The most active cohort of buyers remain the starter first-time buyer market, writes Paul Hannon.
2018 has been a positive year for new home development in Cork, with sales volumes increasing, especially in the first six months.
Schemes all over Cork are now busy with families spending their first Christmas and New Year holidays in their new homes at Kinsale Manor, Clonlara, Janeville, Steeplewoods, Drakes Point, Rosefield, and Powdermill Meadows.
These new estates are now bustling communities with mainly young buyers with or without children who made the decision to acquire a new home.
Having had successful new phase launches at various price points and aimed at different sectors of the market during 2018, price inflation was gradual with single-digit percentage price inflation.
While in 2017 we saw new estates commencing construction, in 2018 we witnessed handover of early-phase homes and the successful sale of further phases.
Our sales volumes increased by approximately 22% on last year with Sherry FitzGerald New Homes agreeing over 200 sales in Cork: 65% of our transactions were under €350,000. Another 26% were in the €350,000 to €500,000 bracket so over 90% of our sales are under €500,000.
It confirms the fact the most active cohort of buyers remain the starter first-time buyer market with the help-to-buy rebate really making an impact in 2018: 47% of our sales were to first-time buyers.
The scheme is due to cease at the end of 2019 and we have now renamed it the ‘Race to Buy’. We expect strong interest from first-time buyers especially in the first half of the year across several new schemes and we have included a countdown clock on a number of our development websites.
There is no doubt this 5% rebate has enabled buyers to progress with securing their new home and we believe this should be extended beyond 2019. Incentives need to remain in place for longer than the fixed, short periods proposed. Residential development takes time and developers, financiers, and buyers need as much certainty as possible.
Traders have also been active and make up the majority of the other purchasers; they remain an important sector in the market. Private investors are almost non-existent in the new homes market; this is not normal but reflective of the dysfunctional market.
Brand new schemes are under construction with several releases expected for spring 2019 in several locations around the city, suburbs, and metropolitan areas. These include Ballinglanna at Glanmire, Brookhill at Carrigaline, Martello at Rushbrooke, Heathfield at Ballincollig, and Eden at Blackrock, and at Glounthaune.
These launches, coupled with the next phases of existing schemes, will see spring 2019 being a busy time for new home agents. These new schemes should all be of interest to first-time buyers as the unit mix includes house types which should serve this market well.
As an example of this, we witnessed a lot of activity in Drakes Point, Crosshaven, throughout the year, especially for the townhouses which were priced below €300,000. This price point is key, and homes that can be delivered to the market and priced below this €300k threshold will definitely be in demand.
Existing established Cork developers such as O’Flynns, Astra, Ruden Homes, Murnane & O’Shea and O’Callaghans are actively building but there are new developers putting ‘spades in the ground’. These include Gannon, Centurion, Glenveagh, Homeland, and Caraden who are allactive.
While demand currently outstrips supply, the macro-prudential lending rules limiting the purchaser’s ability to borrow are affecting matters. More new homes should be delivered to meet the numbers required based on population growth and net migration.
Shrewd purchasers are now often focusing specifically on new homes. This is due to many factors such as the cost savings based around the A-energy rated, Help-to-Buy rebate scheme, higher specifications, structural guarantee, and that ‘new car smell’.
The extensive amount of office accommodation under construction in the city centre will put further upward pressure on the already struggling letting market. Developers are considering build-to-rent apartment blocks in various locations around the city. Cork Docklands is likely to see one of the first purpose-built BTR blocks.
Given the substantial interest from foreign investment funds and successful sale of existing multi-tenanted apartment investments such as the Elysian, City Square, the Quadrants, and Park Avenue, it is expected Cork could see a forward sale commitment purchase of a block of apartments in 2019. This would add much-needed rental product to the Cork market and appease some of the major employers who have highlighted the problems they have in recruiting staff given the lack of good quality residential accommodation available in the major urban centres.
The extension of the Cork City boundary in May will be a positive step in Cork’s growth as a major urban centre, and 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 the Cork city and metropolitan area over the next number of years.
The Cork new homes market is in an interesting place; the large schemes coming on stream in 2019 in Glanmire, Ballincollig, and Carrigaline, which will include a good range of first-time buyer product, should be a good litmus test for the market.
The mortgage market needs to increase, and greater consumer liquidity made available to give the developers/stakeholders confidence to deliver a larger number of homes. Individual tweaks to the market are not good — cohesive policy introduction is what is required.
Developers and buyers nationally and locally need to have confidence that the rules of the game won’t change.
Paul Hannon is director of Sherry FitzGerald New Homes, Cork