coming from [a tidy towns point of view] it’s like a cancer, it spreads. If you get a load of auctioneer signs, the next thing you get is car sales signs, furniture signs, shops, anybody that wants to do business can nail up a sign … the bottom line is that when you see a sign up outside an estate and the house is in half a mile, they’re not advertising the house, they’re just saying ‘look at me, I’m great, I’ve this house for sale’. They put up the signs in the property to sell the property, they put up the signs on the main road to advertise themselves, not the property. There’s lots of other means of doing it, there’s publications, radio, internet.”

Interestingly, when discussing the standards of enforcement of this ‘cancer’, he added that “I’ve heard that sometimes if they get overwhelmed in the [environmental] office, the manager or the director of service will pull it. It’s quite common in Kildare for GAA summons to get written up and then pulled. They’ve prosecuted GAA people and when it gets to the office they tear up the prosecution.”

So is the number of fines being received simply a combination of the negative public perception of the auctioneering business and local council’s belief that the industry is awash with money? Michael Leyden certainly sees it that way: “The funny thing about it is there’s a sign in West Clare, a roadside directional sign belonging to the council themselves, that’s been pointing the wrong way for six months. It’s something that’s obvious and should be corrected straight away but they never see that. I’m someone trying to make a living, it’s a part of my livelihood but they see it as a soft touch, a money making exercise.”

He adds that: “We’re very careful about where we put the signs, we don’t have low signs, and we don’t like to cause a nuisance or obstruction. Sites are not made unattractive. They’re not unappealing and the main thing is that they’re not there forever; they’re not a permanent structure. They’re just temporary while a place is for sale and then ‘sale agreed’ goes up on it for ten days and that’s it and it’s removed.”

By all accounts the current regulations on this matter seem here to stay. Alan Redmond conceded: “I don’t think they’ll look at changing it in any way, they just treat signs of any substance as litter. I suppose they have a job to do but I think that certain exceptions should be allowed to the rule.”

Redmond adds that some people seem satisfied to operate within the status quo: “You could be fined for putting the sign up but you could get a couple of weeks out of it so they just treat it as a cheap form of advertising or marketing. Paying €150 for two weeks of prominent roadside advertising could be viewed as a pretty cheap form of marketing.”

Another tactic used by estate agents is the 'my neighbour's house is for sale' sign for which a token rent is paid to a roadside neighbour of a property being sold.

Knight Frank website

The not so old Ganly Walters / Knight Frank website has been replaced with a new-look site exhibiting all the latest web design thinking:

Quote of the Week 08/05

"Average national house prices fell by a further 0.7% in … This follows a similar reductions [0.8%] in February and [0.7%] in January.” – Permanent TSB/ESRI House Price Index

‘‘I am always amazed by the number of reports produced by the industry. They are meaningless, as a valuer’s assessment is obviously subjective. The basic ingredient for any index is that it is based on the selling price.” - Alan Ahearn, economist with NUI Galway.

"It's a total disgrace that he has allowed this to come about but also that he has totally backed away from closing the loophole, while he made such a mess of the residential stamp duty" – Joan Bruton, Labour finance spokeswoman.

"My predecessor didn’t ‘dither’ on stamp duty, he reformed stamp duty in the last budget and put in place an arrangement which in my view is entirely adequate in relation to stamp duty." - Mr Brian Lenihan TD, Minister for Finance.

“Our decision to withdraw is based on a combination of the uncertain economic market conditions and the planning risks associated with a project of that nature.” - Colm Whooley, finance director at Sisk.

‘‘We are in an economic environment where there are new realities. Banks are no longer comfortable with the gearing levels of around 80 per cent that were almost taken for granted on good quality projects, this time last year. In reality, they are moving down to between 50 and 70 per cent.” - Paul Fagan, head of consultancy and investment services, Farrelly & Mitchell.

“We forecast a 12% drop in house prices in Ireland this year” – Davy Stockbrokers

“The poor results bring to a close 23 straight quarters of positive performance [in the commercial property market], an unprecedented reversal that has dragged the 12 months total to the end of March to 4.9 per cent.” – The Irish Times.

“Every country in the world has a property tax and Ireland is no different from every other country in the world. We do it through a transactions tax called stamp duty but the idea that you can abolish all property taxes to stimulate this particular sector is misguided and I think we’re going to have to face up to that.” – Mr Brian Lenihan TD, Minister for Finance.

Minister for Finance, Brian Lenihan TD gives an initial indicator of his thoughts on stamp duty.

This morning, on RTE’s Morning Ireland programme, the new Minister for Finance, Mr Brian Lenihan TD gave an insight into opinions on Stamp Duty.

When it was put to Lenihan that his predecessor, Taoiseach Brian Cowen was widely criticised for ‘dithering’ on stamp duty, Lenihan responded by saying “let’s be clear about this question. My predecessor didn’t ‘dither’ on stamp duty, he reformed stamp duty in the last budget and put in place an arrangement which in my view is entirely adequate in relation to stamp duty. There was a problem with stamp duty - there was no progressive element in the stamp duty structure.

When the interview suggested to Lenihan that the market ceased to function for about six months due to his inactivity on stamp duty, he received an interesting response.

“No, let’s be clear about this. Every country in the world has a property tax and Ireland is no different from every other country in the world. We do it through a transactions tax called stamp duty but the idea that you can abolish all property taxes to stimulate this particular sector is misguided and I think we’re going to have to face up to that. As you know, most of our partners in the European Union have very substantial property taxes on private residential property. We don’t. We have a transactions tax called stamp duty. What my predecessor, An Taoiseach, did was he reformed that system in the last budget and made it quite clear that it’s not a disincentive for the sale of property and that’s the current position. I’m certainly not going to raise expectations in that department or respond to some kind of stimulated clamor about it.

Asked to comment on the OECD’s recent suggestion that that it might be a good idea to introduce some kind of property tax, Lenihan said: “There are no proposals in government to introduce a property tax. Effectively in Ireland, stamp duty is the property tax and if there’s an overwhelming popular demand to replace stamp duty with a property tax, I’ll certainly examine it. At this stage, it’s the current property tax we have, the outgoing finance minister reformed it in his last budget and I don’t believe it’s central to the current difficulties in the housing market.”

Talk to Joe!

Tuesday’s RTE Radio 1 Liveline show with Joe Duffy involved a hunt for the nation’s cheapest brand-new, circa 1300 sq ft, 3-bed, semi-detached property. In the end, it was more or less a tie between a 159K unit in Roscommon and a 165K turn-key in North Donegal.

Strangely enough, there wasn’t the controversy, uproar or recent buyers sobbing over negative equity that you’d expect from a Joe Duffy show on the property market. The premise of the show seemed to be that if you were an auctioneer with cheap or discounted property, you could ring up and advertise it live to the nation.

There wasn’t much time given to prolonged discussion of the property market as most of the agents who came live on the air were simply reporting prices or price cuts. The one overriding message that came through was ‘houses will sell when priced correctly’ and ‘we’ve some great value down in this neck of the woods’. Unsurprisingly, Dublin agents did not feature strongly.

The winner in the price cut category was a development registered with Sherry FitzGerald in Longford that had been cut from 365K to 250K. The agent concerned said that now that the price was right, he expected them to be sold within about 48 hours.

When speaking about the need for correct pricing, one agent made the interesting observation that prices had been artificially inflated at the beginning of the downturn by inexperienced auctioneers trying to get properties on their books. He said that many of the price drops we’re now seeing are the result of these previous overvaluations rather than further decreases.

Towards the end of the show, one eager auctioneer announced that while the show was on air he had called a construction company and received authorisation to cut prices at a development by 15K. A price cut was probably in the pipeline, but this way he got to announce it live to the nation. Joe’s pride at having someway instigated a price drop was palpable.

While prospective buyers outside of Dublin will have enjoyed the show, those of us house-hunting in the pale found it galling. Obviously, new homes with a price tag of less than 200K are enormously attractive but centralisation is an economic reality rather than a choice, and for most of us, paying 159K in Roscommon would make about as much sense as paying 32K in Rudrapur.

Daphne L Kaye's new website

Noticed Daphne L. Kaye's new website design. Even though it's only a version of many Web 2.0-type designs, not only is it a big improvement on their previous site, it is now among the best looking agent websites out there: the Web 2.0 templates are clean and professional and welcoming, so they work. Well done to Daphne L. Kaye and to Willows Consulting. Cleverly, the default url is now www.foxrockproperty.com now too.

Quotes of the Week 02/05

“While The Irish Times has endeavoured to ensure the accuracy of these sales results it cannot accept responsibility if this information, provided by estate agents, is inaccurate.”

“It is extremely serious from our perspective. It is the equivalent of creating a false market in the price of shares, which is illegal.” - Ann Fitzgerald, chief executive, National Consumer Agency.

“In light of recent events, the IAVI has agreed to find a resolution acceptable to the NCA, on behalf of consumers, and anticipates a speedy resolution to this issue. In addition, we again call for the establishment of National Register of Property Sale Prices to ensure continued transparency in these matters.” - Edward Carey, president, IAVI.

‘‘There is an obligation on licensees [estate agents] to report accurately. If there is evidence of bad practice it is certainly something we would investigate - when we are put on a statutory footing.” - Tom Lynch, chief executive designate, Property Services Regulatory Authority.

“From now on IAVI members will be required by the Institute to refrain from publishing any sale figures other than the exact sale price achieved for any property. In future, terms such as ‘region of’, ‘close to’ or ‘above’ cannot be used and the IAVI recognises that the publication of results, when it occurs, needs to be timely.” – IAVI.

“There has been a notable improvement in demand for well-priced new homes schemes in good locations over the last couple of months although understandably purchasers remain cautious.” - CBRE Research Report - New Homes Market.

‘‘Those who have slashed their prices have sold,” he said. ‘‘If a developer wants to offload units now he has to offer cheaper prices, because the recent increases in rates means prospective buyers need around 10 per cent of their loan, before they can secure it. If you take the average house price in Dublin at €380,000 - 10 per cent of a loan for this is equivalent to some people’s annual salary - so how can you expect someone to save that amount?” - Michael Dowling, spokesman for the Independent Mortgage Advisors Federation (IMAF).

“Until such time as market conditions improve, developers will increasingly focus their attention on securing planning for future projects while many will focus their attentions overseas.” - CBRE Research Report – Development Land.

“The reason why a lot of the €600 million worth of commercial property isn’t selling is because it’s either of dubious quality, or it’s too expensive. Stamp duty remains an issue.” - Jones Lang LaSalle: Ireland Investment Market Review.

“Too much of what’s been in this town [Dublin] for too long is bad quality, and that needs to be looked at again. It’s about time we stopped covering Meath, Wicklow and Carlow in concrete. I don’t think it’s good enough if we don’t care what we leave behind ourselves after we’ve built.” - Mick Wallace, property developer.

Transparency of residential property prices

Following the National Consumer Agency's decision to involve itself in the disagreement between the Irish Times and certain estate agents, Geroge Hook yesterday had a discussion on his radio show with Pat Stephenson, director of Norths Property and Alan Ahern, economist from NUI Galway.

Ahern was quick to blame the industry for trying to 'talk-up' the property market. He added that the shortfall of the Irish property market is that the consumer must turn to the untrustworthy industry for any statistical information

Pat Stephenson advised that many agents, such as Norths, strictly abide by the privacy understood within private treaty sales and don't disclose any figures whatsoever. He also said that the level of inaccurate information was not an industry problem, but rather a problem of regulation, which he hoped the forthcoming auctioneers bill might go some way towards solving.

This morning, Ann Fitzgerald of the National Consumer Agency (NCA) was on Morning Ireland's business news. She argued that the reporting of inaccurate information on the prices paid for houses was illegal and created a "false market", against the interests of the consumer. She suggested that future breaches would see the NCA initiate legal proceedings under consumer protection legislation against the individual agency misreporting. She said it was critical that there be "a clear and transparent market".

Is there a necessary change underway in the Irish property market?

Have your say! Vote in our poll to the right! Should we have full transparency in the residential property industry?

Buyer's expectations

Can the decision to buy be justified when it’s obvious that prices are going to get lower?

Despite the economic slowdown, I’m still confidant that in ten year’s time any price paid for a property now will seem like a really good one. This means that the two main questions I ask myself remain the same: ‘Would I like to live here? Can I repay the mortgage?’

However with no sign of a let up in the slump and commentators now all but writing off 2008 completely, a third question has been added: ‘How much less could I get this house for at Christmas?’ Following the initial drop in prices, many agents reported a spike in viewings. From a personal point of view, this was because years of spiralling prices meant that going sale agreed anywhere under the asking price was a victory for the buyer - we were eager to capitalise on the perceived value in the market.

As it’s become clear that the property slump is no 3-month dip, our interest has waned. The low house prices of today are now being compared to the lower prices of tomorrow as opposed to the high prices of yesterday. Like many other house-hunters, I’m very relieved that bids I placed on houses 6 months ago were rejected and am anxious to avoid making a similar mistake.

A quick search through property chat forums reveals that common opinion estimates prices to fall by a further 10% this year. While this is mostly based on hearsay, the logic behind it that as prices fell by 10% last year, they’ll do the same this year before levelling out in 2009.

So, the first time buyer is expecting the €380,000 average Dublin home to cost €342,000 at year-end, and consequently that would be the sum we’re willing to part with now. This is, of course, assuming that prices pick up in 2009. However, recent events have begun to suggest otherwise.

Just as the issue of oversupply was working to correct itself, the last two weeks chaos in the mortgage markets have moved everything two steps back by placing a stranglehold on demand.

Put simply, the recall of 100% mortgages means that many prospective buyers are out of the running until they figure out how to come up with a +30K deposit. The tightening of some offers from 90% to 85% means that another group of people also have to find more capital before they can buy.

So we’re now only left with the first-time-buyers who have a deposit secured. As demand drops, so too surely must prices?

In the new homes market, over-exposed developers will acquiesce to the demand for lower prices. However, in the second hand market, vendors who had just become realistic about today’s prices will surely not be happy about facing a further 10% cut. All this makes business even tougher for the estate agent. My first comment at most viewings is ‘they know they’re not going to get close to this asking, don’t they?’ Unfortunately, I think many of them still don’t.

Sweeten the deal

Aside from simply cutting prices, how can developers convince nervous buyers to take the plunge on a new home? Initially it was thought that furniture packages and the tantalising possibility of a big raffle prize could cover up the drop in market value. Now, as buyers’ confidence continues to ebb, developers have begun to offer various insurances against the pitfalls of the market and in one case, even a money-back-if-not-satisfied deal.

Offering sweeteners has been commonplace in the property market for some time. An example at the height of the boom in 2006 was when developer Paddy Gilboy decided to offer a free €21,000 two-berth cruiser as a raffle prize to those who purchased a home in his riverside development in the Upper Shannon. While a raffle ticket doesn’t seem like much reward for a home costing between €285,000 and €385,000, there were only 6 units launched in the phase. So, a quick sales run was considered worth a little under €4,000 per unit.

When the slump hit, the offers got bigger, better and more frequent. Lifestyle packages including high quality kitchens, bathrooms and landscaping became the standard for many new developments. Menolly Homes introduced their “Golden Hello” package which offered purchasers at The Coast in Baldoyle fittings worth between €8,500 and €22,000 depending on the value of their purchase. A Sligo developer went further and held a raffle for a free apartment for anyone who bought one of 12 tax-designated units - priced at €175,000. Buyers at Kings Court in Castlepollard, Co Westmeath were offered the choice of a Fiat Punto or furniture packages worth €15,000 and LM Developments are currently offering a free Volvo C30 with every house purchased at their Alderwood development at Hollystown in Dublin 15. Barrack Homes chose to offer a financial incentive as opposed to material goods. In late 2007 they launched their ‘Fixed Plan’ scheme which would subsidise purchasers’ mortgage repayments for three years on its developments in Newbridge, Kilcock and Ballitore.

Eclipsing all these offers, the deep pockets of DAMAC properties found a private jet and a private island in the Caribbean Sea to raffle to Irish investors who purchased an apartment during the Dubai Shopping Festival earlier this year. The company also offered a free car with each property ranging from a BMW 1 series for a one-bed costing €110,000, up to a Bentley Continental Flying Spur that came with luxury penthouses. Though the properties concerned were not in Ireland, the furniture and Fiat Puntos offered by Irish developers suddenly looked far less appealing.

Aware that buyers see these offers for what they are – a smokescreen to disguise a property’s drop in value - some builders have changed tack. Instead of offering freebies, they are now coming up with novel ways of giving buyers security against the market.

Woodgreen Builders will now guarantee buyers two years rent on their existing homes when they purchase a €395,000 home in Bettystown. Woodgreen say this will give sell-to-buyers the chance to ‘buy while house prices are at their lowest level in years and rent out your existing home at rock solid guaranteed rent for two whole years giving the property market time to recover before you sell your existing house at a potentially far more advantageous time’. Additionally, Woodgreen is offering to arrange the finance for the new home, the letting of the existing home and pay the bill for tax advice.

The most dramatic offer of them all was revealed in the Irish Independent today. The paper reported that Walsh Maguire is offering a “cash back guarantee” to buyers of its new 5-bedroom homes in West Dublin. If you’re not satisfied after 18 months, the developer will buy the home back for the original purchase price. The developer said that the scheme is intended to allay worries about negative equity on the homes which have already been reduced from €695,000 to €595,000. What’s next? Buy one get one free?

Quotes of the Week 25/04

‘I feel a bit like Brian Cowen. I get into the top job just when it looks like the party is over.’ – Edward Carey, President, IAVI.

“The current price correction is welcome and brings prices back to end 2005 levels, which are sustainable. Now, we find ourselves in a more demanding market, which others may fear, but in which I see opportunities. There is activity in the market and properties will continue to sell where people perceive value. Although prices may have decreased, demand is good, rents are stable and people are still looking to set up homes all over the country.” - Edward Carey, President, IAVI.

"All the data suggests the economy has slowed down very sharply. The banks are assuming it will be spring 2009 before demand bounces back" - Scott Rankin, analyst, Davy Stockbrokers.

"You might not want to shout about it, but the odds are long on there being any meaningful recovery this year” – unnamed senior banker, Irish Times.

“They're not threatening an immediate rate [ECB] hike, but the hawks are framing the debate now” - Nick Kounis, Economist, Fortis Bank.

"There is a substantial adjustment to be made. There is a disconnect between what banks are paying for their money and what the customers are paying for their loans. It is finally coming home to roost. The whole market has been topsy-turvy since last August." - Mark Duffy, Chief Executive, Bank of Scotland (Ireland).

"It had been very much a cat-and- mouse situation. All lenders want to be the first to be seen to be cutting rates, but nobody wants to be the first to raise," – Emer Lang, Analyst, Davy Stockbrokers.

"All our competitors will react. Why? Because they won't make money out of mortgages. If this continues, it will be very bad news for everyone in the circle." - Mark Duffy, Chief Executive, Bank of Scotland (Ireland).

“We now have a strong distribution channel through which we can sell our mortgage product range. We have already announced that we intend to grow this network, which will provide further capability to increase our mortgage market share” – Ulster Bank commenting on the withdrawal of its mortgages from the broker market.

"It will remain an interesting exercise if the lender can increase market share and maintain profit margins operating solely via the branch network." - Frank Conway, Director of Brokers, Irish Mortgage Corporation.

"Here, the workload on a mortgage has not diminished but expanded because the credit crisis means more cases involve a degree of negotiations with lenders. So the deal is more complex, and if the commission has been cut by the lender then there is no alternative but to charge the appropriate fee." - Diarmuid Kelly, Chief Executive, PIBA.

“With financial institutions either abolishing or slashing fees to brokers it's hard to be confident that they will direct consumers to products or institutions where they receive less or no income … There is now a potential conflict of interest and a concern that ways and means will be found by some brokers around this to maintain their income. This is especially so in a much slower market.” - James Doorley, Chairman, Consumers Association.

"How would you feel if you come into work one day and you were told that your income was to be cut in half?" – Jack Fitzpatrick, Chairman, Professional Insurance Brokers Association.

“The builder [Walsh Maguire] says it will guarantee to buy back homes for a period of five years from the date of purchase at the original price after 18 months has lapsed if the buyer gets itchy feet after purchasing one of 16 new five-bedroom homes at its development in West Dublin.” – Irish Independent, 25/04/08.

“Woodgreen Builders is guaranteeing buyers two years rent on their existing homes when they purchase a four-bed house for €395,000. Woodgreen is promising to manage everything from arranging the finance for your new home in Roseville to managing the letting of your existing home. He will even foot the bills for tax advice.” – Irish Times, 24/04/08.

“Brian Cowen, should be asked to examine the possibility of replacing stamp duty with a more sustainable and equitable form of property tax” – The Sunday Business post reporting on recommendations made by the National Economic and Social Council.

“110,000 sq m of new Dublin office space was completed in the first quarter of 2008. This means that we built more offices in the first three months of 2008 than in the whole of 2006. Looking at the projects currently under construction, this building boom seems set to continue for another 15 months. The market will take time to digest the amount of new product coming on-stream and this could see the quantity of available space begin to creep up later in the year”. – Paul Hipwell, Divisional Director, Lisney.

“New office developments that have not yet broken ground could potentially be put on hold given the current market environment. More rigorous assessment of new office schemes is a welcome outcome of the current funding crisis as this will ultimately prevent oversupply and sustain rental values, even if occupier demand starts to ease” - Marie Hunt, Director of Research, CB Richard Ellis.

“It would appear that office occupiers are becoming even more focussed on city centre properties as economic prospects decline” - James Mulhall, Director of Office Agency, CB Richard Ellis.

“The plan identifies eight ‘‘high intensity clusters’’, in which high-rise buildings may be permitted. The areas are the Dublin Docklands, Dublin Port, the south bank of the Liffey near Poolbeg, the Tara Street area, the areas around Connolly and Heuston Stations, the Digital Hub, and Grangegorman” – The Sunday Business Post reporting on a new policy permitting high-rise development in Dublin.

"Call our agency!"

This development in Carrickmacross, Co Monaghan - Lough na Glack - is clearly after a Dublin market, advertising on the back of the 16 bus here, and emphasising that is only 45 minutes from Dublin airport (it doesn't say at what time of day that is). But what's most interesting about the marketing is the down-playing of the agent: no mention on the bus poster, and only the slightest indication on the website at the foot of the page that it is Property Partners Gartlan that you are calling when you enquire - no logo. Has the agency been too prominent in the marketing of new homes developments in Ireland over the past decade or so? Will the tighter market bring about a shift back to the developer in that respect?

Chapped lips?

Drop in to Savills reception area on Molesworth Street and pick up on of these ...



It won't act as a balm to your property worries, but as a marketing gimmick, I quite like it. It's better than crummy calendars; and it's more "out there" than say key chains and pens. What's next, a tube of branded aspirin or antacids? Or would that imply too much that there were serious problems in the property market?

National be nice to estate agents day: did you catch it?

In this Guardian blog from February, we can learn a lot from the (uncensored, you are warned!) comments at the end about what people think of estate agents ...

"Even the most cynical among us can surely spare a thought for that much-maligned individual the estate agent, writes Susan Smillie.

These property professionals are apparently so unloved that one of their number, Alan Howick, from Essex, has felt the need to designate today "national be nice to estate agents day" (NBNTEAD)."