Which sectors of the property market will be buying in 2013? Conor Power asks the experts
IN his budget speech Finance Minister Michael Noonan referred to the fact that 2012 saw market stability for the first time in six years, in both the residential and the commercial property markets.
If we are going to see a continuation of this positive trend in 2013 the buyers are going to have to emerge from somewhere to make it happen. The question is: which sectors of the market will be doing the buying?
“Cash buyers will continue to drive the market next year, as will first-time buyers,” says Aoife Brennan, head of research at Savills in Ireland.
“It depends on the type of property you’re looking at, but in the price range of €400,000 and below it’s definitely from the first-time buyers sector. If you look at the number of mortgage draw-downs over the year just gone, well over half of them are for first-time buyers. So I’d think that they will definitely be in the market next year, particularly with the measures that were brought in in the budget: If they buy in 2013, then they won’t have to pay the Residential Property Tax until 2016.”
IPAV chief executive Fintan McNamara agrees: “I would say the first-time buyers’ market will be the most important one in 2013.”
As for the cash buyers, they are made up of a more disparate grouping, including those who have sold their homes already and people from outside of the State, both foreign and Irish.
“The buyers in the over-€1m range are typically Irish people coming from overseas,” says Brennan. “They might have spent some time abroad and are cash buyers.
“I don’t know how significant they will be,” notes McNamara of the ‘returning emigrant’ factor, “but there is some anecdotal evidence that there is a strong interest out there now that there are bargains to be found in Irish market.”
Then, there are those who come to Ireland with cash in search of the good life. This is very much in evidence in certain pockets of the country. In Munster, those areas tend to be in West Cork and Kerry and all along the Western seaboard where the proportion of foreign buyers has been important. During the downturn these areas suffered more than others, but the last year or so has seen a marked upswing in the number of foreign-based buyers making their move to realise the dream of a home in Ireland, be it permanent or temporary.
“In the last year we’ve seen a lot of foreigners of all nationalities,” says one auctioneer based on the Ring of Kerry. “The British market was always important around here and has seen a real dip in last few years, but that situation seems to have turned right around during the last year’s season. There are many other nationalities too, such as German, Italian and American.”
Another area that could be worth watching out for in 2013 is that of the Continental, living and working in Ireland over the last four or five years who is eyeing up the city centre apartment market. This is one of the sectors most heavily affected by the downturn and therefore one of the areas where there is a lot of value to be found. This is a potential growth area that has been flagged by industry observers in cities like Cork and Limerick, but there is little evidence of it emerging yet in the capital, according to Aoife Brennan:
“We are seeing a little bit of that, but it’s not such a huge area of the market… the apartment market is still a limited enough sector and we’re finding that most of the demand at the moment is focused on three and four-bedroom family homes.”
As for those who are “sitting on the fence” (i.e. those who have paused in the middle of trading up, living in rented accommodation until the time is right to move), there are more mixed reports. While Aoife Brennan sees little movement in the Dublin market, Sheila O’Flynn of Sherry FitzGerald’s Cork office says that they have already become important active players:
“We saw significant improvement in the moving-up sector this year,” says O’Flynn, “and we saw more of the pent-up demand making its presence felt than there has been for quite some time. Buyers have seen the stabilisation of prices and the prices being achieved towards the middle and the latter end of 2012 have reflected that. We’ve seen some instances where prices of certain types of homes have achieved increases of 10-15%.”
There is the feeling around that this trend will, if anything, continue. The recent budgetary announcement of the property tax drew a lot of criticism. It was felt that the onus on the owner (rather than the occupier) to pay the tax would stifle investment and put upward pressure on residential rental values.
But with rents already increasing and an estimated 30% of all working citizens now renting, such upward pressure will only increase the economic imperative for those already paying high rent to make a move of their own - if, of course, the banking system allows.
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