What will your house be worth this time next year?

CONFLICTING reports in the media predicting just about everything from a full-blown property crash to a miniboom next spring, leaves home-owners and potential buyers only able to speculate about the big question this season; 'what will my house be worth this time next year?'

A question that estate agents and economic forecasters would have been more than happy to answer a few years ago, now elicits a cautious and guarded reply, with even the property experts unsure as to what our homes will be valued at this time next year. According to the most recent statistics from the Permanent TSB/ESRI House Price Index, house prices in Dublin fell by 4.8% in the period up until the end of October 2007, while outside Dublin they fell by 4.9% during the same time. The report also shows that the average price of a house in Dublin is now 403,535 compared to 427,343 this time last year. Outside Dublin the average price of a house is 253,938 compared to 266,339 last year.

Static market It's not all gloom and doom for 2008, says Marian Finnegan, economist with Sherry FitzGerald. "It's been a sluggish year for the property market, but it's begun to ease.

At the end of the summer there was no interest-rate increase, and people realised there wasn't going to be one for at least another six to eight months, which brought a little more activity back to the market, " explains Finnegan, adding that despite the slowdown, firsttime buyers remained fairly active, accounting for 34% of their sales in the first three-quarters of this year, while investors accounted for 17% during the same period.

But what about the year ahead?

"Well, we're not going to see a sudden reversal of the market back to a boom in 2008. The boom happened because we had an inadequate supply of homes in Ireland.

Now those homes have been supplied, and we need to reduce our annual building to around 50,000 homes for the next 15 years, to prevent an over-supply, " says Finnegan, who expects to see house prices stabilise next year, rather than plummet. "We expect a more static market for 2008. Most houses will perform as they should in a normal market, increasing each year, but only in single digit figures."

Negative equity A more static market is certainly what vendors are hoping for. But those who think that finance minster Brian Cowen's recent changes to stamp duty will have buyers knocking down doors to snap up a quick sale may be disappointed.

According to new research by Merrion Stockbrokers, out of 35 estate agents surveyed in 24 of the 26 counties around the country, 74% reported no change in the level of enquiries since the budget move.

Admittedly, December is normally a quiet time of year, and the report did also reveal that potential buyers are more influenced by sensitivity to interest rate movements and confidence on future prices.

Cowen's changes are also unlikely, for the minute at least, to see prices rising.

Goodbody Stockbrokers are predicting that house prices will continue to fall in 2008, by as much as 8%. Until we reach a leveling off, properties may continue to be slow to shift.

Anyone who bought a house in the last two to three years could also be faced with the very real prospect of negative equity, where the mortgage being paid far exceeds the actual value of the property. And to make matters worse, some developers of new homes have already started to reduce the price of their properties, which means that recent buyers have been forced into immediate negative equity.

Such is the case for those who last year bought at The Crescent at Earlswood in Ashtown, Dublin 15.

Just last week Capel Developments slashed the asking price of the final phase of two-bed apartments by a massive 100,000.

"There's no denying that Capel's actions have left recent buyers in an unfortunate situation where they may be in negative equity, however property is a long-term investment and should always be viewed as such, " says Helen Moore, director of new homes at Savills HOK, which is the agent for The Crescent. Since the price slash, Capel has sold 26 out of the 27 remaining units, and to owner occupiers. "This just proves that there is still a market in Ireland for property, and that people still want to buy. For those who bought previously, the upside is that the developer is now out of the development. The development is fully complete, and fully occupied, " says Moore, adding "of course we wouldn't advise all developers to start taking such drastic measures.

Capel's motivation was one of necessity. This is the last phase in the development of only 27 units and they wanted to finish the project so they could concentrate on other projects around the city."

Capel is involved in the redevelopment of the former Sunday World newspaper site, the former Premier Dairies site in Churchtown and is in negotiations to redevelop Clontarf Golf Club.

Falling prices But it's just not developers who are reducing asking prices. A recent Daft report revealed that one in 10 sellers have reduced their asking price in the hope of securing a sale, and one-fifth of properties listed for sale last January are still on the market almost one full year later.

There are tales of some properties on agents' books being reduced by as much as 20% As far back as September, on website thepropertypin. com, two Dublin properties were listed as dropping in price by 750,000 and 800,000 respectively; in upmarket areas such as Sandymount and Sandycove the site recorded reductions of between 100,000 and 150,000; one property in Dalkey was reduced by 300,000. At the other end of the market, price drops of 20,000 to 40,000 are being reported on houses originally around the 420,000 mark.

On a more positive note, Wade Wise, director of Savills HOK, reports that the gap between achieved sales prices and asking prices has actually diminished over the last three months, with some buyers getting higher than the asking price for their home. A sign, according to Wise, that we may actually be close to prices leveling off, if not already there.

Immigration Ronnie O'Toole, chief economist at National Irish Bank says that 2007 won't be remembered fondly by those in the property business.

Commenting on the Daft report, O'Toole says we must look at projected housing demand over the next few years, if we want to analyse the market in the near future.

"In trying to predict long-term housing demand, the joker in the pack is immigration, " comments O'Toole, who points out that while many forecasters believe that immigration into Ireland will fall sharply as a result of a decline in the construction business, only 18% of Eastern Europeans living in Ireland actually work in construction, with the remaining 82% employed in a wide range of sectors from childcare to farming. However O'Toole suggests that inward migration may well decrease, not purely as a result in our declining construction industry, but by virtue of the fact that many of the countries in 'old Europe' are now enjoying a better economy, and rising employment and living conditions which will eventually lead to fewer numbers travelling to Ireland for work.

"Importantly, the fact that this will happen gradually will allow the wider construction industry to accurately predict the future demand for housing, and to adjust their plans accordingly, " says O'Toole, who suggests a more modest figure of around 38,000 new homes needed for the coming years, as opposed to the record numbers built in the past, which peaked at around 92,000 new builds last year.

And while the bulk of immigrants may not depend on the construction industry, the ESRI has predicted that inward migration into Ireland will fall from around 70,000 this year to 25,000 next year, which will impact on the number of rental properties that will become vacant.

Ronan Lyons, economist with Daft. ie, said prices in Dublin had remained static over the last quarter, which is a very different picture from this time last year, when predictions for the new year were still very positive. "The findings in the latest Daft report are interesting because it comes at a time when the market is usually launching into a period of activity, " he said.

No collapse in market Estate agent Felicity Fox feels that 2008 won't see a complete collapse in the market. "I am seeing the same faces come back to me over the last 18 months.

There is a body of buyers out there who are in a position to buy a home and are certainly interested in purchasing but they are holding off to see if there will be any further slippage in prices.

"Rents are increasing, and in general as a society we don't like to pay other people's mortgages. We all like to own our own home, and I feel that these buyers will eventually purchase but only when the time is right. There certainly won't be a boom in 2008, but I think we are going to see buyers come back to us. I think 2008 will be a wait, wait, go situation, " adds Fox.

Northern Ireland Meanwhile in Northern Ireland, which has seen phenomenal price growth over the last two years, with house prices rising faster than anywhere else in Europe, (doubling in some areas), experts at Nationwide and Lloyds TSB are predicting house prices to decline by 5% in 2008. However, following a recent cut in interest rates, some pundits are predicting that the market could take off again. This seems unlikely, as already Northern Ireland is the least affordable region in the UK, with property prices far out of reach of many first-time buyers, averaging around 348.084 (Stg£250,586).

<< back