Problems in the Malahide High End !


#1

There is real stress building up in the high-end (i.e. +2m) Malahide house market

Over 955 houses appear for Malahide since the Property Price Register started in 2010.

Excluding apartment blocks (i.e. Abington Wood) and commercial (i.e. Heely’s View), only four houses have sold for over 2m since 2010.

  1. 9 Dec 2014: 2.45m for 50 Abington Wood (on market 6,500 sq ft. brand new and good quality build on 0.65 acre)
    independent.ie/style/celebrity/celebrity-news/a-look-inside-ronan-and-yvonne-keatings-245m-malahide-mansion-29922353.html
    Unlike many of the 150 sq ft. plywood builds in the Abington estate (Ireland’s McMansion village - or Potemkin village - if there ever was one), 50 Abington Wood was actually very well built and quite tastefully designed as well. About a 1.8m cost of build, so with the site of 0.65 acres, was not far off fair value.

  2. 16 May 2014: 2.30m for 27 Abbots Hill (off market)

  3. 17 April 2014: 3.40m for Roseneath, Church Road (++6,500 sq ft. house, c.1 acre, indoor pool, separate site worth c. 750k).
    thepropertypin.com/viewtopic.php?p=773975
    independent.ie/business/irish/no-idea-mahony-hopes-for-4m-for-house-26209174.html
    Well known mega mansion from infamous character with large indoor pool / sauna etc. Most importantly, it came with an additional site at the back (that had planning), which was worth c. 750k, making the effective cost of Roseneath about 2.5m (similar to 50 Abington but much better road, and much higher standard of internal fit-out.)

  4. 10 April 2013: 2.10m for 25 Abbots Hill (off market)

At least one of the two Abbots Hill houses is not a real transaction - don’t know about the other.

Malahide has not really had a +2.5m sale to date (allowing for the extra site that came with Roseneath). The genuine houses that sold for close to 2.5m were huge, in great condition and on big sites. Note, Howth also has also not had a +2.5m sale to date (see post on Windgate thepropertypin.com/viewtopic.php?t=60767&p=730182)

In contrast, actual house sales (i.e. ex. appts, commercial and sites for multiple houses) of c. 3m and above for equivalent south-side locations:

  1. Killiney had 7 (Miramar 3m, Cloneevin 2.9m, Ash-Hurst 4.1m, Dorset Lodge 3.0m, Strathmore House 7.5m, Paddock Wood 4.0m, Balure House 3.3m)

  2. Dalkey had 3 (Bartra House 3.0m, Sorrento Terrace 3.0m, Nerano Road 3.3m)

  3. Sandycove had 2 (Castle Place 3.0m, Rockfort 3.1m)

  4. Monkstown had 3 (Albany 3.3m, “Brockly” The Hill 2.8m, 30 Belgrave Square 3.0m, The Priory 4.2m)

All the above south-side locations are still struggling to make material increases over their late 2012 / early 2013 pricing.

Malahide (and also Howth) EAs are now really struggling with big asking prices, set at the end of 2014 from the 50 Abington sale. However there is just not a lot of buyers interested in these areas with +2.5m to spend. While Irish banks have - almost - never foreclosed on a 2.5m house (that is for another day), they have no interest in financing +2.5m homes (or even 1.5m).

We are going to see some re-sets of Malahide higher-end asking prices over the Summer.


#2

I have posted many times in the past that property prices in Malahide / Portmarnock are overpriced and a mini bubble in prices has existed particularly since 2013.

Ask any EA outside of Malahide and they will confirm this view.


#3

The Pin has too much bearishness in general, but in this case I have to agree with the two comments above. Malahide +1 million has too much for-sale stock these days, especially relative to SCD.


#4

Also agree there’s been a glut of extra stock lately with not too many sales.

I’m wondering what this indicates exactly? Trying to get out while the going is good given large rises last year? Fear of the CB rules? Just an unusual phase? Hard to know really


#5

The +2m end of the Dublin market is really struggling. If it wasn’t for Embassy’s / Corporates it would be dead. The Ex. Pats have moved on once D4 / D6 prices stopped becoming no-brainers.

And this is despite the Irish banks doing almost zero foreclosures in this area for +5 years. (they do sometimes force borrowers to put houses on the market but myhome.ie has plenty of houses on-the-market, that are at prices which make them off-the-market).

Irish banks are heavy with +1m mortgages (what are classed as “jumbo” loans in the US) where the borrower is in deep negative equity but the tracker interest rate is almost zero. Such a structure should make the Irish bank insolvent (to the benefit of the borrower), but Draghi’s massive repo programme has allowed the Irish banks to claw back the difference by taking rolling 3m loans off the ECB at 0% and investing in Irish 10 year debt. There is no cost/income ratio or Tier capital needed on this carry trade, and the spread, even today, is higher then the spread they would have earned on the original mortgage (this is obviously a longer topic).

Unfortunately, the Irish banks have little appetite - so far - to extend their book of “jumbo” mortgages.
The quantum of buyers in the +2m bracket has hardly changed each year since 2012.
Prices have ticked up in ultra prime roads (but only vs. properties bought at rock-bottom). Outside of that, it is hard going.

This will only get solved if the Irish banks start going back into “jumbo” mortgages again. No foreign banks are really interested in doing Irish “jumbo” mortgages (I have checked - the lack of foreclosure rules terrify them). In the naughties, the Irish banks treated the teacher (whose income was - almost - guaranteed to retirement and beyond), as the same risk as the new law partner (whose income is much more variable and harder to sustain to retirement) for mortgage lending multiples.

This is what the U.S banks know (and price accordingly), but the Irish banks have been taught a very hard lesson on. Until the Irish banks recover in the “jumbo” area, it will be slow going with little peaks and toughs in the higher end. Certainly, in the more periphery locations (i.e. like Malahide), it will be even more so.


#6

The mortgage rules have had a massive impact on the upper end.


#7

But the number and average sale sizes of +2m houses has not changed that much in Dublin each year from 2013 vs 2014 vs 2015 ytd ?

I’m not sure there are that many mortgages being used here ?

The Irish banks aren’t giving big mortgages - and this has been the case since the crash ?


#8

Fair point – let’s see how the year goes.
My own observation was purely experience and anecdotal.


#9

I agreed with the first two comments in this thread (Malahide +1 million is looking wobbly) but then mentioned that the Pin is too bearish in general. Some of the later comments show this second point IMHO. Hard to see how the +2 million market in SCD is in the same situation as Malahide high-end, since there have been very few SCD adverts in several weeks. SCD +2 million seems totally dead - does that mean “sale prices” will go down or up? Difficult to talk about sale price decreases when there is virtually nothing for sale.


#10

@ observer35 - loads of good input above but it seems to be focused on banks/mortgages etc.

I’m still not sure why so much stock has come on in such a short space of time. Any thoughts?

From what I can tell these are all recent additions (added in last 3 months)

daft.ie/sales/auburn-grove-h … n/1055074/
collapso.net/Sale-Property/p … id=1055074

myhome.ie/residential/brochu … in/3162714
collapso.net/Sale-Property/m … id=3162714

myhome.ie/residential/brochu … in/3130269

myhome.ie/residential/brochu … in/3124472
collapso.net/Sale-Property/p … id=1041736

myhome.ie/residential/brochu … in/3171308
collapso.net/Sale-Property/m … id=3171308

daft.ie/sales/4-seapark-hill … n/1046271/
collapso.net/Sale-Property/p … id=1046271

myhome.ie/residential/brochu … in/3111524
collapso.net/Sale-Property/m … id=3111524

Something not adding up here. That’s a lot of €1m+ homes for sale in last 2 months (mainly)


#11

I wonder if the two are related Kennyb ?

The uplift in pricing, especially below the 1.5m mark has seen a lot of houses that would have been worth sub 1m in 2012/2013 now become worth over 1m. Aggressive asking (delusional in many cases) has compounded the situation further. Agents have told owners in Malahide (and I can see Howth) that their homes are worth far more than the register would imply.

There must also be an effect, in addition to this, of people (and their banks) getting on with things after an almost illiquid market form several years.

Both of these conspire to materially increase supply at the upper end of asking.

While Irish banks are lending aggressively for sub 750k houses, they are a lot more circumspect about giving “jumbo” mortgages (so far). The air gets a lot thinner above 1.5m and almost requires oxygen masks over 2m.

Note:

A good book called “House of Debt” spends most of its pages proving (almost laboriously) that prices follow the quantum of lending thrown at them (and not the opposite). You would be surprised how many “economists” still reject this notion (esp. those in central banks). I think this is still the big “headwind” at the upper end, particularly as the lower end pushes their askings up (if you get me). I remember buying houses in the early naughties. When you passed the mortgage limit, what you got for your buck improved dramatically. We are seeing a version of this play out - at least for the time being.


#12

kennyb3
I suspect that these could be forced or at least coaxed sales and the prices reflect the outstanding mortgage rather than any real notion of market values.

Malahide is nice but it’s a long long long way out of town, as I discovered when the DART/bus wasn’t running and I needed to get a taxi back into town.


#13

I agree with your comment, but why does this process only apply to Malahide and not elsewhere? There is this ample new supply of top-end properties in isolated, sparsely populated Malahide, and meanwhile SCD in the +2 million category has gone dry with very few new listings. It seems a bit odd and I do not understand it.


#14

It may be that the PIN poster SoCoDu is secretly buying up all large pads coming to market in SCD, he/she suspiciously seems to know all the background details of the deals and principals involved with these properties…


#15

Who told you my secret?
As for Malahide, there is an absolute flood of stock at the moment as noted above. I believe some are likely to be forced sales, but not all.

Shadow Glen, Back Road - €3.8m
myhome.ie/residential/brochu … in/3162714
One of three palatial piles enclosed within a gated compound - shared with a restaurateur and a finance/property man. Shadow Glen is owned by a family behind a well-known restaurant chain. On a side note, the owner is also trying to offload two lovely Rolex watches (asking five-figures each), one of which SoCoDu would like to add to his collection. Nothing says celtic tiger excess quite like buying two identical €30k watches just to have the choice of two different colour faces (though prices weren’t quite as high when they were bought in the noughties).

Blackwood Lodge, Blackwood Lane - €2.95m
myhome.ie/residential/brochu … in/3130269
Owned by an accountant/restaurateur

28 Abbotts Hill - €2.45m
myhome.ie/residential/brochu … in/3082386
Believe its owned by a pharmacist-turned-property-developer 8DD

Briarsfield, Blackwood Lane - €2.2m
myhome.ie/residential/brochu … in/3124472
Owned by a specialist clothing supplier

Auburn Grove House, Dublin Road - €1.8m
myhome.ie/residential/brochu … in/3175779
Owned by a very prominent developer active in South Dublin. Has a personal development in Dun Laoghaire in the its early stages with his wife/children AFAIK (i.e. not with his brothers/family who usually develops with) and perhaps looking to free up cash for that?

I really do not know who they are going to sell all of these to. There is a much more limited market for the likes of these houses than €2m+ South Dublin homes, of which there are very few actually for sale at present. Ronan Keating is looking to buy in the area, but I imagine he is looking for something more along the lines of a pied-à-terre.


#16

Where are his Rolexes for sale (can you say) ?


#17

Great input SoCoDu & observer35. I find it unusual that all these house have come on within a month or two of one another. As SoCoDu notes, very hard to see who they’ll sell to esp the €2m+ one’s.


#18

Thanks Kennyb3

One extra effect that I should have explicitly noted (I did implicitly) is that IBRC / Danske (residual) loan book sales of 2014 are closed. Borrowers got ‘holding letters’ from the loan buyers (Loanstar, Deutsche Bank, Goldman, etc) at Q3 2014 looking for meetings.

Where as Irish Banks have foreclosed (at least in the way Bank of Scotland did) on almost no one throughout the crisis (and even today), the loan buyers will have no such issues. To defend this, the Governemnt however did put through legislation last year to make foreclosure all but impossible pre 2016 election (this is why foreign banks are afraid to do mortgages in Ireland even though the rate is juicey !). It is also the core of the debate between Noonan and the Irish banks re mortgage rates. Irish banks want a higher rate in lieu of continuing not to foreclose on anybody to repair their books. Noonan wants the opposite.

However the new loan buyers bring an additional dynamic. They have bought personal loans so cheaply (@ 5-25 cents in the euro), that they have the “financial space” to give the borrower a very good deal (major write down) if they volunteer to foreclose.

I.e.

Buy a loan at 25 cents in Euro (thank you Irish tax payer).

Tell borrower that if he repays 50 cents in Euro in 12 months, loan is repaid.

Borrower gets a 50% write down, Investor gets 100% IRR - all happy

The buyers of distressed loans know there will be plenty of basket cases (i.e. zero recovery), however the trick is to:

  1. Nail the good ones (good income stream and assets) - get very high rates of recovery and know that you can wait it out as their coupon payment of say 3% is effectively unlevered 15% to the buyer (assuming 20 cent purchase). Getting paid an unlevered high teens coupon while waiting for potential for 4-5x capital upside is good business.

  2. Do deals with weaker ones (weak income stream but asset) - weaker coupon then above so the faster the cash comes out, the higher the IRR. Don’t be greedy here as things may worsen and what was a certain 50-100% IRR goes to zero. That would be bad business. These are the deals we could be seeing in Malahide.

  3. Play along with the bad ones (little no income or assets) - you might get some lucky wins here - play the optionality of it (i.e. like lotto tickets) and gather more information on the borrower to improve your knowledge on each individual case. If the economic recovery is very strong, this can turnaround dramatically. Can always sell down to other smaller collection agencies.

The point I am making is that the deals that Loan Book buyers have gotten in 2013 / 2014 can create enough “financial space” for voluntary foreclosure to the benefit of investor and borrower (but not Irish taxpayer of course).

Other point is that the higher end is so thin, that any type of foreclosure (voluntary or other) activity depresses prices. There aren’t really that many high end houses for sale in Dublin (incl off market) and yet they all languish for ages with no bids.

When Bank of Scotland almost unilaterally foreclosed on a number of ‘hoarders’ of high-end homes in D4 in 2011/12, the market imploded. They gave the borrowers 6 months to sell and then either close out, or go straight to auction.


#19

Very thought provoking guys - appreciative the insight and perspective.

I’d also add that there are at least 15 off-market properties for sale in excess of €1.25mn currently kicking around in Malahide.


#20

This doesn’t just apply to the high end. Was talking to a local estate agent yesterday who asked me what my rough budget was (lower end!) as they said a lot of people in Malahide like to sell off-market.