‘Affordability’ of buying a house in Dublin ‘stretched’

This article originally appeared in the Irish Examiner

The affordability of homes in Dublin is already “stretched” and the Central Bank mortgage controls will likely hold prices in check, according to a major study of the housing market by Davy Stockbrokers.

Buying an average family home in Dublin costs 6.2 times the average income earned in the region, the broker said.

That compares with only 3.9 times average income required to buy a family home in the south-west.

Central Bank mortgage controls will help to keep house price inflation at 5% this year, it predicts.

Building costs for new homes are falling but the housing market remains dysfunctional in bringing on new supply, it said.

Its survey of builders found that because of high costs, building new homes remains unviable in many areas though the outlook has improved in Dublin.

The survey results “suggest that build costs are not hugely out of line with house prices — about 41% of Dublin transactions are above-estimated build costs — but more could be done to reduce costs to make construction universally viable,” the broker said.

The new housing crisis has become a major thorn in sustaining economic recovery because demand for new homes across many urban areas far outstrips supply.

Consequently, as CSO figures show, the costs of private rents have soared.

Many of Davy’s recommendations for helping to solve the housing crisis and boosting the supply of homes involve the Government pumping in public money.

The broker also suggests the possibility of providing incentives for the construction sector.

The broker said the Government, which has already revised building standards for new apartments, could look again at other building standards, which it says add up to €30,000 to the construction costs of each housing unit.

It also wants local authorities to ramp up investment to bring serviced land on stream and to tackle delays in the planning process and more variety in the types of housing units being built.

The broker said the construction workforce of 126,000 is still less than half the 270,000 employed at the peak of the boom.

Irish Examiner: ‘Affordability’ of buying a house in Dublin ‘stretched’

How To Price Your Home To Sell

In addition to location and condition, the asking price of a home is at the top of the list of important considerations.  When a potential buyer is looking for a property, they want to get the best possible value for their money.  This doesn't mean that a home should be priced too low, but it does mean that knowing how to price your home is a must.

Find Out What The Real Value Is

Regardless of whether you are in a buyer's market or seller's market, it's important for every vendor to know the actual value of their home with the help of an appraisal.  With this information, you will be able to choose a listing price and a strategy on how to achieve the home's value.  At the same time, you will know how to react to various offers that a potential buyer may make.  If you can select a price that is affordable to a range of buyers, you may receive multiple offers thereby sparking a possible competition among the interested parties.

Drill Down Into The Factors Affecting Price

A combination of factors including  recent selling prices for comparable homes in the area known as “comps” will enable your estate agent to give you the best advice on what asking price to set.  Other important factors include the year of construction, the square footage, extensions to the property, interior and exterior upgrades and additional features that make the home unique. 

Set A Realistic Timetable

In researching the sale price for other comparable homes in the area, you should also note the anticipated length of time your home will be on the market.  Some homes practically sell overnight, while others may remain on the market for months without being sold.  If you want to sell your home quickly, you should consider this when setting a price.  A bargain will obviously move quicker, but it's important to make enough from the sale to feel good about your choice.  If you aren't in a hurry to close, talk with your estate agent about a fair starting price that's at or near the appraised value of your home.

Ask Your Estate Agent For Advice About Your Purchase Too

While you hold the key, so to speak, to your house's actual asking price, most sellers will ask their estate agent for their opinion about their own purchase as well.  After all, property is their business and they will be working with you through every step of the process on both property transactions.  Be sure to choose an estate agent that will advise you on both and give consideration to the advice they offer. 

Learn More

The Best Way To Find Your Perfect Home

As the old saying goes, it’s all about location, location, location.  But, there is a lot more to it than just plain geography when it comes to finding your perfect home.  There are a lot of things to consider during the search because, for most, a home is the most significant purchase they will ever make.

Choose A Good Area

When searching for your perfect home, the obvious place to start is with the selection of a location.  If you have children, you may want to choose a home that is close to good schools and is also located close to amenities.  Transport links are very important so in Dublin for instance easy access to the M50, Dart, Luas and Arrow are advisable.  Many people also look for a home that offers a short commute to and from work.  If you are shopping within a specific price range, you can also narrow the choices by finding an area that offers the best value for your money.

 Decide Your Priorities

The perfect home for you is one that has all of the elements that you want. Whether it's a sunny back garden, a large kitchen, an extra bedroom, attic conversion etc , choosing the style of home that you want is an important first step in finding the perfect place to hang your hat.  You may also want to consider whether you prefer a single-level or two-story home.  Many home buyers also factor in the potential to extend in the future as a vital factor in their selection.

Get Mortgage Approval In Principle 

Now that you know what you want and where you want it, it's important to find out how much you can afford.  Your lender will request specific information relating to your income and expenditures and will offer a possible price range for you to keep in mind.  After an initial conversation with your broker, bank, or building society you will have as a good indication of what budget you have to spend.

Enjoy The Process

In conclusion, you should know that the search for your perfect home is a journey.  It may be either long or short and with or without some bumps along the way, but the greatest satisfaction will be at the journey's end and your future's beginning. 

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Top Tips To Make Your Move Easier

We all know that moving can be a stressful time, however, there are several things that you can do to make your move a smooth one.  If you know that you're moving ahead of time, it's a good idea to start packing as early as possible.  Remember, Rome wasn't built in a day and, unless you have to be out in a hurry, it's better to take your time and remember every little detail now than to find yourself with the moving blues later.

A Little Goes A Long Way

If at all possible, pace yourself when packing.  It's better to pack a little at a time and make sure that nothing is forgotten than to hurry and try to get everything done within a day or two. 

Utilities

It's easy to forget to have your address changed, the landline disconnected, internet, water and/or cable service changed, so take the time to make sure every little detail is ironed out now so that you can enjoy your new home later.

Create A Packing List

It will help you to remember things much easier by writing them down on paper as they come to mind.  A packing list can act as a shopping list, which will remind you of the things that you need to remember.

Pack Lightly

Moving day is hard enough, so don't make it any worse by loading down your arms with too much weight.  If you pack lightly, it may cost you a little more footwork, but your body will thank you at the end of the day.

Pack Smart

Because of their design, boxes are easier to carry and provide an effective way to keep everything stored safely in its place.  Rather than just piling everything into the car or van and hoping for the best, take the time to pack everything carefully (especially breakables) inside cardboard boxes with bubble wrap.  What will not fit, such as items of furniture and other household essentials, should always be tied down when they are put into the removals van.  Furniture pads are also a good idea to prevent damage during the move.  Make sure you label each box with the contents of each box along with the room it will go into.  This will make unpacking more efficient and save you loads of time.

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Mortgage-holders have lost €17.6bn in ‘wealth’ since property crash - S&P

This Article originally appeared in the Irish Times Irish mortgage borrowers have lost €17.6 billion of their combined “wealth” since the property market crashed, new research has found. In a report which said the housing and mortgage markets are struggling even as economic growth accelerates, credit rating agency Standard & Poor’s found that more than 40 per cent of borrowers remain in negative equity. S&P said home loans originated in 2007, just before the crash, have the highest degree of negative equity, at 59 per cent. Buy-to-let borrowers were more likely to be in negative equity than owner-occupiers, it added. Homes in the Border and western regions are more likely than other parts of the State to be in negative equity. “We found that the depth of negative equity in Ireland is severe, averaging €53,900 per property,” said S&P analyst Arnaud Checconi. “We also observed that loans in arrears were more likely to be in negative equity: 59 per cent of mortgage borrowers are both in negative equity and arrears, compared with only 40 per cent who are current on their loan payments and in negative equity.” Such findings are based on an assessment of 100,000 loans underpinning a form of debt known as mortgage-backed securities, representing some 18 per cent of outstanding Irish home loans by volume. Proxy The estimate for the overall loss of wealth since the crash represented the sum of the differences between each property’s indexed valuation and its original valuation when the loan was issued across the entire universe of loans. “We view this as a proxy for mortgage borrowers’ perceived change in their own wealth at different points in time,” Mr Checconi said. “Overall, this measure was €13.1 billion as of December 2015. If measured against peak property values (rather than values at the time of loan origination), the wealth loss would be €17.6 billion.” S&P said the “negative equity” situation has improve in recent years due to the price rebound in Dublin since 2012 and the rebound in other regions since 2013. Citing the Central Statistics Office, however, S&P said house prices still represent only 66 per cent of peak values. “Based on our analysis, we estimate that 43 per cent of Irish mortgage borrowers were in negative equity at the end of 2015,” said the report. “Over half of borrowers were in negative equity between the end of 2011 and the end of 2013, although the proportion has been slowly declining. We expect the proportion in negative equity to decline further in the next two years - to about one-third of all borrowers, based on our house price forecasts and estimates of mortgage loan amortisation.” Loans granted between 2006 and 2008 were deepest in negative equity as they were granted at higher original loan-to-value ratios and the initial loan was bigger. Weaker credit histories Loans in those years were issued to borrowers with weaker credit histories, as underwriting standards become more relaxed as mortgage lending increases. Only 38.7 per cent of loans had a loan-to-value ratio greater than 90 per cent in 2005 but the proportion rose to with 43.4 per cent in 2007. “Borrowers with loans from 2007 show an average negative equity of €66,300, representing 3.5 years of average disposable income, compared with 2.9 years across all loan vintages. “There is a correlation between negative equity position and loans in arrears, according to the Central Bank of Ireland. Both tend to arise when a recession sets in as property prices will decline and borrowers will fall into arrears as they become unemployed. “Indeed, we observed that loans in arrears were more likely to be in negative equity: 59 per cent of mortgage borrowers are both in negative equity and arrears, compared with only 40 per cent who are current on their loan payments and in negative equity.” More than 50 per cent of home loans in the Border and western regions were in negative equity, S&P added. “ While the greater Dublin region is in full recovery mode and now has a housing supply shortage, some more rural areas still bear the brunt of the property bust and are ‘ghost estates’ with no need of further property development.”

Central Bank says mortgage lending rules are here to stay

This article originally appeared in The Irish Times.

Review of regulations will not lead to their abolition, says chief econimist

Central Bank chief economist Gabriel Fagan. Photograph: Alan Betson/The Irish Times.

The Central Bank has again robustly defended its restrictive mortgage lending rules, saying they are “permanent”.

At the presentation on Friday of the bank’s quarterly accounts, chief economist Gabriel Fagan said the bank was working on a review of the rules, which will be published in November, but said this review would not lead to their abolition.

Mr Fagan warned against people equating a review with a change in the rules.

“We shouldn’t think of a change taking place,” he said, adding that the rules may not be changed at all or may be tightened.

Introduced in February 2015, the rules limit the amount home buyers can borrow, typically to 3½ times their gross income up to a limit of 80 per cent of the purchase price of the property.

Last month, the Central Bank issued a robust defence of the home loan caps, saying commercial banks and mortgage brokers were unable on their own to uphold “prudent” credit standards.

However, the rules continue to come under increasing criticism.

Addressing the wider economic recovery, the Central Bank revised its growth forecast upwards for the Irish economy for 2016 and is now predicting growth of 5.1 per cent, up from 4.8 per cent previously, “on the back of exceptionally strong rates of growth in domestic demand”.

However, it warned that Ireland’s economic recovery was “not complete” as it forecast “marginally lower growth” for 2017.

Overall the outlook for the economy remained “broadly favourable”, it said.

It is forecasting gross domestic product (GDP) growth of 5.1 per cent for 2016, up by 0.3 per cent from its previous forecast, and 4.2 per cent for 2017, down from 4.4 per cent previously, as it said domestic demand was now firmly the main driver of expansion.

While the economic outlook may be relatively favourable, the Central Bank also noted risks, including levels of public and private sector debt, which remain high.

As such, there is a “strong case for precautionary behaviour and prudence”, Mr Fagan said.

This would allow the next government to build up a buffer should adverse circumstances arise.

Wage growth

Wage growth was also cited by the Central Bank as a potential risk, as it warned that while there may be some recovery in wage growth, “it is important that that this process does not lead to overshooting”.

Political uncertainty at home may also be an issue.

Five weeks after the general election and with no sight of a new government, Mr Fagan said the uncertainty had so far not had a negative effect.

However, he warned that “protracted uncertainty could lead to an adverse impact”.

On the external front, the regulator said emerging market concerns as well as broader geopolitical factors were potential issues, as was the forthcoming Brexit referendum which “creates uncertainty and is a downside risk factor”.

Pointing to household debt figures, the Central Bank said gross new lending increased in 2015 with households drawing down €4.4 billion in new mortgage loans.

However, the figures also revealed that “a significant degree of deleveraging” was still under way in Irish households as they continued to reduce overall debt levels.

This ongoing decline might suggest that the economic recovery had, to date, been somewhat “creditless”, the Central Bank said.

Central Bank says mortgage lending rules are here to stay

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Developers get ready for a busy season

This article originally appeared in the Irish Times.

Many new homes schemes expected to launch shortly while more are in planning stages

With this week’s proposal from Fine Gael to cut the amount of VAT on new homes and to introduce a “Help to Buy” to ease the way for first-time buyers, several leading developers are getting ready for a busy season.

Many of them are already finishing off schemes which have been closed since 2008, while others are quietly buying up development sites with the intention of building out in the short term.

Look out for Joe O’Reilly’s Castlethorn scheme in Stepaside where the next phase of three, four and five-bedroom houses are due to be launched in about 10 days. The plan is to launch a “show village” with the first of the 50 planned houses for sale at between €395,000 and €490,000.

Meanwhile 20 new houses in a large mixed development by Kelland Homes near Tallaght will be relaunched on the Kiltipper road this weekend through DNG.

Edler Heath is expected to attract first-time buyers or those looking to trade up from apartments, looking for gardens and more space.

The three-bedroom houses measure 1,163 sq ft (108 sq m) and are priced at €270,000. Four-beds with 1,270 sq ft (117 sq m) are priced at €315,000. DNG says 20 homes will be released this weekend, 70 have been sold – 50 of which are occupied and 20 to close.

The new surge in housebuilding will not be entirely dependent on traditional builders as Nama is rapidly appointing asset managers to handle the building of a range of new homes in the Dublin suburbs to help ease the housing shortage.

One such development is Hazelbrook in Churchtown, which has just been taken on by Mazars, the asset managers. 

Developers get ready for a busy season