New homes market is ready for take-off

Cork is well placed to greatly increase the number of new homes it can deliver, writes Paul Hannon.

Kinsale Manor.

2017 was the year we saw larger new schemes come out of the ground on infill sites and suburban Cork locations.

Schemes such as Kinsale Manor, Clonlara, Janeville, Steeplewoods, Rosefield and Botanika all had successful launches at various price points and aimed at different sectors of the market.

There have been incremental improvements during the year - but this is from an incredibly low base.

Our sales volumes are up approximately a third on last year with Sherry FitzGerald New Homes agreeing 1,500 units nationally and approximately 165 in Cork. About 50% of our transactions were under €350,000.

Another 30% were in the €350,000 to €500,000 range, so approximately 80% of our sales are under €500,000.

The most substantial and active cohort of buyers is the starter/first time buyer market which has been driven by the Help to Buy scheme.

Speculation during the year about changes to the Help to Buy policy before the budget impacted the rhythm of the year somewhat. Traders have also been active and they remain an important sector in the market.

Investors are almost non-existent in the new homes market, yet these should form part of a functional market.

We look forward to a busy year in 2018 with further launches at Kinsale Manor, Clonlara, Drakes Point and other developments.

New schemes are on the radar for several locations around the city, suburbs, and metropolitan areas.

As prices increase gradually more schemes are becoming viable and deliverability of the developers to increase output will be very important.

There is no doubt there is a market out there for new homes and shrewd purchasers are now often focusing on new homes only.

This is obviously due to many factors such as A energy rated, Help to Buy rebate scheme, higher specifications and like a new car there is the ‘shiny and new’ element.

It was interesting to regularly meet the same young couples at various scheme launches in different geographical locations around Cork who, in order to acquire a new home, are willing to travel north, south, east or west.

These buyers have a targeted interest in New Home schemes once they are within a 10/15-mile radius of the city.

There has been limited development land trading in Cork. The first half of the year saw very few sites coming to the market but the second half saw activity in the sector. Indications are that some substantial landbanks will come to market in early 2018.

This is very important for the new homes market as this is the “raw material” needed for homes to be delivered.

A number of established Cork developers are actively developing while new alternate funders/developers have appeared in 2017.

It is expected in 2018 we will see the new publicly listed companies becoming active in the Cork new homes market. Fast-track planning applications, LIHAF sites, Special Land Reserves, Multi Family Unit development are all hot topics now and will become part of our daily property speak in 2018.

As recently reported major employers (with a special mention to Apple which employ 6,000 people in Cork), have highlighted the problems they have in recruiting staff given the lack of good quality residential accommodation available in the major urban centres.

The recent cabinet approval of the new city and county boundary is a positive step.

While Cork is making strides, an integrated approach from all stakeholders is required to ensure delivery of the 3,000 homes per annum which are estimated to be required in Cork city and county for the next number of years.

Steeplewoods, in Carrigrohane.

 

This needs to be expedited and Cork perceived as a welcoming city for development as it has been for a considerable time by FDI employers.

Cork city infill sites especially in Cork north and south docklands offer excellent opportunities for volume driven schemes which are likely to be ‘build to rent’ Multi Family type developments.

These schemes allow for delivery of a large number of homes in multi-storey buildings and can form part of a mixed commercial and residential urban quarter.

For the first time, large institutions are expressing an appetite for these types of assets in Cork and this is witnessed by the reported offer for sale of the 200-plus Elysian apartment building situated between the city center and docklands.

These are exciting times in the Cork new homes market and given that we estimate a time lag of between 18 and 24 months behind the greater Dublin area, we should be still early in the development cycle.

A developer that can deliver a new scheme of scale at a price point in the mid €250/€300,000 range within that key commutable distance from the city is well set to achieve high sales volume.

The new homes market is a complex one with many moving parts. Consumers on one side and stakeholders/ influencers such as equity providers, investors, banks, institutions, planners, etc on the other.

Short term speculation without longer term commitment on policy is challenging. Cork is well placed to considerably increase the number of new homes it can deliver for its existing inhabitants and for those coming to the city to live/work.

Yes, there are challenges but there is no doubt once the impediments to large scale development are addressed, we can vastly improve our city, suburbs and metropolitan towns.

Paul Hannon is director of Sherry FitzGerald New Homes, Cork.

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