Author: Fran Power Sate: Tuesday 11 September 2018
Latest figures reveal mixed news for house and apartment hunters, writes Fran Power
The autumn new homes season gets well and truly underway this weekend. And at last there is welcome news for house hunters as the number of developments launching is up and the trend looks set to continue.
However, those hoping to secure an apartment to escape the heat of the rental market or to downsize from a larger property, will find little to celebrate.
Latest figures from the CSO show an increase in new homes completed of 34.1pc year-on-year to June 2018, with a total of 7,909 new homes in the first half of this year. Of these, new homes schemes made up a total of 4,794 - a 54.4pc increase on the previous year.
In contrast, apartments showed an increase in completions of just 6.2pc on the same period last year, a total of 980 in total.
In all, a total of 14,446 new homes were completed in 2017, and Central Bank projections are for numbers to reach 17,500 this year and continue upwards in 2019 to reach 22,000.
Most new homes aimed at FTBs
On the ground, those figures are translating into more homes for first-time buyers, in particular, who have been waiting to get a foot on the property ladder.
The sales for new homes in the first half of the year with selling agent Sherry FitzGerald illustrate the buying power of FTBs. Of 1,100 new homes, says Ivan Gaine, head of new homes, "80pc of transactions were under €500,000; 40pc of these were below €365,000 and 40pc between €365,000 and €500,000."
All would potentially qualify for the Help to Buy scheme and it has spurred developers on to deliver to this end of the market. Gaine believes the figures are an accurate reflection of how the market as a whole is divvied up.
However, while supply is inching upwards, estimates put the actual number of houses needed each year at between 30,000 and 35,000 - to match demand from population growth, immigration and smaller household sizes. "Unfortunately," says Ken MacDonald, managing director of selling agent Hooke & MacDonald, "supply is just not meeting the demand. It's way short."
Activity is up, says Gaine, but from a very low base. Construction may be up by 30pc, but figures fell short of demand by 20,000 houses last year, and will be short by 25,000 next year, and maybe by 15,000 the following year.
"With so many stakeholders, the delivery time from consent - even with the new fast track planning system - to delivery, with the best will in the world, can be anything from 24 to 36 months," he says. And it may be five years before that shortfall is met.
Perhaps the next most important concern for new homes buyers is affordability and whether the price inflation seen since 2013 will continue.
The average asking price of a house in Dublin from March to June this year was €374,885 according to the latest House Price Report by property website Daft.ie. This is a rise of 1.5pc over the previous year. The average price nationwide was €254,000, a rise of 5.6pc. In other words, the rate of increase in Dublin prices is slowing, while prices outside the city are playing catch-up.
MacDonald says: "Prices haven't gone up in the new homes market over the last 18 months like they have in the second-hand market. That is probably what has caused some of the second-hand market prices to come back a little bit. The new homes pricing has been pretty consistent. The only increases have been increases required for complying with new regulations or increases in materials or wages. As a result, we're finding the new homes market very strong, particularly for FTBs."
Another factor in price increases in existing developments, according to David Browne, head of new homes at Savills, is the fact that each phase may release a different type or size of house: "You might come out with three-beds first in phase 1; then Phase 2, the way the site is laid out, you could have more four-beds coming in."
However, he does see some price inflation, "It's modest. It might be €5,000, €10,000 in some cases. And it would very much depend on how many were sold in Phase 1. There's nothing mad, there are no huge jumps."
"Prices depend on development and location really," says MacDonald. "Some developments are still being sold this year at the same price as last year."
By year end, expect to see rises of no more than low single figures, says Ivan Gaine, who points out that in the FTB market, prices are being constrained by the upper limit of €500,000 on the Help to Buy scheme and stringent Central Bank mortgage ceilings.
"The new homes market is very different in that we have very clear caps on affordability," says Browne. We have caps in terms of the land costs so it's much stricter in terms of what we can do and what you can produce."
Demand for apartments sky high
While choice has improved for house purchasers, those seeking an apartment in Dublin are faced with few options.
"What we don't have coming to market is apartments," says Browne. "We've Lansdowne Place [a luxury development in Dublin 4], we've high-end apartments, but other than that a lot of the apartment schemes have been sold off to the private rental sector so there's a gaping hole in the market for people trading down.
"If you look at Clontarf or Blackrock or Monkstown or any of these mature markets that are looking to trade down into stock, there is nothing," he says. "No one is looking at the people with four-bed semi-detached houses and where they are moving down to, they don't want 1,600 sq ft, they want 800sq ft, and they have nowhere to go to."
"A lot of the FTBs would love to buy a small two-bed or even one-bed apartment," says Browne, "but they don't exist new. The viability in apartment construction needs to come back to the market so that, in a site of three- and four-bed semis, you can deliver the more affordable smaller units that just don't exist at the moment."
Commmuter belt grows
Lack of supply, coupled with tighter mortgage lending has seen a shift to the greater Dublin area and outer commuter belt in the last 18 months.
"We're seeing more people in the Dublin rental market buying here because the rent they're paying is more than they would pay in a mortgage, and they get more space and value for money," says Will Coonan of Coonan New Homes, who handles sales for many schemes in Kildare and Meath.
The average house price in Kildare is €263,729, or €259,696 in Meath, according to Daft.ie, still well below the Dublin South City average of €411,959.
Regional city homes
There are signs too that Cork, Galway and Limerick are finally seeing the number of new homes coming to market increase - though many schemes are releasing subsequent phases rather than brand-new developments.
Galway, however, sees two new schemes arrive this autumn, one in commuter hotspot Moycullen and one closer to the city at Monivea Road, which are bound to be snapped up in a city that has seen little development since the crash.
Buyers know their limits
In the meantime, David Browne is seeing a more informed buyer out in the market.
"It's very different now. The buyers know exactly what they want, they have a number in their mind, they have a limit they will pay, they have loan approval and everything ready to go. So it's very solid and a very good indicator of how the market will go."