NewsUncertainty Causes Chaos; Out of Chaos Comes Opportunity

August 30, 2015


Everybody wants yesterday’s bargain, today, based upon tomorrow’s market news

Working with home-buyers and property investors over the past decade, throughout one of the most turbulent economic times in modern history, has taught me one important thing: Everybody wants yesterday’s bargain, today, with the certainty of tomorrow’s market news.

This is the unattainable goal; certainty in a volatile market in uncertain times. Home buyers who search for this will stand on the sidelines of the market for years, lamenting the unfairness of the market driving Estate Agents to despair until they simply stop facilitating viewing. First-time investors who search for this will inevitably come to the sensible conclusion that property investing is not for them. Risk is one of the pillars of buying property as a business. Accurately assessing, managing and taking steps to minimise that risk is the job of a professional investor.

When genuine would-be investors ask me when the right time to buy property in Ireland is, I regretfully tell them that that time has passed. 2011 and early 2012 was the magic period for buying Irish residential property. What happened in the years 2012 to 2014 was a combined leap-frog recovery of 40%. This recovery was initially contained within the Dublin area and its commuter-belt, however it has now extended beyond the Pale. In the last month, price growth outside of Dublin has continued it’s slow and steady increase, whereas properties in the Capital actually reduced by 0.3% – 0.4%. After a flurry of high-volume and relatively high-value transactions in the latter part of 2014, 2015 has been a disappointing year for property watchers and property remains more than 35% below peak prices.

Pent-up demand from home-buyers has long been spent and one-off cash investors are struggling to compete with the – mostly foreign – institutional investors and pension funds that are hoovering up the last remaining units in urban areas. Would-be buyers who remain in the market will certainly have their challenges.

The greatest challenge for the market over the next 12 – 18 months is not the restrictive new Central Bank lending policies, but is more likely to be the persisting shortage of stock. Previously, I would have referred to a shortage of ‘suitable’ stock, however, the situation is dire in so many areas that home buyers are settling for apartments when they need and want houses. Investors are buying in regional cities as they find themselves priced out of the Dublin market. The solution is already underway, new developments and completion of previously unfinished ghost developments. Buyers who wish to get an accurate picture of what the marketplace will look like in their target area, in 12 to 18 months time, are advised to check the local planning authority for commencement notices.

In Dublin at the moment, there are at least two to three years worth of shovel-ready sites in Dublin that could be developed if the will existed to create and deliver housing units to the market quickly. Unfortunately, even the planned units are behind schedule for delivery.

This is putting further pressure on the rental market, which is good news for existing landlords but but not for those trying to close a deal. Buyers today will definitely have to work harder to find a good deal and to close it. Over the last two years, rents are up 12% in Dublin, multiple times the rate of inflation, which is not sustainable in the long term. But in the short-term, there are still opportunities for buyers who want to take advantage of the chaos. 

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Carol Tallon