My daughter and her partner have been looking to buy a house for several years. They managed to add a lot to their savings for a deposit during lockdown and were hopeful of buying not far from us here in Dublin. However, they have lost out twice to higher bids in the last couple of months which is very disappointing. My son-in-law needs to be based in Dublin so working from home down the country is not an option for him. Should they keep trying or just wait until more houses come on the market or prices fall?
Ed Carey writes: Whether in spite of or because of Covid-19, many would-be buyers find themselves in your daughter's situation. Unable to spend their disposable income on holidays and with other discretionary spending significantly reduced, those fortunate enough to maintain their employment during the pandemic have increased deposits and are now ready to buy.
On the supply side, the output of new-build houses is reduced, although I’m not convinced significantly, and the number of secondhand houses usually for sale is down by about a half. The most recent Myhome.ie property report suggests stock listed for sale in the Dublin commuter counties is down by 40 per cent. The result is simple supply and demand economics – fewer houses with more money bidding for them.
It’s cold comfort but this is not just an Irish problem, with many European countries and the US reporting a similar experience. I estimate in my local area the average price of a “standard” three-bed semi has increased from €245,000 to €265,000 – not quite 10 per cent but not far off, and that’s only for a three-month period. I am hearing reports of fierce competition in all areas and particularly Dublin where suggestions of a “Covid exodus” would appear to be premature.
I don’t see a short-term change in this general trend for a few reasons. First, construction inflation is occurring and build costs are up. It follows logically that new-house prices are on the up. Second, the Central Bank is under pressure to ease lending rules to allow first-time buyers to borrow more. I don’t agree that the lending rules should be adjusted, as increased buying power will just drive prices more.
I do think that the banks are front-loading their “exception lending” rules (allowing a certain percentage of borrowers more than the 3.5 times income), and this is pushing up house prices. Third, there is a glut of buyers. The “stay-at -home” lockdown period has accelerated the number of first-time buyers into the property market, a good six months or year before they might otherwise have been.
Finally, I think our economy is about the enter an inflationary cycle. It is already happening with businesses; it is costing most business owners more to operate, through a combination of Covid measures, delayed supply chains, increased fuel costs and so on. These increased costs are not yet reported in our consumer price index (CPI) but I will watch general inflation figures carefully. I therefore think that house prices will continue to increase.
None of this is good news for your daughter and her partner. However, there are some things they can do. They should have their AIP (agreement in principle) in place for a mortgage. Sellers will usually prefer a “ready-to-go” buyer over someone who needs to sell before they can purchase.
They should broaden their search area. Moving a little further out from the city or looking at an area they had not considered before will give a wider selection of properties. Also, don’t ignore multi-lot on-line auctions. These type of sales can present good buying opportunities – but make sure to take good advice in advance. Such properties can have issues such as sitting tenants, pyrite or be in very poor condition. But they can present good value, and most problems can be overcome.
Next, try and establish a relationship with a few agents and drive home the “we are ready to buy now” message. Agents and vendors prefer certainty from their buyers, over someone who may be a little less committed to a property.
I think (although this is only a hunch) that more properties will come on the market, and with a little less pressure on the demand side, for July and August as foreign holidays open up a little. Finally, keep at it. Buying in today’s market is not for the faint-hearted and tenacity will win through and I’m sure they will get the home of their choice.
Ed Carey is a chartered residential agency surveyor and member of the Society of Chartered Surveyors Ireland, scsi.ie
