A few years ago, first-time buyers couldn’t get credit to buy a house. And, now that they can, cruelly, there is a chronic shortage of the type of affordable properties that they need and want.
For properties in the first-time buyer )FTB) price range, especially in popular city locations, open viewings have now become the order of the day. These allow auctioneers to cater for the large numbers of buyers who have loan approval and who are watching and waiting for something suitable In Cork city locations some auctioneers have reported as many as 40 people have showed up for viewings and that some are now selling far above the asking prices.
By the end of the year, properties in sought-after locations in Cork city and county were often going ‘sale agreed’ within a few short weeks, so buyers had to be geared up to move and bid. In Waterford, too, Sherry FitzGerald Rohan say that by December good starter properties in the city were selling in the space of a week or two.
Irish Banking Federation figures show that during the first nine months of 2015, first-time buyers borrowed €1,685 million to buy 10,005 houses. This compares to a figure of €1, 877 million to purchase 11,476 properties over 12 months in 2014. Fourth quarter figures aren’t yet available but all the Munster auctioneers the Irish Examiner spoke to are all reporting an end-of-year surge of activity in ‘15 which should put the figures ahead of 2014.
The result of increased activity in a market where few houses are being built is that prices are pushing upwards, except for Dublin which took a necessary price pause in ‘15.
Daft figures for the third quarter show a 2.4% increase in Dublin while prices in Cork city have seen a 19% jump, 18% in Galway city and 17% Limerick The Central Bank deposit regulations, which were designed to stabilize the market, seem, according to the Munster auctioneers interviewed, to have had limited impact on FTB activity.
Michael Downey of ERA Downey McCarthy in Cork says that at the beginning of the year the new regulations, requiring first- time buyers to provide a 10% deposit on properties costing up to €220,000 and 20% on amounts in excess of this, did cause something of a slump which lasted until the middle of the year.
“But by August first-time buyers had come back. There was a surge in sales at the end of 2014 and we are seeing a similar surge at the end of the year.’’ He adds that at the earlier stages of ‘15 first-time buyers were looking mainly at the houses costing up to €220,000 but by the end of the year he was observing an average spend of between €250,000 and €280,000.
Ann O’Mahony of Sherry FitzGerald in Cork also noted an increased level of first-time buyer activity during the year. Many of the first-time buyers she encountered were buyers who had been saving for several years waiting for the credit squeeze to end.
These types of buyers had their finance in place and had the deposit and some were prepared to pay up to €350,000 and €380,000, says Ms O’Mahony noting that around half of the first-time buyers who bought properties being sold by Sherry FitzGerald in Cork city spent in excess of €250,000.
“ In May we had three first-time buyers bidding for a three-bed semi in Ballinlough with a guide of €345,000 which sold for €380,000,’’ Ms O’Mahony says, adding that at the end of the year 40 viewers came to see a three-bed semi in Ballinlough.
Jeremy Murphy Auctioneers say that up to 70% of its customers this year were first-time buyers who all had loan approval and knew what they wanted. Mr Murphy says that the Central Bank deposit requirement had little impact and that many were spending up to €300,000 for the house they wanted. “We had a three-bed semi in Maryborough Woods which had five people bidding on it which had a guide of €270,000 and went sale agreed for €285,000,” Mr Murphy instances.
DNG Cusack Dunne in Limerick reports that there is significant pent-up demand in the city. “We had five people bidding for a house in Raheen which went for €50,000 above the asking price of €125,000,” reveals Gillian Dunne.
She says that many of the suitable starter properties coming on the market are repossessions. “They are only a trickle of these, very few new ones and limited numbers of properties being sold by buyers trading up because of the shortage of trade-up properties”.
Because average prices in Limerick are under the €220,000 deposit threshold, the Central Bank regulations is having very little impact, she says adding that shortage of supply is the main cause of concern.
Ms Dunne says that first-time buyer houses are now going sale agreed in three to four weeks and sales have been getting quicker as the year went on.
In Waterford John Rohan of Sherry FitzGerald reports strong demand, increasing prices and scarcity of supply. He says that some new houses have now become available in the city but are more expensive the second-hand ones. “You can buy a fine, second-hand semi-detached house in a good location for €140,000 while the new houses are coming on at €170,000 and €180,000,” Mr Rohan notes.
In Dublin difficulties caused by the housing shortage combined with the Central Bank regulations have made life especially difficult for first-time buyers.
Average prices are above the €220,000 mark and providing a 20% deposit is too much of a stretch on the finances of the average first-time buyer. As a result they have been purchasing in the surrounding counties - which is causing rising prices in all the commuter counties around Dublin.
For 2016, the Munster auctioneers the Irish Examiner spoke to are expecting first-time buyer activity to continue. Most believe there are still large numbers of first-time buyers with mortgage approval and with deposits who are waiting to resume house hunting in the New Year.
The people that the auctioneers are not meeting are the young couples who don’t have the necessary savings for the deposit, who can’t get mortgage approval and consequently aren’t going to view houses. If they were to enter the picture, it is likely there would be even greater demand for the limited number of houses available and even higher price rises.