The property industry needs to clear most of the unsold stock before prices will be seen to have bottomed out

WITH SEVERAL thousand unsold or uncompleted apartments overhanging the Dublin market, builders, bankers and bankruptcy experts are hedging their bets on whether it would be best to offload them at knockdown prices or retain them in the hope that values will eventually recover.

The build up of new apartment stock over the past two years will scare the living daylights out of the new team of bankers – not to mention Nama – striving to get to grips with the property crisis. There are over 1,500 apartments unsold in the greater Leopardstown area; another 1,000 are either ready-to-go or near completion in Tallaght; the northern fringe of the city accounts for 1,000 units; and the Finglas area has at least 300 available.

Though the Irish banks are heavily exposed to most of the impaired loans on these developments, they have not so far taken a definitive decision on whether to insist they should be sold off at the best prices available or mothballed until the market bounces back. They fear if they take a severe haircut at this stage, it will have a knock-on effect on selling prices for a considerable time to come.

The banks can fall back on any number of reasons for doing nothing at this stage: perhaps they are waiting for some buyers to complete purchases or for the latest valuations from estate agents. Perhaps there is a fault with the title or an unresolved issue over the social and affordable allocation on the development. More likely, they will probably conclude it would be wiser to pass the buck to Nama.

Meantime, an increasing number of developers are finding the money to fit-out apartments and rent them in the hope of persuading Nama they should be allowed to trade out of their difficulties until prices recover. No one doubts prices will bounce back . . . but when?

The stand-off being observed by the Irish banks cannot go on forever now that overseas lenders, who do not come under Nama, are setting out to recover as much of their losses as quickly as possible. Just watch them sell off completed apartments in the coming months and, whether or not the Irish banks like it, they will establish a new price level for the Dublin region. In time, the Irish banks will have no option but to embark on a similar selling campaign, either on their own volition or on the instructions of Nama – even if it means they will be selling below cost.

First indications are that two-bedroom apartments in south Dublin could cost around €250,000, in some cases either marginally higher or lower depending on location, configuration and fit-out. David Brown of agent HT Meagher O’Reilly says, in time, each defined area will have set values. “We need transparency in the market so that buyers can feel confident about the prices they are paying.”

Another new homes expert, Ronan O’Driscoll of Savills, believes that apartment developments going on the market in the coming months should be sold in individual lots rather than in bulk because, he says, it is hard to find a buyer for an entire block in the present banking environment.

Nevertheless, one overseas bank last week sought a single buyer at €2 million for a newly built apartment block with 35 two-bedroom units and four ground-floor commercial facilities overlooking the Blackwater river in Navan. The price works out at €57,000 per apartment – not bad value for a town with ambitions to achieve city status and one due to get a new motorway to Dublin next month and a new rail service to the city in a matter of, well . . . years.

If the experts judge this is an appropriate valuation for large two-bedroom apartments in Navan, you can guess what is coming down the line for unsold homes in remote areas like Leitrim, Cavan, Longford and Roscommon. Just wait for the bargains . . .

Whether banks choose to sell sooner or later, the property industry needs to clear most of the unsold stock before prices will be seen to have bottomed out. Delaying the procedure is in no one’s interest.